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2019 (7) TMI 1215
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....unts, bank statements and other details as requisitioned. From the material placed in the Paper Book, it is noted that before passing of the order u/s 143(3) on 19.12.2011, the AO made independent enquiries u/s 133(6) from the share subscribers in connection with the share capital of Rs. 86.27 crores subscribed by them. Upon verification of the material collected by him, the AO in his original scrutiny order passed u/s 143(3) on 19.12.2011, observed that "during the year the assessee company had raised paid up share capital of Rs. 86.27 crores including premium and it has been duly verified on test check basis". Thereafter, the case of the assessee was reopened after the expiry of four years vide notice u/s 148 dated 22.03.2016. In response, the assessee filed return of income on 18.05.2016 and requested the AO to supply the reasons recorded prior to reopening of the assessment. Vide letter dated 14.06.2016 the AO supplied the reasons recorded for reopening of the assessment which read as follows: "A survey operation u/s 133A was concluded in the case of M/s. Ashika Group. It is found from the evidence that M/s. Yaduka Financial Services Ltd. (Formerly known as M/s. ....
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....t the given address. According to the AO none of the share subscribers attended the summons. The AO thereafter tabulated the details of 34 share subscribing companies which according to him were controlled by some entry operators. Based on the aforesaid enquiries and findings, the AO concluded that the assessee was unable to satisfactorily substantiate the identity & creditworthiness of the share subscribers and the genuineness of the transactions. The AO accordingly framed the assessment u/s 147/143(3) on 26.12.2016 adding sum of Rs. 86,24,30,000/- by way of unexplained cash credit u/s 68 of the Act in the hands of the assessee. Aggrieved by the order passed by the AO, the assessee preferred an appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A) observed that condition precedent for reopening of the assessment after expiry of four years was that the AO was required to point out the specific failure on the assessee's part to disclose true and correct particulars in the course of original assessment. The Ld. CIT(A) observed that the AO had failed to set out the omission or failure on the assessee's part to disclose true and correct particulars in his recorded reasons and f....
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....he addition of Rs. 86,24,30,000/- made by AO u/s 68 merely on the ground that there was no failure on the part of assessee and proceeding initiated after four years are bad in law. The CIT(A) observed that name of the share applicant and amount along with cheque detail was submitted by the assessee in the original assessment order. Whereas, as per the data/information gathered after a survey u/s 133A which was conducted by the investigation wing of the Income tax department in the Ashika Group of cases at the office premises at Trinity, 7th Floor, 226/1, AJC Bose Road, Kolkata700020 andon the basis of information available on record it is found by the AO that the assessee company raised share capital of Rs. 86,24,30,000/- by issuing shares to different companies which are paper/bogus/shell companies. Thus it was clearly held that the said amout Rs. 86,24,30,000/- was nothing but accommodation entry in the form of bogus share capital/entry provider routed through the jamakharchi/shell/paper companies. Thus it is crystal clear that there was failure on the part of the assessee company to submit the full and true information, the assessee company gave misrepres....
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....ot form part of original assessment proceedings - Whether since Assessing Officer had sufficient material at his command to form a reasonable belief that income chargeable to tax had escaped assessment, merely because these transactions were scrutinised by Assessing Officer during original assessment would not preclude him from reopening assessment; thus, impugned reassessment notice was justified - Held, yes [Para 8] [In favour of revenue] 3. The jurisdictional Calcutta High Court in the case of Ballarpur Paper and Straw Board Mills Ltd. -v.- CIT (1975) 101 ITR 55 (Cal) has held that it is necessary that for reopening an assessment, there must be new information before the reopening is made. If it is a new look at the old facts, unprovoked by any knowledge of any fact or law coming to the possession of the department subsequent to the original assessment either from records or from any direction or decision, it would be nothing but mere change of opinion and such a change of opinion would not be justified. 4. In CIT-Kol-II v Eureka Stock and Share Stock & Share Broking Services Ltd.(2017) 291CTR313 (Cal), although the relevant issue had been exa....
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....for reopening of the assessment as there was a mention about the land in question in a communication made by the assessee. The Court rejected the aforesaid submission of the appellant observing that only the value of the land was stated and in support, a certificate from the registered Architect & Engineer was filed. It was held as under: ..... The Hon'ble Gujarat High Court in the case of Yogendrakumar Gupta v. ITO (2014) 366ITR186 (Guj) held that the law requires only formation of belief of the assessing officer on the basis of information in his possession that income had escaped assessment without the necessity to supply and specific documents to the assessee discussing the facts as under: "20. This Court has examined the belief of the Assessing Officer to a limited extent to inquiry as to whether there was sufficient material available on record for the Assessing Officer to form a requisite belief whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. This does not appear to be the case where the Assessing Officer on vague or unspecific information initiated the proceedings of reassessme....
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....could not be said that there was no material before the Assessing Officer to reopen the assessment, as under : "In the present case also, in the wake of information received by the Assessing Officer, when Assessing Officer formed a belief that the investment made from the funding of such companies which are bogus, the Assessing Officer has rightly assumed the jurisdiction of initiating the reassessment proceedings. Assessing Officer, on the basis of information subsequently having come to his knowledge, recognized untruthfulness of the facts furnished earlier. In the present case, since both the necessary conditions to reopen the assessment have been duly fulfilled, sufficiency of the reasons is not to be gone into by this Court. Information furnished at the time of original assessment, when by subsequent information received from the Principal Director of Income Tax (Investigation), Ahmedabad, itself found to be controverted, the objection to the notice of reassessment under section 147 of the Act must fail." Thus it can be argued that the reopening was justified where subsequent information proved that information furnished at the stage of original assessment wa....
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....3) and its relation with formation of belief should have been spelt out in the reasons recorded to justify reopening. According to ld. AR the AO had miserably failed to demonstrate the foregoing in the recorded reasons which vitiated the usurpation of jurisdiction by the AO. The ld. AR further submitted that in the course of proceedings u/s 143(3) the assessee was directed to furnish the particulars of monies received during the relevant year by way of share subscription amounts. In compliance the particulars as requisitioned were furnished which thereafter were examined by the AO not only with reference to the assessee's books of account but also by making independent enquiries u/s 133(6) as noted from the order u/s 143(3). The ld. AR therefore submitted that there was no failure on the part of the assessee to disclose true and full material facts prior to completion of order u/s 143(3). In the circumstances therefore the reopening of assessment after four years was claimed to be impermissible. The ld. AR drew our attention to the correspondence between the ACITCC2(1) and the DDIT(Inv) Unit 2(2), Kolkata to show that no tangible material was gathered by the Investigation Wing whic....
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....al of Rs. 86.24 crores during the FY 2008-09 relating to AY 2009-10. In the letter dated 23.02.2016 it was revealed that the assessee had allotted shares to different companies which were paper / bogus / shell companies. Shares were allotted on 31.03.2009 at a premium of Rs. 190/ share. Considering the report of the DDIT, it was observed that it was nothing but unaccounted income entered in the books of assessee by way of accommodation entry in the form of bogus share capital routed through paper/ bogus / shell companies. The ld. AR submitted that the DDIT's letter dated 23.02.2016 was addressed to the ACIT, CC2(1), Kolkata who in turn forwarded the same to the DCIT, Circle 6(2), Kolkata on 28.02.2016 and within 8 days of the said letter, the DCIT, Circle 6(2), Kolkata recorded his satisfaction and sought sanction from the Pr.CIT-2, Kolkata. The ld. AR therefore submitted that the facts on record demonstrated that without objectively examining the information received and without conducting any worthwhile enquiry of his own the AO proceeded to initiate reassessment proceedings. The ld. AR further submitted that the fact that the assessee had issued fresh capital and thereby raised ....
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.... recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons."Their Lordships added that "The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence....". Therefore, the reasons are to be examined only as they were recorded by the competent officer before the issue of the notice. 9. The next important point is that even though reasons, as recorded, may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment. The reasons should not merely disclose need for an inquiry which may result in detection of an income escaping assessment. Undoubtedly, at the stage of recording the reasons for reopening the assessment, all that is necessary is the formation of prima facie belief that an income has escaped the assessment and it is not necessary that the....
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....nbsp; 10. In CIT vs. Kelvinator of India Ltd. reported in 256 ITR 1, the Full Bench of Hon'ble Delhi High Court held as under :- "It is a well settled principle of interpretation of statute that the entire statute should be read as a whole and the same has to be considered thereafter chapter by chapter and then section by section and ultimately word by word. It is not in dispute that the Assessing Officer does not have any jurisdiction to review his own order. His jurisdiction is confined only to rectification of mistakes as contained in section 154 of the Act. The power of rectification of mistake conferred upon the Income-tax Officer is circumscribed by the provisions of section 154 of the Act. The said power can be exercised when the mistake is apparent. Even a mistake cannot be rectified where it may be a mere possible view or where the issues are debatable. Even the Income-tax Appellate Tribunal has limited jurisdiction under section 254(2) of the Act. Thus when the Assessing Officer or Tribunal has considered the matter in detail and the view taken is a possible view the order cannot be changed by way of exercising the jurisdiction of rectification of mista....
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.... "We also cannot accept the submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded an analysis of the materials on the record by itself may justify the Assessing Officer to initiate a proceeding under section 147 of the Act. The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong." 11. It is necessary to e....
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....aith or was it mere pretence for initiating action u/s 147/148 of the Act. 12. Now let us look into the facts pertaining to the assessee company to examine the legal grounds involved in the present appeal. From the material on record we find that the entire edifice of the reassessment proceedings was based on the letter 23.02.2016 written by the DDIT(Inv), Unit 2(2), Kolkata to the ACIT, CC-2(1), Kolkata. The said letter was written in the context of survey conducted on 19.05.2015 in the case of Ashika Group. We note that at the relevant time when the letter was issued in February 2016, the ACIT, CC2(1), Kolkata did not have jurisdiction over the assessee's case and as such no proceedings could have been initiated by the said officer against the assessee who was not being assessed in his charge. From the letter dated 23.02.2016 which is at Pages 8 & 9 of the paper book, we note that the said survey proceedings were conducted by the Investigation Wing in May 2015 and the main focus of the investigation was the alleged bogus LTCG. In the said proceedings an effort was also allegedly made to find out the genuineness of the share allotments made by the concerned c....
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.... AO had conducted independent enquiries from the share applicants on test check basis. These facts have been admitted by the AO in the order u/s 143(3) of the Act. In the circumstances we note that the enquiry with regard to issue of share capital during the FY 2008-09 was conducted by the AO and therefore it was not a case where the AO was unaware about the material fact that the assessee had raised fresh equity capital of Rs. 86.27 crores during the relevant year. We therefore find that as a consequence of the letter either from the Investigation Officer or from the ACIT, CC-2(1), Kolkata; the AO of the assessee did not receive any fresh information in respect of the amounts received during FY 2008-09 by way of share subscriptions. We find that the survey u/s 133A was conducted in the case of Ashika Group in the month of May 2015 and in the course of the said survey certain information was allegedly gathered by the Investigation Wing in respect of transactions of the assessee during the FY 2008-09. However the letter of the DDIT(Inv) as well as the letter of the ACIT, CC-2(1), Kolkata is found to be conspicuously silent as to in what manner the information gathered in the case of....
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....as no tangible material available with the AO on the basis of which he could form his reasons to believe that income had escaped assessment. Moreover we find that even in the DDIT's letter, he had expressed only an apprehension that the share subscription amount received from 34 companies out of total 94 companies to whom the assessee had allotted shares were paper / bogus / shell companies. We therefore find that even as per the information received it was not the Revenue's case that share subscription amounts received from all 94 share subscribers were having dubious antecedent. Even with regard to the 34 companies claimed by the DDIT(Inv) to be paper / bogus / shell companies, their identities and the amounts received from each of them was not revealed. In the circumstances therefore we find that even as per the letters relied upon by the AO no tangible material or information was available before the AO on the basis of which he could have formed reason to believe that the entire share subscription amount received represented income escaping assessment. We therefore find merit in the ld. AR's submission that after the completion of assessment, no tangible or credible information....
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.... 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 material facts. It is no doubt true that the Court cannot go into sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment." Further reliance can be placed on the detailed judgment in the case of Madhukar Khosla vs. ACIT 367 ITR 165 (Delhi) wherein it has been held by the Hon'ble High Court that the reopening is not permitted under the law unless it is based on fresh tangible material and that if the "reasons to believe" are not based on new, "tangible materials", the reopening amounts to an impermissible review. It has been further observed that : "The foundation of the AO's jurisdiction and the raison d'etre of a reassessment notice are the "rea....
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.... dated 23.02.2016. We also note that even though in the letter dated 23.02.2016, the said DDIT(Inv) had admitted that the survey in the case of Ashika Group was conducted in connection with the alleged bogus LTCG and not in connection with issuance of shares, the opinion was expressed that out of 97 share subscribers, 34 share subscribers were alleged to be bogus / shell companies. Except for making unverified allegation that DDIT's observation was based on the statements of identified entry operators, the letter of the DDIT(Inv) was silent with regard to the identities of the alleged entry operators and in what manner the said statements led him to believe that the capital contributed by unknown or unidentified 34 companies was in the nature of accommodation entries. We therefore find that except for making unverified and unsubstantiated averments, the DDIT's letter was bereft of any specific facts on the basis of which the AO could validly form his reasons to believe that assessee's income had escaped assessment. We also find that in the said letter, the DDIT had himself admitted that no enquiry with regard to cash trail was conducted by him in respect of allotment of shares due ....
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....er of Income-tax, IV Vs.Insecticides (India) Ltd[2013] 357 ITR 330 (Delhi) holding as follows:- "7. We may point out at this juncture itself that the Tribunal did not go into the question of merits. It only examined the question of the validity of the proceedings under Section 147 of the said Act. The Tribunal, in essence, held that the purported reasons for reopening the assessments were entirely vague and devoid of any material. As such, on the available material, no reasonable person could have any reason to believe that income had escaped assessment. Consequently, the Tribunal held that the proceedings under Section 147 of the said Act were invalid. 8. The Tribunal gave detailed reasons for concluding that the proceedings under Section 147 were invalid. Instead of adding anything to the said reasons, we think it would be appropriate if the same are reproduced:- "In the case at hand, as is seen from the reasons recorded by the AO, we find that the AO has merely stated that it has been informed by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 that the above named company was involved in....
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....what mode or way the bogus entries or transactions were given or taken by the assessee. From the reasons recorded, nobody can know what was the amount and nature of bogus entries or transactions given and taken by the assessee in the relevant year and with whom the transaction had taken place. As already noted above, it is well settled that only the reasons recorded by the AO for initiating proceedings u/s 147 of the Act are to be looked at or examined for sustaining or setting aside a notice issued u/s 148 of the Act. The reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. Therefore, the details of entries or amount mentioned in the assessment order and in respect of which ultimate addition has been made by the AO, cannot be made a basis to say that the reasons recorded by the AO were with reference to those amounts mentioned in the assessment order. The reasons recorded by the AO are totally silent with regard to the amount and nature of bogus entries and transactions and the persons with whom the transactions had taken place. In this respect, we may rely upon the decision of Hon....
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....and was processed u/s 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the A.O. to have simply concluded: 'it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries'. In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decision discussed, the basic requirement that the A.O. must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment is missing in the present case. 13. A perusal of the reasons recorded demonstrate total non application of mind by the A.O. Thus applying the proposition laid down by the Jurisdictional High Court in G&G Pharma India (supra) we hold that the reopening of assessment is bad in law" 21. The Hon'ble Delhi High Court in the case of Signature Hotels (P) Ltd. vs ITO and another, reported in 338 ITR 51 (Delhi) under similar circumstances held as follows: "For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s 143(1) of the....
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....ported in 299 ITR 383 it has been held as follows: "Held dismissing the appeals, that the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount. The information did not indicate the source of the capital gains which in this case were shares. There was no information which shares had been transferred and with whom the transaction had taken place. The A.O. did not verify the correctness of information received by him but merely accepted the truth of the vague information in a mechanical manner. The A.O. had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148. What had been recorded by the A.O. as his 'reasons to believe' was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The A.O. had clearly substituted form for substance and therefore the action of the A.O. was not sustainable" 23. Useful reference in this regard is further made to the decision of the Hon'ble High Co....
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....he expiry of four years from the end of the relevant AY, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment. 26. The first part of Section 147 (1) of the Act requires the AO to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. 27. Each case obviously turns on its own fa....
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.... that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment." 28.4 The Court in Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra) quashed the proceedings under Section 148 of the Act. The facts in the present case are more or less similar. The present case is therefore covered against the Revenue by the aforementioned decision. 29.1 The above decision can be contrasted with the decision in AGR Investment v. Additional Commissioner of Income Tax (supra), where the 'reasons to believe' read as under: "Certain investigations were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus....
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....belief. In the present case, however, the AO has made no effort to set out the portion of the investigation report which contains the information specific to the Assessee. He does not also examine the return already filed to ascertain if the entry has been disclosed therein. 30.1 In Commissioner of Income Tax, New Delhi v. Highgain Finvest (P) Limited (2007) 164 Taxman 142 (Del) relied upon by Mr. Chaudhary, the reasons to believe read as under: "It has been informed by the Additional Director of Income Tax (Investigation), Unit VII, New Delhi vide letter No. 138 dated 8 th April 2003 that this company was involved in the giving and taking bogus entries/ transactions during the financial year 1996-97, as per the deposition made before them by Shri Sanjay Rastogi, CA during a survey operation conducted at his office premises by the Investigation Wing. The particulars of some of the transaction of this nature are as under: Date Particulars of cheque Debit Amt. Credit Amt 18.11.96 305002 5,00,000 Through the Bank Account No. CA 4266 of M/s. Mehram Exports Pvt. Ltd. in the PNB, New Rohtak Road, New Delhi.N....
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....hat, in fact, the Assessee‟s income has escaped assessment, the AO would have no jurisdiction to assess the same if his reasons to believe were not based on any cogent material. In absence of the jurisdictional pre-condition being met to reopen the assessment, the question of assessing or reassessing income under Section 147 of the Act would not arise." 33. In Rustagi Engineering Udyog (P) Limited (supra), it was held that "...the impugned notices must also be set aside as the AO had no reason to believe that the income of the Assessee for the relevant assessment years had escaped assessment. Concededly, the AO had no tangible material in regard to any of the transactions pertaining to the relevant assessment years. Although the AO may have entertained a suspicion that the Assessee‟s income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe - not reason to suspect - is the precondition for exercise of jurisdiction underSection 147 of the Act. " 34. Recently in Agya Ram v. CIT (supra), it was emphasized that the reasons to b....
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....e Respondent-Assessee. This was contrary to and in defiance of the decision of the Apex Court in GKN Driveshafts v. ITO [2002] 125 Taxman 963/ [2003]259 ITR 19. The entire objects of reasons for re- opening notice as recorded being made available to an Assessee, is to enable the Assessing Officer to have a second look at his reasons recorded before he proceeds to assess the income, which according to him, has escaped Assessment. In fact, non furnishing of reasons would make an Assessment Order bad as held by this Court in CIT v. Videsh Sanchar Nigam Ltd. [2012] 21 taxmann.com 53, 340 ITR 66. In fact, partial furnishing of reasons will also necessarily meet the same fate i.e. render the Assessment Order on re- opening notice bad. Therefore, on the aboveground itself, the question as proposed does not give rise to any substantial question of law as it is covered by the decision of this Court in Videsh Sanchar Nigam Ltd.' s case (supra) against the Revenue in the present facts. 10. Besides, the submissions made on behalf of the Revenue that in view of the decision of the Apex Court in Rajesh Jhaveri Stock Brokers (P) Ltd.'s, case (supra), the Assessing Officer is en....
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....e reasonable belief on the basis of tangible material could be, prima facie, formed to conclude that income chargeable to tax has escaped assessment. Mr. Mohanty, learned counsel is ignoring the fact that 6the words 'whatever reasons' is qualified by the words 'having reasons to believe that income has escaped assessment'. The words whatever reasons only means any tangible material which would on application of the facts on record lead to reasonable belief that income chargeable, to tax has escaped, assessment This material which, forms the basis, is not restricted, but the material must lead to the formation of reason to believe that income chargeable to tax has escaped Assessment Mere obtaining, of material by itself does not result in reason to believe that income has escaped assessment. In fact, this would be evident from the fact that in para 16 of the decision in Rajesh Jhaveri Stock Brokers (P) Ltd. 's, case (supra), it is observed that the word 'reason' in the 'reason to believe' would mean cause or justification. Therefore, it can only be the basis of forming the belief. However, the belief must be independently formed in the context of the material obt....
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....r that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does- not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that re- opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction. 15. Therefore, in the above facts, the view taken by the impugned order of the Tribunal cannot be found fault with. This view of the Tribunal is in accordance with the settled position in law. ' 16. Therefore, the question; as framed does not give rise to any substantial question of law. Thus, not entertained." 25. We also not....
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....al of Rs. 86,24,30,000/- during FY 2008-09 relevant to AY 2009-10. We find that although the reference to survey operations against Ashika Group is made for justifying reopening of assessment, nowhere any cogent tangible or real connection of the said survey proceedings has been established by the AO with formation of his belief that any income of the assessee had escaped assessment. The fact that the assessee had raised share capital of Rs. 86.24 crores during FY 2008-09 was already known to the AO much prior to survey u/s 133A against Ashika Group and therefore we find that the said survey proceedings did not have any manner of tangible connection with formation of AO's belief that income had escaped assessment. We therefore find that there was not even remote connection between the fact that a survey u/s 133A was conducted in the case of Ashika Group and formation of AO's belief that as a consequence of the said survey he could form a reasonable belief that income chargeable to tax in the form of share subscription amount had escaped assessment. 27. We further note that in the second paragraph of the recorded reasons, the AO has made a reference to the letter of ....
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.... had in his possession the specific details of entry operators who had provided these entries to the assessee and it was found that the complete modus operandi in which the assessee obtained such accommodation entries was received in the information from the Investigation Wing. It was also found that the AOs had independently applied their mind to the information received and thereafter identified the specific entities who had provided accommodation entries to the assessee. It is on these facts that the Hon'ble High Court held that there was sufficient tangible material at the command of the AO to initiate reassessment and therefore upheld the validity of the proceedings. However as discussed in the foregoing, in the given facts of the present case the DDIT(Inv) had not provided the identities of the 34 out of 97 share subscribers who according to him were paper / bogus / shell companies but had made general assertions in his correspondence. In fact the DDIT(Inv) himself admitted that he had not conducted any detailed enquiries on his own or prepared any cash/money trail but based on earlier statements of unnamed entry operators he had suspected the share subscription monies receiv....
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.... of four years and as per law, it can be done only if the AO is able to demonstrate that there was failure on the part of the assessee in disclosing the material facts. In this regard, it would be appropriate to reproduce hereunder the First Proviso to section 147 of the Act :- "Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:" 32. The Hon'ble Supreme Court in the case of CIT v. Avadh Transformers (P.) Ltd. 51 Taxmann.com 369 upheld the judgment of the Allahabad High Court, wherein it was held by the Hon'ble High Court that in absence of failure on the part of the assessee in disclosure of ....
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....nformation 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 fully and t....
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....sary 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 principle as set out in the foregoing finds support in the judgment of the Hon'ble Supreme Court in the case of Calcutta Discount Co Ltd (41 ITR 191)wherein the Apex Court had held as follows: "Both the conditions, (i) the Income-....
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....ing 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 the assessment proceedings which were concluded on the basis of assessment under section 143(3) of the Act. On this short count alone the impugned ....
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....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 material facts in the return, as the ....
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.... would not justify initiation of 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....
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....sclosure. It will have to be held that the Petitioner did not fail to make full and true disclosure of all material facts. The jurisdictional requirement for carrying out the reassessment, after the expiry of period of four years, is not fulfilled in the present case. 40. Identical view has also been expressed by the Hon'ble Gujarat High Court in the case of Nikhil K Kotak Vs Mahesh Kumar (319 ITR 445). The relevant reasons recorded by the AO for reopening of the assessment and the observations made by the Hon'ble High Courtare reproduced below: "5. Section 147 of the Act permits reopening of a completed assessment in a case where income liable to tax has escaped assessment. However, proviso under the said section carves out an exception and shifts the burden on Revenue in a case where a period of four years has elapsed from the end of the relevant assessment year. The proviso stipulates three conditions. The Revenue is required to show from the record and the facts of the case that any one of the three conditions stands satisfied before the Assessing Officer can assume jurisdiction to issue notice for reassessment. 6. In the present case, ....
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....lal & Co. v ITO (supra) and Hon'ble Calcutta High Court in the case of CIT-Kol-II v Eureka Stock and Share Stock & Share Broking Services Ltd (supra) is concerned, we find it to be factually misplaced. The facts involved in these cases are completely distinguishable in as much as it was found in these judgments that the assessee had deliberately misrepresented facts in the course of original assessment and hence it was held that the condition precedent in proviso to Section 147 was satisfied. However as noted in the foregoing, it is not the case of the AO that the assessee had misrepresented or concealed any material facts in the course of assessment. Accordingly the judgments cited by the Revenue are found to be not applicable in the given facts of the present case. 42. Hence applying the ratio laid down in the above cited decisions, we hold that in the present case the recorded reasons nowhere made out any case that the alleged escapement was resulted as a consequence of the assessee's omission or failure to disclose truly & fully all material facts necessary for its assessment. In fact we note that in the reasons recorded, the AO had not spoken any facts which wo....
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....ave looked in to carefully the reasons recorded by the AO and seen the history behind the assessment which was proposed to be reopened by the AO. When a superior authority is given power by the legislature, to grant sanction to do an act by an authority below him, then that power needs to be exercised with due care and circumspection and after due application of mind. In the course of hearing the ld. AR had brought to our attention that the proforma in which the AO had sought sanction of the Pr.CIT had mentioned that the 'reasons for the belief that income had escaped assessment' were 'As per Annexure'. The approval of the Pr.CIT was sought in respect of these reasons which were provided to the Pr.CIT by way of Annexure. He drew our attention to the hand written remark "Where is the Annexure" which was recorded by the Pr.CIT. With reference to this remark, the ld. AR submitted that it was apparent that even the reasons which were germane to the formation of belief that income had escaped assessment was not furnished to the Pr. CIT along with the proforma and therefore it was quite apparent that the approval of the Pr.CIT was obtained mechanically even without there being relevant r....
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....said and certain judgment of the Gujarat High Court, in the case of Lalita Ashwin Jain v. ITO [2014] 88 CCH 273 (Guj.); and, the Supreme Court in the case of CIT (Central) v. Vatika Township (P) Ltd.2014 ITL 833 (SC), Shri Sanjay Lal - learned counsel for the appellants, prays for interference into the matter. 6. However, Shri L.L. Sharma - learned counsel for the respondents, placed reliance on another judgment of the Gujarat High Court in the case of Cargo Clearing Agency v. Jt. CIT [2008] 307 ITR 1 (Guj.), to say that for block assessment and re-assessment, there is no jurisdiction to reopen the block assessment by issuing notice under section 148 and, therefore, on the basis of this judgment learned counsel states that the entire procedure initiated for issuing notice under section 148 is unsustainable. 7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:- 'The Commissioner acted, of c....
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....ct. The relevant observations of the Hon'ble High Court are reproduced hereunder: "It is a settled position in law that grant of the sanction by the Commissioner of Income Tax under Section 151 of the Act, is not a mechanical act on his part but it requires due application of mind to the reasons recorded before granting the sanction. This has been so provided as to safeguard against issue of reopening notice (which seek to disturb the settled position) to ensure that assessee is not troubled with reopening issues without satisfactory reasons. Therefore, it must pass muster of the Superior Officer in the context of Sections 147 and 148 of the Act, before it is issued to the party. 9. In the above view, as the sanction order indicates non-application of mind to the reasons recorded by the Assessing Officer, the impugned notice is bad in law. Thus, quashed and set aside." 49. We note that the coordinate Bench of this Tribunal on similar facts & circumstances in the case of Hirachand Kanunga Vs DCIT (68 SOT 205) held that a mere mention of 'approved' in the report by the Commissioner and thereby according sanction for reopening of assessment u/s 147 did not amount ....
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..... Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction. 12. Hon'ble Delhi High Court in the case of United Electrical Co. (P.) Ltd. v. CIT [2002] 258 ITR 317/125 Taxman 775 has held that "the proviso to sub-section (1) of section151of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-builts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment". The Hon'ble High Court further observed that "what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-secti....