Court quashes assessments for 2009-2012 under Section 147 due to lack of material basis

The court quashed the reopening of assessments for the years 2009-2012 under Section 147 of the Income Tax Act, as the Assessing Officer's belief that income had escaped assessment was not based on material on record but on external information. The court emphasized that the reasons for reopening assessments should clearly demonstrate the basis for the belief, which was lacking in this case. Consequently, the court ruled in favor of the petitioner, quashing the notices issued under Section 148 of the Income Tax Act.

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Issues Involved:
1. Validity of reopening assessments under Section 147 of the Income Tax Act.
2. Adequacy of reasons recorded by the Assessing Officer for reopening assessments.
3. Jurisdiction of the Assessing Officer based on information from external sources.

Detailed Analysis:

1. Validity of Reopening Assessments under Section 147 of the Income Tax Act:
The petitioner challenged the reopening of assessments for the years 2009-2010, 2010-2011, and 2011-2012 under Section 147 of the Income Tax Act. The returns for these years were processed under Section 143(1) and later reopened by notices dated 26.03.2014. The petitioner contended that the reopening was without basis, as the Assessing Officer did not independently apply his mind but acted on information from the Director General of Income Tax (Inv.), Mumbai.

2. Adequacy of Reasons Recorded by the Assessing Officer for Reopening Assessments:
The court scrutinized the reasons recorded by the Assessing Officer, which stated that on verification of details, it was noticed that the assessee made bogus purchases. However, the reasons did not specify the record from which this conclusion was drawn. The court noted that the reasons were identically worded for all assessment years and lacked specific details or material evidence to support the claim of bogus purchases. The court emphasized that the reasons should clearly demonstrate the basis for the belief that income had escaped assessment.

3. Jurisdiction of the Assessing Officer Based on Information from External Sources:
The Assessing Officer's rejection of the petitioner's objections mentioned receiving information from the DGIT (Inv.), Mumbai, about bogus purchases. However, this information was not reflected in the reasons recorded for reopening the assessments. The court observed that the formation of belief must be based on material available on record, not on external information. The court cited precedents, including the Supreme Court's rulings, stating that the reasons recorded cannot be supplemented by affidavits or orders rejecting objections. The substratum for the belief that income had escaped assessment must be part of the recorded reasons.

Conclusion:
The court concluded that the Assessing Officer's belief that income had escaped assessment was not based on the material on record but on external information, which was not mentioned in the reasons recorded. Therefore, the basic requirement for assuming jurisdiction under Section 147 was not satisfied. Consequently, the court quashed the impugned notices dated 26.03.2014 issued under Section 148 of the Income Tax Act, allowing the petitions with no order as to costs.

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