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March, 04th 2014


                                           Date of decision: 14.02.2014

+       W.P.(C) 1608/2013 & CM Appl.3024/2013

                                                   ..... Petitioner
                   Through Mr Rakesh Gupta, Mr Rishabh Kapoor
                   and Ms Khshbu Upadhyay, Advs.
                                                ..... Respondent
                   Through Mr Rohit Madan, Adv.


        The petitioner in this case challenges the notice proposing

reassessment under section 147/148 of the Income Tax Act in respect of

assessment year 2005-06.    The assessee, an investment and security

business company, had raised additional capital and offered shares at a

premium of Rs.90 per share during the concerned assessment year. The

regular assessment under section 143(3) was completed by an order

WP(C) 1608/2013                                                Page 1 of 8
framed on 24.12.2007. The notice proposing reassessment, in the present

case reads as follows :

                              "ANNEXURE 'A'
              In this case initiation was received from DIT
        (Investigation), New Delhi which was circulated amongst the
        Assessing officers of Delhi Charge vide F. No. CIT-I/2005-
        06/2132 dated 13.03.2006. The information received
        indicated that the assessee is amongst the beneficiaries of
        bogus accommodation entries as under:
       Bank     Amount/       Date of      Name of       Bank a/c of   Account
       A/c in   instruments   receipt      party from    entry given   No.
       which    no.                        whom
       entry is                            received
       IDBI,      3,00,000/   10.06.2004   Ashiana       Corpn         4028
       KG         41708                    Electronics   Bank,
       Marg                                Pvt. Ltd.     Kamla
       IDBI,      3,00,000/   29.08.2004   Ashiana       Corpn         4028
       KG         41704                    Electronics   Bank,
       Marg                                Pvt. Ltd.     Kamla
       IDBI,      3,00,000/   10.06.2004   Paropkari     Corpn         4029
       KG         41710                    Finstock      Bank,
       Marg                                Pvt. Ltd.     Kamla
       IDBI,      2,00,000/   24.06.2004   Paropkari     Corpn         4029
       KG         41719                    Finstock      Bank,
       Marg                                Pvt. Ltd.     Kamla

WP(C) 1608/2013                                                        Page 2 of 8
        The information received also indicated that the bank
        accounts of M/s Ashiana Electronics Pvt. Ltd. and M/s
        Propkari Finstock Pvt. Ltd. were maintained and controlled
        by one Shri Hari Om Bansal, who has in statement given on
        oath on 12.04.2005 before the Investigation Wing admitted
        that he had received cash in lieu of cheque or draft to
        various persons through various bank accounts maintained
        by him with the help of his associates.
               In view of the reports received from the Investigation
        Wing and the above facts and findings, it is clear that the
        assessee company has not disclosed fully and truly all
        material facts necessary for its assessment for the assessment
        year under consideration. I am in possession of material that
        discredits and impeaches the particulars furnished by the
        assessee company and also establishes the link with the self-
        confessed "accommodation entry providers", whose business
        is to help assessee bring into their booms of accounts their
        unaccounted money.
              In view of the above facts, I have reason to believe that
        the assessee had introduced its unaccounted/ disclosed
        income routed through such bogus accommodation entries.
        Thus, the Income chargeable to tax amounting to Rs.
        11,00,000/ - during the A.Y. 2005-06 has escaped assessment
        in the case and there has been a failure on the part of the
        assessee to disclosed fully and truly all material facts
        necessary for his assessment in the AY 2005-06. Hence, the
        same is to be brought to tax under section 147 of the Income
        Tax Act. It is a fit case for initiating proceedings u/ s 147 of
        the Act. Sanction for issue of notice u/s. 148 as prescribed
        u/s 151, to assessee such income may kindly be accorded.
                                             (Signature of Officer)
                                           Name: KEYUR PATEL
                            Designation: DCIT. Circle - 15(1), N.D."

WP(C) 1608/2013                                                      Page 3 of 8
        The petitioner urges that on the face of it the impugned notice and

subsequent proceedings are beyond the authority of law. It is urged that

the fresh or tangible material, on the basis of which recourse to section

148 is proposed, existed even when the original regular assessment was

completed. The learned counsel pointedly referred to the first sentence of

the impugned notice stating that the intimation or report of the DIT

(Investigation) was circulated to all concerned including AOs of Delhi

Charge on 13.3.2006. It was therefore urged that the reasons in support of

the notice were based upon material which was stale and therefore plainly

outside the jurisdiction conferred under section 148. Counsel relied upon

the decision of Supreme Court in CIT vs. Kelvinator (India) Ltd. (2010)

320 ITR 561. The learned counsel relied upon the response given during

the assessment proceedings particularly the letters dated 20.9.2007,

5.11.2007, 15.11.2007, 29.11.2007, 10.12.2007 and 17.12.2007. It was

submitted that the details of the share applicants, who had applied for

allotment, sought for by the AO in the regular assessment were furnished

to the AO. It was submitted that in these circumstances the reopening of

assessment proposed on the basis of the material said to have been

contained in the investigation report of 13.3.2006 was a matter that had

WP(C) 1608/2013                                                   Page 4 of 8
been specifically enquired and gone into by the revenue. It was argued

that in these circumstances, the notice is illegal and liable to be quashed.

        Counsel for the revenue submitted that the notice no doubt adverted

to an investigation wing report of 13.3.2006. However, counsel argued

that this report was not on the record when the assessment was completed

originally on 20.4.2007. In the counter affidavit the revenue stated as

follows :

        "The contents of the para are correct and admitted to the
        extent that the Respondents had passed the order after
        application of mind and accepted the income declared by the
        Assessee with no adverse finding but all this done on the
        basis of material/documents disclosed by the Assessee. The
        main reason for reopening the assessment was that the
        Assessee has not disclosed full and true material and the
        same has led to escapement of Income. So, the notice u/s 148
        when issued after complying with all the legal formalities
        cannot be bad in law. Moreover the earlier order passed u/s
        143(3) cannot be made a basis for proving the reopening bad
        in law when there was no disclosure of full and true material
        by the Assessee before the Assessing authority."

        The learned counsel relied upon the following averment made in

additional affidavit filed after the counter affidavit is filed. The additional

affidavit was filed by one Arun S. Bhatnagar, Commissioner of Income

WP(C) 1608/2013                                                       Page 5 of 8
Tax, Delhi-V and affirmed on 16.12.2013. The relevant contents of the

said affidavit are as under :

        "3. That after going through the original assessment
        records, it has been noticed that letter dated 13.03.2006 was
        not on record before the Assessing Officer when the original
        assessment was framed on 24.12.2007.
        4.    The information regarding the letter dated 13.03.2006
        was received by the office of DCIT, Respondent No.1 after
        the proceedings u/s 143(3) were concluded and based on the
        contents of the letter dated 13.03.2006, appropriate
        proceedings have been initiated by the Department u/s
        147/148 of the Income Tax Act, 1961."

Counsel for the revenue urged that in terms of Kelvinator (India) Ltd.

(supra) the reassessment proceedings were within jurisdiction and ought

not to be interfered with.

        It is evident from the above discussion that the reassessment

proceedings were initiated by the impugned notice which expressly and

plainly states that "reasons to believe" are based upon the materials

contained in an investigation report of 13.3.2006. The notice itself does

not spell out that the report was not on the record when the original

assessment was completed on 24.12.2007 nor did the revenue even

suggest so in the counter affidavit filed in the proceedings. It is only in a

WP(C) 1608/2013                                                     Page 6 of 8
subsequently filed additional affidavit that the position is sought to be

clarified. Clearly this Court refrains from making such an enquiry, at a

time when the AO has, in the first instance, failed to spell out clearly in

the section 148 notice itself that such report was not on record. In other

words "the reasons to believe" do not state that even in one sentence that

the investigation report of 13.3.2006 was not with the AO when he

completed the assessment.      The material on record in fact suggests

otherwise; the nature of the queries put to assessee and the replies and

confirmation furnished to the AO in the course of the regular assessment

clarify that what excited the suspicion was indeed gone into by the AO

himself while framing the assessment under section 143(3). This Court is

fortified in its conclusions by the decision of the Supreme Court in

Commissioner of Police v. Goverdhan Das Bhanji AIR 1952 SC 16 where

it was held that public orders made by public authorities intended to have

effect on the public should be construed objectively with reference to the

language used rather than explanations subsequently offered.            This

principle was reiterated in a somewhat different vein in MS Gill V. Chief

Election Commissioner, AIR 1978 SC 851 by the Supreme Court. Such

being the case this Court has no doubt that the impugned notice, in the

WP(C) 1608/2013                                                   Page 7 of 8
circumstances of the case is based upon stale information which was

available at the time of the original assessment and in fact appears to have

been used by the AO at the relevant time i.e. during the completion of

proceedings under section 143(3). Therefore, the attempt to reopen the

proceedings under section 147/148 is really the result of a change of

opinion ­ and thus beyond the pale of the AD's jurisdiction and falling

under the illustration spelt out in Kelvinator (India) Ltd. (supra).

Consequently, the impugned notice and all proceedings further thereto are

beyond the authority of law and are hereby quashed.

        The writ petition is allowed in the above terms.

                                               S. RAVINDRA BHAT, J

                                               R.V.EASWAR, J

FEBRUARY 14, 2014

WP(C) 1608/2013                                                    Page 8 of 8
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