TaxTMI 
TaxTMI 
2019 (10) TMI 298
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....sion, hearing and final disposal of this petition, to stay the implementation and operation of the notice at Annexure' A' to this petition and stay the further proceedings for the Assessment Year 2011-12; (c) any other and further relief deemed just and proper be granted in the interest of justice; (d) to provide for the cost of this petition. 3. The writ-applicant is aggrieved by the notice issued by the respondent dated 30/03/2018 under Section148 of the Income Tax Act, 1961 [for short 'The Act, 1961'] for the purpose of reopening the assessment for the A.Y.2011-12. The reasons assigned by the respondent for the purpose of reassessment are as under:- As per information available with this office during the year under consideration the assessee had made investment of Rs. 50,00,000/- in the pension policies of LIC of India. The assessee has filed his return of income on for A.Y.2011-12 declaring total income at Rs. 72.78. The information was received from the ITO, (I& CI)1, A'bad on 27.03.2018. On perusal of the information, it is found that the assessee has made investment of Rs. 50,00,000/- in the pension policies of LIC ....
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....aw. Further, the assessee has stated neither discussed the information, which has led to form the belief that some income has escaped assessment. The "Reason to believe" refers to the primafacie or tentative belief which the Assessing Officer is required to form at the time of recording the reasons and issuing the notice u/s.148 of the Act. Further, whether the assessee has offered the same for taxation or not is the question of verification. Further, the income which is believed to be chargeable to tax has escaped from assessment or not has not been verified, as there was no occasion for him to do so since the assessment u/s.143(3) has not been made in the instant case. Therefore, it cannot be ascertained that the income escaped assessment has been offered for tax or not. In the reasons recorded for reopening the assessment, the Assessing Officer has referred to the reasons to believe which in his/her view is applicable. It may be that the issue whether there is escaped assessment, but, the fact remains that it could not be examined since the return is not verified and scrutinized. Thus, in the instant case, there is a reason to believe that the income chargeable has esca....
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.... ITO could have found by further probing, the reopening of the assessment was valid. In the case of Shree Krishna (P) Ltd. Vs. Incometax Officer 221 ITR 538 (SC), the Hon'ble Supreme Court reiterated that it was the duty of the assessee to disclose material facts fully and truly. 4. In view of the above discussion and the judicial pronouncements, the objections raised by the assessee against reopening of assessment cannot be entertained as the same are without any basis and the facts of the cases in the case laws mentioned in your Objection letter dated 10/09/2018 are different and are not squarely applicable in your case. It may be seen that while reopening the assessment, proper procedure as per Incometax law has been followed by the Assessing Officer. The case has been reopened well within the time limit prescribed as per the provisions of the Incometax Act, 1961 and also on account of the fact that there was reason to believe that the income chargeable to tax has escaped assessment. It is not a case that there is no reason for reopening of the assessment. 6. Being dissatisfied with the same, the writapplicant is here before this Court with the present writ-appli....
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....here being any specific finding as to escapement of income. He submitted that no cause and effect relationship between "reasons recorded for reopening" and "income escaping assessment" is demonstrated. He submitted that reopening is based on "borrowed satisfaction". Mr. Himani submitted that the Assessing Officer himself must be satisfied that some income chargeable to tax has escaped assessment. Such satisfaction must be of the concerned Assessing Officer himself. In the case on hand, no such satisfaction has been recorded by the respondent himself. It is submitted that the respondent could be said to have been not applied his mind independently so as to reach a conclusion that any income has escaped assessment. 11. In such circumstances referred to above, Mr. Himani submitted that there being merit in this writ-application, the same may be allowed and the impugned notice for reassessment may be quashed and set aside. 12. On the other hand, this writ-application has been opposed by Mr. M.R. Bhatt, the learned senior counsel appearing for the Revenue. Mr. Bhatt would submit that having regard to the materials on record, it cannot be said that there is a total nonapplication o....
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.... the petitioner and in accordance with law. The Hon'ble Supreme Court in the case of Raymond Woolen Mills Vs. ITO [(1999) 236 ITR 34 (SC)] held that what is required to be seen in a case such as this is whether prima facie there was some material before the Assessing Officer on the basis of which he could reopen the case of the petitioner. The sufficiency or correctness of the material is not to be considered because it is open to the petitioner to prove that the facts assumed by the Assessing Officer in the notice were erroneous. (III) With reference to para 3.2.4, the petitioner has contended that the reasons are recorded on 15.03.2018 and the information was made available to the assessing officer on 27.03.2018. I submit that there is a typographical error of date in the reasons recorded supplied to the petitioner. I submit that reasons were recorded on 27.03.2018 after receipt of information from the ITO (I&CI) as can be seen from the proposal sent to the higher authority for its approval under Section 151 of the Act. (IV) With reference to para 3.2.5, the contentions therein are denied. The submissions made in foregoing paras are reiterated. (V) ....
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....ned and income chargeable to tax has escaped assessment. In view of the above, the contention of the petitioner does not hold any merit. 14. The principles of law, governing the subject of reopening of the assessment under Section 147 of the Act, may be summarized as under: "(i) The Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassess....
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.... (ii) Such escapement occurred by reason of failure on the part of the assessee either (a) to make a return of income under section 139 or in response to the notice issued under subsection (1) of Section 142 or Section 148 or (b) to disclose fully and truly all the material facts necessary for his assessment for that purpose. (x) The Assessing Officer, being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. (xi) While the report of the Investigation Wing might constitute the material, on the basis of which, the Assessing Officer forms the reasons to believe, the process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some link between the tangible material and the formation of the belief or the reason to believe that the income has escaped assessment. (xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the As....
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....cted to be elicited by the Assessing Officer during the course of the assessment. The disclosure required only reference to those material facts, which if not disclosed, would not allow the Assessing Officer to make the necessary inquiries. (xix) The word "information" in Section 147 means "instruction or knowledge derived from the external source concerning the facts or particulars or as to the law relating to a matter bearing on the assessment. An information anonymous is information from unknown authorship but nonetheless in a given case, it may constitute information and not less an information though anonymous. This is now a recognized and accepted source for detection of large scale tax evasion. The nondisclosure of the source of the information, by itself, may not reduce the credibility of the information. There may be good and substantial reasons for such anonymous disclosure, but the real thing to be looked into is the nature of the information disclosed, whether it is a mere gossip, suspicion or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to ....
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....d not show in the return the amounts representing the shares of her husband and minor daughter in the two firms, though they were includible in her total income under Section 64(1)(i) and (iii). The question was whether penalty could be imposed on the respondent under Section 271(1)(c), on the ground that the assessee had concealed the particulars of her income because she had not shown the shares of her husband and her minor daughter in the two firms as forming part of the total income in the return submitted by her. The Supreme Court held (at page 627): "There is a decision of this court which is directly in point and it concludes the determination of the question arising in this appeal against the Revenue but before we refer to that decision, we might first examine the question on principle as a matter of pure interpretative exercise. Section 271, Subsection (1), Clause (c), provides for imposition of penalty on an assessee if it is found, inter alia, that the assessee has concealed the particulars of 'his income'. The question is what is the scope and content of the words 'his income' occurring in this penal provision. Do they refer only to the income o....
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....re shall be included all such income as arises directly or indirectly to the spouse of such assessee from the membership of the spouse in a firm carrying on a business in which such individual is a partner as also to a minor child of such assessee from the admission of the minor to the benefits of the partnership firm. It is clear from this provision that though the share of the spouse or minor child in the profits of a partnership firm in which the assessee is a partner is not the income of the assessee but is the income of such spouse or minor child, it is liable to be included in computing the total income of the assessee, and it would be assessable to tax in the hands of the assessee. The total income of the assessee chargeable to tax would include the amounts representing the shares of the spouse and minor child in the profits of the partnership firm. If this be the correct legal position, there can be no doubt that the assessee must disclose in the return submitted by him, all amounts representing the shares of the spouse and minor child in the profits of the partnership firm in which he is a partner, since they form part of his total income chargeable to tax. The words '....
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....artnership firms. The contention of the assessee, if accepted, would render the note meaningless and futile and turn it into dead letter and that would be contrary to all recognised canons of construction. There can be no doubt that the assessee was bound to show in her return the amounts representing the shares of her husband and minor daughter in the two partnership firms and in failing to do so, she was guilty of concealment of this item of income which plainly attracted the applicability of Section 271, Subsection (1), Clause (c)." 18. Although, on this view, the order imposing penalty on the assessee could have been sustained but, in view of the decision of the Supreme Court in V.D.M.RM.M.RM. Muthiah Chettiar v. CIT [1969] 74 ITR 183, which is a larger Bench decision where a different view had been taken by a Bench of three judges of the Supreme Court, the contention of the assessee that imposition of penalty in his case is illegal had to be upheld. There, the Supreme Court proceeded to hold (at page 629 of 125 ITR): "It was held in this case (Muthiah Chettiar) that even if there were any printed instructions in the form of the return requiring the assessee to disc....
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....66 ITR): "We agree with what has been stated in Kochammu Amma's case , and for the reasons indicated therein, we do not propose to refer the case to a larger Bench. Following the law as laid down in the two cases in Muthiah Chettiar's case and Malegaon Electricity Co. P. Lid's case , we dismiss this appeal." 19. The aforesaid two decisions of the Supreme Court have been referred to and relied upon by the Calcutta High Court in the case of Commissioner Of IncomeTax Vs. Sarala Devi Birla reported in [1993] 203 ITR 953 (Calcutta). 20. In the said case before the Calcutta High Court, the original assessment for the relevant assessment year was completed under Section 143(3) of the Act. Later, the reassessment was made on a higher income. The assessee had given a cash gift to her minor daughter and the said amount was invested in shares. The Incometax Officer was of the view that the income arising from the assets transferred to the minor child was to be treated as the income of the individual under Section 64(4) of the Act and, therefore, such income had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material fac....
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....2 of the Incometax Rules has been amended by the said amendment which provides as follows (see [1967] 64 ITR (St.) 13): "12. Return of income.( 1) The return of income required to be furnished under Subsection (1) or Subsection (2) or Subsection (3) of Section 139 shall, (a) in the case of a company, be in Form No. 1 and be verified in the manner indicated therein; (b) in the case of a person not being a company, be in Form No. 2 and be verified in the manner indicated therein; Provided that in the case of a person, not being a company or a cooperative society or a local authority, whose total income (as computed by such person) does not exceed fifteen thousand rupees, the return of income may be furnished in Form No. 3 and shall be verified in the manner indicated therein. (2) Notwithstanding anything contained in Subrule (1), (a) where a return of income relates to the assessment year commencing on April 1, 1961, or any earlier assessment year, it shall be furnished in the appropriate form prescribed in Rule 19 of the Indian Incometax Rules, 1922, and shall be verified in the manner indicated therein; (b) where a return of inc....