Income Tax Appellate Tribunal - Delhi
East Delhi Leasing P.Ltd, New Delhi vs Ito, Ward-8(1), New Delhi on 10 April, 2024
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B": NEW DELHI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
AND
SHRI M. BALAGANESH, ACCOUNTANT MEMBER
ITA No. 7917/Del/2019
(Assessment Year: 2010-11)
East Delhi Leasing Pvt. Ltd, Vs. ITO,
J-47, Ramesh Nagar, Ward-8(1),
Sanatan Dharam Mandir New Delhi
Lane, New Delhi
(Appellant) (Respondent)
PAN: AAACE0240R
Assessee by : Shri K. Sampath, Adv
Shri V. Rajakumar, Adv
Revenue by: Shri Vivek Kumar
Upadhyay, Sr. DR
Date of Hearing 15/02/2024
Date of pronouncement 10/04/2024
ORDER
PER M. BALAGANESH, A. M.:
1. The appeal in ITA No.7917/Del/20119 for AY 2010-11, arises out of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as 'ld. CIT(A)', in short] in Appeal No. ITBA/NFAC/S/250/2023-24/105715343(1) dated 17.10.2023 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 26.12.2019 by the Assessing Officer, ACIT, Circle-35(1), Delhi (hereinafter referred to as 'ld. AO').
2. At the outset, we find that the assessee had challenged the validity of reopening of assessment u/s 147 of the Act on various facets. We deem it fit and appropriate to address this preliminary issue as it goes to the root of the matter.ITA No. 7917/Del/2019
East Delhi Leasing Pvt. Ltd
3. We have heard the rival submissions and perused the materials available on record. The return of income for the Asst Year 2010-11 was originally filed by the assessee company on 15.10.2010 declaring Nil income. No assessment was framed on the said return. The ld. AO sought to reopen the assessment for the Asst Year 2010-11 by recording the following reasons:-
Sir/Madam, Please refer to your letter dated 03-07-2017 filed in response to notice issued to u/s 142(1) of the IT Act in which you have desired to provide reasons recorded for re-opening of assessment u/s 147 and issuance of notice u/s 148 of the IT Act.
In this regard, as desired, the reasons recorded for re-opening of assessment u/s 147 and issuance of notice u/s 148 of the IT Act, 1961 for the Assessment Year 2010-11 is as under:-
Reasons for re-opening the assessment u/s 147 and issuance of notice u/s 148 of the IT Act, 1961 in the case of M/s East Delhi Leasing Pvt. Ltd. (PAN: AAACE0240R) for the Assessment Year-2010-11
1. Return of income for the A.Y. 2010-11 in this case was filed on 15.10.2010 declaring returned income at Nil. As per return of income during the year under consideration the assessee has shown paid up capital of Rs. 3,02,11,700/- and securities premium at Rs. 4,50,00,000/-. Further, the assessee company has made investment of Rs. 6,60,47,400/- and shown bank balance of Rs.
1,45,62,170/-. Further, the assessee company has also shown Sundry creditors of Rs. 55,18,945/- but not shown any business activity during the year under consideration.
2. Brief facts of the case are as under:-
Information is received from the Investigation wing i.e. Income Tax Officer, Unit- 1, New Delhi that there were various regular RTGS credits of Rs. 1 Crore and Rs 50 Lakh from different entities in the bank account of the assessee company M/s East Delhi Leasing (P) Ltd., J-47, Sanatan Dharam Mandir Lane, Ramesh Nagar, New Delhi-1100015, followed by outgoing RTGS favouring different entities. As per information received from the Investigation wing the total deposits in the bank account bearing No. 0026654227 of the assessee company is Rs.
7,56,49,303/- maintained with CITI Bank, Jeewan Bharti, 3, Sansad Marg, New Delhi-110001.
3. As per information received from the Investigation wing, it was observed that there were various regular RTGS credits of Rs. 1 Crore and Rs. 50 Lakh from different entities, followed by outgning RTGS favouring M/s BGS Credit Pvt. Ltd.
ITA No. 7917/Del/2019East Delhi Leasing Pvt. Ltd or M/s ARS Metals Ltd., transfers to the account of M/s Leasing Estates Ltd. were also observed, following payments to M/s ARS Metals Ltd. As declared at the time of account opening, M/s East Delhi Leasing (P) Ltd. was engaged into leasing advisory /consultancy services. Credits into the account of M/s East Delhi Leasing (P) Ltd. were confirmed to be investments by various companies while the debits were confirmed to be investments made by M/s East Delhi Leasing (P) Ltd. in M/s BGS Credit Pvt. Ltd. and M/s ARS Metals Ltd. On further due diligence, it was observed that Mr. Ashwani Kumar and Mrs. Renu Bhatia are directors of M/s Leasing Estates Ltd. while Mr. Ashwani Kumari also holds directorship in M/s BGS Credit Pvt. Ltd. Further, Mrs. Renu Bhatia was observed to be a Director in M/s Leasing Estates Ltd., where Mr. Ashwani Kumar was found to be an authorized signatory.
4. As per Investigation report, bank statement of the assessee company was obtained/gathered from the bank. On perusal of the bank statement it was observed that the assessee company M/s East Delhi Leasing Pvt. Ltd. has deposited sum of Rs. 7,56,49,303/- in its Bank account No. 0026654227 maintained with CITI Bank. Further, on perusal of bank statements of all related parties, it is observe that all the parties are transactions the huge funds to each other though RTGS which resembled that huge amount is revolving again and again in the bank accounts of all the parties and therefore source of funds revolving in account of all the parties remains unexplained, therefore forming a valid reasons to believe that same funds are revolving again & again is escaped assessment.
5. Reasons for formation of belief In the light of above discussion, it is apparent that the assessee company has made transactions the huge funds to its related parties though RTGS which resembled that huge amount is revolving again and again in the bank accounts of all the parties and the source of funds revolving in account of all the parties remains unexplained. During the year under consideration the assessee company has not done any business activity. Further, return of income of the assessee is perused and it is noticed that the assessee has securities premium account of Rs. 4,50,00,000/-. Further, the assessee company has made investment of Rs. 6,60,47,400/- and shown bank balance of Rs. 1,45,62,170/-. Further, the assessee company has also shown Sundry creditors of Rs. 55,18,945/- but not shown any business activity during the year under consideration. The assessee has received huge securities premium of Rs. 4,50,00,000/- and made Investment of Rs. 6,60,47,400/-. The source of fund received by the assessee company remains unexplained before the Investigation wing and also funds transferred to other parties are also remains unexplained. Therefore, the credit/deposit amount of Rs. 7,56,49,303/ in its Bank account No. 0026654227 maintained with CITI Bank is treated as unexplained credits u/s 68 of the IT Act. 1961. Therefore, I have reason to believe that the income of Rs. 7,56,49,303/- has escaped assessment for the Assessment Year 2010-11, as defined by section 147 of the IT Act. The income chargeable to tax has escaped assessment for this year by the reasons of the failure on the part of the assessee to disclose fully and truly ITA No. 7917/Del/2019 East Delhi Leasing Pvt. Ltd all material facts. Therefore, I am satisfied that it is a fit case for reopening the assessment u/s 147 and issuance of notice u/s 148 of the Act for the Financial Year 2009-10 relevant to Assessment Year 2010-11.
Further, you are requested to file the return of income in response to notice u/s 148 of the IT Act, 1961. Statutory Notice u/s 142(1) is enclosed herewith for compliance. Your case is fixed for hearing on 28-07-2017."
4. The assessee filed objections to the aforesaid reasons for reopening by stating that the assessee being engaged into the finance business, finance becomes an integral part of that business ; that movement of funds is intimately and inalienably connected with such business ; that the transactions qua transfers from one bank account to another are integral, inseparable and indispensable to the business particularly to one in the financial and leasing sectors ; that a mere passage of funds from one entity to another cannot result in taxable income in the absence of other crucial factors ; that leasing and finance companies do mobilize funds and funds so mobilized were always amenable to verification in the assessment of the concerned entities ; that a mere perusal of the bank statements evidencing fund movements cannot lead prima facie to any correct conclusion for initiation of reassessment of income unless that could comprise factors indicating escapement of income ; that the movement of funds were between existing assessee's and not from any clandestine or undisclosed sources. Accordingly, it was objected that the ld. AO had thus no valid information at all for initiating reassessment. It was also pointed out that the reasons were recorded by the ld. AO based on borrowed satisfaction of Suspicious Transaction Report (STR) received by the ld. AO and there was no independent application of mind on the part of the ld. AO to reach to the conclusion that income of the assessee had escaped assessment warranting reopening thereon. It was submitted that suspicion howsoever strong cannot partake the character of a legal evidence.
5. The ld. AO disposed of the aforesaid objections by a separate communication dated 8.9.2017 addressed to the assessee. In the said letter, the ld. AO stated that the assessee company has made transactions of huge funds to its related parties through RTGS which resembled that huge amount is revolving again and again in the bank ITA No. 7917/Del/2019 East Delhi Leasing Pvt. Ltd accounts of all the parties and the source of funds revolving in account of all the parties remains unexplained before the investigation wing of the department and also funds transferred to other parties also remain unexplained. With these observations, the objections filed by the assessee were rejected by the ld. AO and reassessment proceedings were further proceeded with by the ld. AO. In the reassessment proceedings, the share application money received in the sum of Rs 5.42 crores was sought to be examined by the ld. AO. The assessee had submitted copies of audited financial statements of the aforesaid investors for the relevant years, copy of Income Tax Returns of the investors, bank statements of the investors, confirmations from the investors, share application forms from the investors. In the reassessment, a sum of Rs 5.42 crores was added by the ld. AO as unexplained cash credit u/s 68 of the Act in respect of share application money received from various investors, despite the fact that the assessee had furnished all the requisite documents to prove the identity of the investors, creditworthiness of the investors and genuineness of transactions. These documents are enclosed in Pages 13 to 121 of the Paper Book filed before us. This action of the ld. AO was upheld by the ld. CIT(A).
6. On perusal of the reasons recorded for reopening the assessment reproduced supra, we find that there is no dispute that the amounts that stood credited in the bank account of the assessee were received from the related entities of the assessee company. Similarly there is absolutely no dispute to the fact that the amounts that went outside the bank account of the assessee company were also invested with the related entities of the assessee company. Assessee being engaged in the business of financing and leasing , obviously had to receive monies and make investments in various entities, This is what is done by the assessee company. The fruits of these investments would get fructified as income only in future years as and when these investee companies start making profits. No fault per se could be attributed on the activities of the assessee in this regard keeping in mind the nature of business of the assessee company. Even the STR only indicated the movement of inflow and outflow of funds in the bank account of the assessee. It does not state that the said transactions represent income ITA No. 7917/Del/2019 East Delhi Leasing Pvt. Ltd of the assessee. This is a clear case of assuming jurisdiction u/s 147 of the Act out of sheer suspicion and in order to make roving and fishing enquiries. It is trite law that suspicion howsoever strong cannot partake the character of a legal evidence. The principles laid down by the Hon'ble Apex Court in its recent decision rendered in the context of Criminal Appellate Jurisdiction in the case of Raja Naykar vs State of Chattisgarh in Criminal Appeal No. 902 of 2023 dated 24.1.2024 would be relevant here and would come to the rescue of the assessee herein. For the sake of convenience, the entire order of Hon'ble Apex Court is reproduced below:-
"1. This appeal challenges the judgement and order dated 22nd July, 2015, passed by the Division Bench of the High Court of Chhattisgarh, Bilaspur in CRA No. 223 of 2012, thereby dismissing the appeal filed by the Appellant, namely, Raja Naykar (Accused No. 1) and confirming the judgment and order of conviction and sentence awarded to him by the Court of Additional Sessions Judge, Durg (Chhattisgarh) (hereinafter referred to as "Trial Judge") in Sessions Trial No. 14 of 2010 on 23rd November, 2011.
2. Shorn of details, the facts leading to the present appeal are as under:
2.1 On 21st October, 2009, the half-burnt body of Shiva alias Sanwar (hereinafter referred to as „deceased‟) was found behind Baba Balak Nath temple near Shastri Nagar ground. Based on the information given by one, Pramod Kumar (P.W.3), merg intimation Ex. P-33 was registered against unknown persons.
2.2 The prosecution case, in a nutshell, is that Mohan - the husband of Accused No. 2 and brother of the Appellant was killed by the deceased; and as its offshoot, on 21st October, 2009 at about 12.00 a.m., the Appellant committed the murder of the deceased by causing 24 stab wounds on his body. He then wrapped the body in a blanket with the help of other accused persons, took it behind the Baba Balak Nath temple near Shastri Nagar ground where the halfburnt body of the deceased was found in the following afternoon. Postmortem examination of the body of the deceased was conducted on 23rd October, 2009 by Dr. Ullhas Gonnade (P.W.11) who observed as many as 24 injuries on the deceased. According to P.W.11, after commission of murder, the body of the deceased was burnt and his death was homicidal in nature. It was further the case of the prosecution that an electricity bill in the name of one, Alakh Verma was found from the body of the deceased, on the basis of which the police proceeded with further investigation. In pursuance of the disclosure statements of the accused persons, seizure was effected and the police concluded that the deceased was murdered by the Appellant and that the body was then taken to the Baba Balak Nath temple with the help of the other accused persons where an attempt was made to burn the body.
2.3 At the conclusion of the investigation, a charge-sheet came to be filed in the Court of Judicial Magistrate First Class, Durg. Since the case was exclusively triable by the Sessions Court, the same came to be committed to the Sessions Judge.ITA No. 7917/Del/2019
East Delhi Leasing Pvt. Ltd 2.4 The accused persons were examined under Section 313 of the Code of Criminal Procedure, 1973 ("Cr.P.C") wherein they pleaded not guilty and claimed to be tried. The prosecution examined 18 witnesses to bring home the guilt of the accused.
2.5 At the conclusion of trial, the Trial Judge found that the prosecution had succeeded in proving that the Appellant had committed the murder of the deceased. The prosecution further proved that the accused persons committed criminal conspiracy to destroy the evidence, and threw the body of the deceased after burning the same behind the Baba Balak Nath temple. The prosecution also proved that accused no. 2 helped in throwing the body of the deceased and destroying evidence by way of cleaning the blood stains etc. of the deceased. Thus, the Trial Judge convicted the Appellant for offences punishable under Sections 302 and 201 read with 120B of the Indian Penal Code, 1860 ("IPC" for short) and was awarded a maximum sentence of life imprisonment; whereas Accused Nos. 2 to 4 were convicted for offences punishable under Sections 201 read with 120B of IPC and were sentenced to undergo rigorous imprisonment for five years and fine of Rs.1,000/-.
2.6 Being aggrieved thereby, the Appellant and other accused persons preferred appeals before the High Court through CRA No. 223 of 2012 and CRA No. 38 of 2012 respectively. The High Court by the common impugned judgement, although allowed the appeal filed by the accused nos. 2 to 4; however, it dismissed the appeal filed by the present Appellant and affirmed the order of conviction and sentence awarded to the him by the Trial Judge.
2.7 Being aggrieved thereby, the present appeal.
3. We have heard Shri Sameer Shrivastava, learned counsel for the appellant-Raja Naykar and Shri Sumeer Sodhi, learned counsel for the respondent-State of Chhattisgarh.
4. Shri Sameer Shrivastava submitted that both the Trial Judge as well as the High Court have grossly erred in convicting the appellant. It is submitted that there is no evidence at all which establishes the guilt of the appellant beyond reasonable doubt. It is submitted that the finding of guilt of the appellant as recorded by the Trial Judge is based on conjectures and surmises and, therefore, not sustainable in law. Learned counsel further submitted that, from the evidence of the father and brother of the deceased, it would reveal that the dead body of the deceased has not been identified and the prosecution has failed to prove that the dead body found in the garbage was that of Shiva.
5. On the contrary, Shri Sumeer Sodhi submitted that both the Trial Judge and the High Court, upon correct appreciation of evidence, have found the accused-appellant guilty of the charges levelled against him. It is submitted that, as per the FSL report, human blood was present on the dagger which was recovered at the instance of the present appellant. It is further submitted that the recoveries made on the basis of the Memorandum under Section 27 of the Indian Evidence Act, 1872 (hereinafter referred to as "the Evidence Act") would establish the guilt of the accused appellant beyond reasonable doubt. He, therefore, submits that no interference would be warranted with the impugned judgment in the facts and circumstances of the present case.
6. With the assistance of the learned counsel for the parties, we have scrutinized the evidence on record.
7. Undoubtedly, the prosecution case rests on circumstantial evidence. The law with regard to conviction on the basis of circumstantial evidence has very well been crystalized in the judgment ITA No. 7917/Del/2019 East Delhi Leasing Pvt. Ltd of this Court in the case of Sharad Birdhichand Sarda vs. State of Maharashtra, wherein this Court held thus:
"152. Before discussing the cases relied upon by the High Court we would like to cite a few decisions on the nature, character and essential proof required in a criminal case which rests on circumstantial evidence alone. The most fundamental and basic decision of this Court is Hanumant v. State of Madhya Pradesh [(1952) 2 SCC 71 : AIR 1952 SC 343 : 1952 SCR 1091 : 1953 Cri LJ 129] . This case has been uniformly followed and applied by this Court in a large number of later decisions up-to-date, for instance, the cases of Tufail (Alias) Simmi v. State of Uttar Pradesh [(1969) 3 SCC 198 : 1970 SCC (Cri) 55] and Ramgopal v. State of Maharashtra [(1972) 4 SCC 625 : AIR 1972 SC 656] . It may be useful to extract what Mahajan, J. has laid down in Hanumant case [(1952) 2 SCC 71 : AIR 1952 SC 343 : 1952 SCR 1091 : 1953 Cri LJ 129] :
"It is well to remember that in cases where the evidence is of a circumstantial nature, the circumstances from which the conclusion of guilt is to be drawn should in the first instance be fully established, and all the facts so established should be consistent only with the hypothesis of the guilt of the accused. Again, the circumstances should be of a conclusive nature and tendency and they should be such as to exclude every hypothesis but the one proposed to be proved. In other words, there must be a chain of evidence so far complete as not to leave any reasonable ground for a conclusion consistent with the innocence of the accused and it must be such as to show that within all human probability the act must have been done by the accused."
153. A close analysis of this decision would show that the following conditions must be fulfilled before a case against an accused can be said to be fully established:
(1) the circumstances from which the conclusion of guilt is to be drawn should be fully established.
It may be noted here that this Court indicated that the circumstances concerned "must or should" and not "may be" established. There is not only a grammatical but a legal distinction between "may be proved" and "must be or should be proved" as was held by this Court in Shivaji Sahabrao Bobade v. State of Maharashtra [(1973) 2 SCC 793 : 1973 SCC (Cri) 1033 : 1973 Crl LJ 1783] where the observations were made: [SCC para 19, p. 807: SCC (Cri) p. 1047] "Certainly, it is a primary principle that the accused must be and not merely may be guilty before a court can convict and the mental distance between „may be‟ and „must be‟ is long and divides vague conjectures from sure conclusions."
(2) the facts so established should be consistent only with the hypothesis of the guilt of the accused, that is to say, they should not be explainable on any other hypothesis except that the accused is guilty, (3) the circumstances should be of a conclusive nature and tendency, (4) they should exclude every possible hypothesis except the one to be proved, and ITA No. 7917/Del/2019 East Delhi Leasing Pvt. Ltd (5) there must be a chain of evidence so complete as not to leave any reasonable ground for the conclusion consistent with the innocence of the accused and must show that in all human probability the act must have been done by the accused.
154. These five golden principles, if we may say so, constitute the panchsheel of the proof of a case based on circumstantial evidence.
8. It can thus clearly be seen that it is necessary for the prosecution that the circumstances from which the conclusion of the guilt is to be drawn should be fully established. The Court holds that it is a primary principle that the accused „must be‟ and not merely „may be‟ proved guilty before a court can convict the accused. It has been held that there is not only a grammatical but a legal distinction between „may be proved‟ and „must be or should be proved‟. It has been held that the facts so established should be consistent only with the guilt of the accused, that is to say, they should not be explainable on any other hypothesis except that the accused is guilty. It has further been held that the circumstances should be such that they exclude every possible hypothesis except the one to be proved. It has been held that there must be a chain of evidence so complete as not to leave any reasonable ground for the conclusion consistent with the innocence of the accused and must show that in all human probabilities the act must have been done by the accused.
9. It is settled law that the suspicion, however strong it may be, cannot take the place of proof beyond reasonable doubt. An accused cannot be convicted on the ground of suspicion, no matter how strong it is. An accused is presumed to be innocent unless proved guilty beyond a reasonable doubt.
10. In the light of these guiding principles, we will have to examine the present case.
11. On a perusal of the judgment of the Trial Judge as well of the High Court, it would reveal that the main circumstance on which the High Court and the Trial Judge found the appellant guilty of the crime is the recovery of various articles at his instance. They have further found that the pieces of blanket recovered from the place of incident and the place where the dead body was subsequently taken for being burnt, were found to be identical/similar. The High Court has observed that specific questions were put to the appellant in his examination under Section 313 of the Code of Criminal Procedure, 1973 (hereinafter referred to as "Cr.P.C.") regarding recovery of various articles at his instance and also regarding the FSL report, but he has failed to give an explanation with regard thereto.
12. The motive attributed to the appellant by the prosecution is that the appellant was under an impression that the deceased Shiva had caused the murder of his elder brother Mohan. It is the prosecution case that, on the date of the offence, deceased Shiva was working in a hotel owned by the sister-in-law of the appellant. The appellant gave money to the deceased to buy liquor. They both had consumed liquor. After having dinner, his sister-in-law, her daughter along with the baby went to bed in the middle-room of the house. He slept on the cot. He asked Shiva to sleep on the spread bed on the floor. It is the prosecution case that, at about 10.30 p.m., the appellant gave several blows to Shiva with a dagger. Thereafter, he wrapped the dead body of Shiva in a blanket and a homemade mattress and called his friend Chandan Sao. Thereafter, they broke the lock of the rickshaw parked near Chawni Chowk and took the rickshaw to the house from Chawni Chowk for disposing off the dead body. Thereafter, the appellant along with other accused persons lifted the dead body of the deceased and placed the same on the rickshaw. The rickshaw was then taken to the garbage dumping ground where he threw the dead body. Thereafter, he concealed the ITA No. 7917/Del/2019 East Delhi Leasing Pvt. Ltd dagger in the garbage scattered inside the boundary wall. Following which, he again went to the place where he had thrown the dead body and burnt the clothes wrapped around the dead body and came back to his sister-in law‟s house.
13. The aforesaid story is narrated in the Memorandum of the appellant under Section 27 of the Evidence Act. However, as held by the Privy Council in the locus classicus case of Pulukuri Kotayya and others v. King-Emperor2, only such statement which leads to recovery of incriminating material from a place solely and exclusively within the knowledge of the maker thereof would be admissible in evidence.
14. Undisputedly, the dead body was found much prior to the recording of the Memorandum of the appellant under Section 27 of the Evidence Act. Therefore, only that part of the statement which leads to recovery of the dagger and the rickshaw would be relevant.
15. The Property Seizure Memo would show that the dagger was seized from a place accessible to one and all. According to the prosecution, the incident took place on 21st October, 2009 and the recovery was made on 25th October, 2009.
16. As per the FSL report, the blood stains found on the dagger were of human blood. However, the FSL report does not show that the blood found on the dagger was of the blood group of the deceased. Apart from that, even the serological report is not available.
17. Insofar as the recovery of rickshaw is concerned, it is again from an open place accessible to one and all. It is difficult to believe that the owner of the rickshaw would remain silent when his rickshaw was missing for 3-4 days. As such, the said recovery would also not be relevant.
18. Another circumstance relied on by the Trial Judge is with regard to recovery of blood-stained clothes on a Memorandum of the appellant. The said clothes were recovered from the house of the appellant‟s sister-in-law. The alleged incident is of 21st October 2009, whereas the recovery was made on 25th October, 2009. It is difficult to believe that a person committing the crime would keep the clothes in the house of his sister-in-law for four days.
19. It can thus be seen that, the only circumstance that may be of some assistance to the prosecution case is the recovery of dagger at the instance of the present appellant. However, as already stated hereinabove, the said recovery is also from an open place accessible to one and all. In any case, the blood found on the dagger does not match with the blood group of the deceased. In the case of Mustkeem alias Sirajudeen v. State of Rajasthan, this Court held that sole circumstance of recovery of blood-stained weapon cannot form the basis of conviction unless the same was connected with the murder of the deceased by the accused. Thus, we find that only on the basis of sole circumstance of recovery of blood-stained weapon, it cannot be said that the prosecution has discharged its burden of proving the case beyond reasonable doubt.
20. As already discussed hereinabove, merely on the basis of suspicion, conviction would not be tenable. It is the duty of the prosecution to prove beyond all reasonable doubt that it is only the accused and the accused alone who has committed the crime. We find that the prosecution has utterly failed to do so.
21. Insofar as the finding of the High Court that the appellant has failed to give any explanation in his statement under Section 313 Cr. P.C. is concerned, we find that the High Court has failed to appreciate the basic principle that it is only after the prosecution discharges its duty of proving the case beyond all reasonable doubt that the false explanation or non-explanation of the accused could be taken into consideration. In any case, as held by this Court in the case of Sharad ITA No. 7917/Del/2019 East Delhi Leasing Pvt. Ltd Birdhichand Sarda (supra), in a case based on circumstantial evidence, the nonexplanation or false explanation of the accused under Section 313 Cr.P.C. cannot be used as an additional link to complete the chain of circumstances. It can only be used to fortify the conclusion of guilt already arrived at on the basis of other proven circumstances.
22. In the result, the appeal is allowed. The impugned judgment and order dated 22nd July, 2015, passed by the Division Bench of the High Court of Chhattisgarh, Bilaspur in CRA No. 223 of 2012 is quashed and set aside. The appellant is directed to be released forthwith, if not required in any other case.
(Emphasis supplied by us hereinabove)
7. In our considered opinion, the principles enunciated in the aforesaid decision by Hon'ble Supreme Court would be squarely applicable to the facts of the instant case before us. The ld. AO while recording the reasons had merely suspected that the movement of funds (both inflow and outflow) in assessee's bank account constitutes income of the assessee. This suspicion was however triggered based on the STR received by the ld. AO. At the cost of repetition, we would like to mention the fact that the assessee is engaged in the business of financing and leasing where obviously there would be huge movement of funds (both inflow and outflow) in the bank account of the assessee. Moreover, all these funds were received from the related entities and invested with the related entities in the regular business of financing and leasing. There is absolutely no income element involved therein. There is no presumption u/s 68 of the Act for the movement of funds between entities to be automatically construed as yielding income. Further the investigation wing had only suggested enquiry to be made with regard to the rotation of funds. This may lead the ld. AO to entertain 'reason to suspect' and not 'reason to believe' that income of the assessee had escaped assessment. Reliance in this regard is placed on the decision of Hon'ble Jharkhand High Court in the case of PCIT vs Maheswari Devi reported in 455 ITR 755 (Jharkhand). This information also cannot be construed as a tangible material available with the ld. AO which would enable him to form a reasonable belief that income of the assessee had escaped assessment warranting reopening u/s 147 of the Act, moreso , when the investigation wing never even complained of the escapement of income of the assessee.
ITA No. 7917/Del/2019East Delhi Leasing Pvt. Ltd
8. A perusal of the reasons recorded by the ld. AO would show that on the mere suggestion of the investigation wing of the rotation of funds escaping assessment, the reassessment proceedings have been initiated by the ld. AO in the belief of escapement of income of the assessee. Apparently as between the information received and the inference drawn by the ld. AO, there is absolutely no live link or nexus which would enable him to form a belief that income of the assessee had escaped assessment warranting reopening u/s 147 of the Act. Absence of live link between the material on record and the satisfaction recoded completely mutilates the validity of the action of the ld. AO. It is with reference to the contents of the material contained in the report of the investigation wing that the nexus of the reasons for the ld. AO's formation of belief of escapement of income of the assessee would have to be tested. Absent that foundational material, the test would without doubt fail. Reliance has been rightly placed by the ld. AR before us on the decision of Hon'ble Supreme Court in the case of ITO vs Lakhmani Mewal Das reported in 103 ITR 437 (SC) , wherein at page 448, the Hon'ble Apex Court held as under:-
"As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence.
The powers of the Income-tax Officer to reopen assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect".
The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing ITA No. 7917/Del/2019 East Delhi Leasing Pvt. Ltd that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income-tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly all material fact was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment. The majority of the learned judges in the High Court, in our opinion, were not in error in holding that the said material could not have led escaped assessment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with costs.
(Emphasis supplied by us hereinabove)"
9. It is equally trite law that an assessment cannot be reopened for making fishing and roving enquiries. Reliance in this regard is placed on the decision of Hon'ble Bombay High Court in the case of PCIT vs Sheetal Dushyant Chaturvedi reported in 134 taxmann.com 327 (Bom) wherein the Special Leave Petition (SLP) preferred by the revenue before the Hon'ble Supreme Court was dismissed in 285 Taxman 85 (SC). Similar views were taken in the following cases:-
a) Decision of Hon'ble Punjab & Haryana High Court in the case of Vipin Khanna vs CIT reported in 255 ITR 220 (P&H).
b) Decision of Hon'ble Jurisdictional High Court in the case of Ranbaxy Laboratories Ltd vs CIT reported in 200 taxman 242 (Del).
9. In view of the aforesaid observations and respectfully following the various judicial precedents relied upon hereinabove, we have no hesitation to quash the reassessment on the ground that the ld. AO had invalidly assumed jurisdiction u/s 147 of the Act in the facts and circumstances of the instant case. Since the entire ITA No. 7917/Del/2019 East Delhi Leasing Pvt. Ltd reassessment is quashed, the other grounds raised by the assessee on merits of the addition need not be adjudicated and they are left open.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 10/04/2024.
-Sd/- -Sd/-
(AMIT SHUKLA) (M. BALAGANESH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated:10/04/2024
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi