TaxTMI 
TaxTMI 
2008 (4) TMI 452
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....ue against the order dated October 30, 2001 passed by the Income-tax Appellate Tribunal, Bangalore Bench "C" in I. T. A. Nos. 545 to 552/Bang/2000 for the aforesaid assessment years. The appeals before the Tribunal were at the instance of the assessee against the consolidated order passed by the Commissioner of Income-tax (Appeals) on June 5, 2000, for the same assessment years. 3. In fact out of the impugned order passed by the Tribunal, eight appeals are preferred by the Revenue. Out of those eight appeals, three appeals already stood disposed of by an earlier order passed by this court. I. T. A. Nos. 99 of 2002 and 101 of 2002 for the assessment years 1991-92 and 1992-93 have been disposed of by us yesterday as the original records produced before us categorically revealed that there has not been any mandatory compliance with regard to section 148(2) of the Act inasmuch as no reasons have been recorded for invoking the said section. Thus, on a technical ground, those two appeals have been disposed of without going into the merits of the same. 4. Although several substantial questions of law have been formulated by the learned counsel for the Revenue in the appeals, but, vi....
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....atements, he was not keeping well. Retractions were made by the assessee on October 18, 1994 and December 17, 1994. By the later retraction he further elaborated the circumstances under which he was required to make the earlier statement under section 132(4) of the Act and reiterated his prayer for retraction thereof. Rejecting his request that the declaration was not voluntary, an order under section 132(5) came to be passed retaining the assets seized on August 23, 1994, as the assets of the assessee and adding it to the income of the assessee. The assessee objected to the said order. The Department had completed the assessments under section 143(1) for the assessment years 1986-87 to 1988-89 after accepting the returns. For the assessment years 1989-90 to 1993-94 the original returns filed by the assessee were processed under section 143(1) (a) of the Act accepting the same. After discovery of the aforesaid documents during the course of search and seizure, the assessments were reopened by the Assistant Commissioner of Income-tax Circle 1(1), after recording reasons on October 5, 1995. The assessee was thereafter issued notice under section 148 of the Act. For the asses....
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....nsel for the appellants-Revenue Sri M. V. Seshachala submitted that once the statement was given by the assessee, there is no provision in the Act to retract the same. Hence, the Tribunal could not have proceeded on the basis that the assessee had retracted his statements given under section 132(4) of the Act. He further contended that after the amendment of section 147 with effect from April 1, 1989, sufficiency or otherwise of the reasons recorded could not be allowed to be enquired into. According to him, if there existed prima facie material to reopen the case, the same would be sufficient for the Revenue to commence reassessment proceedings. It was also contended that looking to the voluminous incriminating documents, found at the time of search and seizure, there was sufficient material before the Revenue for issuance of notice under section 148 of the Act. The findings recorded by the Tribunal are also being attacked and criticised on a variety of grounds. 14. Per contra, Sri A. Shankar, learned counsel appearing for the assessee contended that once the statements given by the assessee under section 132(4) of the Act were withdrawn or retracted, the same could not be basi....
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....g another opportunity provided to him (vide (a) above), the Assessing Officer is directed to complete the reassessment for the assessment year as per his proposal, vide reference above. The assessee has undertaken to furnish all particulars on or before March 23, 1998." 16. The Assessing Officer thereafter passed the order on March 27, 1998. Since these directions were given to the Assessing Officer, it can safely be presumed that he was fully aware of the said order passed by the Deputy Commissioner of Income-tax, Hubli. However, the order passed by the Assessing Officer shows that there is no whisper with regard to the retraction of the statement made by the assessee and compliance with the directions as contained in the order passed by the Deputy Commissioner of Income-tax. The order passed by the Assessing Officer on March 27, 1998, has been filed as per annexure C. In the light of the aforesaid fact situation, we have to examine as to what would be the legal position after retraction of the statements by the assessee, and whether still after retraction, there existed sufficient material or reasons to reopen the case or not. 17. Learned counsel for the Revenue has placed ....
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....hat the income had escaped assessment. In this regard, it has been held that two of the following conditions must be fulfilled before a case is sought to be reopened, namely, (1) the first condition is that the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to income-tax had been under assessed. (2) The second condition is that he must have reason to believe that such "underassessment" had occurred by reason of either, (i) omission or failure on the part of an assessee to make a return of his income under section 22, or (ii) omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment for that year. 23. The Supreme Court then further went, on to hold that fulfilment of the same is a condition precedent to be satisfied by the Assessing Officer, before he acquires jurisdiction to issue a notice under this Act. 24. In the matter of Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500, the Supreme Court while dealing with the provisions of sections 147 and 148 of the Act, has held as under (page 511): "Section 147 authorises and permits the Assessing Officer to as....
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.... believe that any part of the income of the respondent had escaped assess ment by reason of its failure to make a full and true disclosure of material facts, the Income-tax Officer did not disclose in his affidavit any material on the basis of which it could be said that he had come to the requisite belief. All that the Income- Officer stated in his affidavit was that he discovered that the transactions of loan against security of hundis were not genuine and that the credits against the names of certain persons who were alleged to have advanced loans were bogus." 28. It was further held as under (page 6): "We are, therefore, not at all satisfied on the affidavit that the Income-tax Officer had reason to believe that a part of the income of the respondent had escaped assessment by reason of its failure to make a true and full disclosure of the material facts." 29. The Gujarat High Court in the matter of Birla VXL Ltd. v. Asst. CIT [1996] 217 ITR 1, has dealt with the issue as under (page 3): "Why for holding such belief must be reflected from the record of reasons made by the Assessing Officer. In a case where the Assessing Officer holds the opinion that because of exces....
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....with an identical fact situation, the Bombay High Court in the matter of Hindus tan Lever Ltd. [ 268 ITR 332 has held as under (page 338): "It is needless to mention that 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 based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Asses sing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for th....
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....ditions is not fulfilled, the notice issued by the Income-tax Officer would be without jurisdiction. The important words under section 147(a) are 'has reason to believe' and these words are stronger than the words 'is satisfied'. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material." 37. In the light of the aforesaid judgments of various High Courts and the Supreme Court, we have examined whether there existed sufficient reasons for reopening of the case against the assessee, exercising the power conferred on the Assessing Officer under section 148 of the Act. The reasons to believe have been reproduced by us as recorded by the Assessing Officer. The same would show that he was not even able to find out prima facie case with regard to the escaped assessment within the meaning of section 147 of the Act. 38. For the assessment year 1993-94, in fact no cogent and valid reasons have been assigned by the Assessing Officer for reopening of the case. In the light of the aforesaid discussions, we have no hesitation to hold that there existed no material....