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Kamal Dhawan, C/o Kapil Goel, Adv., A-1/25, Sector-15, Rohini, Delhi 110 085 Vs. Income Tax Officer, Ward 27(2), New Delhi
September, 29th 2015
                                                             ITA NO.4678/Del/2014

                 DELHI BENCH "SMC-2", NEW DELHI
                    I.T.A. No. 4678/DEL/2014
                            A.Y. : 2007-08
KAMAL DHAWAN,                           INCOME TAX OFFICER,
C/O KAPIL GOEL, ADV.,               VS. WARD 27(2),
A-1/25, SECTOR-15,                      NEW DELHI
DELHI ­ 110 085
(APPELLANT)                               (RESPONDENT)

         Assessee by                 :   Shri Kapil Goel, Advocate
        Department by                :   Sh. Sudhiranjan Senapati, Sr. DR

                      Date of Hearing : 06-08-2015
                      Date of Order    : 28-09-2015

     This is an appeal filed by the Assessee is directed against the
Order of the Ld. CIT(A)-XXIV, New Delhi dated 28.9.2012 for the
asstt. year 2007-08.

2.   The following grounds have been raised in the Appeal.

                Validity of Reopening u/s. 148

                "1.     That on the facts and in the circumstances of
                        the case and in    law, Ld. CIT(A) erred in not
                        quashing the reopening action of the AO
                        being made in contravention of jurisdictional
                        conditions stipulated u/s. 147 to section 151 of
                        the Act.

                                             ITA NO.4678/Del/2014

2.    That on the facts and in the circumstances of
      the case and in law, form RTI reply dated
      17.6.2014, it is admitted by AO that reasons
      were not    communicated to appellant before
      conclusion of assessment proceedings which
      goes to the root of the matter and vitiates the
      entire proceedings.

3.    That on the facts and in the circumstances of
      the case and in law, from reasons stated in RTI
      reply dated 17.6.2014, it is manifest that
      same do not amount to reasonable belief and
      there is total lack of application of mind and
      tangible material.

4.    That on the facts and in the circumstances of
      the case and in law, appellant has not been
      provided the opportunity to rebut and confute
      the   reopening and reasons recorded as per
      dictum of Apex Court in GKN Drive Shaft 259
      ITR Page 19 thus nullifying entire proceedings.

Merits of the case

5.    That on the facts and in the circumstances of
      the case and in law, ld. CIT(A) erred in not
      deleting the addition of Rs. 749,000/-          made
      on basis of conjectures and surmises and
      suspicion and hearsay, whereas evidence on
      records adequately proves appellant's case.

Violation of Principles of Natural Justice

                                                                ITA NO.4678/Del/2014

                    6.      That on the facts and in the circumstances of
                            the case and in    law, Ld. CIT(A) erred in not
                            deleting the addition of Rs. 749,000/- made in
                            violation of principles of natural justice as no
                            adequate opportunity is provided to assessee
                            to explain his case.

                            That the appellant craves leave to add, to
                            amend, modify, rescind, supplement or alter
                            any    of the grounds stated herein above,
                            either before or at the time of hearing of this

3.      The brief facts of the case are that in this case, a TEP was
received from DG (Vigilance), New Delhi through CIT, Delhi-IX, New
Delhi     vide     letter    No.    CIT-IX/Hqrs/TEP/2007-08/1604         dated
12.09.2007 that a bank locker no. 33 of Shri Kamal Dhawan and
Smt. Anju Dhawan maintained with SBI, Subhash Nagar Branch, New
Delhi was operated on 08.06.2006 and a cash of Rs. 7.49 lakhs, 800
grams jewellery and 3 property papers were found in it. In fact, an
investigation was carried by the CBI, who carried out a search at the
Bank Locker of Sh. Kamal Dhawan, the assessee. The locker
contained cash amounting to Rs.7,49,000/-, approx. 800 grams of
gold jewellery and documents pertaining to three properties i.e.
shop no. 5 in Maya Enclave, Plot No. B-45, Sitapuri, Dabri and House
No. 7/143,       Subhash Nagar. The assessee stated that these three
properties were purchased by him in the years 2000, 1999 and 1998
respectively. As regards the gold jewellery, he stated that most of it
was received by his wife Smt. Anju Dhawan at the time of their
marriage. The assessee gave a statement dated 14.06.2006,
recorded u/s. 161 of Cr.PC. by Sh. Rajiv Wahi, Inspector, CBI, SCR-II,
New Delhi. In the above statement, the assessee stated that he had

                                                         ITA NO.4678/Del/2014

kept cash of Rs.7,49,000/- in his bank locker no. 33 of SBl Branch
Subhash Nagar, which was collected by himself from the market and
his friend Sh. Sanjay Sharan, resident of Janakpuri, for purchasing
plywood core from Kashmir. He stated that the money was collected
and kept in the locker one week before the search at his residence
on 07.07.2005. The assessee further stated that his source of
income was from running a Dhaba in Maya Enclave. He further
stated that he earned approximately Rs. 3 to 4 lacs from the
passport work which he did for nine years. He stated that he was
filing his return of income showing business in the name of M/s.
Dhawan Enterprises, which did not exist. The locker was opened on
8.6.2006 in the presence of the assessee, his wife Smt. Anju
Dhawan, Sh. Rajiv Wahi, Inspector, CBI and Dy. Manager, Accounts
in SBI Subhash Nagar, New Delhi Sh. Ravi Chopra. This information
was passed on to the AO, who issued notice u/s. 148 for AY 2007-08
on 2.6.2009, since the assessment proceedings for that year had
already been completed by that time. Thereafter, notice u/s. 143(2)
dated 08.07.2009 was served on the assessee. In response, the
assessee filed a copy of return which had already been filed for A.Y.
2007-08 declaring a total income of Rs.1,24,916/-. With regards to
cash of Rs.7,49,000/-, the AO issued a query letter to the assessee,
who replied that out of this amount Rs.2,50,000/- belonged to Sh.
Sanjay Sharma, Rs.3,70,000/- belonged to Sh. Jatinder Pal Singh and
Rs. 1,29,000/- belonged to him and his wife. The assessee also
claimed that approx. 800 grams of jewellery found belonged to him
and his wife. The AO issued letters uls. 133(6) to Sh. Sanjay Sharma
and Sh. Jatinder Pal Singh, whose statements were recorded by the
AO on 13.12.2010. Both Sh. Sanjay Sharma and Sh. Jatinder Pal
Singh admitted that they had given cash of Rs.2,50,000/- and
Rs.3,70,000/- to the assessee for business purposes, but both of
them were not aware that this cash was kept in locker no. 33 with
                                                                 ITA NO.4678/Del/2014

SBI, Subhash Nagar, New Delhi. The AO did not accept the
explanations given by the assessee with regards to the cash found
and added the amount of Rs.7,49,000/- to the income of the
assessee as undisclosed cash receipts and assessed the income at
Rs. 8,73,920/- vide order dated 24.12.2010 passed u/s. 147/143(3)
of the Income Tax Act, 1961.

4.    Aggrieved    with   the     aforesaid    assessment       order     dated
24.12.2010, Assessee was in appeal before the              Ld. CIT(A), who
vide impugned order dated 28.9.2012 has dismissed the appeal of
the assessee.

5.   Against the aforesaid order of the Ld. CIT(A), Assessee is in
appeal before the Tribunal.

6.    Ld. Counsel of the assessee reiterated the contention raised in
the grounds of appeal wherein he stated that the reopening action
of the AO and confirmed by the Ld. CIT(A) being made in
contravention of jurisdictional conditions stipulated u/s. 147 to
Section 151 of the Act. He further submitted that the from the Reply
dated 17.6.2014, it was admitted by the AO that reasons were not
communicated      to   assessee    before     conclusion   of    assessment
proceedings which goes to the root of the matter and vitiates the
entire proceedings and the reasons are not reasonable to believe
and there is a total lack of application of mind and tangible material.
In order to support this contention, the submitted that the assessee
has not been provided the opportunity to rebut and confute the
reopening and reasons recorded as per dictum of Apex Court in GKN
Drive Shaft 259 ITR Page 19 thus nullifying entire proceedings. He
further referred the various case laws of the Delhi High Court by
which the present case of the assessee is covered including the
case of Signature Hotel Pvt. Ltd. (2011) 338 ITR 51.

                                                            ITA NO.4678/Del/2014

7.   On the other hand, Ld. DR relied upon the order passed by the
Ld. CIT(A) on the issue in dispute.

8.    I have heard both the parties and perused the records. I find
that the AO has recorded the reasons for belief that income has
escaped assessment as under. The same is attached with the Paper
Book filed by the assessee.

           "Reasons for       the belief that    income has escaped
           1. An information has been received from CBI, New Delhi
              vide letter No. 3/6(a)2004 SCU/V/SCR.II/3015 dated
              20.7.2007 that Shri Kamal Dhawan has kept the cash
              of Rs. 749,000/- and jewellery of 800 grams in locker
              No. 33, SBI, Subhash Nagar, New Delhi.
           2. On the basis of above information and perusal of asstt.
              records, it is found that assessee has not shown any
              cash in hand nor in the books of accounts even he has
              not shown any jewellery in the books of accounts.
           3. On the basis of information as per para 1 above, I have
              reason to believe that assesee has not disclosed true
              and correct particulars of his income and income has
              escaped assessment is likely to exceed more than Rs.
              100,000. Notice u/s. 148 is required to be issued to
              assessee for asstt. year 2007-08.
                                                        (S.P. Sachdeva)
                                           ITO, Ward 27(2), New Delhi
9.   I find that Assessee Sh. Kamal Dhawan has asked some
information from the Income Tax Department under the Right to
Information Act, 2005 and the Income Tax Department has            replied
the said information by passing an      Order dated 176.2014 issued
vide F.No. ITO/Ward27(2)/RTI/2014-15/32.        For the sake of clarity,
the contents of the order is reproduced as under:-

                      "The application from Sh. Kamal Dhawan (the
                applicant) has been received in this office on
                                                  ITA NO.4678/Del/2014

23.5.2014      with       request   to   supply       following

      In this regard, question wise reply in respect of
this office is as under:-

S.No. Information/         Details         Reply / Status
1.    Whether before issuing               Yes
      notice u/s. 148 for Asstt.
      year 2007-08, any reasons
      were recorded by Assessing
      Officer kindly reply in Yes
      or No.
2.    If answer is Yes, whether  You have not
      same were informed to the  made and any
      Assessee and whether a     request      to
      copy of said reasons were  provide     the
      served on Assessee.        same     during
3.     Also provide copy of the Copy attached.
       said   reasons   recorded
       alongwith   accompanying

      In case you wish to file an appeal against this
order, you may file the same within thirty days from
the receipt of this letter before the appellate
Authority i.e. the Jt. CIT, Range-27, New Delhi at
Room No. 1806, 18th floor, Pratyaksh Kar Bhawan, E-
2 Block, Dr. SPM Civic Centre, Minto Road, New
Delhi ­ 110 002.

                                       (Suresh Kumar)
                            Central Public Information
                            Officer & Income Tax Officer,
                            Ward 27(2), New Delhi

                                                         ITA NO.4678/Del/2014

9.1   From the above, I find considerable cogency in the assesse's

counsel submission that was       not given opportunity to rebut and

confute the reopening and reasons recorded as per dictum of Apex

Court in GKN Driveshafts (India) Ltd. vs. ITO [2003]     259 ITR 19

which nullifying entire proceedings. In this case, the Hon'ble Apex

Court has held as under:-

           "That after the receipt of the notice under section 148 of

           the I.T. Act, the assesse must file the return, but he is

           entitled to ask for the reasons for issuance of a notice.

           The Supreme Court has further held that when the

           reasons are asked for, the AO is bound to furnish the

           reasons within a reasonable time. Thus the sine qua non

           for issuance of a notice under section 148 of the I.T. Act

           is recording     of the reasons by the AO.    In our view

           recording of the reasons and furnishing copy thereof to

           the Assessee when asked is not an empty formality. If

           the reasons recorded and a copy thereof required to be

           furnished to the assessee on demand the assessee would

           be   entitled to show that the reasons recorded were

           factually incorrect. Furthermore, the power of the AO to

           proceed with the Assessment proceedings would be

           limited by the reasons recorded by him.      He would be

           assessing or reassessing the income of the assessee only

                                                                      ITA NO.4678/Del/2014

            on the reasons recorded by him and cannot travel

            beyond the reasons and continue the proceedings of

            assessment on different reasons."

9.2   In the background of the aforesaid discussions and precedent

relied upon, I am of the considered view that only effective ground

in this appeal is reassessment proceedings u/s. 148 of the I.T. Act,

the Assessee has reiterated that reassessment               proceedings are

illegal and without jurisdiction in the absence of                any tangible

evidence or material in respect of any undisclosed income and

recording of requisite satisfaction in respect of any such undisclosed

income. After hearing both the parties on the issue in dispute as well

as after going through the orders passed by the Revenue Authorities

alongwith    order   dated    21.7.2011     passed         by    the        Hon'ble

Jurisdictional High Court in the case of Signature Hotels P. Ltd. vs.

Income Tax Officer [2011] 338 ITR 0051 wherein the Hon'ble High

Court has held matter as under:-

                 "Held, allowing the petition, that the reassessment

                 proceeding    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 lacs during

                 the financial year 2002-03 as stated in the

                                                              ITA NO.4678/Del/2014

                  Annexure.     According to the information, the

                  amount received from a company, S, was nothing

                  but an accommodation entry and the assesee 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

                  lakhs 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 reassessment proceedings

                  were not valid and were liable to be quashed."

10.     In view of above, I am of the considered view that the above

issue    is exactly the   similar to the issue involved in the present

appeal and is squarely covered by the aforesaid decisions of the

                                                             ITA NO.4678/Del/2014

Apex Court in GKN Driveshafts (India) Ltd. vs. ITO [2003] 259 ITR 19

and Hon'ble High Court of Delhi decision delivered in Hotel

Signatures Ltd. (Supra). Hence, respectfully following the above

precedents, I decide the legal issue in dispute in favour of the

Assessee and against the Revenue and accordingly quash the

reassessment proceedings. The other issues are not dealt with as

the same have become academic in nature.

11.   In the result, the Assessee's Appeal stands allowed.

      Order pronounced in the Open Court on 28/9/2015.


                                                       [H.S. SIDHU]
                                                    JUDICIAL MEMBER

Date 28/9/2015
Copy forwarded to: -
1.    Appellant -

2.    Respondent -
3.    CIT
4.    CIT (A)
5.    DR, ITAT         TRUE COPY
                                                  By Order,

                                                 Assistant Registrar,
                                                 ITAT, Delhi Benches

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