TaxTMI 
TaxTMI 
2017 (12) TMI 1625
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....e Act. On 20.2.17, AO issued a notice under Section 148 of the Act proposing to assess/re-assess the income of the appellant for the said A.Y. and required him to deliver return in the prescribed form before the expiry of 30 days from the date of service of the notice. The appellant vide letter dated 2.3.17 requested the AO to supply the reasons recorded for issuing notice under Section 148 of the Act. The AO vide letter dated 10.3.17 supplied the reasons recorded for issuing notice under Section 148 of the Act to the appellant. The appellant vide communication dated 14.3.17 requested to treat the return filed on his behalf for the A.Y. 2013-14 on 28.9.13 as filed in compliance of notice issued under Section 148 of the Act. On 19.5.17, the appellant submitted its objections questioning the legality of the notice and re- assessment proceeding initiated pursuant thereto. The appellant also demanded certified copies of the relevant documents on the basis of which the reasons for initiating re-assessment proceedings were recorded. The objections raised by the assessee questioning the validity of re-assessment proceedings stood rejected by the AO vide order dated 2.6.17. Aggrieved there....
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.... 603 and Bench decisions of this court in the matters of CIT v. Shiv Ratan Soni [2005] 146 Taxman 392/279 ITR 261 and Smt. Kiran Kanwar v. Union of India [2017] 81 taxmann.com 281. Learned counsel submitted that the appellant had disclosed fully and truly all material particulars while filing the return and therefore, the reassessment proceedings initiated on mere change of opinion is ex facie without jurisdiction. 4. On the other hand, learned counsel appearing for the respondent submitted that during the assessment proceedings for the year 2014-15, it was revealed that assessee has received share application money to the tune of Rs. 2.2 crore from the various entities in the financial year 2012-13 which was utilised during the year and subsequently returned in the financial year 2013-14. Learned counsel submitted that all the 9 entities from which the assessee has received share application money were only engaged in the business of providing accommodation entries of bogus nature which was further confirmed by the directors, dummy directors/key persons of the above entities in their respective statements. Drawing the attention of the court to the reasons recorded by the AO bef....
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....[1961] 41 ITR 191 (SC), the Hon'ble Supreme Court while dealing with the ambit and scope of the provisions of Section 34 of the Indian Income Tax, 1922, which were similar to the provisions of Section 147 of the Act of 1961 explained the purports of Section 34, as under:- "To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such "under-assessment", has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income- tax Officer could have jurisdiction to issue a notice for the assessment or reasses....
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....he sufficiency of the reasons for the belief. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretense. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the Income- tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a court of law." The Hon'ble Supreme Court further observed :- "As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income -tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all mate....
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....eturn is processed under Section 143(1) of the Act, observed: "11. What were permissible under the first proviso to section 143(1)(a) to be adjusted were, (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction allowance or relief, which was prima facie admissible on the basis of information available in the return but not claimed in the return and similarly (iii) those claims which were on the basis of the information available in the return, prima facie inadmissible, were to be rectified/allowed/disallowed. What was permissible was correction of errors apparent on the basis of the documents accompanying the return. The Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues. In other words, the Assessing Officer had no power to go behind the return, accounts or documents, either in allowing or in disallowing deductions, allowance or relief. 12. One thing further to be noticed is that intimation under section 143(1)(a) is given without prejudice to the provisions of section 143(2). Though technically the intimation issued was deemed to be a dema....
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....nd "assessment order" have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes "the computation of income" sometimes "the determination of the amount of tax payable" and sometimes "the whole procedure laid down in the Act for imposing liability under the tax payer". 15. In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(1)(a) as it stood prior to 1-4-1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing or an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature i.e. to minimize the departmental work to scrutinize each and every return and to concentra....
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....elieve", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Pvt. Ltd., [1996 (217) ITR 597 SC]; Raymond Woolen Mills Ltd. v. ITO (1999 (236) ITR 34 (SC)]. 21. The scope and effect of section 147 as substituted with effect from 1-4-1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly, the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, a....
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....tune of Rs. 2.2 crore from 9 entities which was utilised during the year and subsequently returned in Financial Year 2013-14. That apart, on further examination of certain information received from the Directorate of Investigation, Kolkata which had carried the investigation in the case of the 9 entities, details whereof has been set out in the reasons recorded, it was ascertained that those 9 entities are the companies with no real business and are only engaged in business of providing accommodation entries of bogus nature to beneficiary concerns which was further confirmed by the directors/dummy directors/key persons of the said entities in their respective statements. Thus, on the basis of the material on record, AO opined that the appellant company has received and utilised the share application money received from bogus sources lacking genuineness, creditworthiness, genuine identity, which fall within the purview of Section 68 of the Act. 15. In our considered opinion, in the instant case where the return filed by the assessee was not subjected to scrutiny assessment, the belief formed by the AO after due examination of the material on record that the income of the assessee....