TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 1287
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....rbitrary, excessive & unjustified. 5. That the non-consideration the request of appellant before AO to call the concerned persons for examination and to confirm original copy of the agreement to sell & amount received as per agreement at Rs. 4942000/- is against the Law & justice of the case. 6. That to sustain the addition of Rs. 50240/- as agricultural income by the Learned CIT(A) Rohtak is against Law, facts & documents on record. 7. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal before & also at the time of hearing. 2. Assessee has also filed an Application for admission of additional ground of Appeal vide its Application dated 29.8.2016 in which the assessee has stated that in view of the settled decisions in the case of NTPC 229 ITR 383 (SC), (legal ground can be raised for first time in collateral and second round also). The legal ground can be very well raised for first before the ITAT which goes to the root of the matter and pertains to the assumption of jurisdiction. For the sake of convenience, the legal additional ground raised by the asseseee are reproduced as under:- "1. That the Learned Income Tax Officer has....
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....he Assessee. 8. Aggrieved with the aforesaid order of the Ld. CIT(A), Assessee is in Appeal before the Tribunal for challenging the legal issue raised vide additional as well as the addition in dispute, as aforesaid. 9. At the time of hearing, Ld. Counsel of the assessee has only argued the legal ground and stated that there is no nexus between the prima facie inference arrived in the reasons recorded and information available with the office of the AO. He further stated that the information was restricted to cash deposits in bank account but there was no material much less tangible, credible, cogent and relevant material to form a reason to believe that cash deposits represented income of the assessee. He further stated that even the communication dated 24.1.2012 could not be made a basis to assume jurisdiction in view of the fact that such an enquiry letter is an illegal enquiry letter and thus cannot be relied upon. It was the further contention of the Ld. Counsel of the assessee that the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction. He further stated that the reasons recorded are highly vague, far-fetc....
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.... Sd/- (O.P. Poonia) Income Tax Officer, Ward-2, Rewari" 12. After going through the reasons recorded by the ITO, Ward-2, Rewari, I am of the view that there is no nexus between the prima facie inference arrived in the reasons recorded and information; the information was restricted to cash deposits in bank account but there was no material much less tangible, credible, cogent and relevant material to form a reason to believe that cash deposits represented income of the assessee; that even the communication dated 24.1.2012 could not be made a basis to assume jurisdiction in view of the fact that such an enquiry letter is an illegal enquiry letter and thus cannot be relied upon; that the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction; that the reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and there are merely presumption in nature; that it is a case of mechanical action on the part of the AO as there is non-application of mind much less independent application of mind so as to show that he formed an opinion based on any ....
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....n of the assessment proceedings U/S 147 was the information with the Department, of the deposits made by the assessee in his bank account. 46. 'Bir Bahadur Singh Sijwali' (supra), makes reference to 'Hindusan Lever Ltd. vs. R.B. Wadkar'. 26R TTR 332 (Born.), to hold that the reasons recorded for reopening the assessment are to be examined on a standalone basis and nothing can be added to the reasons. It was also observed that the reasons must point out to an income escaping assessment and not merely need of an enquiry which may result in detection of an income escaping assessment. It was observed that it is necessary that there must be something which indicates, even if it does not establish, the escapement of income from assessment; that it is only on that basis that the AO can form a prima-facie belief that an income has escaped assessment; that merely because some further investigations have not been carried out, which, if made, could have led to detection of an income escaping assessment, this cannot be reason enough to hold the view that the income has escaped assessment; and that there has to be some kind of cause and effect of relationship between the reaso....
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....ed assessment of income because the assessee has Rs. 10,24,100/- in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income, and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escapement assessment." 48. The Tribunal concluded thus: "but then in the case before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred to several other judicial precedents in support of the proposition that at the stage of initiation of reassessment proceedings, all that is to be seen is existence, rather than adequacy, of the material to come to the conclusion that income has escaped assessment. There can....
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....n because of a statutory provision. It was therefore for the department to establish that these receipts were chargeable to tax." D. ITAT, Delhi Bench decision in case of Praveen Kumar Jain v ITO in ITA No. 1331/D/2015 for Assessment year 2006-07 dated 22.1.2015 wherein it has been held as under:- "12. Thus it is clear that the basic requirement for reopening of assessment that the AO must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment was found to be missing when the AO proceed to reopen the assessment which is in nature of a post mortem exercise after the event of reopening of the assessment. Therefore the reopening of the assessment was found to be invalid as it does not satisfy the requirement of law that prior to the reopening of the assessment the AO has to apply his mind to the material and conclude that he has reason to believe that income of the assessee has escaped assessment. Applying the above proposition of law it leaves no doubt in the mind that in the case on hand the AO has reopened the assessment mechanically without application of mind to conclude that the said amount of Rs. 6 lac deposit ....