TaxTMI 
TaxTMI 
2018 (1) TMI 942
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....t a case of change of opinion. 4. Reasons to believe, for initiation of proceedings for the AY 2008-09, read :- "Income Tax Return for the A.Y. 2008*09 was filed by the assessee on 28.09.2008 declaring income of 3,64,26,780/-. 1. Commission on sales received: In the case, information in the form of complaint of Tax evasion dated 10.12.2014 &12.03.2015 has been received in this office. As per the information received, the company is stated to be involved in money laundering. The company has tried to convert its black money into legitimate business income. The modus operandi of the case is that a company i.e. M/s Ball Corporation (a listed company on NYSE) has incorporated a wholly owned subsidiary in India namely M/s Ball Packaging India Pvt Ltd with the object of installation of beverage can manufacturing amount to the assessee company as bribe to get the various clearances/licences/permission from govt departments. The Ball Corporation has made a payment of Rs. 1,26,20,250/- and Rs. 2,19,71,126/- as commission on sales. The total amount of commission declared was received by a singly cheque by M/s Scan Holdings Pvt Ltd who has also declared this amount as commission of....
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....ame has not been paid on monthly basis. Further, the company office is lying vacant still rent is paid for the office related to directors. 7. Deprecation on Office: The assessee has claimed depreciation on investment in office which includes cost of land also. The company has claimed depreciation on entire consideration paid for this which is liable to be disallowed. 8. Therefore, I have reason to believe that during the assessment year 2008-09, certain amount has escaped assessment which cannot be quantified at this stage. 9. It is important to refer herein the Auditor's report (3CD Report) for AY 2007-8. According to notes 6 of Schedule 13 of Balance Sheet as on 31,03.2008, the auditor has indicated that no external supporting document for any financial transaction were made available and the auditor only relied upon the entries appearing in the books of account and explanation given the management of the company. Further, as per records, no scrutiny assessment u/s 143(3) was undertaken and only summary assessment u/s 143(1) was completed. Therefore, the books of accounts and details of expenses have not been verified and the detail verification of issues can ....
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....re issues as to increased audit fee demanded by him, started to write and shoot of complaints with regard to the very same accounts. ANNEXURE-g to this letter contains document after document wherein the Assessee's accounts have been certified to be true and fair by the same individual. Doubtless, while applying your mind to the allegations made by him, your kind self would have referred to the Assessee's annual accounts and found this contradiction to exist. At the worst therefore, at the time of recording' reasons, your kind self had on the very same file, a set of allegations and a set of certifications by the very same person as to the very same annual accounts. At worst, such a singular coincidence would lead to the logical conclusion that one of the two acts o the complainant is false. But no such process of reasoning or verification is gleaned from a perusal of the Reasons Recorded. There is therefore nothing on record to tip the scales and hold that the complaints are correct and the certifications are erroneous. That clearly amounts to no material. b. The observations made in respect of each of the seven issues listed have been tabulated at Para 3(c) abov....
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....oney laundering, sham transaction converting black money into legitimate income are bald allegation and completely illogical. There is not even a remotest ground or reason to support the assertion. [2] Investment of Rs. 2,65,734/- in a joint venture in Singapore was made in assessment year 2007-08, but no income from the said investment was earned in the year by the assessee. The assertion that the income must have been earned is ex-facie flawed and mere guess work. No such assumption could be made. [3] Allegation of bogus and personal expenses being booked business expenses have been made without any details and particulars. [4] Alleged non-disclosure of expenditure incurred to earn exempt dividend income, is based upon surmises and conjectures without specific detail as to what expenditure was incurred. [5] There cannot be any assumption that foreign travel was not for business purpose. Substantial purchases as well as sales of the assessee were from foreign trading. [6] Allegation with regard to rent and depreciation were also without basis and elucidation. The accommodation was used for business activities and was also its registered address. There was no basis or r....
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.... 147/148 of the Act, distinction is drawn between "reasons to believe" and "reasons to suspect" for the statute permits re-opening in the former case and not in the latter case. In Income Tax Officer, Calcutta and Others versus Lakhmani Mewal Das, (1976) 103 ITR 437 (SC), it was held as under:- "The powers of the Income-tax Officer to reopen assessment though wide are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements o....
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....s fully applicable to the facts of the present case. 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 Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income Tax Officer 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." We wish to clarify, least there be any doubt and debate. At the stage of issue of notice what is required and necessary is that the information must be "definite", i.e, it should not be mere guess, gossip or rumour. In the context of the two Sections "definite" does not mean conclusion of certainty at the stage of notice for there is clear distinction between receipt of information as a consequence of which the Assessing Officer forms an honest belief and notice is issued, and the final determ....
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....t examine and ascertain whether or not allegation made are mere guess work, surmise and rumour, or has some basis to make it the basis for detailed final determination. 14. The procedure for filing of objections and a speaking order by the Assessing Officer dealing with the objections, came to be adopted in terms of the decision of the Supreme Court in GKN Driveshafts (India) Limited versus ITO, (2003) 259 ITR 19 (SC), the relevant portion of which reads as under:- "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 proc....