TaxTMI 
TaxTMI 
2017 (6) TMI 1126
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....39;the Act, 1961'). She filed return for the assessment period 2011-12, financial year 2010-11, on 31-3-2013 along with necessary documents in which she was served with notice under Section 148 of the Act, 1961 on 12-9-2013 stating that the Assessment Officer has reasons to believe that income has escaped assessment and she was directed to file return within 30 days of the notice period. Thereafter, fresh notices were issued under Sections 142 (1) and 143 (2) of the Act, 1961 calling for revised return and documents in support thereof respectively, as scrutiny assessment was to be conducted under Section 143 (3) read with Section 147 of the Act, 1961. Thereafter, assessment order was passed under Section 147 read with Section 143 (3) of the Act, 1961, on 31-3-2015 accepting the earlier return filed on 31-3-2013, but in the meanwhile, a reference was made to the Departmental Valuation Officer (Assistant Valuation Officer-II), Mumbai in terms of Section 55-A of the Act, 1961 in which a preliminary valuation report was furnished on 2-3-2015, but the final report was furnished only after the completion of assessment proceedings. Thereafter, the petitioner was served with second not....
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....hat petition challenging show cause notice under Section 148 of the Act, 1961 at the very threshold is maintainable in view of the judgments of the Supreme Court in the matter of Calcutta Discount Co. Ltd. v. Income-Tax Officer, Companies District I, Calcutta AIR 1961 SC 372. The order challenging final reassessment can also be challenged in writ proceeding, as the Revenue has proceeded hastily without waiting for the outcome of the instant writ petition. 3.2) The condition precedent for invoking Section 147 of the Act, 1961, did not exist for exercise of jurisdiction and reopening of the assessment relying upon the Assistant Valuation Officer's report without application of mind, is per se illegal and without authority of law. Reliance has been placed upon the judgment of the Supreme Court in the matter of Assistant Commissioner of Income Tax, Gujarat v. Dhariya Construction Company (2010) 15 SCC 251 to buttress his submission. 3.3) The order disposing of the objections is not a speaking order and same does not dispose of the objections as it does not furnish any reasons why the objections are not tenable in law and simply reiterates the reasons recorded vide....
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....e Court in Chhabil Dass Agarwal's case (supra) that such a writ petition would not be maintainable, whereas the petitioner has relied upon the decision of the Supreme Court in Calcutta Discount (supra). 8. In Calcutta Discount (supra), Their Lordships of the Supreme Court have clearly and unmistakably held that the High Court in appropriate cases has power to issue an order prohibiting the Income Tax Officer from proceeding to reassess the income when the conditions precedent do not exist. K.C. Das Gupta, J, speaking for the Supreme Court and delivering the majority judgment held as under: - "It is well-settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such consequences The High Court may, therefore, issue a high prer....
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....1961 and the reasons which were recorded by the Assessing Officer for reopening the assessment is maintainable, after noticing the earlier decision of the Supreme Court in Chhabil Dass Agarwal's case (supra) and observed as under: - "2. We find that the High Courts in all these cases have dismissed the writ petitions preferred by the appellant/assessee herein challenging the issuance of notice under Section 148 of the Income Tax Act, 1961 and the reasons which were recorded by the Assessing Officer for reopening the assessment. These writ petitions are dismissed by the High Courts as not maintainable. The aforesaid view taken is contrary to the law laid down by this Court in Calcutta Discount Limited Company v. Income Tax Officer, Companies District I, Calcutta [(1961) 41 ITR 191 (SC)]. We, thus, set aside the impugned judgments and remit the cases to the respective High Courts to decide the writ petitions on merits. 3. We may make it clear that this Court has not made any observations on the merits of the cases, i.e. the contentions which are raised by the appellant challenging the move of the Income Tax Authorities to re-open the assessment. Each case shall ....
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....the matter for a period of four weeks from the date of receipt of the order rejecting the objections of the assessee to enable him to question that order, if any, in accordance with law. This principle of law has further been followed by a Division Bench of the Bombay High Court in the matter of Aroni Commercials Limited v. The Dy. Commissioner of Income Tax-2(1) and another 2014 SCC OnLine Bom 221. 15. If the facts of the present case are examined in light of the principle of law laid down in Asian Paints Ltd. (supra) and Aroni Commercials Limited (supra), it would appear that in the present case, preliminary objections filed by the assessee were rejected on 13-12-2016 and the petitioner immediately filed writ petition challenging the notice issued under Section 147 read with Section 148 of the Act, 1961, on 16-12-2016, but on 20-12-2016, the Assessing Officer passed order of reassessment without granting reasonable time and opportunity to the petitioner to lay challenge to that order. Thus, the Assessing Officer has passed order in haste and it does not appear to be bona fide. The Assessing Officer ought to have, in all fairness, granted sufficient/reasonable time to the asses....
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.... to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: 148. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." 18. The expression 'reason to believe' e....
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....and Raymond Woollen Mills Ltd. v. Assessing Officer and others (1999) 236 ITR 34 (SC).) 21. In the matter of Commissioner of Income-Tax v. Kelvinator of India Ltd. (2010) 2 SCC 723, the Supreme Court has clearly said that only one condition precedent remained in Section 147 of the Act, 1961, after amending in 1989, is that the reason to believe that income has escaped assessment has to be recorded in writing, there must be tangible material for the formation of the belief. The Assessing Officer cannot reopen the assessment on mere change of opinion. The Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief. 22. Now, the question is whether the Assessing Officer is justified in seeking to reopen the scrutiny assessment for the year 2011-12 solely relying upon the Assistant Valuation Officer's report as in the present case, notice under Section 148 of the Act, 1961 was issued to the assessee by the Assessing Officer on 21-9-2016 and reasons recorded were furnished under Section 148 on 15- 11-2016 holding....
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.... observed in its report as under: - "5. The condition which invests the Income-tax Officer with jurisdiction has two branches: (i) that the Income-tax Officer has reason to believe that income chargeable to tax has escaped assessment; and (ii) that it is in consequence of information which he has in his possession and that he has reason so to believe. Since the learned Judges of the High Court have concentrated their attention upon the second branch of the condition and have reached their conclusion in favour of the assessees on that branch, it would be appropriate to deal with the correctness of that approach. The expression "information" in the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. If as a result of information in his possession the Income-tax Officer has reason to believe that income chargeable to tax had escaped assessment, the Income-tax Officer has jurisdiction to assess or reassess income under Section 147 (1) (b) of the Income-tax Act, 1961. Information in his possession that income chargeable to tax....
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....ts of the present case are examined in light of the principles of law laid down by Their Lordships of the Supreme Court and subsequent decisions of the High Courts of Gauhati and Madhya Pradesh, it would appear that reassessment proceeding has been sought to be reopened by the assessing authority as apparent from Annexure P-7 which is the reason recorded under Section 148 (2) of the Act, 1961 for initiation of action under Section 147 of the Act is the report of the Assistant Valuation Officer-II, Mumbai dated 12-6-2015, which states as under: - "The report from the AVO-II, Mumbai dated 12.6.2015 was received in this office on 18.6.2015 where the FMV of the property as on 1.4.1981 was again determined at Rs. 8,34,300/-. The income on a/c of capital gain has not been correctly disclosed in her return of income for a.y. 2011-12 belatedly filed on 31.3.2013 and now it has to be worked out as per AVO-II, Mumbai's report on the basis of FMV determined as on 1.4.1981 at Rs. 8,34,300/-. Therefore, I have reason to believe that the said income under the head "capital gain" has escaped assessment within the meaning of provisions of section 147 of the Act." 30. Thus,....
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.... "5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years." 35. Similarly, in the matter of Godrej Industries Ltd. v. Deputy Commissioner of Income Tax and others (2015) 281 CTR (Bom) 372, the Bombay High Court has clearly held that the order disposing of the objections has to clearly record reasons why the objections are not tenable. The Bombay High Court further held that the reproduction of the reasons and reiterating them again is no comp....
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....xed for final hearing on 20-12-2016. The petitioner has raised number of preliminary objections to question the notice initiating reassessment, none of them have been considered in seriatim on their merits and simply after narrating the entire facts, in one paragraph all objections have been rejected summarily holding that the objections are not tenable without assigning any reason and such a course is wholly impermissible in law, as it has already been held that preliminary objections have to be decided by a reasoned and speaking order giving reasons that why the objections are not tenable in law. No such reason appears to have been assigned, rather no application of mind has been made by the assessing authority while deciding the objections which is contrary to the mandate of law declared in that behalf and in force. Therefore, the order deciding preliminary objections cannot be sustained. 38. Finally, the question is whether the reassessment proceeding is justified, as the scrutiny assessment under Section 143 of the Act, 1961 has already been made without considering the valuation report and on the basis of the valuation report, the reassessment has been initiated. 39. Su....