TaxTMI 
TaxTMI 
2020 (1) TMI 1070
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....in information from the assessee. The same was provided by the Petitioner on 28.03.2018, at the time of hearing. Subsequently, Respondent issued a notice dated 29.03.2018 under Section 148 of the Act, which is impugned in the present petition. In response thereto, Petitioner filed her return of income on 30.04.2018 and pursuant to a request for supply of 'reasons to believe', the AO furnished the same on 10.07.2018. Assessee's objections to the said reasons, filed on 10.09.2018, came to be disposed of vide order dated 08.10.2018. 3. Since the scope of challenge in the instant petition pertains to the assumption of jurisdiction by the AO under Section 147 of the Act, perusal of the reasons to believe is necessary. The same are extracted herein below: "Reasons for reopening of the assessment in case of Ms. Vanita S Anand Asstt.Year 2011-12 U/s.147 of the I.T.Act 1961 1. The ITO (Inv.) Unit-7/2/2017-18/419 dated 09/03/2018 forwards the information that following transactions with M/s.Duggal Associates are appearing in the bank account NO.002901528361 of Ms. Vanita S. Anand maintained with ICICI Bank, Greater Kailash Branch, New Delhi: S.No. Date Amount Re....
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....e following incomes, shall be chargeable to income-tax under the head "income from other sources", namely :- (i) dividends' 73[(ia) income referred to in sub-clause (viii) of clause (24) of section 2'} 74[ib) income referred to in sub-clause (ix) of clause (24) of section 2;] 75[(ic) income referred to in head "profits and gains of business or profession";] 76(id) income by way of interest on securities, if the income is not chargeable to income-tax under the head "profits and gains of business or profession";] (ii) income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not chargeable to income-tax under the head "profits and gains of business or profession"; (iii) where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is insperable from the letting of the said machinery, plant or furniture, the income from such letting, if it is not chargeable to income-tax under the head "profits and gains of business or profession"; 77[liv) income referred to in sub-clause (xi) of clause (24) of section 2, if such income is not chargeable to income....
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....ion wing that the loan was interest bearing, and substantial amount thereof was returned in the next year. The said amount is shown as outstanding in his record and cannot be assumed to be the escaped income of the assessee. 5. Ms. M.S. Talha, Advocate appearing for the Revenue argues that the Petitioner had filed her original return of income for AY 2011-12 on 15.07.2011, declaring an income of Rs. 3,57,939/-. Subsequently, information was received from ITO (Investigation), Unit-7, New Delhi dated 09.03.2018, wherein it was intimated that the Petitioner-assessee had entered into suspicious transaction of receiving loan amount of Rs. 70,12,000/- from Duggal Associates during Financial Year (hereinafter referred to as "FY") 2010-11 relevant to AY 2011-12. After careful perusal and examination of the information, the Investigation Wing issued a letter to the Petitioner, calling for certain information under Section 133(6) of the Act. Enquiries were conducted from Shri Anil Duggal, proprietor of M/s. Duggal Associates, who in response thereto furnished a reply stating that he had given loans of Rs. 70,12,000/- to the Petitioner with interest @11% amounting to Rs. 7,05,320/-. Petiti....
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....evant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income Tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Co....
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.... FILED BY THE ASSESSEE', which is absolutely incorrect. In the counter affidavit, Revenue while admitting this mistake sought to justify the said response. The explanation offered makes a very interesting reading and we therefore, consider it necessary to reproduce the same: "XI. In Paragraph 13(c) the Petitioner-Assessee submitted that the Deponent had obtained approval by stating wrong facts that no return was filed by the Petitioner-Assessee. It is put forth that due to urgency and paucity of time, the clerical mistake occurred in the Annexure only. Otherwise, there is no other place where the Deponent has mentioned that the Petitioner Assessee has not filed the return of Income for A.Y. 2011-12. To elaborate, it is put forth that, the Petitioner-Assessee herself has filed income tax returns on the income tax website for A.Y. 2011-12 wherein she had shown different taxable income in her returns. Firstly, return was filed on 15/07/2011 with taxable income of Rs. 2,93,100/-; further another return of income in response to notice u/s 148 was filed under protest on 30/04/2018 and shown taxable income of Rs. 1,75,110/-. In its letter dated 02.05.208, filed on 07.05.2018 the ....
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....of the fact that the petitioner-assessee had filed the original return of income and, therefore, the entire basis for reopening gets vitiated. 9. Be that as it may, the recorded reasons are entirely based on the information received from the office of Income-Tax Officer (Investigation) Unit-7, New Delhi vide letter dated 09.03.2018. The premise for reopening as spelt out in the recorded reasons is that the petitioner-assessee had transactions with Duggal Associates and had received certain credits in her account maintained with ICICI Bank, Greater Kailash Branch, New Delhi. This transaction was considered to be a short term loan from Shri. Anil Duggal, proprietor of M/s Duggal Associates and was partly returned back. It is also the case of Revenue that on enquiries, Shri Anil Duggal confirmed that he had given loan to the Petitioner and the same had been included in his books of account as "Loans and Advances". On a perusal of the loan agreement, the AO concluded that the expiry date of the loan agreement was 15.03.2011 and on the said date, the loan alongwith interest became due. Thereon, taking note of the fact that the Petitioner-assessee has made a payment of Rs. 60,00,000/-....
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....elief that the income chargeable to tax has escaped the assessment. The AO formed the reason to believe that an amount of Rs. 17,17,320/- is the unpaid loan liability towards Shri Anil Duggal, and the same is the notional income of the assessee - which has escaped assessment. The AO does not dispute the loan transaction. In fact the loan transaction forms the basis of computing this notional income. The AO on the basis of the loan transaction, which he does not suspect to be a bogus transaction, proceeds to calculate the interest liability and after hypothetically computing the same, adds it to the principal amount and makes a deduction of the amount repaid, and assumes that the balance amount remains unpaid and charges it to the notional income of the assesse by relying on provisions under Section 56(2) and 56(2)(vii)(a) of the Act. A quick reference of the said provision would be useful. The same reads as under: "56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, item....
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....- Ms. Vanita S. Anand had paid only Rs. 60,00,000/- and remaining Rs. 17,17,320/- the Rs. 77,17,320 - Rs. 60,00,000 = Rs. 17,17,320/- remained unpaid". 13. It is clearly discernable that the AO has accepted genuineness of the loan transaction. The reasons are completely silent as to how, and on what basis, material or evidence, the AO has come to the conclusion that the loan transaction was an amount received without consideration, so as to bring the same within the ambit of Section 56 of the Act. The nature of the transaction depends solely on the intention of the parties. Both the parties have admitted that the same is an interest bearing loan, a fact accepted by the AO. The AO has, thus, not shown any rational for involving Section 56 to the transaction of loan. The reasons are completely and wholly silent as to how the provisions of Section 56 are attracted in respect of outstanding liability of loan. Moreover, the reasons also do not spell out as to how there has been escapement of income by the assessee. The approach of the AO is fundamentally flawed, as he has assumed that just because certain loan amount is outstanding, the same was liable to be added to the income of th....