IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `F', NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
&
SHRI J.S. REDDY, ACCOUNTANT MEMBER
ITA No. 5414/Del/2012
Assessment Year: 2002-03
RL Travels, vs. ACIT,
118, Ansal Bhawan, Central Circle-12,
Kasturba Gandhi Marg, New Delhi.
New Delhi.
AAAFR7325R
(Appellant) (Respondent)
Appellant by : Sh. Ashwani Kumar, CA
Respondent by : Sh. Sameer Sharma, Sr. DR
ORDER
PER H.S. SIDHU, J.M.
The assessee has filed the present appeal against the impugned
order dated 03.09.2012 passed by the Commissioner of Income Tax
(Appeals)-XXXI, New Delhi for A.Y. 2002-03.
2. At the time of hearing ld. Counsel for the assessee stated that in
the case of assessee's sister concern exactly similar legal issue was
raised before the ITAT, Delhi `C' Bench and the Bench has quashed the
reopening of assessment. He has filed a copy of the order dated June
18, 2014 in the case of assessee's sister concern i.e. reported as (2014)
33 ITR (Trib) 526 (Del.) Indo Arab Air Services vs. ACIT. He requested
that keeping in view of the decision of aforesaid case the reopening of
assessment in the case of assessee may be quashed. On the contrary
ld. DR relied upon the order passed by the Revenue Authorities.
ITA No. 5414/D/2012 RL Travels 2
2.1 We have heard the both parties and perused the records available
with us specially the order passed by the ITAT Delhi `C' Bench in the case
of assessee's sister concern i.e. Indo Arab Air Services vs. ACIT reported
in [2014] 33 ITR (Trib) 526 (Del.). The relevant finding given by the ITAT
Delhi `C' Bench (supra) is reproduced as under:
"We have heard rival contentions and perused the entire
material available on record. Section 147 can be invoked
when the Assessing Officer has "reason to believe" that
any income chargeable to tax has "eascaped assessment".
Thus, the crucial point is that the AO should have "proper
reason to believe the escapement of income". The words
"reason to believe" and "escapement of income" have
been judicially interpreted by various courts.
The Hon'ble Supreme Court in the case of Lakhmani
Mewal Das (1976) 103 ITR 347 (SC) has held that the
powers of the Income-tax Officer to reopen the assessment,
though wide, yet are not plenary. The words of the statute
are "reason to believe" and not "reason to suspect". The
reopening of an assessment is a serious matter and it
should be ensured that these powers are used by the AO
properly. Thus, the Hon'ble Supreme Court has held that
the reason to suspect cannot be a basis for reason to
believe.
The Hon'ble Supreme Court in the case of Ganga Saran
and Sons P. Ltd. [1981] 130 ITR 1 (SC) has held that the
amended words in section 147, i.e., "has reason to
believe" are stronger than the words "is satisfied". The
belief entertained by the AO must not be arbitrary and it
must be based on reasons which are relevant and material.
The court though cannot go into the adequacy or
sufficiency of the reason but court can certainly examine
whether the reasons are relevant and have bearing on the
matter in regard to which the belief is exercised.
The Hon'ble Supreme Court in the case of Kelvinator of
India Ltd. [2010] 320 ITR 561 (SC) has also held that for
the AO to reopen the assessment there should be tangible
material to come to the conclusion and should have a live-
link with the formation to belief to come to a conclusion
that there is escapement of income.
On similar lines, the Hon'ble Supreme Court in the case
of Sheo Nath Singh [1971] 82 ITR 147 (SC) has held that
ITA No. 5414/D/2012 RL Travels 3
the reason to believe must be that of a reasonable person
based upon reasonable grounds; the AO may act on direct
or circumstantial evidence, but not on mere suspicion or
vague information. If proper reason for his belief does not
exist then the reopening of assessment will be without
jurisdiction.
Considering the facts of the case before us in the light of
the above pleadings and other judgments on the meaning
of the words "reason to believe", as recorded, we have to
examine whether in the assessee's case the reasons as
recorded constitute a tangible and correct and are
indicative escapement of income in material terms, or they
amount to mere suspicion, vague, or incorrect information
which ought to have been further verified by the AO from
the assessee record, which are not disputed to be
available.
In order to make a reasonable belief in terms of section
147 the AO should be in possession of some valid
information which should have a live nexus with the
assessee's record of income. The information should be
correct in the first place and should not merely raise
suspicion. In the case before us it has not been disputed
that the information in possession of the AO was only to
the effect of communication from the Enforcement
Directorate which is reproduced above.
From this communication the Enforcement Directorate
has communicated
(i) The assessee has not disclosed cash transactions in
its books of accounts.
(ii) In the investigation of the Enforcement Directorate
no plausible explanation was offered by the partner
of the assessee about the source of this cash
received.
This Enforcement Directorate information in the first
place is not correct in as much as the assessee is
regularly assessed to income tax. Return along with
account statement, sales, purchases, bank transactions
are filed on the basis of audited books of account. The
AO himself has given a finding in the reasons that the
cash transactions are recorded in the books of account.
Thus from the AO's reasons itself it emerge, the
information sent by the Enforcement Directorate was not
correct.
ITA No. 5414/D/2012 RL Travels 4
The information no plausible explanation from the
Enforcement Directorate point of view again is vague
and cannot be a basis for the AO to form a belief unless
the statement given by Mr. Chetan Gupta to this effect
was also enclosed with the information which does not
emerge from record. Thus, both the suspicion raised by
Enforcement Directorate were incorrect and ought to
have been verified from available record by the AO to
come to a reason to believe that the assessee's income
had escaped assessment.
When the AO has recorded in the reasons that all
the cash transactions are recorded in the assessee's
books of account, entire edifies of the veracity of the
Enforcement Directorate information fails. Besides, in
the absence of any information about the non-plausible
explanation from the Enforcement Directorate point of
view this vague information on its own also cannot be a
basis to form a reasoned belief. Thus, in our considered
opinion the AO has blindly relied on the suspicion
intimated by the Enforcement Directorate. The Assessing
Officer on one hand gave a reason that transactions are
recorded, on the other hand without making any effort
recorded reason to believe to reopen the assessment of
the assessee.
In our considered view, the reason to believe made
by the AO are self-contradictory and based only on
suspicion. The ld. CIT(Appeals) has decided the issue
only on the issue of change of opinion or sufficiency of
reasons and not on the tenability and correctness of
reasons and the AO's own contradictory reasons.
The assessee has assailed the primary information
itself being wrong, vague and bereft of any material. We
find merit in the argument of ld. Counsel that the reason
to believe as formed by the AO are not in terms as
contemplated by section 147 and as mandated by the
courts in the decisions referred to above. Respectfully
following the above referred judgments by the Hon'ble
Supreme Court, i.e., Lakhmani Mewal Das [1976] 103
ITR 437 (SC); Ganga Saran & Sons P. Ltd. [1981] 130
ITR 1 (SC), Kelvinator of India Ltd. [2010] 320 ITR 561
(SC) and Sheo Nath Singh [1971] 82 ITR 147 (SC), we
hold that the AO did not have valid reason to believe that
ITA No. 5414/D/2012 RL Travels 5
impugned income had escaped assessment. Thereby, the
reopening is quashed as bad in law.
Since we have held the reopening of assessment to
be bad in law, therefore, we need not to go into the merits
of the case.
In the result, the assessee's appeal is allowed and
that of the Revenue is dismissed.
The order pronounced in the open court on June
18, 2014."
3. Keeping in view of the aforesaid order passed by the ITAT Delhi
`C' Bench in the case of assessee's sister concern (supra) we are of the
view that the legal issue raised by the assessee is exactly similar to the
case of assessee's sister concern i.e. Indo Arab Air Services vs. ACIT
(supra) and respectfully following the aforesaid order, we quash the
reopening of assessment in the case of assessee by accepting the
present appeal.
4. In the result, the appeal filed by the assessee is allowed.
The order is pronounced in the open court on 22.10.2014
Sd/- Sd/-
(J.S. REDDY) (H.S. SIDHU)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 22/10/2014
*Kavita, P.S.
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
ASSISTANT REGISTRAR
ITA No. 5414/D/2012 RL Travels 6
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