1. We have heard Shri Shambhu Chopra, learned counsel for the income tax department.

2. In this appeal under Section 260A of the Income Tax Act, 1961 arises against the order dated 7.6.2013 passed by the Income Tax Appellate Tribunal in ITA No.99/Lkw/2011 for the assessment year 1998-99 the department has preferred following questions of law for adjudication of the Court:-

"1. Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in quashing the re-assessment proceedings ignoring the fact that the case was reopened on the basis of specific, relevant and reliable information that the assessee was engaged in concealing unexplained cash credits by giving them the garb of long term capital gains

2. Whether on the facts and in the circumstances of the case and in law the ITAT was justified in quashing re-assessment proceedings ignoring the fact that no objection for issuing of notice u/s 148 was raised by the assessee during the course of assessment proceedings or during the proceedings before the CIT (A)

3. Whether on the facts and in the circumstance of the case and in law the ITAT was justified in accepting challenge to re-assessment proceedings despite the assessee having been estopped by his conduct during assessment proceedings and proceedings before first appellate authority from doing so

4. Whether on the facts and in the circumstances of the case the Hon'ble ITAT was justified in quashing the re-assessment proceedings ignoring the facts that the assessee had not disclosed truly at the time of regular assessment the material facts with regard to the bogus long term capital gain entries from M/s Kishan Lal Monga & Company, New Delhi and M/s Capital Investment Ltd., New Delhi and thus the income of the assessee had escaped assessment"

3. The Tribunal held after quoting notice under Section 148 of the Act that no case has been made out for demonstrating any failure of disclosure by the assessee. The reopening of assessment was thus vitiated. The Tribunal relied upon Hindustan Lever Ltd. v. R.B. Wadkar, 268 ITR 332 [LQ/BomHC/2004/310] in which it was held that the reasons are required to be read as they are recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons and no inference can be drawn on the basis of reasons not recorded. It is for the A.O. to disclose and open his mind through the reasons recorded by him. In the present case in the notice under Section 148 dated 21.3.2005 it was stated by the A.O. as follows:-

"From the perusal of information received from Dy. Director of Income Tax (Inv.)-II, Kanpur, it is found that the assessee had received Demand Drafts from M/s Kishan Lal Monga & Co., New Delhi and M/s Capital Investment Ltd., New Delhi aggregating to Rs.17,21,445/-. The investigation made by DI Wing reveals that these transactions are fictitious one as the above mentioned two parties are not traceable at the given address. It was also found from the perusal of information received from DI Wing that the assessee was engaged in obtaining fictitious Long Term Capital Gains during F.Y. 1997-98 relevant ot A.Y. 1998-99.

In view of the above facts and the information in possession of the undersigned, I am of the opinion that the assessee has concealed income of Rs.17,21,450/- being unexplained cash credit. I, therefore, have reason to believe that income chargeable to tax amounting to Rs.17,21,450/- has escaped assessment for A.Y. 1998-99.

I, therefore, in light of fats narrated above, have reasons to believe that income exceeding Rs.1,00,000/- has escaped assessment. Accordingly, it is requested to kindly accord approval for issuing notice u/s 148 of the I.T. Act, 1961 in this case for A.Y. 1998-99. Assessment record in one volume is enclosed herewith for kind perusal.

(S. YADAV)

Income Tax Officer-6 (2),

Kanpur"

4. We have gone through the orders of the A.O., CIT (A) and the ITAT and find that the CIT (A) has gone into detail with regard to disclosure made by the assessee and found that the A.O. made addition on the basis of certain suspicion without verifying required facts and circumstances of the transaction under question. The findings recorded by CIT (A) in paragraph 8 of the order is quoted as below:-

"I have considered the facts and circumstances of the case, the discussion of the AO in the assessment order, submissions and arguments of the appellant. From the fact of the case and detail of proceedings during the assessment, it is clear that the AO has made the addition on the basis of certain suspicion and without verifying the required facts and circumstances of the transaction under question. While on the other hand, it is on record that the assessee has filed supporting documents by way of bills, vouchers, contractor's note and also detail of transactions of ale and purchase of share which have been routed through banking channels. The books of account of the appellant, as can be seen from the record, reflect and evidence the stock and sale of shares which were produced before the AO at the time of original assessment and also during the reassessment proceedings. The copies of statement of account, bank account, broker's note etc. have also been filed before me and same have been placed on record. In so far as the necessary documents and evidence in support of sale and purchase of shares is concerned, the appellant has placed the required details and documents before the AO and it is also obvious that no discrepancies and/ or defects have been noted by AO in the assessment order in respect of such details/ documents. The contention of the AO that the shares of the companies where private limited, no traceable in the stock exchange itself has no conclusive evidentially value. The other statements and material referred by AO such as statement of Directors of other concerns during survey conducted in the year 2005 has no relevance to the transaction relating to assessment year 1998-99 unless same were examined specifically with reference to the books of account of such companies for the relevant period i.e. assessment year 1998-99. It is further seen that the transaction through brokers has been dully supported by the appellant but after such a long gap of about more than 6 years if brokers could not be contacted by the AO, it was not enough to disregard the transaction. Thus, for the above reasons and the arguments and submission of the appellant pointing out the fact that the AO has wrongly presumed that - (a) "shares of M/s Nak Securities Ltd. remained the same from 1997 to 2001" and also that - (b) "Stock Brokers service tax was made applicable w.e.f. 01.07.1994 vide notification No.1/1994 hence service tax has been correctly charged/ realized", I find that there is no basis for making the addition of Rs.18,20,269/- and Rs.17,21,450/-."

5. In the present case a notice under Section 148 was issued on 28.3.2005 in response to which assessee has filed return of income on 29.4.2005. A survey was conducted in the premises of various directors and registered office of the companies on 5.8.2005 from which A.O. came to conclusion that no entries were found to show that the assessee company is registered shareholders of the 6 companies and also during the course of survey the Directors of the company had clearly denied transaction of shares of M/s Vee Aar Leasing Pvt. Ltd. with M/s Kishan Lal Monga & Co. Ltd., New Delhi. It was stated by Smt. Anupama Singhal, Director of M/s Ushin Investment Finance & Leasing Pvt. Ltd., Allahabad that in her individual capacity she had acquired shares of the assessee and had shown it in the return of her income. Similarly during the course of survey in the case of M/s Nak Securities Ltd., Kanpur, the statements on oath of the Directors were recorded in which the Directors stated that the shareholding of the assessee company has remained the same from the year 1997 to 2001. From this the A.O. concluded that the shareholdings were neither increased nor decreased. and that all the evidences shown that M/s Nak Securities Ltd., Kanpur never sold the shares to the assessee company. Similar was the situation in respect of the case of M/s Krishna Thermoware Pvt. Ltd., Kanpur and M/s R.L. Investment & Finance Co. Ltd., Kanpur.

6. Shri Shambhu Chopra has relied upon Explanation-1 appended to Section 147 and Clause-C of Explanation-2 and submits that the production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to a disclosure within the meaning of the foregoing proviso. He further submits that Clause (c) (i) of the Explanation 2 provides that where an assessment has been made but income chargeable to tax has been underassessed. It is submitted that in the present case both the conditions in Explanation 1 and Explanation 2 (c) (i) are satisfied and thus the Tribunal committed error in confirming the order of CIT (A) and interfering with the order of the A.O.

7. Shri Shambhu Chopra has relied upon the judgment of the Bombay High Court in Indian Hume Pipe Co. Ltd. v. Asstt. Commissioner of Income Tax & Ors., (2012) 348 ITR 439 (Bom) [LQ/BomHC/2011/2350] and of Delhi High Court in Shumana Sen v. Commissioner of Income Tax & Ors., (2013) 356 ITR 291 (Delhi) [LQ/DelHC/2012/5238] .

8. We find that in both the cases specific finding was recorded that the assessee has not made full and complete disclosures. Subsequent discovery was made in Indian Hume Pipe Co. Ltd. (Supra) that dates on which investments were made and which were claimed to be eligible for exemption under Section 54 EC were neither disclosed in the returns of income nor were made in response to the query of the assessing officer. Similarly in Shumana Sen (Supra) the Delhi High Court held that no document or evidence was filed along with return explaining the expenditure incurred on foreign travel during previous year.

9. In the present case we find from the findings recorded by the CIT (A) that not only primary evidence but all details and documents were before the A.O. and that it was obvious that no discrepancies or defects have been noted by the AO in respect of such details/ documents. The CIT (A) has further found that the contention of the AO that the shares of the companies, which were private limited were not traceable in the stock exchange did not have conclusive evidentially value. The transactions through brokers were duly supported by the appellant, which could not have been assailed after a long gap of 6 years, if brokers could not be contacted.

10. Primary facts and supporting facts have been produced and on which the A.O. has made sufficient enquiry, it was not open to issue notice after 6 years and to conduct enquiries and take statements to find out whether the income has escaped assessment.

11. We do not find that any material was discovered by A.O, prior to issuing notice under Section 148 nor any such material was discovered from any other source, which may have given him reason to believe that the income has escaped income. The A.O. based his findings on the same material, which were disclosed in the return after making some more enquiries and which was not permissible as the limitation of 4 years had expired. We do not find any error of law in the order of the Tribunal. We also do not find that any question of law arises for consideration in this appeal.

12. The income tax appeal is dismissed.