TaxTMI 
TaxTMI 
2013 (10) TMI 986
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....he operator of the above floated stock broking companies M/s. Mukesh M. Choksi admitted that he was involved in providing accommodation entries in various modes such as long term capital gains/short term capital gains etc. through the above company and the assessee was one of the beneficiary of such transactions. Accordingly, the case was reopened by issuing notice under section 148 of the Act on 30/03/2010 and the copy of the reasons was supplied to the assessee. 3. Being aggrieved, the assessee carried the matter to the learned CIT(A) and submitted that the following reasons for escapement of taxable income were recorded by the Assessing Officer:- "Name of the assessee : Shri Dinesh Jain (HUF) Address of the assessee : 47, Shastri Marg, Udaipur PAN : AACHD8903P Status : Individual Assessment Year : 2003-04 Reasons for reopening of case u/s 148 In this case, the above assessee has filed his return of income for A.Y. 2003-04 on 31/03/2004. As per information gathered, Shri Dinesh Jain (HUF) has entered into transactions of Rs. 18,33,466/- with M/s. M/s. Mahasagar Securities Pvt. Ltd., Mumbai (Now Alag Securities Pvt. Ltd.) in F.Y. 2003-04. As gathered, Mahasagar Securities P....
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....f has to be definite and relevant. In the present case, during the relevant year, the transaction was entered into by the assessee through Gold Star Finvest (P) ltd, and not from the company as recorded in the reasons for re-opening of assessment. This shows absence of nexus or live link between the material coming to the notice of the A0 and the formation of the belief. It also shows lack of enquiry by the ld. AO in order to form a belief regarding escapement of income. (iv) It is respectfully submitted that there is complete lack of application of mind by the ld. AO. In absence of any transaction with the said company, how the ld. AO has formed a belief that the assessee is one of the beneficiaries of these fraudulent billing activities by the above company. The AO cannot re- open the assessment merely on the basis of information received without applying his mind to the information and forming an opinion. The reasons must show due application of mind to the information, which is not present in the instant case. (v) The amount of transaction and escapement of income is stated as Rs,18,33,466/- while recording the reasons for re-opening, In this connection, it is humbly & respe....
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....ference to the material available with the AO at the time of issue of notice under Section 148 and cannot be substantiated by reference to the material that may have come to the light subsequently in the course of assessment proceedings. He should have, therefore, set out clearly the full details of such material and that if he does not do so and later on it is found that he had no materials, the initiation of proceedings need to be quashed. (ix) It is respectfully submitted that the powers of the A0 in initiating the re- assessment proceedings are wide but it has been repeatedly pointed out by the Courts that they are not plenary. These powers are vitally controlled by the words 'reason to believe' employed by the Section. Reason for formation of belief for re-opening the assessment must have a rational connection or relevant bearing on the formation of belief. The existence or otherwise of such a belief, on the part of the AO, is the very foundation of his jurisdiction. As already submitted above, the reasons recorded do not provide any reasonable basis for formation, of belief of escapement of income. These reasons as such may cause mere suspicion but in no way provide any reas....
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....cer to reopen the case. So, the reopening of the assessment could not be sustained on this account. Learned CIT(A) was of the view that for the reopening of the assessment, the Assessing Officer should have had reasons to believe that income chargeable to tax had escaped assessment under section 147 of the Act and for that purpose, he had to follow the provisions of Section 148 to 153 of the Act. The provisions contained in 148(2) of the Act specifically mentioned that Assessing Officer before issuing any notice under this section, shall record reasons for doing so and only the reasons recorded would be looked for sustaining and setting aside the notice under section 148 of the Act. Learned CIT(A) observed that the principle is well settled on the question as to whether there were reasons to believe within the meaning of section 147 of the Act that income had escaped assessment must be determined with reference to the reasons recorded by the Assessing Officer, but in assessee's case, it was apparently clear that the notice issued under Section 148 of the Act on the basis of reasons recorded under section 147 of the Act was not sustainable and the assessment proceedings on the basis....