TaxTMI 
TaxTMI 
2020 (1) TMI 728
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....d to be bad in law and the same be quashed / set aside / cancelled. 2. For that in the facts and circumstances there was no escapement of income hence the reopening and the consequential assessment order be held to be bad in law and the same be quashed / set aside / cancelled. 3. For that in the facts and circumstances there was no addition made on account of the reasons recorded hence the reopening and the consequential assessment order be held to be bad in law and the same be quashed / set aside/cancelled. 4. For that in the facts and circumstances of the case the reasons there was no addition made on account of the reasons recorded hence the reopening and the consequential assessment order be held to be bad in law and the same be quashed / set aside/ cancelled. 5. For that in the facts and circumstances of the case the reopening was based on dictate of other authorities and without any independent inquiry or formation of independent reasons and hence the reopening and the consequential assessment order be held to be bad in law and the same be quashed / set aside/ cancelled. 6. For that the income from commodity transaction be held to ....
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....of the Act. If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the AO could not have reason to believe that any part of the income of the assessee had escaped assessment. [Ganga Saran & Sons Pvt. Ltd. (1981) 130 ITR 1 (SC)]. It is well settled in law that reasons, as recorded for reopening the reassessment, are to be examined on standalone basis. Nothing can be added to the reasons so recorded, nor can anything be deleted from the reasons so recorded. The Hon'ble Bombay High Court in the case of Hindusthan Lever Ltd. (2004) 268 ITR 332 (Bom) has, inter alia, observed that "...... It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded by him. He has to speak through the reasons." Their Lordship added that "The reasons recorded should be self-explanatory and should not keep the assessee guessing for rea....
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....use and effect relations between reasons recorded and the income escaping assessment. While dealing with this matters, it is useful to bear in mind the following observation of Hon'ble Supreme Court in ITO Vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC): "the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of belief. Rational connection postulates that must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of this belief that there has been escapement of the income of the assessee from the assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening and at the same time, we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far- fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from asse....
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....bers of the NMCE during the financial year by misuse of the NMCE platform through bogus commodity trading have been received by him. Thereafter, the AO states about the report of the Forward Market Commission (FMC) that the clients/members of the NMCE were found to be involved in creating artificial volume and suspected evasion of income tax by misuse of NMCE platform. Thereafter the AO states that when the departmental data base was checked to identify the companies/entities involved in this practice it was found that M/s. Avenue Dealers Pvt. Ltd. is a shell company it was managed and controlled by various Kolkata based entry operators like Shri Devesh Upadhyay. And thereafter the AO notes that the statement of Shri Devesh Upadhyay has been recorded; and that during various search and seizure operations the entry operators accepted that those companies are shell/paper companies which are engaged in providing accommodation entries in various form to the beneficiaries. Thereafter, the AO in his reasons recorded notes that from the information in possession of the department it came to notice that the assessee's is one of the beneficiary who have taken bogus profit during the assessm....
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....individuals show that they have accepted that the loss which was booked was bogus loss/profit to facilitate accommodation of bogus loss/profit to the beneficiaries. So, I find from a reading of the above reasons recorded by the AO to reopen the assessment that it is vague and generalized report/information/allegation which has kindled the suspicion in the mind of the AO from the information he got from the DDIT (Inv.) about systematic evasion of taxes by clients/members of NMCE by misuse of the NMCE platform ;and based on the report from the Forward Market Commission that clients/members of the NMCE were found to be involved in creating artificial volume and suspected evasion of income tax by misuse of the NMCE platform. Thus, from two sources the AO had got information that NMCE clients/members were misusing the NMCE platform and it is case of suspected evasion of income tax by misuse of NMCE platform and there is nothing in the information/report about any wrong doing/nexus with assessee's before me. Thereafter, the AO states about checking up the departmental data base from where he realized that M/s. Avenue Delaers Pvt. Ltd. is a shell company and are managed by entry operators....
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....ct" then AO had to make reasonable enquiry and collect material which would make him belief that there is in fact escapement of income, which unfortunately the AO has not taken the burden to do in this case. The Hon'ble Delhi High Court in a similar case had quashed the assessment in the case of CIT Vs. M/s. Insecticides India Ltd. in ITA Nos. 608 & 609 of 2012 pronounced on 20.05.2013 wherein the Hon'ble High Court on similar facts dismissed the appeal of the Revenue and upheld the decision of the Tribunal quashing the proceeding initiated u/s. 148 of the Act. In that case the reasons recorded by the AO were totally silent with regard to the amount and nature of bogus entries and transactions and the persons with whom the transaction had taken place. It is also taken note that in Ganga Saran & Sons Pvt. Ltd. (1981) 130 ITR 1 (SC) the Hon'ble Supreme Court held that the expression "reason to believe" occurring in section 147 is "stronger" than the expression "is satisfied" and from the discussions made above, I am of the considered opinion that such requirement under the law has not been made in the reasons recorded in the instant case to reopen the assessment and, therefore, the r....
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....id any margin money to the broker before entering into commodity trading transaction; ii) The broker has accepted during the survey u/s. 133A that the director of M/s. PKC Commodities is dummy person. 10. I note that the Hon'ble Bombay High Court in the case of Bonanja Commodities Brokers Pvt. Ltd. Vs. Mrs. Roshanara Bhinder (arbitration petition 195 of 2015 dated 16.04.2015) has held that the collection of margin money as per bye laws of MCX Stock Exchange Ltd. is only discretionary in nature and transactions entered into by the clients without payment of margin money cannot be considered as illegal; And the AO has made the allegations against the assessee on the strength of the statement recorded during survey which has no evidentiary value as held by the Hon'ble Supreme Court in CIT Vs. S. Kader Khan & Son (2013) 352 ITR 480 (SC). It is also noted that NMCE pursuant to the notice of the AO in the case of assessee had replied vide letter dated 02.11.2017 has accepted that Shri Gopal Prasad Agarwal, Smt. Manju Devi Agarwal and Smt. Payal Agarwal (appellants before us) are registered as clients being members of the Exchange had made transactions in the commodity future ....