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2011 (8) TMI 1151
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.... Whether in the facts and circumstances of the case, the decision of another CIT(A) or a non-jurisdictional bench of the ITAT was binding on the Ld. CIT(A)." 3. The relevant facts of the case are that the assessee had returned the taxable income of Rs. 89,940/- as per his return filed on 12.1.2000. The assessment was reopened u/s 147 vide letter dated 8.12.2006 submitted through his Ld. AR. The assessee contended that the notice issued u/s 148 dated 28.3.2006 was never served upon the assessee. He also stated therein that the return which already stood filed on 12.1.2000 may be considered to be sufficient compliance. 3.1. The AO accordingly framed an assessment taking note of the fact that assessee is showing income from interest capital as partner from M/s. Mohan Dairy of Rs. 88,123; and income from other sources of Rs. 9,644. He considered that the assessee has received gifts of Rs. 15 lakhs. He observed that from M/s. Amit Trade Corporation M/s. Bhargava Enterprises; M/s. Shanti Enterprises;M/s Shanti Enterprises the assessee had received gifts of Rs. 5 lacs, Rs. 5 lacs, Rs. 1 lac, Rs. 4 lacs respectfully,. 3.2 Thus Rs. 15 lakhs were added to the income of the as....
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....as placed upon the following cases for the proposition that the exercise of the AO must contain the ingredients of a definite application of mind so as to form an independent belief: a) Anant Kumar Soania vs. CIT reported in (1998) 232 ITR 533 (Gau.) b) Madan Lal Jindal Vs. ITO reported in (1973) 92 ITR 546 (Cal.) c) Mrs. Vinita Jain vs. ITO reported in (2007) 158 Taxman 167 (Del.) (Mag.) 4.4. It was further submitted before the CIT(A) that the order of the ITAT in the case of Vinita Jain which was challenged by the Revenue before the Hon'ble Delhi High Court was confirmed as reported in 299 ITR 383 (Delhi.) It was contended that the re-opening therein had been done on the basis of the DDIT (Investigation) belief that the transaction of capital gain was bogus. The Hon'ble High court held therein that the AO did not verify the correctness of the information received and simply accepted the correctness of the information. 4.5. In the context of these facts and position of law it was submitted that the reasons recorded in the present case is nothing but the copy of report as received from ITO 4 (1), Agra who was of the opinion that the transaction is non-genuine. The As....
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....essing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and therefore, the issuance of notice under section 148 for reassessment proceedings was not valid. 4.9 The action of the AO was also assailed as per the para 15 of the impugned order on the following reasoning :- 15. It was vehemently submitted by the appellant that the reasons have been recorded in a cyclostyled manner. It cannot be a co-incidence that almost all the Assessing Officer could have recorded identical reasons. Reasons as recorded in the present case are on records. Assessee furnished a columnar chart demonstrating that ITO Ward-4 and ITO Ward-1, have recorded reasons which are similarly worded. It is therefore, proved that reasons have been recorded in a mechanical manner without independent application of mind by the Assessing Officer. 4.10 Pages 6-9 of the impugned order contains the tabular form of reasons recorded by the AO on the very same date. 4.11 The contention was also put forth on behalf of the assessee that formation of the required belief by the AO is a condition precedent for the issuance of notice and without formation of such belief the ....
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.... of the reasons recorded are open can certainly be questioned and are open for judicial scrutiny. Thus, the reasons recorded may kindly be examined in the light of decisions referred above." 4.15. At page 12 to 16 para-wise comments adducing the reasons recorded made by the assessee again in a tabular form are found reproduced. 4.16. Reliance before the CIT(A) was further placed upon the orders of the Agra Bench vide orders dated 23.5.08 and 20.6.2008 in ITA Nos. 171,173, 174 and 175 alongwith CO No. 24, 26, 25 and 50 wherein the issue for consideration involved was identical as there also the re-opening was based on the same information pertaining to gift received from same to same Shri D.K. Agarwal. 4.17. Reliance was also placed upon the order dated 19.5.08 of the Agra Bench in ITA No. 484/Agr/2007 wherein the notice u/s 148 of the Act was found to be based on no valid reasons in the case of same kind of gifts. 4.18. Reliance was also placed upon yet another order dated 28.7.2007 of Agra Bench in ITA No. 468/Agra/2008 and 469/Agra/2008 for asstt. Year 1999-2000 wherein the reassessment proceedings were quashed. The facts were also stated to be identical. It was submi....
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.....24. It was submitted that the AO disposed the assessee's objection in regard to the service of notice holding that the notice was served by notice server on Smt. Meenakashi Agarwal on 30.6.2006 and by speed post on 29.3.2006 on 18/33 Moti Bagh, Bulandshahr. It was assailed on the ground that the postal address to which notice was sent was the wrong address as the postal address of the assessee is Vijendra Kumar, C/o M/s. Mohan Dairy, Siyana Road, Bulandshahar. It was stated that the assessee has always been filing its return of income from the said address. Further it was submitted that the residential address of the assessee is 18/37 Moti Bagh, Bulandshar and not 18/33, Moti Bagh, Bulandshahar. 4.25. It was his submission that since the assessee has denied the receipt of service of notice u/s 148. Accordingly it was incumbent upon the AO to show that notice was properly served upon the assessee or his appointed agents. It was submitted that the said exercise was not done. Prior to service of notice the AO was required to record the requisite satisfaction that the notice could otherwise not be served on the assessee in person or the assessee is avoiding service of notice. It wa....
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....ras 35 to 67 and the pages 22 to 34 the assessee advanced various arguments on merit. It was contended that the facts available on record were not considered by the AO in the correct perspective in line with the settled legal principles. The judgments relied upon by the AO on merit were discussed at length and the applicability of these in the facts was addressed. Judgments of various High Courts and the apex court were relied upon at length in order to contend that the additions have been made dehorse the facts as such the addition deserves to be deleted in the eventuality the assessee does not succeed on the grounds of jurisdiction. 5. Considering the submissions the CIT (A) proceed to quash the proceedings vide para 69 to 74 found at pages 35 to 38 of the impugned. The CIT(A) held that the reopening has been based on the reasons forwarded by ITO ward 4 (1) Agra by ITO Ward 4 Bullandshar it has been held by him that there is no application of mind by the AO as there were no details or information which could prime facie establish the non genuineness of the gifts. The AO was held to have initiated proceedings on the basis of vague and sketchy information supplied to him by ITO ....
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.... High Court in K.N.Agarwal vs. CIT (supra) is binding on appellate authorities. Therefore, in the totality of facts and circumstances of the case as detailed out above and in view of the legal position the action of the Assessing Officer in issuing notice under section 148 on the basis of reasons as recorded by him is declared without authority of law and therefore, the consequent assessment is void-ab-initio without jurisdiction and liable to be quashed. 74. Appellant has also filed submission on merits. However, after having held that the reasons recorded in this case are not valid and on which action under section 148 could not have been taken, there is no need to decide other grounds taken on merits in view of the decisions of Hon'ble Calcutta High Court in the case of Rawatmal Harakchand vs. CIT (1981) 129 ITR 346 (Cal.) and Hon'ble ITAT (S.B.). Nagpur Special Bench in the case of Rahul Kumar Bajaj vs. ITO (1999) 69 ITD 1 (Nag.) (S.B.)" 6. Aggrieved by this finding the revenue is in appeal before the Tribunal. 7. Ld. DR places reliance upon the assessment order. He further places heavy reliance upon the following judgements :- 1. Praful Chunilal Paten vs. M.J. Makw....
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....f the alleged bogus transactions of gifts from four trusts amounting to Rs. 20 lacs as would be evident from the page 2 which contains a copy of the reasons recorded. For ready reference these details are reproduced hereunder :- GIFT AMOUNT CH/DD NO. DATE NAME & ADDRESS OF THE DONOR Rs.5,00,000/- 307084 20.01.1999 from M/s. Mahesh Trust, 31/87 Lohar Gali, Agra Rs.5,00,000/- DD 21.01.1999 M/s. Smt. Meera Agarwal Family Trust, Agra Rs.1,00,000/- DD861978 138929 21.1.1999 M/s.Gyanendra Agarwal (P)Family Trust, Agra Rs.4,00,000/- DD8619825 23.01.1999 M/s. -do Rs.5,00,000/- 307064 20.01.1999 M/s. Dinesh K Agarwal(P) Fly(Sp.)Trust,Agra Rs.20,00,000/- 8.4. Inviting attention to the assessment order it was submitted that addition has been made on the other hand on account of bogus gifts of Rs. 15 lacs as opposed to the reason recorded which talks of bogus gifts of Rs. 20 lacs. 8.5 Addressing the AO u/s 147 vis a vis the reasons recorded it was further submitted that none of the trusts mentioned by AO are the ones from whom gifts have been received as ....
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....n that the CIT(A) has held that the AO has proceeded on borrowed satisfaction and nothing has been placed on record by the department to show that there was any material before the concerned officer to hold that income had escaped assessment. It was emphasised that since no documents either accompanied the fax information and admittedly no independent inquiry to form the prime facie belief that income has escaped was done by the concerned AO. In fact it was contended that the AO did not even have those documents on the basis of which ITO Agra sent the fax to the concerned AO. Thus the impugned order was supported on the ground that the concerned AO did not even examine the correctness of the information . For the said assertion reference was again made to the amounts and the name of the trust mentioned in the reasons recorded and how they do not tally either in the total amount or in the names of the donor trust with the trusts mentioned in the assessment order. It was argued that since there was no application of mind by the concerned AO as he has proceeded on borrowed satisfaction no independent inquiry was done and there was no material before him in order to come to the conclus....
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....d income and a fax letter of a different ITO cannot lead to reason to believe of the concerned AO. The concerned AO as per settled legal principles has to do some exercise independently on the information to cross check its correctness. Since admittedly the assessee did not receive any gift from the alleged donors as mentioned in the reasons recorded. This itself approved the fact that the AO has not applied his mind at all and has merely proceeded on borrowed satisfaction treating the information of a different AO to be the gospel truth. Reliance in support of the said proposition was placed upon the following judgments . Cit Vs. Sfil Stock Broking Ltd. 233 Ctr (Del.)69 Sarthak Securities Co. (P) Ltd. 329 Itr 110 (Del.) Tej Pratap Singh 116 Itd 388 (Del.) Cit Vs. Smt. Paramjit Kaur 311 Itr 38 8.12. The impugned order was also assailed on the ground that in the facts of the present case there was no notice served upon the assessee. Heavy emphasis was laid on the fact that often this argument is advanced at the last stage by the assessee. However in the facts of the present case it was submitted that the assessee has assailed the action of the AO right from the beg....
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....ceipt. In regard to the notice sent through post therein the address was found to be incomplete and in fact a wrong address. As such the impugned order was supported on this ground too as it was the argument of the Ld. AR that these grievances of the assessee are available on record and stand unrebutted. Admittedly the address mentioned in the postal address is not the correct address of the assessee. At the cost of re-iteration it was pointed out that it is neither the address from which returns are filed nor is it the correct residential address. It was further stated that the asstt. order itself has been framed mentioning this address and all other notices sent to the address over the years have always been received by the assessee. The presumption of service cannot operate in favour of the AO since the address mentioned is admittedly a wrong address. In the face of the assessee's stand the onus was upon the department to prove service by producing cogent material which may include the AD or service report from the postal authorities which is not available. Reliance was placed upon CIT vs. for the contention that if serviceby Registered post is denied then the onus shifts to the....
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....een canvassed that the reasons recorded are based on borrowed satisfaction, The AO has proceeded in haste and acted mechanically as admittedly the specific facts namely donor trusts, amounts, were all wrong. It is seen that on facts the department has not rebutted the assessee's stand. The department has relied upon case law to canvass that once the reasons are recorded on the information received, the action of re-opening is justified. No doubt sufficiency of reason cannot be agitated however the first hurdle that the formation of belief is of the concerned AO and not of some other AO has to be met. The blind acceptance in haste the view of another AO has not been rebutted by any cogent fact or argument and to our mind case law cannot address the issue. A perusal of the finding of the CIT(A) reproduced in the earlier part of this order would show that Appellate Authority has held that the reasons recorded is nothing but a copy of information as received from ITO 4(1) Agra who was of the opinion that the transaction is nongenuine. The CIT(A) has come to the conclusion that the AO has proceeded on "borrowed satisfaction". The AO has been held to have proceeded in issuing notice a....
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....on of the principles laid down by the courts in the facts before them it is seen that in the facts of the present case they do not strengthen the case of department in any manner. Notwithstanding the fact that each case proceeds on facts entirely peculiar to its own. It is seen that the principles laid down therein cannot have a blanket application . We consider it appropriate to discuss them separately. It is seen that the Ld. DR has heavily relied upon Praful Chunilal Patel vs. M.J. Makwana/ACIIT, H.A. Nanji & Co. Vs. ITO, ACIT vs. Rajesh Jhaveri Stock Brothers (P) Ltd., Phool Chand Bajrang Lal and Another vs. ITO (citied supra) for the proposition that for the formation of belief some information is necessary and no preliminary inquiry is required to be made and as long as reasons are recorded; the satisfaction of the AO on the basis of information available with him will tantamount to fulfilling the requirements of law. 10.4 H.A. Nanji & Co. Vs. ITO, Calcutta ( cited supra ):- It is seen that the facts available on record were that after the deductions claimed by the assessee on account of interest paid on hundi loans were accepted as genuine in the original assessments s....
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....epted and assessee should be subjected to reopening of the proceedings. The AO exercising the powers vested in him by the statute is necessarily presumed to act in an unbiased manner on the receipt of information in order to form a belief that income has escaped assessment. The haste in which right from the receipt of the information to the issuance of notice leads us agree with the conclusion of the CIT(A) that the AO has acted on borrowed satisfaction. The fact that the entire exercise has been completed within the day shows that the power vested in the AO has been mechanically exercised. In the facts of the present case we find ourselves in agreement with the finding of the CIT(A) in as much as that the concerned AO has proceeded on borrowed satisfaction in a mechanical manner and not even caring to make a bare minimum effort to cross check the veracity of the information received. As such the decision of the Hon'ble Calcutta High Court in the facts of the present case does not help the department in any manner. 10.6 Reliance has also been placed upon by the Ld. Sr. DR on the judgment of the Apex Court in the case of Phool Chand Bajrang Lal and Another vs. ITO (cited supra). ....
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.... this communication notice was issued to the assessee on 26th August 1971. It is seen that there was sufficient material before the AO for the formation of his belief and he had not proceeded in undue haste accepting as gospel truth the information from another AO. The concerned AO has acted and proceeded diligently and not formed an opinion in undue haste. Whereas in the facts of the present case the information received by fax has been found to be inaccurate and wrong as it contained wrong names of the donors mentioning wrong amounts of the gifts were stated to given. Had the concerned AO applied his mind his mind the glaring mistakes would have been noticed. Having proceeded mechanically on borrowed satisfaction the actions cannot be upheld. As such the principle laid down therein on facts is not of much help to the Revenue as there the time taken attention to detail and the efforts to cross-check the veracity cannot be compared to the hasty exercise in the present proceedings. 10.7. Similarly in judgment of the Gujarat High Court in the case of Praful Chunilal Patel vs. M.J. Makwana/ACIIT, (cited supra) it is seen that therein the conversion of capital asset into stock-in-tr....