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Ludhiana., [hereinafter referred to as 'CIT(A)'] each dt. 04/09/2018 pertaining to A.Y. 2013-14.

2. Since the issues involved in all the above appeals were similar, they were heard together and are being disposed off by this common and consolidated order.

3. With the consent of both the parties, the case of the Assessee in ITA No. 1338/Chd/2018 in the case of Smt. Sudesh Rani, Ludhiana Vs. ACIT was taken as the lead case wherein the grounds of appeal read as under:

"1. That order passed u/s 250(6) of the Income Tax Act, 1961 passed by the Ld. Commissioner of Income Tax (Appeals)-I, Ludhiana is against law and facts on the file in as much as he was not justified to arbitrarily uphold the action of the Ld. Assessing Officer in initiating proceedings under sec. 147 of the Income Tax Act,

1961.

2. That he was further not justified to arbitrarily uphold the action of the Ld. Assessing Officer in making an addition of Rs. 1,04,07,648/- representing the sale proceeds of equity shares held by the appellant for more than one year by invoking the provisions of section 68 of the Income Tax Act, 1961.

3. That he was further not justified to arbitrarily uphold the action of the Ld. Assessing Officer in making an addition of Rs. 3,12,230/- on account of alleged expenses allegedly paid by the appellant for arranging the alleged entries in respect of long term capital gain by invoking the provisions of Section 69C of the Income Tax Act, 1961.

4. That he was further not justified to negate the claim of the appellant that the assessment framed by the Ld. Assessing Officer by ignoring the basic principles of natural justice and relying on certain statements of various persons without affording any opportunity to cross examine such persons was not bad in law."

4. Briefly the facts of the case are that the assessee has filed her return of income declaring total income of Rs. 10,19,280/- on 30/07/2013. Thereafter information was received from Pr. DIT (Investigation), Kolkata regarding entry of bogus Long Term Capital Gains (LTCG) at platform of Calcutta Stock Exchange and basis the same, the AO recorded the reasons to believe that income of the assessee has escaped assessment to the extent of Rs. 1,04,07,648/- and notice under section 148 was issued on 30/03/2017 which was served on the assessee

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through notice server on 31/03/2017. Thereafter notice under section 143(2) and 142(1) were issued and after issuing a specific show cause dated 22.12.2017, the assessment was completed vide order passed under section 143(3) r/w 147 dated 29.12.2017 wherein the sale consideration received by the assessee on sale of shares of M/s Access Global Ltd. amounting to Rs. 1,04,07,648/- was treated as bogus and not genuine and sale consideration was considered as unexplained cash credit and addition was made under section 68 of the Act. Further addition of Rs. 3,12,230/- was also made under section 69C of the Act in respect of brokerage expenditure.

5. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) challenging the order of the AO both on legality as well as on merits of the case. The Ld. CIT(A) after considering the submissions of the assessee dismissed the appeal so filed by the assessee vide the impugned order dt. 04/09/2018 and against the said order and the findings of the Ld. CIT(A), the assessee is in appeal before us.

5.1 During the course of hearing, the Ld. AR submitted that the reassessment proceedings under section 147 were initiated by way of notice under section 148 dt. 30/03/2017 based on information received from Pr. DIT (Investigation) Kolkata regarding entry of bogus LTCG at platform of Calcutta Stock Exchange. It was submitted that the AO acted merely on the information supplied by the Pr. DIT(Investigation), Kolkata, he didn't carry out any further examination/verification and he did not apply his independent mind and the proceedings were initiated only on the basis of information received from Investigation Wing, Kolkata.

5.2 It was submitted that the case of the assessee was reopened only on the basis of information received from the Investigation Wing which suffers with serious debility and lacks definiteness without describing the basic aspects of an

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alleged transaction, and in the absence of the same, the whole action of the AO stand vitiated. It was submitted in the instant case there is no nexus between the material relied upon and the belief formed for escapement of income, there is no independent application of mind, no proper satisfaction had been recorded and no independent conclusion has been drawn regarding escapement of income by the assessee. In this regard our reference was drawn to the reasons recorded by the AO prior to issuance of notice u/s 148 which are contained at pages 45 to 51 of the assessee's paper book.

5.3 Further in support of his contention, the Ld. AR has placed reliance on the following decisions:

• ACIT Vs. M/s Dhariya Construction Company [2010] 328 ITR 515 (SC)

• Pr. CIT Vs. M/s RMG Polyvinyl(I) Ltd. [2017] 396 ITR 5 (Del)

• Pr. CIT-6 Vs. Meenakshi Overseas(P.) Ltd. [2017] 395 ITR 677 (Del)

• CIT Vs. M/s SFIL Stock Broking Ltd. [2010] 325 ITR 285 (Del)

• Sarthak Securities Co. (P) Ltd. Vs. ITO-Ward 7(3) [2010] 329 ITR 110 (Del)

• SABH Infrastructure Ltd. Vs. Asst. CIT [2017] 398 ITR 198 (Del)

5.4 It was further submitted that the legal proposition so laid by the Courts in the aforesaid decisions have been consistently followed by various Coordinate Benches including Chandigarh Benches of the Tribunal and in this regard, our reference was drawn to the decisions in case of Future Tech IT Systems (P. ) Ltd. Vs. ITO [2021] 89 ITR (T) 676, M/s Century Fiscal Services Ltd. Vs. ITO (ITA No. 1204/Chd/2018 dt. 28/10/2020), M/s Indo Global Techno Trade Limited Vs. The ITO (ITA No. 1616/Chd/2018), M/s Rajshikha Enterprises Pvt. Ltd. Vs. ITO (ITA No. 6113/Del/2014 vide order dt. 23/02/2018) and M/s Sur Buildcon Pvt. Ltd. and others reported in 90 ITR (Trib) 300 and Shri Sanjay Singal & Others (ITA Nos. 705,708,710,711,714,716,717-719 /Chd /2018 vide order dt. 20/09/2021).

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6. Per contra, it was submitted by the ld. Sr. DR submitted that the information received by the Assessing Officer from the Pr. DIT (Investigation), Kolkata contains factual information and on the basis of this information, the AO prima facie formed a belief that the income has escaped assessment. It was submitted that the from the reasons recorded by the Assessing Officer, it is amply clear that the AO formed his belief on the basis of specific information arisen out of investigation proceedings in the case of persons who were bogus entry providers and for the purpose of reassessment proceedings, what has to be seen is whether there is any prima facie material on the basis of which the AO could reopen the case. The sufficiency or the correctness of the material is not to be considered at this stage of recording of the reasons. It was further submitted that once the AO has received specific information from Pr. DIT (Investigation), Kolkata regarding bogus entries of long term capital gains and on the basis of such information, the AO has recorded reasons for reopening, it cannot be held that the reasons were not those of the Assessing Officer and are of the Pr. DIT (Investigation). It was accordingly submitted that there is nothing which prevent the Assessing Officer to rely on the exercise undertaken by other Wings of the Departments, if the material so collected through enquiry and investigation provides prima facie information, which enables the Assessing Officer to form a belief that income has escaped assessment. It was further submitted that it would undoubtedly require application of mind on the part of the Assessing Officer when certain materials collected by other wings of the department is placed before him, however, there cannot be any straight jacket formula of the manner in which mind can be applied or shown to have been applied and the same may be gathered from the reasons recorded and other contemporaneous material on record. It was accordingly submitted that there is no infirmity in the action of the Assessing Officer in initiating the proceedings U/s 147 of the Act on the basis of information received from Pr. DIT (Investigation), Kolkata. It was further submitted that the notice u/s 147 has been issued after

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seeking approval from the competent authority which clearly show application of mind before granting approval on the part of the appropriate authority.

7. The Ld. Sr. DR accordingly supported the order and the findings of the Ld. CIT(A) and our reference was drawn to para 12 of the impugned order wherein the Ld. CIT(A) has discussed the ground so raised by the assessee challenging the reopening of the assessment and the findings therein read as under:

"12. The appellant's grievance against the assumption of jurisdiction by the AO to reassess under the provisions of section 147 of the Act does not stand to reason. The AO was in possession of information by way of an Investigation Report by the Investigation Wing of Kolkata which had unearthed a scam of accommodation entries of LTCGs by a cartel of brokers and operators. That the appellant was a beneficiary of the said scam could not have been more evident from the return of income for the year under consideration, in which there was a claim of exemption from long term capital gains of Rs. 99,13,946/- under the provisions of section 10(38) of the Act from the sale of shares of a dubious company, whose acquisition cost was a mere Rs. 4,12,000/- and which gave the appellant a return of around 2400% in a span of just a year. The AO did form a prima facie belief of escapement of income on the basis of an indubitable and credible information in respect of the appellant. All the essential ingredients for reopening the case of the appellant were satisfied and due procedure was followed in assumption of jurisdiction to assess the appellant. The grievance qua the reopening of the case is nothing but an exercise in nitpicking and an attempt to abuse the process of law. The ground of appeal pertaining to the reopening of the case is, thus, dismissed as devoid of any merit."

8. We have heard the rival contentions and purused the material available on record. It is a settled legal proposition that for assumption of jurisdiction u/s 147, the Assessing Officer has to form a prima facie opinion on the basis of tangible material that there is an escapement of income, the opinion formed may be subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion, the reasons recorded and/or the documents available on record must show a nexus and relevancy to the opinion formed by the Assessing Officer regarding escapement of income. The reasons are required to be read as they were recorded by the Assessing officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons

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not recorded. It is for the Assessing officer to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons. It is for the Assessing officer to form his opinion and record his reasons in clear and unambiguous terms and the reasons should not suffer from vagueness and should be self-explanatory.

9. In this regard, we refer to the decision of the Hon'ble Delhi High Court in case of Meenakshi Overseas Pvt Ltd (supra) wherein it was held that the reopening of assessment under section 147 is a potent power not to be lightly exercised and certainly cannot be invoked, casually or mechanically. The heart of the provision is the formation of belief by the Assessing officer that income has escaped assessment. The reasons recorded have to be based on some tangible material and that should be evident from reading of the reasons. The Assessing officer being a quasi-judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the investigation wing might constitute the material on the basis of which he forms the reasons to believe, the process of arriving at such satisfaction cannot be a mere repetition of the report of the investigation wing and in the said case, it was held that the reasons to believe doesn't contain the reasons rather the conclusions of the Assessing officer one after another which are at best reproduction of the conclusion of the investigation report, which in effect is a borrowed satisfaction. It was accordingly held in the said case that the Tribunal has therefore rightly held that the initiation of proceedings under section 147 to reopen the assessment doesn't satisfy the requirement of law and the relevant findings read as under:

"19. A perusal of the reasons as recorded by the AO reveals that there are three parts to it. In the first part, the AO has reproduced the precise information he has received from the Investigation Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material.

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20. Coming to the second part, this tells us what the AO did with the information so received. He says: "The information so received has been gone through." One would have expected him to point out what he found when he went through the information. In other words, what in such information led him to form the belief that income escaped assessment. But this is absent. He straightaway records the conclusion that "the abovesaid instruments are in the nature of accommodation entry which the Assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver)". The AO adds that the said accommodation was "a known entry operator" the source being "the report of the Investigation Wing".

21. The third and last part contains the conclusion drawn by the AO that in view of these facts, "the alleged transaction is not the bonafide one. Therefore, I have reason to be believe that an income of Rs. 5,00,000 has escaped assessment in the AY 2004-05 due to the failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment... "

22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying "unaccounted cash" is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be

"a known entry operator" is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom.

23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing.

24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act.

25. At this stage it requires to be noted that since the original assessment was processed under Section 143 (1) of the Act, and not Section 143 (3) of the Act, the proviso to Section 147 will not apply. In other words, even though the reopening in the present case was after the expiry of four years from the end of the relevant AY, it was not necessary for the AO to

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show that there was any failure to disclose fully or truly all material facts necessary for the assessment.

26. The first part of Section 147 (1) of the Act requires the AO to have

"reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment."

"36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment.

37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law."

10. Following the aforesaid decision, the Hon'ble Delhi High Court in its subsequent decision in case of RMG Polyvinyl ltd (supra) has held that the information received from the Investigation wing cannot be said to be tangible material per se without further enquiry being undertaken by the Assessing officer and there is no live link between the tangible material and formation of reasons to believe that income had escaped assessment and the relevant findings read as under:

"12. Recently, in its decision dated 26th May, 2017 in ITA No. 692/2016 Pr. CIT v. Meenakshi Overseas, this Court discussed the legal position regarding reopening of assessments where the return filed at the initial stage was processed under Section 143(1) of the Act and not under Section 143(3) of the Act. The reasons for the reopening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding

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accommodation entries provided by a 'known' accommodation entry provider. There, on facts, the Court came to the conclusion that the reasons were, in fact, in the form of conclusions "one after the other" and that the satisfaction arrived at by the AO was a "borrowed satisfaction"

and at best "a reproduction of the conclusion in the investigation report."

13. As in the above case, even in the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived himself of that opportunity by proceeding on the erroneous premise that Assessee had not filed a return when in fact it had."

11. Earlier, the Hon'ble Delhi High Court in case of SFIL Stock Broking Ltd (supra) referring to the decision of Hon'ble Supreme Court in case of Rajesh Javeri has also held that the AO must have formed a belief that income has escaped assessment and basis of formation of such belief could be discerned from the material available on record and in the instant case, mere receipt of information from DDIT (Investigations) and directions to issue notice under section 148 cannot be called as reasons to believe that income has escaped assessment as it is not clear whether Assessing officer had applied his mind to the information so received and independently arrive at a belief that income has escaped assessment and the relevant findings read as under:

"8. After having heard the counsel for the parties, we are inclined to agree with the submissions made by the respondent/assessee. We find that the Supreme Court in Rajesh Jhaveri [2007] 291 ITR 500 made it absolutely clear that before an Assessing Officer issues a notice under section 148, thereby reopening the assessment under section 147 of the said Act, he must have formed a belief that income had escaped assessment and that there must be some basis for forming such a belief. The Supreme Court made it clear that the basis of such belief could be discerned from the material on record which was available with the Assessing Officer. However, the Supreme Court in Rajesh Jhaveri [2007] 291 ITR 500 did not say that it was not necessary for the Assessing Officer to form a "belief and that the mere fact that there was some material on record was sufficient.

9. In the present case, we find that the first sentence of the so-called reasons recorded by the Assessing Officer is mere information received from the Deputy Director of Income-tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income-tax (Investigation) to issue a notice under section 148 and the third sentence again comprises of a direction given by the Additional Commissioner of Income-tax to initiate proceedings under

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section 148 in respect of cases pertaining to the relevant ward. These three sentences are followed by the following sentence, which is the concluding portion of the so-called reasons :

Thus I have sufficient information in my possession to issue notice under section 148 in the case of SFIL Stock Broking Ltd. on the basis of reasons recorded as above."

10. From the above, it is clear that the Assessing Officer referred to the information and the two directions as "reasons" on the basis of which he was proceeding to issue notice under section 148. We are afraid that these cannot be the reasons for proceeding under section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on the facts. The law is well settled. There is no substantial question of law which arises for our consideration."

12. Similarly, the Hon'ble Delhi High Court in case of SABH Infrastructure (supra) has held that there have to be reasons to believe and not merely reason to suspect that income has escaped assessment and in the said case, it was held that the reasons so recorded failed to mention what facts or information were withheld by the assessee and mainly relying upon the investigation report which doesn't form part of the reasons and not even annexed to the reasons so recorded and merely the statement of Mr Navneet Kumar Singhania that companies in question were paper companies is insufficient to reopen the assessment unless the Assessing officer had any further information after making further enquiries into the matter and the relevant findings read as under:

"15. The assessment proceedings, especially those under section 143(3) of the Act, have to be accorded sanctity and any reopening of the same has to be on a strong and sound legal basis. It is well-settled that a mere conjecture or surmise is not sufficient. There have to be reasons to believe and not merely reasons to suspect that income has escaped assessment. In this case, the reasons failed to mention what facts or information was withheld by the petitioner. Merely relying upon the statement of Mr. Navneet Kumar Singhania that the companies in question were "paper companies", by itself, is insufficient to reopen the assessment, unless the Assessing Officer had further information that these companies were non-existent after making further inquiries into the matter. It is clear that the Assessing Officer did not make any inquiry or investigation, if these companies were in fact "paper companies". No effort has been made to

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establish the connection between the statement of Mr. Navneet Kumar Singhania and the five companies.

16. Mr. Chaudhary's submission that this court cannot dictate the manner and content of what is to be written in the reasons to believe is correct as a legal proposition. However, the court has to examine the reasons to believe to see if it satisfies the rigour of the provisions. The observations of this court in Multiplex Trading & Industrial Co Ltd (supra) are relevant in this respect and are set out below;

"In our view, the question whether the assessee could have been stated to disclose fully and truly all material facts have to be examined in the light of facts of each case and also the reasons that led the Assessing Officer to believe that income of an assessee has escaped assessment. In a case where the primary facts have been truly disclosed and the issue is only with respect to the inference drawn, the Assessing Officer would not have the jurisdiction to reopen assessment. But in cases where the primary facts as asserted by the assessee for framing of assessment are subsequently discovered as false, the reopening of assessment may be justified."

17. In the facts of this case, the primary facts have not been shown to be false. The five companies do exist. They did subscribe to the share capital of the petitioner. They did pay the money to the petitioner. All the five companies are assessed to tax. These are the primary facts. The reasons to believe rely upon a letter received from the Investigation Wing and Mr. Chaudhary submits that this letter was in fact an investigation report. The report does not form part of the reasons and neither was it annexed to the reasons. Interestingly, even the counter-affidavit is silent as to the material which has not been disclosed by the petitioner. The counter- affidavit merely states that the information was specific and the information would be provided to the petitioner during the assessment proceedings. Thus, if the Revenue had any basis to show that the primary facts were incorrect, the same ought to have been set out in the reasons to believe. That has not been done in the present case.

18. Thus, the petitioner cannot be said to have failed to disclose fully and truly all the material facts. This being a jurisdictional issue. the assumption of jurisdiction under sections 147 and 148 of the Act was erroneous. The notice dated March 20, 2015 and the subsequent order dated February 1, 2016 deserve to be and are hereby quashed.

19. Before parting with the case, the court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments:

(i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the Assessing Officer for obtaining the approval of the Superior Officer should itself be provided to the assessee. This would contain the

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comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the Assessing Officer to the assessee is to be avoided;

(ii) the reasons to believe ought to spell out all the reasons and grounds available with the Assessing Officer for reopening the assessment-especially in those cases where the first proviso to section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the Assessing Officer on the same and if so, the conclusions thereof:

(iii) where the reasons make a reference to another document, whether as a letter or report, such document and/or relevant portions of such report should be enclosed along with the reasons:

(iv) the exercise of considering the assessee's objections to the reopening of assessment is not a mechanical ritual. It is a quasi-judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed."

13. Similarly, the Coordinate Chandigarh Benches in case of Future Tech IT system Private Ltd (supra) has held that where the AO acted merely upon the report of the Investigation wing and initiated the proceedings for reopening the assessment by issuing notice under section 148, the reassessment proceedings were not valid and deserve to be quashed.

14. Similarly, in case of M/s Century Fiscal Services Ltd (Supra), the Coordinate Chandigarh Benches have held that on perusal of the reasons recorded by the AO, it is very much evident that he has mainly relied on the information passed to him by the Investigation wing regarding accommodation entry taken by the assessee without even applying his mind to it and verifying the same. The entire reasons talks about some information with the Assessing officer, and there is nothing in the reasons revealing application of mind by the Assessing officer to the information in his position as to whether he had verified that any such amount was actually received during the year and if so, in what mode or manner. The Assessing officer has formed his belief solely on the information without even verifying and cross-checking the same with the facts on record

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available with him. The belief of escapement of income as recorded in the reasons is clearly not that of the Assessing officer but a borrowed relief and reassessment proceedings were thus held to be vitiated and not sustainable in law.

15. Applying the aforesaid legal proposition in the present case, we refer to the reasons recorded by the Assessing officer before issuance of notice u/s 148 of the Act. In the first part, the Assessing officer states that "as per information available with him, the assessee is involved in manage trading of shares of penny stocks in order to convert its undisclosed income into exempt income thereby the assessee has not paid the due taxes on the undisclosed income"

and thereafter, it talks about the details of transactions in terms of scrip sold by the assessee, quantity of scrip sold, rate and trade value. What information is available with the Assessing officer is neither stated nor enclosed with the reasons so recorded by him and thus not discernable from the reasons so recorded. Merely the fact that the assessee has sold certain shares with certain value on the stock exchange cannot by itself be held as tangible material. Further we find that the Assessing officer has not just recorded a reason to belief rather recorded a conclusive finding that assessee is involved in manage trading of penny stock to convert his undisclosed income into exempt income. How the Assessing officer has reached such a conclusive finding and basis thereof is again not borne out from the reasons so recorded by him.

16. In the second part of the reasons, the Assessing officer stated that certain investigation has been conducted by the Principal Director of Income tax (Investigation), Kolkata in respect of accommodation entry of long-term capital gains and a report has been received in his office and then it goes about discussing the type of penny stock companies, the entities involved in the transaction and the different legs of the transaction and survey conducted at the premises of Ashok Kumar Kalyan where he has named some nine

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companies including Access Global Limited as penny stock company which is used for providing accommodation entry in form of long term capital gains. We find that these are general descriptions and how the same are relevant in the case of the assessee is not borne out from the reasons so recorded. Even the contents of the investigation report so stated to be received by the Assessing officer doesn't form part of the reasons so recorded and has thus not been shared with the assessee. How Access Global Limited which is a listed entity has been held as penny stock companies and whether any

investigation/verification carried out by the Assessing officer is not borne out of the reasons so recorded.

17. In third and fourth part of the reasons so recorded, the AO talks about the fact that M/s Access Global Ltd is a Calcutta Stock Exchange listed company having paid-up capital of Rs.28,87,30,000/- and it talks about three companies namely M/s Seaview Suppliers Ltd, M/s Matrix Barter Private Limited and M/s Mapple Goods Ltd and all three companies having amalgamated with M/s Access Global Ltd vide Hon'ble Calcutta High Court decision dated 15.11.2011. The Assessing officer goes on further to state that M/s Access Global Ltd has allotted shares to a large number of persons including four Jamakharchi companies and under the scheme of amalgamation, the swap ratio is so fixed which is indicative that the capital in the listed company have been raised using JamaKarchi route in the form of allotment of shares to Jama Kharchi companies and amalgamation of Jama Kharchi companies with the listed company. This is again a generic information wherein three companies have been said to be amalgamated with M/s Access Global Ltd under the scheme of amalgamation approved by the Hon'ble Calcutta High Court and merely the fact that the assessee has sold shares of M/s Access Global Ltd, how the same can lead to reasonable belief that its assessee's undisclosed income which has been routed back in form of sale consideration and income has escaped assessment is not

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borne out of the reasons so recorded. We find that the whole focus of the Assessing officer is on M/s Access Global Ltd and he has infact failed to carry out even preliminary enquiry that the assessee had originally purchased shares of M/s Maple Good Ltd and on its amalgamation, was allotted shares of M/s Access Global Ltd in exchange for its existing holding and there is thus no finding that the purchases so made were bogus and therefore, where the purchases have not been doubted, how the sale have been held to be bogus is again not borne out of the reasons so recorded.

18. In part six of the reasons so recorded, the Assessing officer has stated that the assessee has filed its return of income on 28.09.2013, which has been processed under section 143(1) on 31.12.2013 wherein the assessee has shown exempt income of Rs.99,13,946/- on account of long-term capital gains from the transaction on which securities transaction tax is paid and the case has not been taken up for scrutiny earlier. Merely the fact that the return of income has not been selected for scrutiny earlier cannot be a reason sufficient enough to hold that the income has escaped assessment. The Assessing officer has to record reasons as to why the transaction so reflected in the return of income and claimed exempt is liable for taxation which has escaped assessment and such reasons to belief must be based on tangible material. As we have noted above, the whole focus of the Assessing officer is on M/s Access Global Ltd whose shares have been sold and sale consideration thereof has been shown in the return of income and he has infact failed to carry out preliminary enquiry and examine the return of income that the assessee had originally purchased shares of M/s Maple Good Ltd and on its amalgamation, was allotted shares of M/s Access Global Ltd in exchange for its existing holding and whose cost of acquisition has been claimed as eligible deduction and net sale consideration has been claimed as exempt as long term capital gains.

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19. Thereafter, in part seven of the reasons so recorded, he has stated that "it is therefore clear that the assessee has also taken bogus long-term capital gains and has shown exempt income on the managed transactions/bogus long-term capital gain and therefore, I have reasons to believe that undisclosed income of Rs. 1,04,28,197/- has been converted into bogus long-term capital and has escaped assessment within the meaning of section 147 of the Act." We therefore find that the Assessing officer has started off with conclusion, as we have noted in the first part of the reasons, that the assessee is involved in manage trading of shares of penny stocks in order to convert its undisclosed income into exempt income and in last part of the reasons, again concluded that the assessee has taken bogus long term capital gains through managed trading of shares. The whole exercise thus shows a pre-determined mind on part of the Assessing officer to issue notice u/s 148 of the Act and complete lack of application of mind on receipt of information from the Investigation Wing without carrying out any further examination/verification and that too, at the fag end of the limitation period as evident from the fact that the notice u/s 148 was issued on 30/03/2017.

20. In light of aforesaid discussions and respectfully following the decisions referred supra, we are of the considered view that in the instant case, the Assessing officer has simply relied upon the report and conclusion drawn upon by Investigation Wing Kolkata without carrying out any preliminary enquiry and investigation and establishing the necessary nexus between material and formation of belief that income has escaped assessment. There is clearly no independent application of mind by the Assessing officer as can be discernable from the reasons so recorded and in view of the same, we are of the considered view that that the Assessing officer doesn't have the legal basis to acquire jurisdiction for reassessment u/s 147 and thus, the notice issued under section 148 and consequent reassessment proceedings are liable to be set-aside.

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21. The other grounds raised on merits of the additions have therefore become academic and we do not propose to adjudicate them and the same are dismissed as infructious.

22. In the result, the appeal of the assessee is allowed.

23. In ITA No. 1339/Chd/2018 and ITA No. 1340/Chd/2018, both the parties fairly submitted that the facts and circumstances of the case are exactly identical except for the difference in the amount involved. Therefore, our findings and directions contained in ITA No. 1338/Chd/2018 shall apply mutatis mutandis to these appeals and the same are decided in favour of the respective assessees.

24. In the result, all three appeals are allowed and disposed off in light of aforesaid directions.

Order pronounced in the open Court on 12/01/2023.

Sd/- Sd/-

दवा सहं &व'म सहं यादव

(DIVA SINGH) ( VIKRAM SINGH YADAV)

या#यक सद$य / JUDICIAL MEMBER लेखा सद$य/ ACCOUNTANT MEMBER

AG

Date: 12/01/2023 आदेश क! त,ल-प अ.े-षत/ Copy of the order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent

3. आयकर आयु/त/ CIT

4. आयकर आयु/त (अपील)/ The CIT(A)

5. -वभागीय तन4ध, आयकर अपील&य आ4धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH

6. गाड  फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar