TaxTMI 
TaxTMI 
2018 (11) TMI 479
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 6,72,000/- and from the sale of sarees earned commission of Rs. 13,750/- and also incurred loss of Rs. 951.72 during this year. The assesse had filed its IT return on 24-10-2007 electronically determining total income at Rs. Nil. Later on, the assessment was picked up for scrutiny and thereafter was completed u/s. 143(3) of the Act on 29-09-2009 determining the total income at Rs. 1,200/-. Subsequently, on receipt of an information from the office of the CIT-15, Kolkata that the appellant/assessee company has received accommodation entries to the extent of Rs. 27,50,000/- from one party, Shri Madan Mohan Chowdhury, who was alleged to be an entry provider, then AO, Ward 1(4), Kolkata initiated proceedings u/s. 147 of the Act on 21-02-2014 and issued notice u/s. 148 on 21-03- 2014 to the appellant company. Later the file relating to the appellant assessee was transferred to the present AO, Ward 15(2), Kolkata (according to assessee the change of jurisdiction was not intimated to it) and thereafter the AO issued notice u/s. 143(2) on 6-2- 2015 requiring the assessee company to submit various documents and then the AO framed the re-assessment dt. 13-03-2015 which was passed u/s. 144 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... based on information is there, still there must be reason to warrant holding a belief that income chargeable to tax has escaped assessment. The Hon'ble Supreme Court in the case of M/s. Ganga Saran & Sons Pvt. Ltd Vs. ITO reported in 131 ITR 1 (SC) held that expression " reason to believe" occurring in section 147 is stronger than the expression "is satisfied" and this legal requirement has to be met in the reasons recorded before re-opening. However, it has to be kept in mind that if an assessment (original assessment) has been made u/s. 143(3), the proviso to sec. 147 mandates that no action shall be taken under section 147 after the expiry of 4 years from the end of the relevant assessment year unless there is failure on the part of the assessee to disclose fully and truly all facts necessary for his assessment for that assessment year. Thus in a case where assessment was made u/s. 143(3) of the Act and are sought to be reopened after the expiry of 4 years from the end of the relevant assessment year, in order to assume jurisdiction u/s. 147 of the Act, one of the condition precedents is that recorded reasons should point out the failure on the part of the assessee to disclose ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der consideration. In such a scenario one of the additional condition precedent which also is required to be satisfied is that the reasons recorded should point out what was the material facts the assessee failed to disclose fully & truly necessary for assessment. A bare perusal of the reasons recorded which is set out above does not reveal any statement to the effect which would throw light as to what was found by the AO which can be construed to be a failure on the part of the assessee to disclose fully & truly the material facts necessary for the assessment during original assessment, which recording of which was sine qua non and had to be spelt out by the AO in the reasons recorded to validly assume jurisdiction u/s. 147 of the Act. In this case, from a plain reading of reasons recorded, we note that the AO has not satisfied this jurisdictional fact. Thus, usurpation of jurisdiction u/s. 147 to re-open the assessment completed u/s. 147, after four years has to be struck down for not satisfying the jurisdictional fact which is a condition precedent to legally assume jurisdiction to reopen assessment after 4 years from the end of the relevant assessment year. The judicial princip....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced. 21. Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of proviso to section 147 of the Act, the Assessing Officer had no jurisdiction to reopen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....jurisdiction on the Assessing Officer to issue notices under section 148 for reopening the assessments as sought to be made in the instant case. If there is no failure on the part of the assessee to disclosure fully and truly the material facts, wrong interpretation of accounts by the Assessing Officer leading to excessive relief cannot be a ground for reopening and thus cannot confer jurisdiction on the Assessing Officer. Explanation 2 cannot be read in isolation of section 147. It should be read in conjunction with the provisions in the section. The words for the purpose of this section appearing in Explanation 2 show that the conditions precedent for reopening assessment as laid down in section 147 have to be complied with. In instant case, since the conditions for assuming of jurisdiction under section 147 were not fulfilled, the notices under section 148 were uncalled for and warranted interference by appearing orders. If an authority assumes jurisdiction illegally which is not vested under the law it would be fit and proper for the writ Court to intervene. In the instant case, as there was no omission or failure on the part of the assessee to disclose truly and fully all ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....action for reopening the assessment, it held. 45. The same view was expressed in Associated Stone Industries (Kotah) Ltd. v. CIT [1997] 224 ITR 5601 (SC). The Bombay High Court on the same issue in Hindustan Lever Ltd. v. R.B. Wadkar, Asstt. CIT (No. 1) [2004] 268 ITR 3322, held that the reasons in support of the proposed action under section 147 of the Act must necessarily reveal all facts or materials that had not been disclosed by the assessee fully and truly necessary for assessment so as to establish the link between the reasons and evidence. It was further held that the reasons so recorded cannot be supplemented by any affidavit or oral submissions as otherwise the reasons which were lacking in the material particulars would receive supplementation by the time those are subjected to Court's scrutiny. 46. The notices admittedly do not exhibit as to what material facts were not truly and fully disclosed by the assessees necessary for assessment for the assessment years in question. The returns admittedly mention about the cess on green leaves paid and deductions as permissible were allowed. In view of the exposition of law on the point mentioned hereinabove, the inescapable....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee's case that the AO was himself never satisfied that income chargeable to tax had escaped assessment as a consequence of assessee's transactions with Shri Madan Mohan Chowdhury who had alleged provided benefit in the form of sum paid amounting to Rs. 27,50,000/- in the form of sale consideration for sarees. We therefore find that no material was available either in the recorded reasons or in the assessment order on the basis of which it can be held that there was a failure on the part of the assessee in disclosing fully and truly all material facts necessary for assessment prior to completion u/s 143(3). 13. We note that in the case of Hindustan Lever Ltd vs R.B. Wadekar (supra) as also in Amiya Sales & Industries Vs ITO (supra), it has been emphasized by the Hon'ble Courts that reasons recorded by the AO prior to issue of notice u/s 148, must contain specific finding with regard to the alleged failure on the part of the assessee to disclose fully and truly all material facts. It has also been observed by the Hon'ble High Courts that the 'Reasons' recorded by the AO have to be read as it is. The AO has to speak through his 'Reasons' and should disc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... proceeds of sarees. In such a scenario, when the AO was in receipt of the information from the Ld. CIT-15, Kolkata he ought to have made enquiries to unravel the truth. It has to be remembered that information is not synonymous to truth. Just because a letter has been received from the Ld. CIT-15, Kolkata the AO cannot reopen the completed assessment u/s. 143(3) of the Act. The information given by Ld. CIT-15, Kolkata can only be a basis to ignite/trigger "reason to suspect" for which reopening cannot be made for further examination to be carried out by him in order to strengthen the suspicion to an extent which can form the belief in his mind that income chargeable to tax has escaped assessment. It has to be kept in mind that the allegation leveled by Ld. CIT-15, Kolkata can only raise suspicion in the mind of the AO which is not the sufficient/requirement of law for reopening of assessment. The 'reasons to believe' is not synonymous to 'reason to suspect'. 'Reason to suspect' based on an information can trigger an enquiry to find out whether there is any substance or material to substantiate that there is merit in the information adduced by the Ld. CIT-15....