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2020 (11) TMI 814
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....2, Kolkata has erred on facts as well as in law by holding that the assessment made under section 147/144 on 11.12.2017 is barred by limitation of time, disregarding the provisions of section 153(2) which provide that, no assessment or reassessment shall be made after mine months from the end of the financial year in which notice under section 148 is served. And in this case, notice under section 148 was served in financial year 2016- 17, hence, the assessment could have been made upto 31.12.2017. 3) For that the Ld. CIT (Appeals)-2, Kolkata has erred on facts and in law by placing reliance on a decision of the Hon'ble Supreme Court, i.e. Banarasi Debi Vs. ITO, which has been distinguished and superseded in a subsequent decision in the case of R.K. Upadhyay Vs. Shanabhai P. Patel. 4) That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or hearing of this appeal. 3. Brief facts of the case are that assessee company had filed its e-return for the assessment year 2009-10 i.e under consideration on 25-09-2009 showing returned income of Rs. 1,599/-. Based on information received from the DDIT (Inv), Unit....
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....nt company in course of assessment proceedings itself. It was brought to the notice of the AO that if the notice u/s. 148 was issued and served before 31.03.2016, the order u/s. 147 was barred by limitation as contained in provisions of section 153(2) of the Act and if the notice u/s. 148 was issued and served after 31.03.2016 then the notice u/s. 148 itself was barred by limitation u/s. 149 of the I.T Act, 1961. The AO however after considering the submissions made by the A/R proceeded to pass order u/s. 147/144 of the I.T Act, 1961 by making an addition of Rs. 4,08,00,000/- and by misinterpreting the provisions of section 148, 149 and 153(2) of the I.T. Act, 1961. The appellant had e-filed its original return of income for AY 2009-10 u/s. 13(1) on 25.09.2009. The said return was not selected for any scrutiny assessment. The limitation period of six years from the end of the relevant assessment year as contained in section 149(1) of the Act for the purposes of assessing the income of the appellant was to expire on 31.03.2016. The AO alleges that such notice u/s. 148 of the Act was issued and also dispatched to the appellant on 31.03.2016. But the said notice remained unse....
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....considered as compliance of the requirement of proviso to section 143(2) of the Act. In fact that is the only conclusion that can be arrived as to the expression 'serve' appearing in section 143(2) of the Act." Similarly, it is the date of issue of the notice u/s. 148, and not actual receipt of notice by assessee which is relevant to return a finding as to whether re-assessment proceedings have been initiated within period of limitation. The Hon'ble Punjab & Haryana High Court in the case of CIT v. K.G Singhania (2012) reported in 24 Taxmann.com 208. It is further the contentions gain strength from the following decisions wherein the notice was issued within time but was served on the assessee after the expiry of the time limit, it held to be valid- R.K Upadhyaya V Shananhai Patel P.Patel (1987) 166 ITR 163 (SC); CIT v Sheo Kumari Debi (1986) 157 ITR 13 (Pat) (FB) and Jai Hanuman Trading Co P.Ltd (1977) 110 ITR 36 ( P & H ) (FB). Similarly, in framing an assessment time period/limitation period as prescribed in Act on date of issue of notice would apply and not on the date of service of such notice as held in the case of C.B Richards Ellis Mauritius Ltd v. ADIT (2012) 208 ....
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.... be 22.09.2016 then also the impugned order passed u/s. 147/144 has to be held to be bad in law as the period of six years from the end of the relevant assessment year i.e the last date for service of notice u/s. 148 for the relevant assessment year ended on 31.03. 2016 and hence no notice u/s. 148 could have been served upon the appellant beyond 31.03.2016. The AO has mentioned in the order that "as you will appreciate that issuance of notice and service of the same are to different things. Notice was issued and handed over to the postal authority on 31st March, 2016. The said notice was returned unserved by the postal authority on 04.04.2016.And finally it was served on you through email on 22.09.2016 i.e in the Fin, Yr 2016-17. And none months form the end of the finance year 2016-17 is 31.12.2017. ....... And the matter was settled......" The AO has further mentioned that notice was issued on 31.03.2016 and no return of income was filed by the assessee in response to notice u/s. 148. Thereafter notice u/s. 142(1) were issued on 16.08.2017 for hearing on 29.08.2017, 29.08.2017 for hearing on 06.09.2017, 13.10.2017 for hearing 24.10.2017 and 25.10.2017 for heari....
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....eturn required to be furnished under-section 139." The section 149 relates to time limit for notice sys as under:- 149(1) No notice under section 148 shall be issued for the relevant assessment year,- (a)....... (b) if four years, but not more then six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year; ( c ) ...... The section 153 relates to time limit for completion of assessment, reassessment and re-computation says as under:- 153(1).... (2) No order of assessment, reassessment or re-computation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served; From the above, since the financial year in which notice u/s. 148 was issued ended on 31.03.2016, the reassessment order ought to have been made by the AO till 31.12.2016 and the impugned order u/s. 147/144 being passed on 11.12.2017 is barred by limitation. Alternatively, even if the contention of AO ....
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.... finality of proceedings. Quietus of the completed assessments can be disturbed only when the Assessing Officer has information or material in his possession regarding undisclosed income which had escaped assessment. As per the scheme of the Act, the reopening of assessment for assessing the income which has escaped assessment can be traced to Section 147 of the Act, where it is prescribed that if the Assessing Officer has "reason to believe" that any income has escaped assessment for any assessment year, he may subject to provision of Section 148 to 153 of the Act, assess or reassess such income and other incomes which has come to his notice during reopened proceedings. So, when the Assessing Officer has to assess / reassess the income which has escaped assessment, then he can do so if he satisfies the conditions precedents prescribed in Section 147 which is also subject to law prescribed in Section 148 to 153 of the Act. The Parliament while prescribing the time limit for validity reopening an assessment by issuance of notice has stated so in Section 149 of the Act. Here one has to note the crucial words used by the Parliament when it prescribed under the sub-heading "Time Limit ....
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....ay as prescribed by Section 149 of the Act, the AO gets the jurisdiction to reopen the assessment of the assessee for AY 2009-10. Further, it can be noted that section 153 of the Act, prescribes the "Time Limit for completion of assessment, re-assessment and re-computation". Therefore, in the case of reopening of assessment u/s 147 of the Act, the time limit to frame the assessment or reassessment starts only after serving of notice u/s 148 of the Act i.e. nine (9) months from the end of financial year in which the notice u/s 148 of the Act was served upon the assessee. Therefore, admittedly in this case, the notice u/s. 148 of the Act was served upon the assessee by e-mail on 22.09.2016, so the limitation time of nine months starts from the end of financial year, so in this case the end of financial year after serving notice is 31.03.2017, so as per Section 153 of the Act, the Assessing Officer should frame the assessment before the expiry of nine months from the end of the financial year in which the notice u/s. 148 of the Act was served, therefore, in this case, the Assessing Officer has time to frame the assessment till 31.12.2017 and the Assessing Officer in the instant cas....
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....his Tribunal as held by the Hon'ble Supreme Court in NTPC Vs. CIT 229 ITR 383. Assailing the action of AO to re-open the assessment, the Ld. AR submitted that the basic jurisdictional fact as well as law before an AO intends to reopen an assessment which has attained finality is that the AO should have 'reason to believe' escapement of income. According to him, it is settled law that 'reason to believe' postulates foundation based on information and belief based on reason. According to him, even if there is foundation based on information, still there must be some reason warrant holding the belief that income chargeable to tax has escaped assessment. According to him, from a mere perusal of the reasons recorded by the AO in order to reopen the assessment would reveal that the basic requirement of law u/s. 147 has not been satisfied. Thereafter, he drew our attention to the reasons recorded for reopening which is placed at page 31 of the paper book, which reads as under: "The office has been informed that Investigation Wing has conducted enquiry on the basis of some credible information in respect of cash deposits in a manner of dubious A/cs. The A/cs stood in the name of c....
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....her, it was pointed out by the Ld. AR that the information recorded in reason for re-opening has not been linked in any way to assessee, so that AO could have thought that assessee could have indulged in any kind of activity/transaction which could give rise to an event which could have formed as foundation for the Assessing Officer to form the requisite reason to believe that income has escaped assessment. According to Ld. AR, if the general modus-operandi of entry providers in Kolkata is based as a foundation for forming the belief that income has escaped assessment, then whichever company in Kolkata has raised share capital / loans will be proceeded against which will be arbitrary exercise of power, which has no sanction of law. Therefore, according to Ld. AR, the AO erred in concluding that assessee enjoyed bogus accommodation entries to the tune of Rs. 4.08 Crores without carrying out any preliminary enquiry/verification or examination or any other exercise after receipt of information. According to Ld. AR, the AO had not conducted any preliminary enquiry to base his belief that the said sum of Rs. 4.08 crore is fall out of accommodation entry and that share capital was the un....
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....95 ITR 677(Del.) (referred to para 19 till para 37). ii) DCIT Vs. Greal Wall Marketing Pvt. Ltd. ITA No.660/Kol/2011 (referred to page 10 para 11) iii) Shri Raj Kumar Goel Vs. ITO ITA No.1028/Kol/2017 (referred to page 5-8 para 11) (iv) Classic Flour & Food Processing Pvt. Ltd. Vs. CIT ITA Nos. 764 to 766/Kol/2014 (page 7 para 12 to 16) v) PCIT Vs. Shodiman Investments (P) Ltd. (2018) 93 taxmann.com 153 (Bom) page 4 para 12 to 14) vi) KSS Petron Pvt. Ltd. Vs. ACIT ITA No. 224/Mum/2014 (referred to page 3 para 8- 11) vii) PCIT Vs. Tupperware India Pvt. Ltd. (2016) 236 Taxman 494 (referred to page 3 para 6 and 9) viii) DCIT Vs. National Bank for Agriculture and Rural Development ITA No.4964/Mum/2014 (referred to page 10- 13 para 12) ix) CIT Vs. Insecticides (India) Ltd. (2013) 357 ITR 330 (Del.) x) Hon'ble Calcutta High Court in the case of Pr. CIT Vs. G4G Pharma India Ltd. in ITA 545/2015 vide order dated 08.10.2015 (para 12 and 13) 9. The Ld. AR drew our attention to the decision of the Hon'ble High Court of Delhi in ACIT Vs. Meenakshi Overseas (P) Ltd. (2017) 82 taxmann.com 300 (Del) wherein it has....
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.... 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 facts and no two cases are identical. However, there have been a large number of cases explaining the legal requirement that requires to be satisfied by the AO for a valid ....
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....oner 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/accommodation entries provided by certain individuals/companies. The name of the assessee figures as one of the beneficiaries of these alleged bogus transactions given by the Directorate after making the necessary enquiries. In the said information, it has been inter-....
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....ax, New Delhi v. HighgainFinvest (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. Note: It is noted that there might be more such entries apart from the above. The return of income for the assessment year 1997-98 was filed by the Assessee on 4th March 1998 which was accepted under Section 143 (1) at the declared income of Rs. 4,200. In view of these facts, I have reason to believe that the amo....
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....ct 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 believe "should have a link with an objective fact in the form of information or materials on record..." It was further emphasized that "mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments." ....
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....e information given by DIT(Inv.),New Delhi. The date of the information received by the AO were not spelt out in the reasons recorded. The involvement of the assessee is also not spelt out, except mentioning the corporate bodies who had subscribed to the share capital of the assessee were non-existent and not creditworthy. On identical facts the Hon'ble Delhi High Court in the case of CIT vs Insecticides (India) Ltd (supra) has taken a view that the reasons recorded were vague and uncertain and cannot be construed as satisfaction on the basis of the relevant material on the basis of which a reasonable person can form a belief that income has escaped assessment. The Hon'ble Delhi High Court has also come to the conclusion that the reasons recorded did not disclose the AO's mind regarding escapement of income. The Hon'ble Delhi High Court ultimately held that initiation of proceedings u/s 148 of the Act was not valid and justified in the eyes of law. The facts and circumstances in the present case are identical to the case decided by the Hon'ble Delhi High Court. Following the said decision we hold that initiation of re-assessment proceedings is not valid. On this gro....
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....d (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed to confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to, income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices." . Therefore, the sentence being relied upon was made in the context of the change in law that under the amended provision 'reason to believe' that in case of escaped assessment, is sufficient to re-open the assessment. This unlike the earlier provision of Section 147(a) of the Act which required two conditions i.e. failure to dis....
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....Act, before re-opening notice, is issued. These reasons, must indicate the material (whatever reasons) which form the basis of re-opening . Assessment and its reasons which would evidence the linkage/nexus to the conclusion that income chargeable to tax has escaped Assessment This is a settled position as observed by the Supreme Court In S. Narayanappa v. CIT [1967] 63 ITR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ITO v. LakhmaniMerwal Das [1976] 103 ITR 437 had laid down that the reasons to believe must have rational connection with or relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer. 13. In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from t....
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....assessment. It is the case of the assessee that in the assessment order passed u/s 147 of the Act, the AO did not make any addition on account of unexplained investment in construction. It is the plea of the assessee that when no addition is made on the grounds on which re-assessment proceedings are initiated then no other addition can be made in such reassessment proceedings. 8. The first aspect which needs to be examined is as to whether the assessee is entitled to challenge the validity of initiation of proceedings u/s 147 of the Act in the present appeals in which he has challenged the validity of order passed u/s 263 of the Act. The ld. Counsel for the assessee submitted before us that it is open to an assessee in an appeal against the order u/.s 263 of the Act which seeks to revise an order passed u/s 147 of the Act, to challenge the validity of the order passed u/s.147 of the Act as well as initiation of proceedings u/.s 147 of the Act. In this regard the Ld. Counsel for the assessee placed before us two decisions one rendered by Lucknow Bench of ITAT in the case of Inder Kumar Bachani (HUF) vs ITO 99 ITD 621 (Luck) and ITAT Mumbai 'G' Bench in the case of M/s. West....
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....cured even by consent of parties." 10. The ITAT Mumbai bench made a reference to another decision of the Hon'ble Supreme Court in the case of Sushil Kumar Mehta vsGobind Ram Bohra, (1990) 1 SCC 193 and the decisions in the case of Indian Bank vsManilalGovindjiKhona (2015) 3 SCC 712. The ITAT Mumbai bench also held that if order of assessment passed u/s 147 of the Act was illegal and nullity in the eyes of law then that order cannot be revised by invoking powers u/s 263 of the Act by CIT. The Mumbai Bench has in this regard placed reliance on the decision of Hon'ble Delhi bench of the Tribunal in the case of Krishna Kumar Sarafvs CIT in ITA NO.4562/Del/2007 order dated 24.09.2015 wherein it was held as follows :- " 17. There is no quarrel with the proposition advanced by Id. DR that the proceedings u/s 263 are for the benefit of revenue and not for assessee. 18. However, u/s 263 the Id. Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice U/S 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the same was no....
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....ged even in an appeal arising out of collateral proceedings. We have already set out the ratio laid down in these decisions and we do not wish to repeat the same. Suffice it to say the law is well settled that invalidity of the primary proceedings for want of proper jurisdiction can be challenged even in appellate proceedings arising out of a collateral proceeding. In view of the aforesaid legal position we admit the additional grounds for adjudication. 12. As far as the merits of the validity of initiation of proceedings u/s 147 of the Act for A.Y.2007-08 and 2008-09 are concerned the question for consideration is as to whether on the basis of the reasons recorded it can be said that there can arise any belief on the part of the AO that income chargeable to tax for the relevant assessment years has escaped assessment. In this regard the reasons recorded by the AO for initiating proceedings u/.s 147 of the Act for A.Y.2007-08 and 2008-09 has already been set out by an order in the earlier part of this order. The gist of the reasons recorded by the AO is that the assessee had made investments of about Rs. 4 crore in construction of hotel/resort at Mandarmoni, PurbaMidnapore....
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....rnished when the same will be signed by the auditor. 4 The photo copies of two bank accounts are enclosed for your kind perusal." 14. In the light of the aforesaid reply the question that needs to be answered is as to how did the AO get information that the assessee had invested Rs. 4 crores in hotel at Mandarmoni, PurbaMedinipur. Apparently there appears to be no basis for this conclusion arrived at by the AO in the reasons recorded. The ld. DR however sought to defend the action of the AO by submitting that there was a survey in the business premises of the assessee and in such survey there was evidence to show that the assessee had invested a sum of Rs. 4 crores in construction of a hotel at Mandarmoni. We are of the view that this submission of the ld. DR cannot be accepted. The law is well settled that the reasons recorded by the AO have to be tested on the basis of specific wordings of the reasons so recorded. No external material can be shown to justify the conclusion arrived at in the reasons recorded unless these materials are specifically referred to or incorporated in the reasons recorded. In the reasons recorded the AO has not disclosed the basis of th....
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....has been held in the aforesaid decision as follows :- " It is clearly evident from the reasons recorded by the Assessing Officer that there was actually no reason for him to have formed a belief about the escapement of any income of the assessee from the assessment, but the assessment was reopened by him to verify or examine certain particulars furnished by the assessee in the return of income, which according to the Assessing Officer, might have possibly involved introduction of her un accounted money by the assessee. It is thus clear that the assessment was reopened by the Assessing Officer on the basis of suspicion and in order to make fishing and roaming enquiries, which, in my opinion, is not permissible. It is a settled position of law that the assessment can be reopened under section 147/148 on the basis of 'reason to believe' and not 'reason to suspect'. As held by the Coordinate Bench of this Tribunal in the case of Deputy Director of inc me Tax (International Taxation )-21, Mumbai -vs.- Societe International De Telecommunication ( supra) cited by the Id. counsel for the assessee, unless the reasons to believe about the escapement of incom....
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....ng 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 giving and taking bogus entries/transactions during the relevant year, which is actually unexplained income of the ass....
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....y 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'ble jurisdictional Delhi High Court in the case of CIT v. Atul Jain [2000] 299 ITR 383, in which case the inf....
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....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" 15. Per contra, the Ld. Sr. DR Shri JayantaKhanra vehemently defended the action of the lower authorities and contended that this legal issue regarding deficiency if any of 'reasons recorded' before reopening u/s. 147 of the Act, was not taken up before the Ld. CIT(A), therefore, he urged us to remit this legal issue back to Ld. CIT(A) for adjudication. According to ld. DR, the AO had in his possession information from Investigation Wing....
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....ssment. If this condition is not satisfied at the first place, then it cannot be said the AO has validly assumed jurisdiction u/s. 147 of the Act. Therefore, the question for consideration is whether on the basis of the reasons recorded by the AO, he could have validly reopened the assessment. For that it has to be seen as to whether the AO on the basis of whatever material before him, [which he had indicated in his "reasons recorded"] had reasons warrant holding a belief that income chargeable to tax has escaped assessment. It is important to remember that the reasons recorded by AO to reopen has to be evaluated on a stand-alone basis and no addition/extrapolation can be made or assumed, while adjudicating the legal issue of AO's usurpation of jurisdiction u/s. 147 of the Act. Moreover, the Parliament has given power to AO to reopen the assessment, if the condition precedent as discussed above are satisfied, and not otherwise. It should be kept in mind that the concept of assessment is governed by the time-barring rule and the assessee acquires a right as to the finality of proceedings. Queitus of the completed assessment is the Fundamental Rule and exception to this rule is Re....
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....irement has to be met by the AO in the reasons recorded before usurping the jurisdiction u/s. 147 of the Act. It must also be kept in mind that information adverse against the assessee may trigger "reason to suspect" then the AO is duty bound to make reasonable enquiry to collect material which would make him belief that there is in fact an escapement of income. 19. So the condition precedent as discussed above is the jurisdictional fact & law, which is sine qua non for the AO to successfully usurp the jurisdiction u/s. 147 of the Act and it has to be also kept in mind that the jurisdictional fact (mixed question of fact and law) referred to in section 147 of the Act i.e Reason to believe escapement of income should be that of AO and not that of any other authority, or else it will in-derogation of one of the basic feature of the Constitution of India ie, the Rule of Law, wherein the Parliament has empowered this reopening jurisdiction only to that of Assessing Officer and that is why if the reason to believe escapement of income is not that of AO, the assumption of jurisdiction to re-open, has been held to be vitiated and resultantly bad in law, since it will be on the basis of....
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....l statement, no specific inputs are mentioned in the reasons recorded to have any nexus or connection with the assessee's income escaping assessment. No bank accounts, no entry operator has been named which can be linked to assessee qua this AY. So the foundation on which the Assessing Officer builds his belief is totally vague and does not have any inputs or material to remotely even connect the assessee. And if such information can be the base/foundation for re-opening, then any person/company's assessment can be reopened, which is why the Parliament as well as the Hon'ble Constitutional Courts have prescribed safe-guards against arbitrary reopening of assessment. Here in this case, it can be seen that the foundation itself on which the AO forms his belief of assessee's income escaping assessment is bad in law because there is nothing in the information which remotely connects assessee's income escaping assessment. So, when the foundation falls, the super structure falls. Thus, the case of assessee is squarely covered by the legal maxim 'Sublato Fundamento Credit opus' meaning in case a foundation is removed, the super structure falls. Since the 'reason to believe' postulates a f....
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....rding to us, the information given by the Investigation Wing can only be at the best be a basis to ignite/trigger [ though we have our reservation on it ] and be the starting point to enquire; and at that stage the information of Investigation Wing can be termed as a foundation only to form "reason to suspect" and not reason to believe escapement of income which is the jurisdictional fact & law required to enable the AO to successfully assume jurisdiction to reopen as envisaged u/s. 147 of the Act. And the reason to suspect cannot be the basis for usurping jurisdiction to reopen u/s. 147 of the Act, for conducting roving/further examination cannot be resorted by him in order to strengthen the suspicion to an extent which can later transform the suspicion to create the belief in his mind that income chargeable to tax has escaped assessment. Merely on a study by Investigation Wing ,as in this case explaining the general modus operandi carried out by un-scrupulous persons in suspected transactions to convert the unaccounted cash of beneficiaries which were transferred to the bank accounts of the beneficiaries through the dubious bank accounts of fake entities can only raise suspicion ....