No reassessment on basis of wrong, incorrect & non-existing reasons

Karan Khurana Vs ITO (ITAT Delhi)

Conclusion: AO had recorded wrong, incorrect and non-existing reasons for reopening of the assessment. It made clear that there was a total non-application of mind on the part of AO while recording the reasons for reopening of the assessment.  The reasons failed to demonstrate the live link between the alleged tangible material and the formation of belief that income chargeable to tax had escaped assessment. Thus, reopening of the assessment was invalid and bad in law.

Held:  In the present case, AO recorded wrong facts on many count in the reasons recorded for reopening of the assessment i.e. AO recorded incorrect amount of Rs. 58,40,171/- credited in HSBC account, Noida despite he had admitted in the assessment order that it was Rs. 30,74,006/-. AO in the reasons also recorded incorrect fact that no assessment had been completed in this case u/s 143(3) but in the reason itself AO recorded that earlier reassessment had been done u/s 147/148 read with section 143(3). AO also incorrectly recorded that sanction for reopening of assessment was required under proviso to section 151(1) despite such proviso did not exist in the statute as it was amended in 2015. AO, therefore, recorded wrong, incorrect and non-existing reasons for reopening of the assessment. It made clear that there was a total non-application of mind on the part of the AO while recording the reasons for reopening of the assessment.  The reasons failed to demonstrate the live link between the alleged tangible material and the formation of belief that income chargeable to tax had escaped assessment. Thus, reopening of the assessment was invalid and bad in law and that sanction/approval granted was also without any application of mind. Thus, the reopening of the assessment could not be sustained in law.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal by Assessee has been directed against the Order of the Ld. CIT(A)- 16, New Delhi, Dated 07.01.2019, for the A.Y. 2010-2011, on the following grounds :

1. The Ld CIT(A) has erred both in law and in facts of the case in upholding the reassessment proceedings and consequential reassessment order on the ground that impugned reassessment order has been passed without providing copy of reasons recorded along with satisfaction note of approving authority u/s 151 of IT Act despite specific request made by the appellant during assessment proceedings. Therefore, the resultant order of reassessment is non-est and need to be quashed.

2. The impugned reassessment is invalid and without jurisdiction as the said assessment is completed without complying with legal requirements of the provisions of section 147/148 of the Income Tax Act therefore such assessment is void ab initio and liable to be quashed.

3. The Ld. CIT(A) has erred both in law and circumstances of the case in upholding the reassessment proceedings initiated u/s 147 of the IT Act without application, of mind on the material, if any, provided by the Inv. Wing of the department. In view of the above defects in the compliances the resultant reassessment proceedings are required to be set aside.

4. The Ld. CIT(A) has erred both in law and in facts of the case in upholding the impugned assessment order need to be set-aside as the satisfaction recorded by the Pr CIT-i 6, New Delhi is mechanical and without application of mind as such approval vitiates the assessment.

5. The Ld. CIT(A) has erred both in law and in facts of the case in upholding the impugned reassessment proceedings and the consequential reassessment order on the ground that the reassessment proceedings in the present case is covered by proviso to sec i47 and there is no allegation in the reason recorded reproduced in the assessment order by the assessing officer that there is failure of the appellant in disclosing fully and truly all material facts.

6. The Ld. CIT(A) has erred both in law and in facts of the case in upholding lie reassessment proceedings and consequential reassessment order on the ground that AO has failed to issue a valid notice u/s 148 within the time limit prescribed u/s 1 49(1)(b) of the 11 Act as the notice has been issued on 01.04.2017 whereas the limitation has expired on 31.03.2017. Therefore, the reassessment proceedings / reassessment order both need to quashed.”

2. We have heard the Learned Representative of both the parties and perused the material available on record.

3. The Ld. D.R. contended that some of the above grounds now raised before the Tribunal were not raised before the Ld. CIT(A), therefore, the same cannot be considered for disposal of the appeal.

4. On the other hand, Learned Counsel for the Assessee submitted that all the grounds are legal in nature and arise out of the record. Learned Counsel for the Assessee also submitted that the Ld. CIT(A) at the appellate stage called for the remand report and decided the above grounds. Therefore, the contention of the Ld. DR has no merit and the same may be dismissed and appeal of assessee may be decided on merits on the grounds raised above.

5. We have considered the rival submissions and do not find any force in the objection of the Ld. D.R. The grounds of appeal raised by the assessee in the present appeal are legal in nature and all the material and facts are available on record which are undisputed also. The Hon’ble Punjab & Hayana High Court in the case of VMT Spinning Co. Ltd., vs., CIT & Another [2016] 389 ITR 326 [P&H] considering the Judgment of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd., vs., CIT [1998] 229 ITR 383 (SC) held as under:

“Held, that the Tribunal could decide the appeal on a ground neither taken in the memorandum of appeal nor by seeking its leave. The only requirement was that the Tribunal could not rest its decision on any other ground unless the party who might be affected had sufficient opportunity of being heard on that ground. Therefore, the

Tribunal ought to have exercised its discretion in view of the fact that the assessee intended raising only a legal argument without reference to any disputed questions of fact. Since there were no additional evidence required for the decision on the new ground raised by the assessee and such question arose from the facts which were already on the record of the assessment proceedings and since a decision upon the new ground raised by the assessee would only help in determining the assessee’s correct tax liability, the matter could be remanded to the Tribunal for adjudicating upon the additional ground on its merits. [Matter remanded].”

5.1. We also find that the Ld. CIT(A) called for the remand report from the A.O. and decide the issues as well. Considering the above facts, we reject the contention of the Ld. D.R. and proceed to decide the appeal on the points raised/arguments advanced by the assessee on the above

6. Briefly the facts of the case are that original assessment in this case was completed under section 147/ 143(3) of the I.T. Act, 1961 on 24.02.20 14 at an income of Rs. 1,37,43,790/-. Subsequently proceedings under section 147 of the I.T. Act, 1961 were again initiated and notice under section 148 of the I .T. Act, 1961 Dated 31.03.2017 was issued by 1T0, Ward 47(1), New Delhi. In response to which, the assessee filed return of income on 29.04.2017 declaring an income of Rs. 1,37,43,790/-. The A.O. issued statutory notices and discussed the case with the Counsel for Assessee. The A.O. also noted in the assessment order that reasons recorded for initiating proceedings under section 147 of the I.T. Act, 1961 were duly provided to the assessee. The A.O. reproduced the reasons recorded for reopening of the assessment as under:

“Reasons to believe in the case of M/s Lakshmi tex

processors (Prop. Sh. Karan khurana

PAN: AGDPK4271C forA.Y2010-11

An information has been received from the office of Dy. Director of income tax (Investigation)-II, Ghaziabad that the assessee has deposited an amount of Rs.58,40, 171/- during assessment year 2010-11 in account of the assessee as per following details:

2. From the records of the case, it is seen that the assessment U/s 147/148 for the year under consideration has been completed at an income of Rs.1,37,43,790/- for A. Y. 2010-11 vide order u/s 143(30) of the income tax Act, 1961 dated 24.02.2014, the reasons for reopening at that time were that assessee did not disclose certain bank accounts. A per usal of the original return of income as well as reassessment proceeding reveals that the above bank account of the assessee maintained with HSBC, Noida has not seen disclosed by the assessee Therefore, I have reasons to believe that the income of the assessee to the extent of Rs.58,40, 171/- approximate for A. Y 2010-11 has escaped assessment and hence it is a fit case for initiation of proceedings in terms of section 147oftheI.T. Act,1916.

3. It is pertinent to mention that in the case of CIT Vs., Nova Promoters & Fin Lease Private Ltd [ITA No. 342 of 2011 1 dated 15.02.2012, the Hon’ble Delhi High Court which is the jurisdiction High court, has held that as long as there is a ‘live link’ between the document/information which was placed before the assessing officer at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The court also held

”we are aware of the legal position that at the stage of issuing the notice u/s 148 the merits of the matter are not relevant and the assessing officer at that stage is required to form only a prima facie before or opinion that income chargeable to tax has escaped assessment”

4. Further more, in the case of Jyoti GoyaI vs ITO (ITA.No.1259/Del/2010), the Hon’ble ITAT Delhi held that:

“As regards the order contentions of the assessee that the reopening was done in a mechanical manner without application of mind. We find there is nothing on record to support such a contention. There is a live link between the information which was available with the assessing officer and his formation of belief that income has escaped assessment, sufficiency of such information cannot be gone into while deciding the issue of validity of reopening. The assessing officer can also not make enquiries as no proceedings were pending before him for the relevant assessment year. In the above view of the matter, we are in agreement with finding of the Ld. CIT(A) that the reopening of assessment u/s 147 of the Act, was valid.”

5. The live link between the material provided by the investigation Wing and the reasons for belief that income has escaped assessment has been sufficiently demonstrated. Since, no assessment has been completed u/s 143(3) of the Act, and period of 4 years has elapsed, hence, forwarded to the Pr. Commissioner of income tax-1 6. New Delhi for consideration and necessary approval in accordance with the proviso appended with section 151(1) of the IT Act, 1961 for issuance of notice u/s 148 of the Act.”

 6.1. The A.O. also noted in the assessment order that earlier also proceedings were reopened on the basis of information that assessee had maintained various Bank accounts which have not been accounted for in the regular books of account and the assessee had offered the amount for taxation while filing the return of income under section 148 of the I.T. Act, 1961. The assessee filed the reply which is quoted in the assessment order in which the assessee explained that assessee was trying to enter in the chemical business and for that purpose he had joined for training with the persons already operating in the market. The assessee at the instance of such persons was made to open the Bank account, but, was not aware of the transaction made in such Bank account and it was also not connected with the regular business of assessee. Such Bank account was misused by others. The assessee also made submissions with regard to reopening of the assessment.

 6.2. The A.O. noted that details were called for from the Banks for its statement under section 133(6) of the I.T. Act, 1961. Perusal of the bank statements, it shows that there are deposits of Rs.30,74,006/- during financial year relevant to assessment year under appeal. Since the assessee failed to explain the source of the same, therefore, A.O. made addition of Rs.30,74,006/-. The challenged the reopening of the assessment before the Ld. CIT(A) and submissions of the assessee were forwarded to the A.O. who has filed the remand report which is also noted in the impugned order. The Ld. CIT(A), however, dismissed the appeal of assessee.

7. Both the parties argued on various issues which we decide as under:

7.1 Issue No. 1:

Whether AO has supplied copy of the reasons recorded u/s 148 of the I.T. Act?

 7.2 Ld. Counsel for assessee submitted that assessee vide letter dated 01.05.2017 acknowledged on 03.05.2017 (PB1) requested the AO to provide copy of the reasons recorded, performa for obtaining sanction u/s 151 and evidence of satisfaction given by the authority u/s 151 of the Act. The AO acknowledged this fact in the remand report dated 28.11.2018 (PB 40). The assessment was completed without providing the above documents. The AO was under obligation to provide reasons in view of the decision of the Supreme Court in the case of GKN Driveshaft India Ltd. Vs. ITO 259 ITR 19, judgment of Delhi High Court in the case of M/s Sabh Infrastructure Ltd. vs. ACIT 398 ITR 198, M/s Haryana Acrylic Manufacturing Co. vs. CIT 308 ITR 38 and judgment of Bombay High Court in the case of M/s Allana Cold Storage Ltd. Vs. ITO 287 ITR 1. The Ld. CIT(A) required the AO to give comments on this ground and AO in the remand report dated 28.11.2018 (PB 40) dealt with the above objection on the premises that the assessee had attended the assessment proceedings on various dates but has not mentioned anything that he was not provided copy of the reason and hence the AO remained under the apparent illusion that copy of the reason was provided to the assessee by the earlier incumbent before whom request was made by the assessee prior to the transfer of the jurisdiction. The Ld. CIT(A) based on the above remand report was of the view that the assessee was in possession of the information of the investigation wing and, therefore, it was apparent that the assessee was aware of the reasons recorded. Ld. Counsel for assessee, therefore, submitted that AO has never provided copy of the reasons u/s 148 as well as sanction u/s 151 of the Act. Therefore, entire assessment order is null and void ab initio. In support of his contention, he has relied upon following decisions:

• PCIT Vs. Jagat Talkies Distributors 85 taxrnann.corn 189 (Del.)
• PCIT vs. Rarnaiah 103 taxrnanncorn 201 (Kar.)
• CIT vs. M/s Trend Electronics 61 taxrnann.corn 308 (Born.)
• CIT vs. Videsh Sanchar Nigarn Ltd. (340 ITR 66) (Born.)
• CIT vs. Fornento Resorts and Hotels Ltd. dated 27.11.2006 (Born.)
• CIT vs. IDBI Ltd. dated 19.09.2016 (Born.)

8. On the other hand, Ld. DR submitted that it is a case of HSBC Bank account at Noida. The conduct of the assessee is relevant that assessee did not show this bank account to the Revenue Department and in other year also assessee did not declare other bank accounts to the Revenue Department. The reasons were supplied to the assessee as per the remand report. After conclusion of the hearing Ld. DR was directed to produce evidence of supply of the copy of the reasons to the assessee at reassessment proceedings i.e. in the form of copy of the order sheet or other material to prove that copy of the reasons and satisfaction have been supplied to the assessee as per request for the assessee dated 01.05.2017 (PB 1).

9. We have considered the rival submissions. The Hon’ble Delhi High Court in the case of Pr. CIT vs. Jagat Talkies Distributors 389 ITR 13 following the decision of Hon’ble Supreme Court in the case of GKN Driveshaft India Ltd. vs. ITO 259 ITR 19 (SC) and judgment of Hon’ble Bombay High Court in the case of CIT vs. Videsh Sanchar Nigam Ltd. 340 ITR 66 held as under:

Held, dismissing the appeals, that the Appellate Tribunal was right in holding that on account of failure on the part of the Assessing Officer to furnish the copy of the reasons recorded for reopening of the assessments, under section 147, to the assessee, the reassessment proceedings stood vitiated. Failure by the Assessing Officer to provide the assessee the reasons recorded for reopening the assessment could not be treated as a mere procedural lapse. The assessments for the assessment years 1999-2000 onwards for five years were sought to be reopened. Having contested those proceedings for nearly two decades, the Department was not fair in making the offer to consider the assessee’s objections to the reopening and pass orders thereon. No reason could be discerned why the Assessing Officer had failed to furnish to the assessee the reasons for reopening the assessments. It was not disputed that the assessee had made requests in writing for the reasons in respect of each of the assessment years in question. Merely because the assessee did not repeat the requests did not mean that it had waived its right to be provided with the reasons for reopening the assessments. According to the proviso to section 292BB(1) there was no estoppel against an assessee, on account of participating in the proceedings, as long as it had raised an objection in writing regarding the failure by the Assessing officer to follow the prescribed procedure. No question of law arose.”

10. It is not in dispute that assessee made a written request on 01.05.2017 (PB 1) to the AO to supply copy of the reasons recorded u/s 147/148 of the Act and Performa and sanction u/s 151 of the Act which is received by the AO on 03.05.20 17 which fact is also admitted by the AO in the remand report dated 28.11.2018 (PB 40). The AO in the remand report did not mention as to how the copy of the reasons and sanction have been provided to the assessee at reassessment proceedings. The AO merely mentioned in the remand report that assessee attended the assessment proceedings on various dates but never mentioned anything that he was not provided the copy of the reasons. The AO was, therefore, of the view that it is apparent that copy of the reasons were provided by the earlier AO. The AO did not bring any evidence on record or to refer any evidence in the remand report as to when copy of the reasons for reopening of the assessment and satisfaction have been provided to the assessee. The Ld. CIT(A) also in his findings on going through the remand report merely mention that since assessee was in possession of the information received from the Investigation Wing would mean that reasons were disclosed to the assessee during reassessment proceedings.

The Ld. CIT(A) in his findings did not mention anything specifically whether copy of the reason and satisfaction has been provided to the assessee by any of the Assessing Officer. Thus, the impugned order is silent as to when copy of the reasons and satisfaction were supplied to the assessee on making a demand by the assessee in writing. Therefore, in order to verify this fact, Ld. DR was directed to file copy of the order sheet or any other document from record to show that actually copy of the reasons recorded for reassessment and satisfaction u/s 151 have been supplied to the assessee at reassessment proceedings. However, till date Ld. DR did not produce any evidence in this regard. Therefore, considering the totality of the facts and circumstances, it is clear that assessee was not provided copy of the reasons recorded for reopening of the assessment and satisfaction u/s 151 of the Act despite demand is made by the assessee in writing before AO. The assessee is thus, precluded from raising objection against reopening of the assessment at assessment proceedings. The valuable right of the assessee has been denied by the

authorities below in this regard. Therefore, the entire reassessment proceedings are nullity, invalid and bad in law. The entire reassessment proceedings are vitiated and, as such, liable to be quashed.

11. In view of the above findings, we set aside the orders of the authorities below and quash the reopening of the assessment.

12. IssueNo.2:

Whether AO recorded wrong, incorrect and non­existing reasons in the reasons recorded for reopening of the assessment and, as such, did not apply his mind? 12.1 Ld. Counsel for assessee submitted that AO has recorded wrong, incorrect and non-existing reasons in the reasons recorded for reopening of the assessment. AO has mentioned incorrect amount of Rs. 58,40,171/- in HSB Bank account at Noida. The AO, however, later on made a request to the Bank u/s 133(6) of the Act and called for the bank statement and found that actual amount deposited was of Rs. 30,74,006/-. The AO without applying his mind to the information received from Investigation Wing recorded wrong and incorrect facts in the reasons for reopening of the assessment. The AO also recorded wrong facts in the reasons that no assessment has been completed u/s 143(3) of the Act prior to the reasons because in the reasons itself AO has mentioned that earlier also reassessment order has been passed u/s 147/148 read with section 143(3) and income was determined at Rs. 1,37,43,790/-. He has further submitted that AO has also recorded incorrectly the provisions of law for obtaining the sanction from the Pr. CIT by mentioning proviso to section 151(1) of the Act which does not exist in the Income Tax Act from 01.06.2015 after the amendment through Finance Act, 2015. He has, therefore, submitted that AO has recorded wrong, incorrect and non-existing facts in the reasons recorded for reopening of the assessment and has not applied his mind for forming the belief that income chargeable to tax has escaped assessment. In support of his contention he has relied upon following decisions:

• Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. 395 ITR 677 (Del.)
• Pr. CIT vs. RMG Polyvinyl (I) Ltd. 396 ITR 5 (Del.)
• Pr. CIT vs. G&G Pharma India Ltd. 384 ITR 147 (Del.)
• Signature Hotels P. Ltd. Vs. ITO 338 ITR 51 (Del.)

13. Ld. Counsel for assessee submitted that it is, therefore, clear that reopening is based on incorrect facts. It is well settled law that if wrong facts and wrong reasons are recorded for reopening of the assessment, such assessment is bad in law. In support of his contention he has relied upon order of the ITAT Delhi Bench in the case of M/s Ganesh Ganga Investments P. Ltd. Vs. ITO in ITA No. 1579/Del/2019 dated 07.11.2019 only in paras 8.5 to 9 are reproduced as under:

“8.5. The statement of Shri Himanshu Verma is also filed on record which did not find mention if MIs. Shubh Propbuild Pvt. Ltd., as mentioned in the reasons belong to Shri Himanshu Verma. There is no investor exist in the name of MIs. Management Services Pvt. Ltd., and no addition in respect of the same company have been made by the A.O. The A.O, therefore, recorded incorrect facts in the reasons for reopening of the assessment. Thus the same cannot be approved under the Law. It is well settled Law if wrong facts and wrong reasons are recorded for reopening of the assessment, reopening of the assessment would be invalid and bad in Law. We rely upon Judgment of Hon’ble Punjab & Haryana High Court in the case of Atlas Cycle Industries 180 ITR 319 (P&H). It is well settled Law that note already filed with return disclosing nature of capital receipt and no other tangible material found, therefore, reopening of the assessment under section 148 was quashed. We rely upon Judgment of Hon’ble Delhi High Court in the case of CIT vs., Atul Kumar Swami [2014] 362 ITR 693 (Del.) and Judgment of Hon’ble Allahabad High Court in the case of Kanpur Texel P. Ltd., 406 ITR 353 (Alld.). Similarly, in the case of CIT vs., Vardhaman Industries [2014] 363 ITR 625 (Raj.), the Hon’ble Rajasthan High Court has held that “reasons must be based on new and tangible materials. Notice based on documents already on record, 148 not valid.” In the instant case under appeal, the A.O. has reproduced the information received from Investigation Wing and reproduced the same in the reasons recorded under section 148 of the I. T. Act. This information shows that assessee has received the amount of credit from 06 parties, but, one of the party ie., MIs. Management Services Pvt. Ltd., do not exist and that MIs. Shubh Propbuild Pvt. Ltd., do not belong to Shri Himanshu Verma. It, therefore, appears that A.O. has not gone through the details of the information and has not even applied his mind and merely concluded that he has reason to believe that income chargeable to tax has escaped assessment. In the reasons A.O. has recorded that assessee has received accommodation entry of Rs.2.45 crores, but, ultimately made an addition of Rs. 11.05 crores without bringing any material against the assessee. The reasons to believe are, therefore, not in fact reasons, but, only conclusion of the A.O. In the case of Meenakshi Overseas Pvt. Ltd., (supra), the A.O. in the reasons has even mentioned that he has gone through the information received which is lacking in the present case. The A.O. being a quasi-judicial authority is expected to arrive at subjective satisfaction independently on his own. The A.O. however, merely repeated the report of the Investigation Wing in the reasons and formed his belief that income chargeable to tax has escaped assessment without arriving at his satisfaction. Thus, there is no independent application of mind by the A.O. to the report of Investigation Wing to form the basis for recording the reasons. The reasons recorded by the A.O. are also incorrect as noted above. The reasons failed to demonstrate the link between the alleged tangible material and the formation of reasons to believe that income chargeable to tax has escaped assessment. The decisions relied upon by the Learned Counsel for the Assessee in the cases of Pr. Commissioner of Income Tax vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. Commissioner of Income Tax vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), Pr. Commissioner of Income Tax vs., G and G Pharma India Ltd., 384 ITR 147 (Del.) and Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), clearly apply to the facts and circumstances of the case. Learned Counsel for the Assessee also relied upon Order of ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., (supra) in which on identical facts reopening of the assessment have been quashed. The Ld. D.R. relied upon certain decisions in support of the contention that reopening of the assessment is justified, but, the same are distinguishable on facts of the present case. Considering the facts and circumstances of the case in the light of above discussion and decisions referred to in the Order, we are of the view that reopening of the assessment is bad in law and that sanction/approval granted by Pr. Commissioner of Income Tax is also invalid. We may also note that vide Order sheet Dated 23.08.2019 the case was re-fixed for hearing because the Ld. D.R. argued that approval have been granted by Commissioner of Income Tax after due discussion of the matter and perusal of the relevant information and thereafter approval in prescribed proforma sent to the A.O. and he has mentioned that I am satisfied. However, no record was produced. Therefore, this case was re-fixed for fresh hearing. However, on the date of hearing no such record have been produced for the inspection of the Bench. Therefore, satisfaction recorded by the Pr. Commissioner of Income Tax is invalid and without application of mind. Therefore, the reopening of the assessment is invalid and bad in Law and cannot be sustained in Law. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment under section 147/148 of the I. T. Act, 1961. Resultantly, all additions stands deleted. Since we have quashed the reopening of the assessment, therefore, there is no need to decide the addition on merit which is left with academic discussion only.

9. In the result, appeal of Assessee allowed.”

14. In support of the same proposition, he has also relied upon order of the ITAT Delhi Bench in the case of M/s Key Components (P) Ltd. vs. ITO ITA No. 366/Del/2016 dated 12.02.2019 in which the reassessment proceedings have been quashed because the reopening was based on incorrect facts. The findings of Tribunal in para 6.3 to 7 are reproduced as under:

“6.3 Considering the above discussion, it is clear that there is a total non-application of mind on the part of the AO while recording the reasons for reopening of the assessment. He has recorded incorrect amount which escaped assessment. His conclusion was merely based on observations and information received from DIT(Inv.), New Delhi, which is not brought on record and his conclusion is merely based on doubts because he was not sure whether transaction in question is genuine or not. Therefore, the decisions relied upon by the Ld. Counsel for the assessee squarely apply to the facts and circumstances of the case. The decisions relied upon by the Ld. DR would not support the case of the Revenue. Since, there is a total lack of mind while recording the reasons for reopening of the assessment, therefore, assumption of jurisdiction under section 147/148 of the I.T. Act, 1961, is bad and illegal. The AO was not justified in assuming jurisdiction under section 147/148 of the I.T. Act, 1961. We, therefore, hold that reopening of the assessment in the matter is bad in law and illegal, as such, same cannot be sustained in law. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted.”

14.1 Ld. Counsel for assessee in support of the above contention also relied upon following decisions:

1. Shamshad Khan vs. ACIT 395 ITR 265 (Del.)

2. Pr. CIT vs. M/s SNG Developers Ltd. 404 ITR 312 (Del.).

3. CIT vs. Atlas Cycle Industries 180 ITR 31 9(P&H)

4. Siemens Information System Ltd. vs. ACIT 293 ITR 548 (Bom.).

15. On the other hand, Ld. DR relied upon the orders of the authorities below and submitted that since the assessee did not disclose bank account so AO applied his mind to the information received from Investigation Wing. Exact amount cannot be determined at the time of initiation of reassessment proceedings. Prima facie opinion to be formed at the stage of initiation of reassessment proceedings and that sufficiency of the reasons is not relevant for reopening of the assessment and relied upon judgment of the Supreme Court in the case of Raymond Woolen Mills Ltd. vs. ITO 236 ITR 34.

16. We have considered the rival submission. Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Atlas Cycle Industries 180 ITR 319 held as under:

“Held, (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make the reassessment.”

17. Hon’ble Delhi High Court in the case of Pr. CIT Vs. SNG Developers Ltd., [2018] 404 ITR 312 (Del.) held as under:

“Held, dismissing the appeal, that the reasons recorded by the Assessing Officer for reopening the assessment under section 147, issuing a notice under section 148 did not meet the statutory conditions. As already held by the Appellate Tribunal, there was a repetition of at least five accommodation entries and the total amount constituting the so-called accommodation entries would therefore, not work out to Rs. 95,65,510. It was unacceptable that the Assessing Officer persisted with his “beliefI that the amount had escaped assessment not only at the stage of rejecting the assessee’s objections but also in the reassessment proceedings, where he proceeded to add the entire amount to the income of the assessee.

Therefore there was non-application of mind on the part of the Assessing Officer. The Appellate Tribunal was justified in confirming the order of the Commissioner (Appeals) and holding that the reopening of the assessment was bad in law.”

18. Hon’ble Delhi High Court in the case of Shamshad Khan Vs. ACIT [2017] 395 ITR 265 (Del.) held as under:

“Held, allowing the petition, that the form for recording the reasons for initiating the proceedings under section 148 of the Act for obtaining approval of the Commissioner itself proceeded on the erroneous basis that the quantum of income which had escaped assessment was Rs.28, 75,000 whereas the assessee had filed returns showing income of merely Rs.20,56, 145 and it was on this basis that the Additional Commissioner and the Commissioner granted their approval for reopening the assessment. Even though the assessee highlighted this fundamental error at the initiation of the case by stating that his income was mentioned as Rs.20,56, 145 instead of Rs.69, 71,191, this was summarily rejected stating that it was a clerical mistake and that the latter figure would be treated as his income. If the correct income ie. Rs.69, 71,191 was put before the Commissioner at the time of seeking his approval, he might have taken a different view. There was nothing on record to show that the clerical mistake of substituting Rs.20,56, 145 for Rs.69, 71,191 was ever brought to the notice of the Commissioner either before or after approval or sanction under section 151(1) of the Act. The initiation of the case for reopening of the assessment was erroneous and without application of mind especially since the Assessing Officer had not examined the return filed, which would have revealed that the assessee had filed regular returns, had sufficient opening balance in his account and the withdrawals therefrom substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in law and the notice issued under section 147 of the Act was to be quashed.”

19. Hon’ble Bombay High Court in the case of Siemens Information Systems Ltd. Vs. ACIT & Others [2007] 293 ITR 548 (Bom.) held as under:

“The petitioner had several EOU/STP units engaged in the business of export of software. In response to the notice for reopening the assessment for the assessment year 1999-2000, the petitioner, objecting to the issuance of the notice, stated that the reasons furnished by the authority had quoted the provisions of section 1 0A as amended by the Finance Act, 2000, with effect from the assessment year 2001-02 and as such could not have been made applicable to the assessment year 1999-2000 and the notice had been issued under the mistaken belief about the correct position of law. However, opportunity to show cause was given to the petitioner as to why the loss claimed should not be disallowed to be carried forward. On a writ petition :

Held, allowing the petition, (i) that it would be clear from the reasons given that the authority proceeded on the presumption that the law applicable was the law after the amendment and not the law in respect of which the petitioner had filed the return for the year 1999-2000. This by itself clearly demonstrated that there was total non-application of mind on the part of the authority and consequently, the notice based on that reason would amount to non-application of mind.

(ii) That the income derived by the assessee from an industrial undertaking to which section 1 0A applies could not be included in the total income of the assessee. Therefore, the petitioner was right infiling the return by excluding the income in terms of section 10A.”

19.1 The crux of the above judgments and the judgment of the Tribunal relied on the above had been that in case, incorrect, wrong and non-existing reasons are recorded by the AO for reopening of the assessment and that AO failed to verify the information received from Investigation Wing, the reopening of the assessment would be unjustified and is liable to be quashed.

19.2 In the present case, the AO recorded wrong facts on many count in the reasons recorded for reopening of the assessment i.e. AO recorded incorrect amount of Rs. 58,40,171/- credited in HSBC account, Noida despite he has admitted in the assessment order that it was Rs. 30,74,006/-. The AO in the reasons also recorded incorrect fact that no assessment has been completed in this case u/s 143(3) but in the reason itself AO recorded that earlier reassessment has been done u/s 147/148 read with section 143(3) of the Act. The AO also incorrectly recorded that sanction for reopening of assessment is required under proviso to section 151(1) of the Act despite such proviso does not exist in the statute as it was amended in 2015. The AO, therefore, recorded wrong, incorrect and non-existing reasons for reopening of the assessment. It makes clear that there is a total non-application of mind on the part of the AO while recording the reasons for reopening of the assessment. The AO has recorded incorrect amount which escaped assessment. The reasons failed to demonstrate the live link between the alleged tangible material and the formation of belief that income chargeable to tax has escaped assessment. The decisions relied upon Ld. Counsel for assessee in the cases of Pr. CIT Vs. Meenakshi Overseas (P) Ltd. 395 ITR 677 (Del.), Pr. CIT Vs. RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. CIT vs. G&G Pharma India Ltd. [2016] 384 ITR 147 (Del.) and Signature Hotels P. Ltd. Vs. ITO (supra) squarely apply to the facts and circumstances of the case. Considering the facts and circumstances of the case, in the light of the above discussion, and decisions referred to in the order, we are of the view that reopening of the assessment is invalid and bad in law and that sanction/approval granted is also without any application of mind. Therefore, the reopening of the assessment cannot be sustained in law. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment. Resultantly all the additions stand deleted.

20. Since, we have quashed the reopening of the assessment, therefore, there is no need to decide the remaining grounds which are left with academic discussion only.

21. In the result, the appeal of assessee is allowed.

Order pronounced in the open Court.