TaxTMI 
TaxTMI 
2018 (5) TMI 1547
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the petitioner had filed the return of income on 29.09.2010. Such return was taken in scrutiny. Assessing Officer passed order of assessment under section 143(3) of the Income Tax Act, 1961 ['the Act' for short] on 28.02.2013. To reopen such assessment, the Assessing Officer issued notice under section 148 of the Act on 31.03.2015. In order to do so, he had recorded following reasons: "M/s. Marwadi Shares and Finance Pvt. Ltd (PAN:AABCM5192K), Rajkot-A.Y. 2010-11.: In this case, return of income for the A.Y. 2010-11 showing income of Rs. 33,31,55,229/- was filed on 29.09.2010 and the assessment was finalized vide assessment order u/s. 143(3) determining income of Rs. 33,31,80,070/-. Information has been received by this office in respect of fictitious losses created by some brokers by misusing the client code modifications facility in F & O segment on NSE during March 2010. The assessee M/s. Marwadi Shares and Finance Ltd. is reported to be one of the beneficiaries of such fictitious losses by misuse of client code modification facility. This fictitious loss have been adjusted by the assessee against the profits in the A.Y. 2010-11 which has resulted in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reopening the petitioner's assessment for the assessment year 2010-11. During the course of hearing of this petition, we confronted the counsel for the Revenue with our prima facie impression that the reasons recorded by the Assessing Officer for issuing the notice may not satisfy the requirement of the Assessing Officer having a bona fide belief that income chargeable to tax had escaped assessment. In view of the unsatisfactory recording of reasons, the counsel for the Revenue had taken time to take instructions whether the Assessing Officer would like to withdraw the notice and issue a fresh notice of reopening after recording proper reasons. Under the instructions from the concerned authority, Shri P.G.Desai conveyed to us that the Assessing Officer would withdraw the notice for the purpose of issuing a fresh notice. However, he pointed out that original notice was issued within a period of four years and any fresh notice now would be beyond a period of four years from the end of the relevant assessment year. He, therefore, made a request that we should clarify that the fresh notice would also be treated as one having been issued within four years since it would be in conti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Petitioner. with a view to issuing a fresh notice after recording fresh reasons. in that view of the matter, it is not necessary to decide the validity of the notice which is under challenge in this petition. Learned Counsel for the petitioner however submitted hat if fresh notice is issued, the petitioner may consider challenging it in accordance with law. Petition disposed off accordingly. 2. Based on the above direction. the DCIT Cir 1(1) had not recommended SLP. The Chief ClT Rajkot. vtde approval letter No. CC/RJT/HQ-1/JUD/SLP-22/2016-17 dated 15.7.2016, addressed to the Pt. ClT-1 Rajkot, agreed to the proposal of non-filing of SLP, but observed as under: NO SLP review petition may be filed On perusal of the GHC's order, it is seen that the Hon'ble GHC has mentioned that learned counsel for the petitioner, however submitted that if fresh notice is issued, the petitioner may consider challenging it in accordance with law. Thus, the Hon'ble GHC has taken note of the representation made by the learned Counsel for the petitioner. However, the Hon'ble GHC's order is silent about the prayer of the AO to treat the fresh notice issued as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t opinion from NSE to broadly distinguish a genuine CCM and non-genuine CCM. As per NSE, the following constituted genuine CCM. i) Error due to communication and/or punching or typing such that the original client code/name and the modified client code/name are similar to each other. ii) Modification within relatives. iii) Any similar genuine error. c. Some of the most popular Non genuine client code modification constituted as under:- i) Percentage of modified traded value is significantly higher than the total traded value of any trading members/clients. ii) Number of modified trades is significant to total number of trades of any trading members/clients. iii) Profit/loss arising on account of all modifications by trading member/client is significant in comparison to the profit/loss in the trades where no modifications have been carried out. iv) Profit/loss arising due to modification is significant. v) Trades have been modified to unrelated parties. vi) Both buy and sell leg of different trades have been modified to same client. vii) The same sets of client are observed to be makin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and issuance of fresh notice. He contended that the High Court had never given any such directions. (ii) There is no material difference in the reasons recorded by the Assessing Officer for issuance of earlier notice of reopening and those recorded in the present case while issuing the impugned notice. (iii) Counsel contended that the first notice dated 31.03.2015 was never withdrawn. Without withdrawal of such notice by the Officer who had issued it, it was not permissible for the Revenue to issue a fresh notice. The law does not recognize issuance of notice of reopening when the assessment or reassessment is still pending. (iv) In support of this contention counsel relied on the following decisions: In case of Aditya Medisales Ltd vs. Deputy Commissioner of Income Tax, Circle 1(1) reported in [2016] 73 Taxmann.com 197 [Guj.]; In case of Kunal Organics (P.) Ltd vs. Deputy Commissioner of Income Tax reported in [2014] 44 Taxman.323 (Gujarat) Inc case of India Gelatin and Chemicals Ltd. vs. Assistant Commissioner of Income Tax (No. 2) reported in [2014] 52 taxmann.com 141 (Gujarat) (v) Counsel next contended that the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f petitioner's assessment. In this context, in addition to the affidavits filed by the respondents, he also relied on the original files. (iv) Once again, relying on the affidavits and the original files, counsel contended that there was proper sanction granted by the competent authority after due application of mind. In short, his submission was that the petition should be dismissed. 11. Though in our opinion the petition could have been decided on only one of the several contentions raised by the petitioner, in view of the possibility that the aggrieved party may carry the matter further, we would like to express our opinion on all contentions raised before us. For consideration of such contentions, we would club all arguments except of withdrawal of the first notice of reopening which would be considered separately. We may recall, the department previously issued a notice dated 31.03.2015. We have reproduced the reasons recorded by the Assessing Officer for issuing such notice. This notice was challenged by the petitioner before this Court. After some discussion at the bar, counsel for the Revenue, under instructions, stated that the notice of reopening of the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orded were good enough to sustain a notice of reopening. At this stage, when the Court is examining the validity of notice of reopening, the Court would only prima facie consider the reasons recorded by the Assessing Officer. It is not necessary for the Assessing Officer to demonstrate beyond doubt that invariably and unfailingly additions will be made in the hands of the assessee. What is required to be seen is whether the Assessing Officer had some tangible material at his command permitting him to form a bona fide belief that income chargeable to tax had escaped assessment. The petitioner's contentions of the previous reasons and the fresh reasons being identical that there was lack of application of mind on part of the Assessing Officer; he having acted on borrowed satisfaction; that notice could not have been issued beyond the period of four years since there was no failure on part of the assessee to disclose truly and fully all material facts or that the reasons are invalid, must fail. 13. Coming to the question of unauthorized transfer of jurisdiction, we notice that there is no formal challenge to such transfer. However, when a legal issue has been raised, we have ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his proposal was first placed before the Joint Commissioner of Income Tax for his comments who had, in his own handwriting, commented as "fit case for reopening u/s. 147 of the Income Tax Act, 1961". On 28.03.2017, the Principal Commissioner of Income Tax, Central, Ahmedabad in response to a column where he was satisfied on the reasons recorded that it was a fit case for issuance of notice under section 148. He had in his own writing remarked "yes it is a fit case". It appears that simultaneously submissions were also placed before him on 28.03.2017 for placing the case for his consideration and approval. He had placed his signature approving the same. Thus, there was clear application of mind on part of the sanctioning authority who had, after perusing the reasons recorded by the Assessing Officer and other materials, granted necessary sanction. 15. Despite such observations and conclusions recorded above, the question is, should the reassessment process be allowed to continue? Answer to this question would depend on the question of validity of the fresh notice, without, as contended by the counsel for the petitioner, withdrawing the previous notice. In this regard, we may peru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y such assessment or reassessment, there cannot be a notice of reopening. The Courts have held that there cannot be reopening of assessment which is not yet complete. Counsel for the petitioner has referred to several decisions in this regard which we have noted. Reference to only one of them would be sufficient. This Court in case of Aditya Medisales Ltd (supra) had occasion to take into consideration various judgements of High Courts and Supreme Court in background of facts which were thus. The petitioner had filed the return of income for the assessment year 2005-06. Notice of reopening the assessment issued by the Assessing Officer. Such notice was challenged by the petitioner before the High Court. High Court had admitted the petition and granted interim relief staying further proceedings pursuant to such notice. When the petition was pending, the Assessing Officer issued yet another notice under section 147 of the Act seeking to reopen the petitioner's assessment for the same assessment year, however, on the basis of independent reasons possibly upon availability of fresh material. This second notice of reopening was challenged on various grounds including on the ground t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to rest on the notice already issued and the reasons recorded for the same which would deprive the revenue of the additional grounds to support reopening or after withdrawing the first notice to issue a fresh notice which would be beyond a period of four years and thereby sacrifice the reasons already recorded, which would not sustain the test of failure on part of the assessee to disclose truly and fully all material facts. However, such difficulty in making a choice, would not govern the interpretation of statutory provisions or would permit us to enlarge the scope of reassessment by holding that the second notice of reopening pending reassessment would also be permissible. We do not discern any concept of alternative or protective notice of reassessment. In the result, impugned notice of reopening is bad in law. This is despite the fact that the first notice came to be quashed on the ground that on the basis of reasons recorded, it cannot be stated that income chargeable to tax had escaped assessment. 9. To this conclusion, we may however add a caveat. In a given case, if it is found that the notice itself is invalid being nonest or ab initio void, it would be no valid....