TaxTMI 
TaxTMI 
2011 (3) TMI 1576
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....er a period of about six years, the impugned notice has been issued along with brief reasons for reopening the assessment. 3. Pursuant to the notice, the petitioner filed return of income on 28th April, 2010 declaring total income of Rs. 2,18,850 and vide letter dt. 26th April, 2010, the petitioner also requested for a copy of the reasons recorded for reopening the assessment and also objected to the reopening of the assessment. Upon filing the return of income, the AO issued notice under s. 143(2) of the Act on 16th June, 2010 for making further inquiry in connection with the reassessment. In terms of the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 179 CTR (SC) 11: (2003) 259 ITR 19(SC) the petitioner by a letter dt. 28th June, 2010 requested for a copy of the reasons recorded before issuance of notice under s. 148 of the Act. According to the petitioner, the AO instead of furnishing a copy of reasons for reopening and without disposing of the objections filed by the petitioner, sought to make further inquiries not connected with the grounds for reopening of assessment by issuing summons under s. 131 of the Act on 28th June, 201....
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....he reasons stated for reopening the assessment were unfounded and were only a matter of further investigation by the AO. According to the learned advocate, the AO ought to have at the first instance, called for the details of the matter which was required to be investigated and thereafter on the basis of the evidence on record, if need be, issued a notice for reassessment. It was submitted that the reasons as recorded for seeking approval, clearly show that jurisdiction under s. 147 has been assumed for making roving and fishing inquiries, which is not permissible in law. 6. Inviting attention to the reasons recorded, it was submitted that the respondent himself is not certain as to whether the amount received is loans and advances or trading receipts/trading payments and that, no satisfaction has been recorded as regards any income having escaped assessment. It was submitted that acceptance or repayment of loan/deposit in violation of the provisions of s. 269SS or 271B may at best lead to levy of penalty under s. 271D or 271B of the Act, but the same does not in any manner lead to a conclusion that income has escaped assessment. It was urged that disallowance under s. 40A(3) of t....
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....s escaped assessment is more than rupees one lakh. It was submitted that in the circumstances, in the present case, since the notice has been issued beyond a period of four years from the end of the relevant assessment year, the statutory requirements as envisaged under cl. (b) of sub-s. (1) of s. 149 of the Act are clearly not satisfied and hence, the proceedings are without jurisdiction on this count also. 9. In support of his submissions, the learned advocate placed reliance upon the following decisions : (a) The decision of this High Court in the case of Shankarlal Nagji & Co. & Ors. vs. ITO & Anr. (2009) 20 DTR (Guj) 116: (2010) 322 ITR 90(Guj). (b) The decision of the Supreme Court in the case of P.S. Subramanyan, ITO & Anr. vs. Simplex Mills Ltd. (1963) 48 ITR 182(SC). (c) The decision of the Supreme Court in the case of Chhugamal Rajpal vs. S.P. Chaliha & Ors. (1971) 79 ITR 603(SC). (d) The decision of the Delhi High Court in the case of CIT vs. Batra Bhatta Company (2008) 220 CTR (Del) 531: (2008) 13 DTR (Del) 115: (2010) 321 ITR 526(Del) : (2008) 174 Taxman 444(Del). (e) The decision of the Supreme Court in the case of Sheo Nath Singh vs. AAC 1973 CTR (SC) 484:....
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....t the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the AO and examine whether there was any material available on record from which the requisite belief could be formed by the AO and further whether that material had any rational connection or a live link for the formation of the requisite belief. [See Phool Chand Bajrang Lal & Anr. vs. ITO & Anr. (1993) 113 CTR (SC) 436: (1993) 203 ITR 456(SC)]. Since, the assessment is sought to be reopened after a period of four years from the end of the relevant assessment year, in the light of the provisions of s. 149(1)(b) of the Act, the reasons recorded should also reflect that the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. 13. Keeping the aforesaid position of law in mind, it may be germane to refer to the reasons recorded for reopening of assessment under s. 147 of the Act, which read thus : "Reasons in brief for reopening the assessment in the case of Shri Bakulbhai Ramanbhai Patel of Kheda for asst. yr. 2003-04. In....
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....come has escaped assessment by not disclosing the true income relating to asst. yr. 2004-05. Hence, it is a fit case for issuance of notice under s. 148 of the IT Act. Submitted for kind perusal and necessary approval for issuance of notice under s. 148 of the Act, if deemed fit." 14. A perusal of the reasons recorded indicates that the assessment is sought to be reopened by recording nine grounds. Examining each ground individually : the first ground is that the assessee has not filed his return of income for the year under consideration. This factual basis for reopening the assessment is admittedly incorrect, in as much as, the respondent has categorically accepted the fact that the petitioner had filed return of income for asst. yr. 2003-04 under s. 139(1) of the Act and the return was assessed and processed by the respondent under s. 143(1) of the Act in the affidavit-in-reply filed by him. 15. The next ground, which in fact appears to be the first ground for reopening the assessment is that according to the AO, the petitioner has received cash amount of Rs. 57,80,120 in the form of either loan and advances or trading receipts, which needs detailed investigation. Thus, the A....
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....SS or 271B of the Act or both. Thus, it is not the case of the AO that any income has escaped assessment. According to him, if the petitioner has received the aforesaid amount, he is a defaulter under the provisions of s. 269SS or 271B of the Act or both. The learned advocate for the petitioner is, therefore, justified in contending that in case the petitioner is a defaulter under either of the said provisions he may at best be liable to penalty under the provisions of s. 271D or 271E of the Act, however, the same would not lead to any conclusion that the income chargeable to tax has escaped assessment. 17. In relation to the third ground relating to an amount of Rs. 95,88,550, it is stated in the reasons that the petitioner has paid the said amount in cash in form of either payment of loan and advances or trading payments and that in both cases the assessee is a defaulter either under s. 269T or s. 40A(3) of the Act. Here also, the AO is not certain about the nature of the payment or as to whether the payment has been made by way of loan and advances or trading payments. As noted in the preceding para the AO by issuing notice under s. 142(1) of the Act has called upon the petitio....
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....be verified or investigated. As regards agricultural income, the AO has only recorded a statement of fact without stating as to how the same gives rise to escapement of income. 19. For the purpose of invoking the provisions of s. 147 of the Act, formation of requisite belief precedes the initiation of the proceedings. In the circumstances, in the light of the provisions of sub-s. (2) of s. 148, before issuing notice under s. 148 of the Act, the AO is required to record reasons for the formation of belief that income chargeable to tax has escaped assessment. In the present case, on a plain reading of the reasons recorded, as noted hereinabove no such belief appears to have been recorded by the AO. However, in the penultimate para of the reasons recorded, the AO has recorded thus : "In view of the Expln. 2 to s. 147 of the IT Act, the case of the assessee is that where cash transaction made is verified. Therefore, I have reason to believe that deemed income has escaped assessment by not disclosing the true income relating to asst. yr. 2003-04. Hence, it is a fit case for issuance of notice under s. 148 of the IT Act." This in effect and substance is the only satisfaction recorded by....
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.... all. The payment of interest was in no sense a relief granted in computing income; it was paid at the rate calculated according to the law then in force. No doubt in view of the subsequent amendment of the law and in view of this amended provision being given retrospective operation covering the date when the original assessment had been made, if the interest has to be computed according to the amended law then a smaller sum might have been payable as interest. But when it was computed, the new law was not in fact there and, therefore, the computation had been according to the law then in force. That computation cannot be reopened under s. 34 because it cannot be said that it is a case either of under-assessment or of excessive relief having been granted. It is really a case where the statutory liability of the State to pay interest was reduced from a higher figure to a lower one. Therefore, quite clearly it was not a case within s. 34." 23. In the facts of the present case, it is not the case of the AO that any income chargeable to tax has escaped assessment. The case of the AO is that in case the petitioner is a defaulter, under the provisions of the Act, in relation to ground ....
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....s a pre-condition for invoking s. 147 of the Act but a belief founded on reasons. The expression used in s. 147 is "If the AO has reason to believe" and not "If the AO believes". There must be some basis upon which the belief can be built. It does not matter whether the belief is ultimately proved right or wrong, but, there must be some material upon which such a belief can be founded. 27. In the case of Sheo Nath Singh vs. AAC (supra), the Supreme Court held that there can be no manner of doubt that the words "reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the ITO may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The ITO would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the Court. 28. In the case of Sarthak Securities Co. (P) Ltd. vs. ITO (supra), the Delhi High Court held that at the stage of....