TaxTMI 
TaxTMI 
2018 (10) TMI 1609
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....o any "reason to believe" that the appellant's income had escaped assessment, notice under Section 148 of the I.T.Act was issued. It is in this backdrop that the learned Senior Counsel appearing on behalf of the appellant submitted that the order of the ITAT gave rise to the following substantial question of law:- "Did not the Appellate Tribunal err in law in upholding the proceedings initiated against the Appellant under Section 147 of the Income Tax Act for A.Y. 2007-08" 2. Before we advert to the legal submissions canvassed by the learned Senior Counsel as well as the Revenue, it would be apposite to set out the brief facts of the case and which are undisputed before us. In the case of Mr S. Ganesh (son of the appellant herein), for the A.Y. 2007-08 the addition of certain investments made in Birla Mutual Fund & Standard Chartered Mutual Funds were brought to tax against Shri S. Ganesh (son of the appellant herein). This was done on the basis and as per the Annual Information Return (for short "AIR") that the assessee had made total investments of Rs. 23,83,43,112/-. The assessee was, therefore, asked to reconcile the investments made by him. After hearing Mr S. Ganesh....
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....had escaped assessment within the meaning of Section 147 of the I.T.Act, 1961, and accordingly, a notice under Section 148 of the I.T.Act, 1961 was issued. This notice was dated 21st March, 2013. In response to the notice, the appellant's authorized representative, vide its letter dated 28th April, 2013, stated that the appellant is not able to trace out all the documents including the bank statements and TDS certificates which are required to file the return of income-tax. The appellant further stated that she had made an application to her bankers for issuance of bank statements and requested for further time to file her return of income tax. 4. Subsequently, the appellant's son, Mr S. Ganesh, vide his letter dated 2nd July, 2013, stated that the return of income for A.Y. 2007-08 was filed under protest and also enclosed a copy of the I.T. return for the said A.Y. declaring 'nil' income. In the said return of income the appellant showed her income from other sources of Rs. 1,38,522/- and also showed exempt income being dividend from Mutual Funds of Rs. 2,62,32,867/-. The appellant also took objections for reopening the assessment on the ground that she had suff....
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.... coming to this finding, the A.O. also went on to examine whether the addition should be made on merits. The A.O. also went on to observe that no evidence was provided by the appellant regarding the source of income through which these investments were made. We must mention here that on the merits no challenge has been laid before us. The only challenge to the impugned order, and as can be seen from the question of law reproduced by us above, is that the A.O. had no "reason to believe" that income had escaped assessment for the A.Y. 2007-08, and therefore, notice under Section 148 of the I.T.Act, 1961 could not have been issued to the appellant. 7. Be that as it may, being aggrieved by the assessment order passed by the A.O., the appellant preferred an appeal before the CIT(A). There also it was argued that the A.O. could not have had any reason to believe that the income of the appellant had escaped assessment. It was submitted before the CIT(A) that the reasonable belief of escapement of income was only on the basis of the finding of the ITAT. This could not give rise to "reason to believe" that income had escaped assessment. As far as the appellant is concerned it was also ar....
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....al Funds for Rs. 29.53 lakhs and Standard Chartered Mutual Funds for Rs. 64 lakhs is belonging to assessee, Smt. S. Rajlaxmi and if at all any addition can be made it can be made in the hands of Smt. S. Rajlaxmi. The reopening of assessment u/s 147 on the basis of information in the form of observations of ITAT is on sound footing and which constitutes a tangible material for the purpose of reopening as the assessee did not file her return of income as required u/s 139(1) of the Act explaining the source of investment. Therefore, we are of the considered view that the reopening of assessment is on sound basis and there is no merits in the arguments of the assessee that the AO has reopened the assessment without any tangible material which suggests escapement of income within the meaning of section 147 of the Act. In our considered view, the observations of the ITAT in assessee's son's case on the basis of assessee's son's admission constitute a valid tangible material for the purpose of reopening of the assessment and hence, this cannot be considered as change of opinion or formation of belief without any tangible material. Insofar as the case laws relied upon by th....
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....an inquiry into the same cannot give the revenue reason to believe that income had escaped assessment. In support of this proposition, the learned Senior Counsel relied upon a decision of this Court in the case of CIT Vs. Smt. Maniben Valji Shah [(2006) 283 ITR 354 (Bom)]. He submitted that the facts of the present case are almost identical to the facts in the case of Maniben Valji Shah (supra) and would, therefore, be governed by the ratio laid down therein. For all these reasons, the learned Senior Counsel appearing for the appellant, submitted that the impugned order gives rise to a substantial question of law as reproduced by us hereinabove. He, therefore, submitted that the appeal be allowed and the order of the ITAT be set aside. 11. On the other hand, Mr Suresh Kumar, the learned advocate on behalf of the respondent - revenue, supported the findings given by the A.O., CIT(A) as well as the ITAT. He submitted that the findings given by all these authorities were on the facts of the case and did not suffer from any perversity or vitiated by any error apparent on the face of the record that would give rise to any substantial question of law, which in turn, would require our ....
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.... A.O. clearly had "reason to believe" that income of the appellant had escaped assessment. This being the case, he submitted that no fault can be found with the order passed by the A.O. and which was thereafter upheld by the CIT(A) and the ITAT. He, therefore, submitted that as a consequence thereof, this appeal raises no substantial question of law and the same ought to be dismissed with costs. 12. We have heard the learned Counsel for the parties at length and have perused the papers and proceedings in the above appeal. We find considerable force in the arguments canvassed by Shri Suresh Kumar, learned advocate appearing on behalf of the respondent - revenue. As mentioned earlier, in the assessment proceedings against the son of the appellant the investments made in these three Mutual Funds (Birla Mutual Fund, Standard Chartered Mutual Fund and Standard Chartered Mutual Fund) were brought to tax in the hands of Mr S. Ganesh. It was the contention of Mr S. Ganesh (the son of the appellant) that he being the second holder of these investments, these amounts could not be brought to tax in his hand and could be brought to tax, if any, in the hands of the appellant. This was the sp....
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....th regard to the source of funds for purchasing the flat. It was on this basis that this Court came to a finding that there was no question of the Assessing Officer having any basis to reasonably entertain the belief that any part of the income of the Assessee had escaped assessment. This decision can be of no assistance to the appellant, especially in the factual backdrop before us as discussed by us earlier. In the facts of the present case, as noted earlier, considering that the appellant, when she filed her return of the income under section 139(1) had not explained the source of her investments coupled with the fact that her exempt income from dividends did not form part of her return filed under section 139(1) of the Act, the Assessing Officer clearly had reason to believe that the income of the Appellant had escaped assessment as contemplated under section 147 of the Act. We therefore find that the reliance placed on this decision (Maniben Valji Shah) is wholly misconceived. It does not in any way support the case of the appellant before us. 14. In fact, when one looks at the merits of the matter, it is recorded that the appellant was unable to explain the source of incom....