The Principal Commissioner of Income Tax-4 v. Geetanjali Credits and Capital Limited

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:- S.No. Name of the share broker Name of the company whose shares were sold Date Amount

1. S.K. Sharma & Co. Samksons Paper Ltd., New Delhi 30.03.99 Rs.5,00,000/-

2. Usha Garg & Co. Manan Steel Ltd. Ldh. -do- Rs.10,00,000/-

3. EssArr& Co. Randeep Capital Srvices Ltd. -do- Rs.5,00,000/-

4. EssArr& Co. Randeep Capital Services Ltd. -do- Rs. 5,00,000/-

5. Usha Garg & co. Manan Steel Ltd. Ldh. 17.04.99 Rs.5,00,000/-

6. EssArr& Co. Kinetic Trust Ltd. New Delhi. -do- Rs.5,00,000/-

7. S.K. Sharma &Co. Samksons Paper Ltd. -do- Rs.10,00,000/- New Delhi. 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 3rd 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 stockbrokers 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 19th 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."

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 stockbrokers 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 respondentassessee 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 respondentassessee. 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:-

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 28th 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 respondentassessee 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 30th March, 2004. The block assessment order in the case of Ms. Mohinder Kaur as legal heir of Taranjit Singh was passed on 22nd August, 2005, i.e. more than a year after the „reasons to believe‟ were recorded. In these circumstances, the findings in the block assessment order; or that substantive addition was made in the case of Taranjit Singh & Co. and protective addition was made in the case of the respondent-assessee vide Assessment Order dated 16th March, 2006, were completely irrelevant and not germane for deciding the validity of issue of notice, which has to be determined and decided on the basis of the facts as they existed when the notice under Section 148 read with Section 147 of the Act was issued. Validity of the “reason to believe” cannot be examined on basis of findings on merits in the assessment order, appellate orders in the case of respondentassessee or the block assessment order or appellate orders in the case of M/s Taranjit Singh & Co. Furthermore, income must be taxed and assessed in the hands of the right person, notwithstanding another person had been 'wrongly' subjected to tax or had declared and paid tax on the income.

28. Legal principle applicable where return of income is processed and not subjected to regular/scrutiny assessment was examined and settled by the Supreme Court in Assistant Commissioner of Income Tax versus Rajesh Jhaveri Stock Brokers Private Limited, (2008) 14 SCC 208 in the following words:-

29. This ratio was reiterated in Deputy Commissioner of Income Tax and Another versus Zuari Estate Development and investment Company Limited, (2015) 15 SCC 248 observing that an order under Section 143(1) is not an Assessment Order by which the Assessing Officer forms an opinion on merits. Hence, principle of change of opinion is not applicable in such cases.

30. In Rajesh Jhaveri Stock Brokers Private Limited (supra), the Supreme Court emphasis that the word 'reason' in the phrase 'reason to believe' would mean cause or justification. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the question of escapement by legal evidence or conclusion. Escapement is a matter to be finally decided when the Assessment Order under Section 147 read with Section 143(3) of the Act is passed. Reliance was placed on earlier decision of the Supreme Court in Central Provinces Manganese Ore. Company Limited versus I.T.O., Nagpur,(1991) 191 ITR 662 (SC) wherein it has been observed that at the stage of initiation, the final outcome of the proceeding is not relevant. The requirement at the initiation stage is "reason to believe" and not the established fact of escapement of income. Further, at the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief as was recorded by the Assessing Officer. Whether or not the material would conclusively prove escapement was not the concern at that stage. The mandate of Section 147 of the Act, when it uses the word 'reason to believe' is that the belief must be that of an honest and reasonable person based on reasonable grounds and not mere suspicion, gossip or rumour. In other words, the basis in the formation of opinion for re-opening should not be wholly vague, indefinite, far-fetched and remote. At the same time, adequacy or sufficiency of reason, as distinct from existence or relevance, cannot be investigated and made subject matter of challenge in appellate or writ proceedings. Satisfaction of the Assessing Officer on the „reason to believe‟ is subjective. Such satisfaction can be challenged on the ground of irrelevance of the reasons in the sense that the reasons indicated must have live nexus between the knowledge of the Assessing Officer and formation of belief and not on merits, for formation of belief by the Assessing Officer falls within the domain and realm of subjective or personal satisfaction of the Assessing Officer.

31. We would now refer to the statement of Bharat Bhushan Goyal, Director of respondent-assessee recorded by the Deputy Director (Inv.) Chandigarh on 3rd September, 2002, which reads as under:- “I state on oath that I am founder Director of M/s Shubh International Limited, SCO 1104-05. Sectior 22-B, Chandigarh. This company was incorporated 1990-91. The company was incorporated with the intention of manufacturing egg trays. However, this business could not be started. The other directors in this company were sh. Kewal Krishan s/o late Sh. Satparkash, my friend & Sh. Harmesh Jain s/o Sh. Ram Prkash. Initially, the Directors contributed about one lac and purchased land in village Haripur, Distt. Panchkula near Shubh Poultry Farm Ltd. This land is still in the name of company. The total area of land was about 2 acres. So far this land has not put to any use. For one year, we tried to have crops from this land but due to non-availability of water and the flow of rainwater on this land, we were not successful. After about three-four years, we made further investment in this company. This investment was by promoters i.e. myself, kewalkrishan and our Friends & relations. So far, I recollect Mr. Harmeshdisaasociated himself from the company. In December, 1996, Public issue of this company was floated. This issue was for Rs. 95 lacs. Before this issue promoters have further contributed towards equity of the company. List of the shares held by the promoters at the time of public issue is produced/filed. This issue was fully subscribed. The list of share holders as on today is also produced and filed. Myself, Sh. Kewal Krishan and Sh. Sunil Gupta C.A. are the present directors of the Company. Sunil Gupta, was taken as Director in 1996 at the time of public issue of the company. Sh. Sunil Gupta is not holding any share in this company. Since, the project of manufacturing of egg tray did not materialized, the company started making inter-corporate investments. List of main investments produced/filed. In the inter-cooperate investments company was not having any income Sh. Taranjit Singh, who was my friend offered me to have control of this company. He promised me to pay for my investments in this shares of this company. Legally this formality was not completed but he started controlling the affairs of the company. He sold/liquidated the investments of this company. Myself, Kewal Krishan Goel handed over the original share certificates along with signed transfer deeds to Taranjit Singh for disposing of the same. For this, a bank account was opened with Bank of Baroda, Civil Lines, Ludhiana which was operated by the Directors of the company in consultation with Sh. Taranjit Singh. How he manages to sell the investments is not known to me as I or Kewal Krishan were not associated with these transactions. It may be informed here that the market value of shares held by this company was negligible, as these company were not paying any dividend since our investments. For this reason also we wanted to get rid to this company and handed over the control of this company to Sh. Taranjit Singh informed me that he is going to make this company as a partner in his liquor business. For this, he might have got some papers/documents signed from me or sh. Kewal Krishan. But, actually we have not knowledge of this business activity. Sh. Taranjit Singh expired in the month of April, 2000. At that time, the account books and other documents were incomplete. On the basis of vouchers/documents available in the office of the company. We got the books completed. This we have to do as legally, we were answerable for all legal actions of the company. In the books of accounts, entries were made as per vouchers, we cannot guarantee the correctness, genuineness of the vouchers supplied by Sh. Taranjit Singh, I say with guarantee that I have not gone to any broker for the sale of investment in the form of shares held by M/s Shubh International Ltd. It was Sh. Taranjit Singh only who sold/disposed off these investments. Sh. Taranjit Singh expired in April, 2000. So far we have not received any amount either from Sh. Taranjit Singh or from his legal heris. We are still pursing the matter with Smt. Mahinder Kaur for payment of our investments. It may be stated here that Sh. Taranjit Singh did not negotiated any amount for payment on account of investments by promoters in the company. We also did not press for the negotiation of the price to be paid by Sh. Taranjit Singh as the value of the investments of the company was nominal and not known at that time.

32. Shagun Garg, authorized signatory of M/s Usha Garg and Company, Ludhiana in his statement had stated as under:-

International Ltd. to various persons brought by the representative of the company i.e. Shubh International Ltd. and mediators who deal with us in the sale and purchase of shares. The payment was received in cash from the buyers brought by the representative of the company and the mediators who deal through us. The cash was deposited in may bank account and cheques were issued thereafter to them. This is a common practice to accept cash from the buyers and deposit cash in the bank and issue cheques to the seller after deducting after brokerage.

33. Hari Krishan Punni, authorized signatory of M/s Ess Arr and Company, Ludhiana in his statement recorded on 20th August, 2002 had stated:-

International Ltd. for about 90 lacs during the last four years. We have already furnished you the account of above company. Giving all the details of size of above transactions.

International ltd. Who use to visit you for delivery of shares and get payments on behalf of the company when shares are sold to you. What was the mode of payment i.e. cash or cheques? A The representative of the company i.e. M/s Shubh International Ltd, use to come and give order frequently inthe year 1998 for the sale/purchase of shares. The procedure for the sale of shares is firstly representative places the orders for purchase of shares which is written in a register i.e. day book. When we execute the order then the delivery of shares is made to us and we made the payment within a stipulated period of 12-15 days of the execution of the deal. We usually made the payments by cheque but when the amount is Rs.20,000/- or less it was made also in cash.

International Ltd. Did the representative of the company brought the buyer with themselves and asked you to execute the deal?

Ltd. to various persons brought by the representatives who deals with us. I want to make it clear that………. I was directly involved as the transactions of sale/purchase of shares of Shubh International Ltd. were of special kind i.e. of different nature. The representative of the company used to bring buyers in whose names shares were to be transferred. The cash payments were received from the buyers brought by the representatives of the company M/s Shubh International Ltd. The cash brought by these so called buyers were deposited in my bank account and cheques were issued thereafter to the representative of the company M/s ShubhIntenational Ltd.”

34. Sudhir Kumar Sharma, proprietor of S.K. Sharma and Company, Ludhiana, in his statement recorded by the Assessing Officer on 11th March, 2005 had stated as under:-

35. In addition to the statements, the Assessing Officer had details of the credit entries i.e. investment made by the respondent-assessee of Rs.2.10 crores with M/s Taranjit Singh & Co. The aforesaid evidence and material was available with the Assessing Officer when he had recorded the 'reasons to believe'.

36. The impugned order passed by the Tribunal does not dispute the evidence and material, albeit holds that this material was not tangible for the three brokers did exist and it was known that the source of deposit in the bank account was a sale of shares/investments. No information was received by the Assessing Officer from the Investigation Wing that the respondent-assessee had received accommodation entry (see paragraph 25(i) of the impugned order). The aforesaid rationale is incorrect, for whether or not any accommodation entry was received has to be inferred and concluded from the facts by the Assessing Officer, and not by a third person. It is the subjective opinion formed by the Assessing Officer that has to be tested on the principle of an honest and reasonable person. In this case, the stockbrokers had elucidated on the sham and bogus nature of the share transaction i.e., investment and sale of worthless shares which was done through unknown persons who were the respondent-assessee's representatives, and other facts accepted and admitted in the statements which were recorded by the Investigation Wing.

37. Similarly, paragraph 25(ii) of the impugned order proceeds on wrong premise that when the block assessment order in the case of Ms. Mohinder Kaur was quashed on the technical ground that addition of Rs. 2.[5] crores could not have been made in the block assessment proceedings, re-opening under Section 147 read with Section 148 of the Act would not be justified, for the entire money of Taranjit Singh was routed through the respondentassessee or the Revenue could not take a 'somersault' for the purpose of reopening assessment or make addition on substantive basis later on. This reasoning is wrong and fallacious being contrary to law, for appellate orders in the case of Ms. Mohinder Kaur had not been passed when the 'reason to believe' in the case of respondent-assessee were recorded. The 'reason to believe' recorded cannot be set aside on the basis of the appellate order in the case respondent-assessee making substantive addition instead of protective additions made in the assessment order. Question of 'somersault' does not arise when protective addition made into substantive addition.

38. We, at this stage, reproduce the findings of the Tribunal in paragraphs 28 to 30, which read as under:-

39. There is a contradiction in the findings recorded in paragraphs 23 to 27 in the impugned order and what has been recorded in paragraphs 28 to

30. In paragraphs 23 to 27 the Tribunal accepts and holds that Taranjit Singh was responsible and the addition was assessable in his hands as undisclosed income. In paragraphs 28 to 30, the Tribunal, in fact, upholds and accepts that the investment was genuine and valid. We shall deal with the findings in Para 27 to 30 while examining question no. 2. Question No. 1 is accordingly answered in favour of the appellant/Revenue and against the respondent/assessee. Question No.1, ITA No. 75/2017 (AY 2000-01).

40. Order passed by the Tribunal does not record and exact the 'reason to believe' and without reproducing and examining the same, holds that following the reasons given for the Assessment Year 1999-2000, they would quash the reopening of the assessment under Sections 147 and 148 of the Act and also delete the addition of Rs.40 lacs made by the Commissioner of Income Tax (Appeals) on substantive basis. We have already commented upon the reasoning given by the Tribunal on the question of reopening for the Assessment Year 1999-2000. As the Tribunal has not considered and examined the 'reasons to believe' for the Assessment Year 2000-01, we would pass an order of remit for fresh consideration. Question No. 1 is accordingly answered. Question No.2, ITA No. 74/2017 (AY 1999-2000) & 75/2017 (AY 2000- 01).

41. As regards question No. 2 in ITA Nos. 74/2017, we have already pointed out contradiction of the first order of the Tribunal vide paragraphs 23 to 26, 27 and second portion of the order of the Tribunal vide paragraphs 28 to 30.

42. Apart from the said contradiction, we find that the Tribunal has not taken notice of the statements of Bharat Bhushan Goyal, and the three brokers, reproduced in the Assessment Orders, on the ground that there was violation of principles of natural justice. The reason given was that the Assessment Orders do not record that the assessee had been allowed to cross examine the brokers at the assessment stage. An adverse presumption has been drawn to affirmatively believe and hold that the respondent-assessee was not given opportunity to cross examine or was denied the right to cross examine because the Assessment Order did not record that such opportunity was granted. The presumption is wrong and perverse. The finding, in fact, ignores the grounds of appeal reproduced in the order of the Commissioner of Income Tax (Appeals) dated 19th September, 2008,which read:-

43. The assessee had not raised a specific ground that they were not furnished statements on oath or were denied opportunity to cross-examine the brokers. The Assessment Order specifically refers to the failure of the stock brokers to produce relevant documents/papers. Assessing Officer had not only relied upon the statements recorded by Deputy Director (Inv.) but had also himself recorded the statement of Shagun Garg on 11th March,

2005. The Commissioner of Income Tax (Appeals) had similarly recorded the statement of Hari Krishan Punni on 27th February, 2008 during the pendency of the appeal. Relevant facts noticed in the assessment order, statement an oath etc. have been passed over and overlooked.

44. In view of the aforesaid discussion, we would answer the substantial question of law No. (2) framed in ITA No.74/2017, relating to Assessment Year 1999-2000 in favour of the appellant-Revenue and against the respondent-assessee, albeit, with an order of remand to the Tribunal to decide the issues raised on merits after duly taking into account all facts and circumstances recorded by the Assessing Officer and the first Appellate Authority. The decision would be taken afresh without being influenced by the impugned order or present judgment. We have passed an order of remand on question No.(2) in the present ITA relating to Assessment Year 1999-2000 in view of the remand order in ITA No.75/2017 passed in respect of question No.(1). Question No.(2) in respect of ITA No.75/2017 is also accordingly answered in the manner indicated above with a direction to the Tribunal to decide the question afresh on merits.

45. The appeals are accordingly disposed of, with no order as to the costs. Parties would appear before the Tribunal on the 12th of March, 2019, when a date of hearing would be fixed. (SANJIV KHANNA) JUDGE (CHANDER SHEKHAR)

JUDGE JANUARY 15th, 2019 MR/VKR