TaxTMI 
TaxTMI 
2011 (10) TMI 624
X X X X Extracts X X X X
X X X X Extracts X X X X
....der the provisions of the Act. The authorities below have committed serious jurisdictional errors. 4. That the authorities below have committed serious error in not supplying the appellant with the reasons for initiation of proceedings within the prescribed mandatory statutory time limit. 5. That on the facts and in the circumstances of the case, the learned CIT(A) has erred in sustaining the validity of the reassessment proceedings u/s 147 of the Act despite the fact that the objections were raised by the appellant against the issuance of notice for reopening of the case which was not disposed off by the Assessing Officer thereby not following the procedure laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts vs. Income Tax Officer 259 ITR 19. 6. That on the facts and in the circumstances of the case, the learned CIT(A) has erred in upholding the addition made on account of unexplained gifts alleged to be of ` 17,00,000 and by ignoring the evidence adduced by the appellant in support of the alleged unexplained transaction. 7. That on the facts and in the circumstances of the case, the learned CIT(A) has erred in upholding the addition of `34,000/- made arb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on entries , be not treated as income from undisclosed sources for the AY 2002- 03, the assessee replied that receipt of manager's cheques did not suggest it was an accommodation entry, forming part of income escaping assessment. The assessee submitted that she received an amount of 10,00,000/- from Shri Harish Pawar, Proprietor of M/s Amrit Impex (India) and Rs. 7 lacs from Ms. Susham Sharma by way of gifts as detailed hereunder:- 1. "072688 dated 25.2.2002 of `5 lakhs from Harish Pawar 2. 072676 dated 25.2.2002 of `5 lakhs from Harish Pawar 3. 018468 dated 12.09.2001 of `7 lakhs from Ms. Susham Sharma through Union Bank of India." 2.2 The assessee further submitted copies of gift deeds and affidavits ,in original, of the donors but did not produce the donors before the AO. According to the AO, the aforesaid persons were entry providers and the assessee had given unaccounted cash and received the aforesaid cheques. Since the assessee admitted that bank account of M/s Amrit Impex(India) has been used for providing accommodation entries while shri Harish Pawar was not filing any return nor had any movable or immovable assets and the assessee failed to submit any confirmation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment ...". The directions of the Apex Court were delivered in the specific context of the appellant filing its objections before the court, instead of before the Assessing Officer. In the present case, it is seen that the appellant, as stated in her letter dated 16.11.2009,addressed to ITO ,Ward-48(2),had filed a return of income on 20.4.2009 in response to the notice u/s 148. After being provided the reasons for reopening the assessment, vide letter of the Income Tax Officer, ward- 20(3) dated 01.12.2009, the appellant filed objections to the issuance of notice vide letter of 17.12.2009. Undoubtedly, the Assessing Officer should have dealt with the objections of the appellant before completing the reassessment on 29.12.2009. However, the failure of the Assessing Officer to consider objections to the notice u/s 148 rendered the assessment order not void but irregular, as held by the Madras High Court in the case of Areva T&D India Ltd. Vs. ACIT, 294 ITR 233. It should be noted that the Madras High Court judgment was rendered after considering the Supre....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... into consideration the principle laid down by the Apex Court in the case of Ganga Saran & Sons P. Ltd., Vs. ITO, 130 ITR 1 to hold that at the time of issuance of notice the AO should have proper basis to entertain a belief that any part of the income of the assessee has escaped assessment and reopening cannot be made merely to collect further details. The Apex Court, in turn, observed that the belief entertained by an AO must not be arbitrary or irrational and it must be reasonable; if there is no rational and intelligible nexus between the reasons and the belief, the conclusion would be inescapable that the AO could not have reason to believe that any part of the income of the assessee had escaped assessment, in which event notice issued by the AO would be liable to be struck-down as invalid. In the light of view taken in these decisions, we are of the opinion that the reasons which are recorded by the AO for reopening an assessment are the only reasons which can be considered when the formation of the belief is impugned. It is on the basis of the reasons recorded alone that the validity of the order, reopening the assessment is to be decided. The principle of law, therefore, is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....partment could reopen the case. In the instant case , no such prima facie material is evident from the reasons recorded by the AO nor the reasons lead to escapement of any income.Thus ,reliance on the said decision is also misplaced. 5.3 As regards reliance on decision in Rajesh Jhaveri Stock Brokers P. Limited.(supra), we have already observed that this decision supports the case of the assessee since no cogent ,specific ,definite or reliable material has been mentioned in the reasons. 5.4 Here, we may refer to the following observations of the Hon'ble Bombay High Court in Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR 332 (Bom.), when they mentioned about the nexus between reasons recorded and evidence forming the basis of those reasons: ". . . 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 form his opini....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us, I have sufficient information in my possession to issue notice under section 148 in the case of M/s. SFIL Stock Broking Ltd. on the basis of reasons recorded as above." 10. From the above, it is clear that the Assessing Officer referred to the information and the two directions as 'reasons' on the basis of which he was proceeding to issue notice under section 148. We are afraid that these cannot be the reasons for proceeding under section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well-settled. There is no substantial question of law which arises for our consideration." [Emphasis supplied] 5.6. Now in the present case, the reason for reopening the assessment was that two Manager's cheques issued....