The Principal Commissioner Of Income Tax-4 v. Geetanjali Credits And Capital Limited

* IN THE HIGH COURT OF DELHI AT NEW DELHI+ INCOME TAX APPEAL No. 74/2017 Reserved on : 1[st] August, 2018 Date of decision: 15[th] January, 2019 THE PRINCIPAL COMMISSIONER OF INCOME TAX-4 .....Appellant Through Mr. Ruchir Bhatia, Advocate. versus GEETANJALI CREDITS AND CAPITAL LIMITED ..... Respondent Through Mr. Kamal Ahuja and Mr. Sameer Srivastava, Advocates. INCOME TAX APPEAL No. 75/2017 THE PRINCIPAL COMMISSIONER OF INCOME TAX-4 .....Appellant Through Mr. Ruchir Bhatia, Advocate. versus GEETANJALI CREDITS AND CAPITAL LIMITED Through Mr. Kamal Ahuja and Mr. Sameer Srivastava, Advocates. ..... Respondent CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE CHANDER SHEKHAR SANJIV KHANNA, J.: The above captioned appeals by Revenue under Section 260A of the Income Tax Act, 1961 („Act‟, for short) in the case of M/s Geetanjali Credits and Capital Limited, formerly known as Shubh International Limited ('respondent- assessee' for short), relate to Assessment Years 1999-2000 and 2000-01 and arise from common order of the Income Tax Appellate Tribunal, Chandigarh ('Tribunal', for short) dated 22[nd] April, 2016 passed in ITA Nos. 920 and 921/CHD/2008 ('impugned order' for short). 2. The appeals were admitted for hearing vide order dated 10[th] February, 2017 on the following substantial questions of law:- -“(1) Did the ITAT fall into error in holding that reassessment in the circumstances of the case, was not in accordance with law; and (2) Did the ITAT fall into error in cancelling the additions made to the tune of Rs.2.1 crores and Rs.48.00 lakhs [Sic. Rs. 40.00 lakhs] (for AYs 1999-2000 and 2000-2001, respectively) under Section 68 of the Income Tax Act, 1961 in the hands of the Assessee, in the circumstances of the case.” 3. The respondent-assessee has not disputed the territorial jurisdiction of this High Court to decide the afore-captioned appeals in view of order dated 31[st] July, 2014 passed under Section 127 of the Act. 4. Two issues arise for consideration in view of the substantial questions of law framed vide order dated 10[th] February 2017. First issue relates to validity of proceedings initiated by the Assessing Officer vide notice under Section 148 read with Section 147 of the Act. The second issue relates to merits i.e. deletion of additions of Rs.2.10 crores and Rs.40 lacs made by the Assessing Officer on protective basis for the Assessment Years 1999-2000 and 2000-01 respectively, which additions were affirmed by the Commissioner of Income Tax (Appeals) on substantive basis. 5. To avoid prolixity, repetition and for convenience, we have with consent of the parties, treated the appeal preferred by the Revenue for the Assessment Year 1999-2000 as the lead case. Tribunal and the ITA Nos. 74/2017 & 75/2017 Page 2 of 42 Commissioner of Income Tax (Appeals) had also treated the appeal for the Assessment Year 1999-2000 as the lead case and followed and applied their findings to the appeal for the Assessment Year 2000-01.Wherever necessary, we would refer to the facts relevant for the Assessment Year 2000-01. 6. Respondent-assessee is a public limited company, that had made a public issue for Rs. 95 Lakhs in December, 1996 which was fully subscribed. The issue was to fund the project for manufacture and sale of egg trays. However, this business/project did not start though the respondent-assessee had acquired about 2 acres of land in village Haripur, Distt. Panchkula in Haryana. Attempt made once to grow crops on the land was not successful due to non-availability of water etc. Thereafter the land could not be put to any use. 7. Bharat Bhushan Goyal, Kewal Krishan and Sunil Gupta were the Directors of the respondent-assessee, during the period relevant to the Assessment Years 1999-2000 and 2000-2001. Sunil Gupta, a Chartered Accountant by profession, was not a shareholder in the respondent-assessee. 6. Respondent-assessee is a public limited company, that had made a public issue for Rs. 95 Lakhs in December, 1996 which was fully subscribed. The issue was to fund the project for manufacture and sale of egg trays. However, this business/project did not start though the respondent-assessee had acquired about 2 acres of land in village Haripur, Distt. Panchkula in Haryana. Attempt made once to grow crops on the land was not successful due to non-availability of water etc. Thereafter the land could not be put to any use. 7. Bharat Bhushan Goyal, Kewal Krishan and Sunil Gupta were the Directors of the respondent-assessee, during the period relevant to the Assessment Years 1999-2000 and 2000-2001. Sunil Gupta, a Chartered Accountant by profession, was not a shareholder in the respondent-assessee. 8. The respondent-assessee in the return for the Assessment Year 1999-2000 filed on 31[st] December, 1999 had declared taxable income of Rs. 6,899/-and in the return for the Assessment Year 2000-2001 filed on 11[th]June, 2002 had declared loss of Rs. 41,766/-. The returns were processed under Section 143(1) of the Act and were not taken up for scrutiny assessment under Section 143(3) of the Act. 9. On or about 23[rd] May, 2002 search and seizure operations under Section 132 of the Act were conducted in the case of M/s Lada Liquor Group by Investigation Wing, Chandigarh. It was then noticed that respondent-assessee had made investment of Rs.2.50 Crores with M/s Taranjit Singh & Co., Chandigarh, a partnership firm engaged in the business of Liquor Contractors. Payments were made in February, March and April, 1999. Money paid to M/s Taranjit Singh & Co. had not been refunded or re-paid till the date of search. Detailed enquiries by the Investigation Wing on the source of investment had revealed that cash was first deposited in different accounts of stock-brokers before it was transferred to the bank account of the respondent-assessee with Bank of Baroda, Civil Lines, Ludhiana. Source of deposits in the bank accounts of stock-brokers had remained unexplained and were dubious. This information with details and evidence were furnished to the Assessing Officer of the respondent-assessee by the Additional Director of Income Tax (Inv.), Chandigarh vide his letter dated 4[th] September, 2003. The Assessing Officer had thereupon recorded „reasons to believe‟ and notice under Section 148 read with Section 147 of the Act for the Assessment Year 2000-01 was issued on 6[th] October, 2003 and served on the respondent-assessee on 16[th]October, 2003 and notice for the Assessment Year 1999-2000 was issued on 30[th] July, 2004 and served on the respondent-assessee on 2[nd] August, 2004. 10. Pursuant to the said notices, the respondent-assessee had stated that the earlier returns filed under Section 139 of the Act should be treated as returns filed in response to the notices. 11. By Assessment Order dated 16[th] March, 2006 for the Assessment Year 1999-2000, addition of Rs.2.10 crores on protective basis on account of unexplained deposit in bank account was made, for the following reasons:- ITA Nos. 74/2017 & 75/2017 Page 4 of 42 10. Pursuant to the said notices, the respondent-assessee had stated that the earlier returns filed under Section 139 of the Act should be treated as returns filed in response to the notices. 11. By Assessment Order dated 16[th] March, 2006 for the Assessment Year 1999-2000, addition of Rs.2.10 crores on protective basis on account of unexplained deposit in bank account was made, for the following reasons:- ITA Nos. 74/2017 & 75/2017 Page 4 of 42 10. To summarise, the facts of the case are that search was conducted in the case of M/s Lada Liquor whereby it was noticed that M/s Taranjit Singh & Co. took entries of Rs. 2,50,00,000/- (Rs. 2,10,00,000/- pertaining to the year under consideration) in the name of the assessee M/sShubh International Ltd. (now Nis Getanjali Capital & Credit Ltd.) through demand drafts. Perusal of bank account of the assessee shows that these demand drafts were issued by the assessee after receiving various cheques (as discussed in Para 3 above). These cheques were received by the assessee from three stock brokers namely M/s EssArr& Co., M/s S.K. Sharma & Co. and M/s Usha Garg & Co. (as shown in para 4 above) in lieu of sale of investments by the directors of the assessee in connivance with Sh. Taranjit Singh. When examined, the stock brokers failed to give ledger folio numbers/distinctive nos. of the shares sold and identity of buyers. In addition payments from so called buyers which were brought by the representatives of the assessee, have been allegedly received in cash by the stock brokers. In turn the stock brokers issued cheques to the assessee and the assessee transferred sum Rs. 2,10,00,000/- in the account of M/s Taranjit Singh & Company through Demand Drafts, Shri Bharat Bhushan, Director of the company assessee, in his statement dated 03.09.2002 has accepted that market value of shares held by the company was negligible. But these shares have been shown as sold for a whopping consideration of Rs. 2.5 crores and the whole sale was made in cash which was received by the stockBrokers on behalf of M/s Shubh International Ltd. This makes it quite obvious that these are simply sham transactions by which unaccounted cash has been introduced in the form of sale of investments of Assesse Company. This unaccounted cash is nothing but the unaccounted income of the assesse company. The director of the assesse company Sh. Bharat Bhushan has stated that control of the company was handed over to Sh. Taranjit Singh though legal formalities were not completed as Sh. Taranjit Singh expired in April, 2000 and Sh. Taranjiot sold the investments of the company. He has further stated that the investments of the assesse company were sold by Sh. Taranjit Singh. Sh. Taranjit Singh might have sold the investment in order to bring his own unaccounted money into Assesse Company. Since the amount was paid out of bank account n. 60140 of the company maintained with Bank of Baroda, Civil Lines, Ludhiana, addition of Rs, 2,10,00,000/- is made on protective basis without prejudice to any action in the hands of M/s Taranjit Singh& Company, Chandigarh. 11. Vide order sheet entry dated 13.03.2006, Sh. Sunil Gupta, FCA, councel for the assesse company confirmed that the fads of the present case are similar to the case of assesse itself for the assessment year 2000-01 and claimed that there is no justification of making double addition as the addition has been made by the ACIT (Central Circle) in the case of lulls Taranjit Singh & Co. in respect of credits received from the assesse company. 12. The replies of the assesse company have been considered. He has accepted that the facts are similar for the Assessment Year 2000-01 in which addition of Rs. 40,00,000/- was made on protective basis in respect of entries pertaining to that year. Total of entries pertaining to this year comes to Rs. 2,10,00,000/-. Protective assessment does not tantamount to double addition as claimed by the assesse. 12. The replies of the assesse company have been considered. He has accepted that the facts are similar for the Assessment Year 2000-01 in which addition of Rs. 40,00,000/- was made on protective basis in respect of entries pertaining to that year. Total of entries pertaining to this year comes to Rs. 2,10,00,000/-. Protective assessment does not tantamount to double addition as claimed by the assesse. 13. In view of above, an addition of Rs. 2,10,00,000/- is made in the hands of the assessee company on protective basis without prejudice to any action in the hands of M/s Taranjit Singh &Company, Chandigarh. 12. By the Assessment Order dated 30[th] March, 2005 for the Assessment Year 2000-01, the Assessing Officer made an addition of Rs.40 lacs on protective basis on account of unexplained deposit in the bank account and investment for the following reasons: - “7.1. On 21.03.2005 a copy of a/c of M/s Shubh International Ltd. as appearing in the books of account of M/s Sharma & Co. was furnished. Shri S.K. Sharma failed to furnish the names & addresses of company whose shares were sold by him. 7.2 Hence, it has been established that the directors of M/s Shubh International Ltd. has introduced their unexplained money in the guise of shares in the bank account of the company from which the amount was further advanced to M/S Taranjit Singh & Company. 8. Vide order sheet entry dated 21.3.2005 the assessee company was asked to furnish the distinct number of shares which were sold by M/s Usha Garg & Co., M/s EssArr& Co. and M/s S.K. Sharma & Co. 8.1 On 23.3.2005 Shri Sunil Gupta, CA furnished the names of the companies whose shares were sold by the above mentioned concerned which are as under:- 8.2 The counsel for the assessee company failed to supply the complete addresses of the companies of which the shares were sold bythe stock brokers on behalf of Shubh International Ltd. Before the DDIT(Inv.) the assessee has not filed the detail of share holding of above companies. In the return of income the assessee has also failed to show the transactions as well as the income from these transactions, it clearly shows that no sale of shares have been taken place. Only the accommodation entries have been given by the above mentioned stock brokers to M/s Shubh International Ltd. by issuing the cheques amounting to Rs. 40,00,000/- which was further advanced to M/s Taranjit Singh & Company, Chandigarh during the year 1999-2000 relevant to the A.Y 2000-01. 9. The statement of Shri Bharat Bhushan Goyal, Director, shows that investments held by the company were not worth the liability of the company. Since the amount was paid out of the bank account No. 60140 of the company maintained with Bank of Baroda Civil Lines, Ludhiana, addition of Rs.40,00,000/- is made on protective basis without prejudice to any action in the hands of M/s Taranjit Singh & Company, Chandigarh.” 13. Two Assessment Orders had reproduced details of deposits/credit and payments/debit entries in the account of the respondent-assessee with Bank of Baroda, Civil Lines, Ludhiana. In this manner deposits made were collated with issue of bank drafts/cheques in favour of the M/s Taranjit Singh & Co. Assessment Orders had reproduced statement on oath made by Bharat Bhushan Goyal, Director of the respondent-assessee recorded on 3[rd]September, 2002 by Dy. Director (Inv.) Chandigarh accepting that worthless shares held by the respondent-assessee were purportedly disposed of for more than Rs. 2 crores and credited in the account in Bank of Baroda by 13. Two Assessment Orders had reproduced details of deposits/credit and payments/debit entries in the account of the respondent-assessee with Bank of Baroda, Civil Lines, Ludhiana. In this manner deposits made were collated with issue of bank drafts/cheques in favour of the M/s Taranjit Singh & Co. Assessment Orders had reproduced statement on oath made by Bharat Bhushan Goyal, Director of the respondent-assessee recorded on 3[rd]September, 2002 by Dy. Director (Inv.) Chandigarh accepting that worthless shares held by the respondent-assessee were purportedly disposed of for more than Rs. 2 crores and credited in the account in Bank of Baroda by transfer/payments by the stock-brokers. Amounts deposited were then transferred to M/s Taranjit Singh & Co. These transactions relating to purchase and sale of shares to generate book entries were bogus and sham and were allegedly made by Taranjit Singh who was also wanting to take control of the respondent-assessee, for which legal formalities had not been completed. Taranjit Singh, partner of M/s Taranjit Sigh & Co., died in April, 2000 and thereafter the respondent-assessee had tried to recover the investment from Ms. Mahinder Kaur, the legal representative/heir of Taranjit Singh. We shall subsequently refer to and reproduce statement made by Bharat Bhushan Goyal. 14. The Assessment Orders also extensively quote from statements made on oath by Shagun Garg, authorized signatory of M/s Usha Garg and Company, Ludhiana; Hari Krishan Punni, authorized signatory of M/s Ess Arr and Company, Ludhiana and Sudhir Kumar Sharma, proprietor of S.K. Sharma and Company, Ludhiana, the stock-brokers through whom the respondent-assessee had made investments and sold the worthless shares. They had confirmed the sham and bogus nature of share transactions accepting that they did not know the purchasers to whom the shares were sold as the purchasers were brought to them by representatives of the respondent-assessee and were unknown persons who had paid cash as sale price which was deposited in the bank accounts of the stock-brokers, who in turn had issued cheques in favour of the respondent-assessee. The stock-brokers were unable to even give detail of distinctive number of shares, name and addresses of the purchasers etc. We would subsequently reproduce relevant portion of their statements. 15. Appeals preferred by the respondent-assessee against the Assessment Orders were decided by the Commissioner of Income Tax (Appeals) by a common order dated 19[th] September, 2008. 16. During the course of hearing before the Commissioner of Income Tax (Appeals), Sunil Gupta, a Chartered Accountant by profession and one of the Directors of respondent-assessee, had argued that there was no justification to make double addition as M/s Taranjit Singh & Co. had been taxed on substantive basis. Rejecting the submission, the Commissioner of Income Tax (Appeals) observed that the block assessment in the case of M/s Taranjit Singh & Co. had been quashed in the first appeal on the technical ground that no material found in the course of search or enquiries conducted and the addition would not fall within the scope of Chapter XIV-B of the Act. He reproduced the relevant order passed by the first Appellate authority in the case of M/s Taranjit Singh & Co., which reads-: "I have considered the submission of the appellant and, perused the orders of assessment and considered the material placed on record. In the case of the appellants, the undisputed facts are that deposit from M/s Shubh International Ltd., which has been added as undisclosed income, has been duly disclosed. No material has been detected as a result of search or gathered as a result of enquiries conducted on the basis of material detected during the course of search to establish that such deposit represent undisclosed income of the assessee. In these facts the addition is outside the scope of Chapter XIV-B of the Income Tax Act and hence is directed to be deleted." "I have considered the submission of the appellant and, perused the orders of assessment and considered the material placed on record. In the case of the appellants, the undisputed facts are that deposit from M/s Shubh International Ltd., which has been added as undisclosed income, has been duly disclosed. No material has been detected as a result of search or gathered as a result of enquiries conducted on the basis of material detected during the course of search to establish that such deposit represent undisclosed income of the assessee. In these facts the addition is outside the scope of Chapter XIV-B of the Income Tax Act and hence is directed to be deleted." 17. Further, Tribunal had dismissed the appeal preferred by the Revenue in the case of M/s Taranjit Singh & Co., reiterating the ground that no material was found during the course of search and that the addition made would not come within the scope of block assessment. 18. The Commissioner of Income tax (Appeals) noticed that the Assessing Officer had held that the amounts received from the three stock-brokers on 'sale of investments' were sham and bogus, yet the assessment against the respondent-assessee had been framed on protective basis. 19. The Commissioner of Income Tax (Appeals) issued letter no. 853 dated 21.11.2007 to the respondent-assessee setting out relevant facts like deletion of substantive addition in the case of M/s Taranjit Singh & Co., failure of the respondent-assessee to discharge onus to establish genuineness of the share transactions, clandestine sale of worthless shares for price of Rs. 2.5 crores, evidence of connivance of the stock-brokers who had allegedly sold the investments for cash to unknown persons and thereupon issued cheques in favour of respondent-assessee. Reply given by the respondent-assessee to the said letter was considered. 20. The Commissioner of Income Tax (Appeals), for the detailed reasons recorded, held that substantive addition of Rs. 2.1 crores and Rs. 40 Lakhs should be made in the hands of the respondent-assessee for Assessment-Years 1999-2000 and 2000-2001. This appellate order referred to statement on oath made by Hari Krishnan Punni authorized signatory for M/s. Ess Aar & Co. on 20.08.2002 before the Deputy Director of Income Tax (Inv.) and the second statement before the Commissioner of Income Tax (Appeals) on 27.02.2008. Statement on oath made by Mr. Sagun Garg authorized signatory for M/s Usha & Co. was also quoted. Statement by Mr. Bharat Bhushan Goyal, Director of respondent-assessee, was reproduced to show incongruities and to highlight negligible value of shares. 21. The Commissioner of Income Tax (Appeals) specifically rejected the challenge to validity of notice issued under Section 148 of the Act, recording that at the stage of issue of notice, prima facie belief that the income has escaped assessment was required. The expression 'reason to believe' meant a cause or justification to know or suppose that the income had escaped assessment and it should not read to mean that the Assessing Officer had finally ascertained and concluded that income had escaped assessment. 22. The Commissioner of Income Tax (Appeals), however, did not specifically refer to 'reason to believe' and facts in the appeal preferred by the respondent-assessee for Assessment Year 2000-2001, noting that the grounds taken were similar to those taken in the appeal preferred for Assessment Year 1999-2000 and had been dealt with. 23. Appeal for Assessment Year 2000-2001 was accordingly dismissed with substantive addition of Rs.40 lakhs in the hands of the respondent-assessee. Discussion on Question No. 1, ITA No. 74/2007 relating to Assessment Year 1999-2000. 24. The 'reasons to believe' recorded by the Assessing Officer as quoted in the order passed by the Tribunal reads as under:- “M/s Shubh International Ltd. SCO 1104-05, Sector 22-B, Chandigarh Assessment Year 1999-2000 Reasons for issue of Notice under Section 148 23. Appeal for Assessment Year 2000-2001 was accordingly dismissed with substantive addition of Rs.40 lakhs in the hands of the respondent-assessee. Discussion on Question No. 1, ITA No. 74/2007 relating to Assessment Year 1999-2000. 24. The 'reasons to believe' recorded by the Assessing Officer as quoted in the order passed by the Tribunal reads as under:- “M/s Shubh International Ltd. SCO 1104-05, Sector 22-B, Chandigarh Assessment Year 1999-2000 Reasons for issue of Notice under Section 148 The company M/s Shubh International Ltd., SCO 1104-05, Sector 22-B, Chandigarh filed its return of income on 31.12.1999 declaring income at Rs.6,899/-. The same was processed u/s 143(1) on 5.6.2000. As per information received from Addl. Director of Income Tax (Inv.), Panchkula vide letter No. Addl.DIT(Inv.)/CHD/2002-03/1777 dated 4.9.2003, received through the Addl. CIT Range-III office letter No. 2416 dated 9.9.2001, the company, Shubh International Ltd., Chandigarh claimed to have invested Rs.2,10,000,00/- with M/s Taranjit Singh & Co. Liquor Contractors, Chandigarh during the F:Y: 1998-99 relevant to the A:Y: 1999-2000. Till now this amount was not repaid as per inquiries conducted by Investigation Wing Shubh International Ltd. has given only entry and actually no deposits/investments were made with M/s Taranjit Singh & Co., Chandigarh. Since the amount Rs.2,10,00,000/- was first deposited in the account of the company maintained with Bank of Baroda, Pakhowal Road, Ludhiana, the source of this amount remained unexplained within the meaning of the Section 148 of the IT Act in the hands of Shubh International Ltd. I have therefore reasons to believe that income to the extent of Rs.2,10,00,000/- has escaped assessment. Hence, a notice u/s 148 is being issued to M/s Shubh International Ltd. for the A:Y: 1999-2000. sd/- (AMRIK SINGH)30.3.04 Income Tax Officer, Ward 3(3) Chandigarh.” 25. The Tribunal in the impugned order vide paragraph Nos. 20 to 27 has held as under:- “20.The record revealed that search & seizure operation under Section 132 of the Income Tax Act was conducted at the residential and business premises of ITA Nos. 74/2017 & 75/2017 Page 13 of 42 Smt. Mohinder Kaur and others on 23.05.2002. Late Shri Taranjit Singh was husband of Smt. Mohinder Kaur, had been doing liquor business at Chandigarh and Panchkula. After his death on 19.04.20000, business was taken over and carried out by his wife Smt. Mohinder Kaur till the date of the search. The reasons recorded would, therefore, clearly suggest that information was received from ADIT (Investigation) Panchkula vide letter dated 04.09.2003, was in reference to the search conducted in the cases of Smt. Mohinder Kaur, legal heir of late Shri Taranjit Singh. 21. In the reasons, the Assessing Officer on the basis of information received from ADIT (Investigation) noted that assessee company has invested Rs.2.10 Cr with M/s Taranjit Singh & Co., Chandigarh, liquor Contractor in assessment year under appeal and till date, this amount has not been repaid as per enquiries conducted by Investigation Wing. It is also noted in the reasons for re-opening of the assessment that assessee had given only entry and actually no deposits/investments were made with M/s Taranjit Singh & Co., Chandigarh. This information supplied by the Investigation Wing would reveal that actually no investments have been made by assessee company with M/s Taranjit Singh & Co., Chandigarh. 21. In the reasons, the Assessing Officer on the basis of information received from ADIT (Investigation) noted that assessee company has invested Rs.2.10 Cr with M/s Taranjit Singh & Co., Chandigarh, liquor Contractor in assessment year under appeal and till date, this amount has not been repaid as per enquiries conducted by Investigation Wing. It is also noted in the reasons for re-opening of the assessment that assessee had given only entry and actually no deposits/investments were made with M/s Taranjit Singh & Co., Chandigarh. This information supplied by the Investigation Wing would reveal that actually no investments have been made by assessee company with M/s Taranjit Singh & Co., Chandigarh. 22. The Assessing Officer, in the block assessment under Section 158BC of the Act in the case of Smt. Mohinder Kaur, wife of late Shri Taranjit Singh dated 22.08.2005 observed that after detailed enquiries and analysis of the statements of Directors on record, it emerged that transactions of sale of shares are sham transactions and sale transaction by assessee through the broker was not genuine. The amount was deposited in the bank account of the broker in cash, thereafter transferred to bank account of the assessee company from where drafts in favour of M/s Taranjit Singh & Co., Chandigarh were issued belong to Shri Taranjit Singh. It is also observed that Shri Taranjit Singh routed his undisclosed funds in the name of assessee company in the business of M/s Taranjit Singh & Co., Chandigarh and ultimately invested in his personal business and for acquiring various assets in his name and in the name of his wife. The amount so invested is assessable in the hands of late Shri Taranjit Singh as his undisclosed income. The total amount involved in both assessment years under appeal in a sum of Rs.2.50 Cr, was assessed as undisclosed income in the hands of late Shri Taranjit Singh, on substantive basis. It would, therefore, make it very clear that on the basis of investigation conducted after search in the case of Smt. Mohinder Kaur, legal heir of late Shri Taranjit Singh, it came on the record of the Revenue Department that the entire deposit of Rs.2.50 Cr was the money of Shri Taranjit Singh from his undisclosed funds which was routed through the brokers into the bank account of the assessee company and then transferred to M/s Taranjit Singh & Co., Chandigarh. This was the sole reason for initiating the re-assessment proceedings against the assessee. Therefore, where in question of holding that Assessing Officer has reason to believe that income chargeable to tax has escaped assessment in the hands of the assessee company. The Assessing Officer also did not examine this information received from ADIT (Investigation) and without applying his mind accepted the same to be correct. In the assessment order, Assessing Officer has referred to statements recorded by DDIT (Investigation) Chandigarh of Shri Bharat Bhushan Goyal, Director of the assessee company in which he has briefly explained that since incorporation of the assessee company, there were no manufacturing activities. Therefore, assessee company started making inter-corporate investments. List of many investments was produced and filed. 23. Shri Taranjit Singh, who was friend of the Director, wanted to control the assessee company but the formalities could not be completed but actually he started controlling the co, he sold/liquidated the investments of company. Original certificates and transfer deeds were given to him. Bank account opened and operated in his 23. Shri Taranjit Singh, who was friend of the Director, wanted to control the assessee company but the formalities could not be completed but actually he started controlling the co, he sold/liquidated the investments of company. Original certificates and transfer deeds were given to him. Bank account opened and operated in his consultation. Shri Taranjit Singh, by that time expired. Since Shri Taranjit Singh wanted to take over control of the assessee company, therefore, he sold/liquidate the shares of the assessee company and for that purpose, he wanted to make him as a partner in his liquor business. The Board of Directors of the assessee company passed a resolution for selling the investments. The investments were to be sold through Shri Taranjit Singh. He has conformed in his statement that investment of Rs.2.10 Cr was initially made in March, 1999 and Rs.40 lacs was invested in April, 1999. The Assessing Officer, however, took it adversely against the assessee company. The source of the deposits in the bank account of the assessee were from the three brokers through the banking channel and all the brokers have confirmed selling investments of the assessee company through them and payments made by them through banking channel. The Assessing Officer did not believe their statement because the brokers have not mentioned the Ledger Folio Number/distinct number and name of the purchaser etc in the record. It may be noted that in ledger, generally no details of shares are mentioned. 23(i) The Assessing Officer also noted that assessee has failed to supply complete address of the companies, the shares of which were sold through three brokers. the Assessing Officer also noted that the assessee received cheques from these three brokers in lieu of sale of investments by the Directors of the assessee in connivance with Shri Taranjit Singh, therefore, the whole complexion of the findings of the Assessing Officer would reveal that everything was done by Shri Taranjit Singh in order to control the business affairs of the assessee company and even the shares/investments of the assesseee company were sold by the three brokers through Shri Taranjit Singh. In this way, the Revenue Department had taken a stand that the entire amount shall have to be added on substantial basis in the hands of Shri Taranjit Singh which, in-fact was also done in the case of Shri Taranjit Singh through the legal heir in block assessment. The Assessing Officer, therefore, on the basis of the same, made the protective assessment in the case of the present assesseee company. The Assessing Officer also noted in the assessment order that protective assessment is made because ld. counsel for the assessee intimated him that substantive addition is made in the case of M/s Taranjitsingh& Co., Chandigarh which fact is incorrect because the order for assessment year 2000-01 was passed earlier on 30.03.2005 and block assessment order in the case of Smt. Mohinder Kaur was passed on 22.08.2005. These facts would clearly reveal that Assessing Officer did not apply mind to the information received from the ADIT (Investigation), Panchkula and did not examine any information on the matter in issue. He was having no tangible material with him to show that there was any reason to believe that income chargeable to tax in the hands of the assessee has escaped assessment. There were no reference to any document or material except the information received from ADIT (Investigation), Panchkula which could not be recorded as a material or evidence that prima-facie showed or established nexus or link which disclosed escapement of income. The information received from ADIT (Investigation) was not a pointer and did not indicate escapement of income in the case of the assessee. 24. Hon‟ble Gujrat High Court in the case of Inductotherm (India) P. Ltd. V M. Gopalan, DCIT, 356 ITR 481 held as under: “The power to reopen an assessment is available either in a case where a return has been accepted under Section 143(1) of the Income Tax Act, 1961, or a scrutiny assessment has been framed under Section 143(3) of the Act. A common requirement in both cases is that the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment. There should be tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.” It was also noted, “(ii) that in two out of the four reasons recorded by the Assessing Officer for re-opening the assessment, he stated that he needed to verify the claims to bad debts and the admissibility of the bad debts written off. For mere verification of the claim, power for re-opening of the assessment could not be exercised. The Assessing Officer in the guise of power to reopen an assessment, cannot seek to undertake a fishing or roving inquiry and seek to verify the claims as if it were a scrutiny assessment.” 24((i) Hon‟ble Delhi High Court in the case of Signature Hotels P. Ltd. Vs ITO & Another 338 ITR 51 held as under: -“Held, allowing the petition that the re assessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation that the petitioner had introduced money amounting to Rs. 5 lakhs during financial year 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of Section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs.90 lacs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The re-assessment proceedings were not valid and were liable to be quashed.” 24(iii) Hon‟ble Bombay High Court in the case of CIT Vs Smt. ManibenValji Shah 283 ITR 453 held as under: “The assessee purchased a flat in the accounting year relevant to the assessment year 1988-89 for Rs.2,50,000 and filed a return but no regular assessment order was passed. A notice was issued to the assessee on October 10, 1991 under Section 148 on the ground that details regarding the source of funds for the purchase had not been furnished. The Tribunal held that notice was not valid. On appeal to the High Court: Held, dismissing the appeal, that a bare perusal of the notice dated October 10, 1991, clearly indicated that the officer wanted to know the details with regard to the source of funds for purchase of the flat for a sum of Rs.2,50,000. Obviously there was no question of the Assessing Officer having any basis to reasonably entertain the belief that any part of the income of the assessee had escaped assessment. The notice was not valid.” 25. The Assessing Officer in the reasons further noted that since the amount of Rs.2.10 Cr was first deposited in the account of the assessee company maintained with Bank of Baroda, Ludhiana and source of this amount remained unexplained within the meaning of Section 148 of the Act, therefore, he has reason to believe that income chargeable to tax has escaped assessment. This alleged belief was also not tenable in law because once it is a stand of the Revenue Department that the 25. The Assessing Officer in the reasons further noted that since the amount of Rs.2.10 Cr was first deposited in the account of the assessee company maintained with Bank of Baroda, Ludhiana and source of this amount remained unexplained within the meaning of Section 148 of the Act, therefore, he has reason to believe that income chargeable to tax has escaped assessment. This alleged belief was also not tenable in law because once it is a stand of the Revenue Department that the entire undisclosed money belong to Shri Taranjit Singh as per block assessment order passed in the case of Smt. Mohinder Kaur, legal heir of Shri Taranjit Singh which was routed through the bank account of the assessee, therefore, there is no reason to believe that income chargeable to tax has escaped assessment in the case of the assessee company. There is, thus, change in the stand of the Department for the purpose of making the addition in the hands of the assessee. 25(i) As per information, all brokers exist. Assessing Officer was aware of transaction of sale and purchase of shares/investments through brokers prior to recording of reasons for re-opening of assessment. Source of deposit in bank account of the assessee was sale of Shares/investments, within knowledge of Assessing Officer. The brokers prior to recording of reasons under Section 148 of the Income Tax Act in their statements to DDIT (Investigation) confirmed selling of shares/investments of assessee company. It is also interesting to note that A.O. in assessment order observed, Directors have introduced the money in bank account of assessee company from the source best known to them. Therefore, decision in case of Saraswati Devi (supra) apply in favour of assessee. No information has been received by Assessing Officer from Investigation Wing that assessee company received any accommodation entry. The reasons, however, records that assessee company given entry to Shri M/s Taranjit Singh & Co. The case law cited by ld. DR are mainly on account of bogus/accommodation entries received by assessees. Therefore, there may not be a justification to reopen assessment in case of assessee company. 25(ii) It may be noted here that the ld. CIT (Appeals) in the case of Smt. Mohinder Kaur, legal heir of Shri Taranjit Singh deleted the entire addition of Rs.2.50 lacs vide order dated 12.09.2005 mainly on the reason that since the deposits from the assessee company have been duly disclosed and no material was detected during the course of search to prove undisclosed income in the hands of late Shri Taranjit Singh, therefore, same would not fall within the meaning of Chapter XIV-B of the block assessment. The entire addition of Rs.2.50 Cr was deleted in the case of late Shri Taranjit Singh. On further appeal by the revenue and the assessee, ITAT vide order dated 26.04.2012 set aside and quashed the block assessment being bad in law and without jurisdiction because no warrant of authorization was issued in the name of Smt. Mohinder Kaur, legal heir of late Shri Taranjit Singh, therefore, no block assessment order could be framed in this case. It would, therefore, show that technically, the addition has been deleted in the case of Shri Taranjit Singh by quashing the block assessment proceedings but the finding of fact recorded by the Revenue Department would remain same that Shri Taranjit Singh disclosed the fact of receipt of Rs.2.50 Cr from the assessee company in his books of account. Therefore, the finding given by the Assessing Officer in the block assessment that the entire money was of Shri Taranjit Singh routed through the name of the assessee company in his business remain unchallenged and as such Revenue Department cannot take a somersault in the case of the assessee for the purpose of re-opening of the assessment or to make addition on substantive basis later on. 26. We may note here again that the Assessing Officer in the case of the present assessee, first passed the assessment order under Section 148/143(3) on 30.02.2005 for assessment year 2000-01 and no block assessment order was passed by that date in the case of late Shri Taranjit Singh, therefore, passing of the protective assessment in the case of assessee company would also support our finding that the Assessing Officer was having no reason to believe that income chargeable to tax has escaped assessment in the case of assessee company, otherwise, Assessing Officer would not have made the protective assessment in the case of the present assessee company. The decisions relied upon by ld. counsel for the assessee, as reproduced above, clearly support the case of the assessee that it is not a fit case of re-opening of the assessment on the facts and circumstances of the case for merely making protective assessment in the hands of the assessee. Re-opening of assessment would be bad in law. The decision cited by ld. DR would not support case of revenue. 27. Considering the totality of the facts and circumstances of the case, noted above in the light of the material on record, we are of the view that Assessing Officer has not applied his mind to the information received from ADIT (Investigation) and he was having no tangible material with him to form his belief that income chargeable to tax has escaped assessment. Rather, there was no material available with the Assessing Officer to form his belief that income chargeable to tax has escaped assessment in the case of the assessee company. There was no reason to believe that income chargeable to tax has escaped assessment. The opening of the assessment has, thus, not been done validly in accordance with law. The reopening of assessment is bad in law. We, accordingly, set aside the orders of authorities below and quash the re-opening of the assessment under Section 147/148 of the Income Tax Act.” 26. The Tribunal for examining the issue of reopening, viz. satisfaction of the jurisdictional preconditions and „reasons to believe‟, has referred to the block assessment order passed under Section 158BC of the Act in the case of Ms. Mohinder Kaur, dated 28[th] August, 2005 (see paragraph 22 of the impugned order). Referring to the statement of Bharat Bhushan Goyal, Director of the respondent-assessee, it was opined that Taranjit Singh was his friend and wanted to take control of the respondent-assessee but formalities had not been completed. Taranjit Singh had started selling and liquidating the investments of company, for which original certificates and transfer deeds were given to him. Bank account in the name of respondent- assessee was opened in the Bank of Baroda and was operated in consultation with Taranjit Singh. Investments were sold with intent to make the respondent-assessee a partner in his liquor business. The Assessing Officer had passed protective assessment orders, with intent to tax the entire amount on substantive basis in the hands of Taranjit Singh & Co. This was done through block assessment order passed against the legal heir of Taranjit Singh. 27. The aforesaid findings, we would observe, are completely against the principles applicable to Section 148 read with Section 147 of the Act, for the following reasons:- (A)Return filed for the Assessment Year 1999-2000 was processed under Section 143(1) and had not been taken up for scrutiny assessment under Section 143(3). (B)'Reasons to believe' for the Assessment Year 1999-2000 were recorded on 30[th] March, 2004. The block assessment order in the case of Ms. Mohinder Kaur as legal heir of Taranjit Singh was passed on 22[nd]August, 2005, i.e. more than a year after the „reasons to believe‟ were recorded. recorded on 30[th] March, 2004. The block assessment order in the case of Ms. Mohinder Kaur as legal heir of Taranjit Singh was passed on 22[nd]August, 2005, i.e. more than a year after the „reasons to believe‟ were recorded. (A)Return filed for the Assessmen