TaxTMI 
TaxTMI 
2016 (4) TMI 1395
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....ssee had operated an undeclared account with HSBC Bank located in Switzerland under Code BUP 5090165807 and carried out unaccounted transactions and made deposits in them during the FY 2005-06 and FY 2006- 07 relevant to the assessment years 2006-07 and 2007-08 respectively. 2.2 The assessments were reopened after recording reasons thereof with the prior approval of the Joint Commissioner of Income tax/ Salary Range V, Chennai. Notices u/s.148 dated.26.09.2011 for both the AYs 2006-07 and 2007-08 were issued by the Deputy Commissioner of Income tax/ Salary Circle-V, Chennai. Notices u/s 143(2) were issued subsequently/in response to assessee's AR made submissions and furnished details. After discussing the case with the assessee's representative, the assessments were completed by the AO broadly stating in an uniform manner for both AYs in appeal, as under: "The information received regarding bank accounts held by Sri Pradeep Dayanand Kothari in HSBC Bank, Geneva, Switzerland are as follows : A/c. Name with HSBC Bank Account number Beneficiary XENIOS FOUNDATION 5091365665 Pradip Dayanand Kothari DAYANAND837 5091352245 Pradip Dayanand....
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....ting prosecution proceedings against me for any alleged default/offence under the provisions of the Income Tax Act. This offer is conditional upon the fact that no proceedings, either penal or prosecution, should be initiated against me by the Income Tax Department. " The Assessing Officer considered the contentions of the AR, but rejected the same and made additions towards deposit in those accounts. Against this, the assessee carried the matter in appeal before the CIT(Appeals) challenging the reopening of the assessment and he confirmed the reopening of the assessment. Aggrieved, the assessee is in appeal before us once again, challenging the reopening of the assessment. 3. The ld. AR submitted that these appeals relate to assessment years 2006-2007 and 2007-2008 and these are reopened assessments and the original assessments were only under section 143(1). The reasons recorded for reopening the assessment as communicated to the assessee nowhere states that the AO has reason to believe that income has escaped assessment. The reasons merely alleged the following:- "It has come to my notice that the assessee has operated an undeclared account with HSBC Bank located ....
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....3.4 No enquiries have been conducted by the assessing officer independently and as a matter of fact the assessment order itself mentions that no confirmation has been received from the competent authority as prescribed in the Income Tax Act 1961 on a reference made by the assessing officer. The assessing officer himself again states that there is no conclusive information ("absence of conclusive information"). Hence it is stated that reopening on the basis of the inconclusive and unverified information is invalid. It has also be held by the Delhi High Court that a notice issued mechanically merely on the information supplied by the Investigation Wing has unjustified in the case of CIT Vs. Kamadhenu Steel Alloys Ltd., 248 CTR 33. 3.5 The assessing officer has taken as income that alleged peak credit in the alleged bank account. Copy of the said bank account was never supplied to the assessee. The alleged credits in the said bank account need not necessarily represent the fresh deposits made during the year. Even the assessment order does not contain any narration about the credits in the bank account. 3.6 It is true that the assessee filed a reply in the Investigation Wing in ....
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....tzerland to the tune of USD 33,754.07 which converted to Indian Rupee @ Rs. 50 per dollar works out to Rs. 16,87,700. I have reason to believe that this amount of Rs. 16,87,700 has escaped assessment." According to him, there are two accounts in Switzerland Bank and there are deposits in the assessment years under consideration as tabulated by the AO in his assessment order especially in para 12 for the asst. year 2007-08. According to the ld. DR, these deposits are not disclosed and has rightly brought to tax. Accordingly, reopening of the assessment by the AO is valid. He placed reliance on the following judgments : i) Kalyanji Mavji And Co. v. CIT (102 ITR 287)(SC), wherein it was observed as under : "Section 147 of the Income-tax Act, 1961 (Corresponding to section 34(1)(b) of the Indian Income-tax Act, 1922] - Income escaping assessment - Position prior to 1-4-1989 - Assessment Year 195657 - In original assessee-firm was allowed deduction of a sum being amount of interest paid by it on debts incurred for partnership business - Later on, ITO, having found that amount of deduction claimed by assessee was utilised for giving interest free loans to partn....
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....returns - ITO recorded reasons and thereafter issued notices under section 148 - Whether said letter could constitute relevant material and basis for formation of requisite belief by ITO under section 147 and, therefore, issuance of notice under section 148 was valid - Held, yes" 5. We have heard both the sides and perused the material on record. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. For initiation of action under section 147(a) (as the provision stood at the relevant ti....