TaxTMI 
TaxTMI 
2021 (5) TMI 694
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....d no scrutiny assessment was made under Section 143 (3) of the Act. 3. The Assessing Officer, reopened the assessment under Section 147 of the Act by issuing impugned notice dated 28.03.2019 under Section 148 of the Act. The writ applicant filed his return of income in response to the notice and requested the respondent to supply the copy of the reasons for reopening and same was supplied vide communication dated 25.04.2019. The writ applicant vide letter dated 25.06.2019 raised objections and the same came to be disposed of by the revenue vide order dated 14.11.2019. 4. The Assessing Officer before issuing the notice has recorded the following reasons for reopening of the assessment. "1. Brief details of the assessee: The assessee is an individual and has filed her return of income ITR-4 for the year under consideration on 31.07.2012 declaring total income at Rs. 9,29,230/-. 2.Brief details of information collected/received by the AO: The information in respect of the penny stock transaction made in FY 2011-12 was made by the asessee as per information received from the ITO/CIB)1, Mumbai on 02.04.2013 at DIT (I & CI) Mumbai uploaded in the ITS data. ....
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.... lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 will be obtained separately from Principal Commissioner of Income Tax, Jamnagar as per the provisions of section 151 of the Act." 5. The writ applicant raised the objections against the issuance of impugned notice and initiation of the reassessment proceedings, mainly on the following grounds : i. Lack/absence of valid sanction under Section 151 of the Act. ii. The reasons for reopening factually incorrect; iii. No 'reason to believe' that the income chargeable to tax has escaped assessment; iv. No live nexus/link between the information received and material gathered from the different sources. v. Reopening is not permissible for proving and/or fishing inquiry or investigation without their being a specific findings as to escape of income; vi. Reopening is based on borrowed satisfaction. 6. Being aggrieved by the order of disposal of the objections against the notice for reopening of the assessment, the writ applicant has come up before this Court by filing the present writ application. 7. We have heard learned....
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....ns entered into by the writ applicant in the scrip in question is a penny stock transaction, which cannot be a legal ground to reopen the assessment for the year under consideration. 9. In view of the aforesaid contentions, the learned counsel submitted that reopening of the assessment is, therefore, without jurisdiction and hence, the impugned notice deserves to be quashed and set aside. 10. In support of the aforesaid submissions, the learned Senior Counsel Mr. Tushar Hemani has relied upon the following decisions: i. Principal Commissioner of Income Tax Vs. Smt. Krishna Devi (Delhi High Court, ITA 125 of 2020 decided on 15.01.2021) ii. Prashant S. Joshi Vs. Income Tax Officer (2010) 189, taxmann 1(Bom) iii. Gujarat Lease Finance Ltd. Vs. Deputy Commissioner of Income Tax (2013) 36 taxmann.com.359 (Guj) iv. Krishna Metal Industries Vs. HM Algotar (1997) 225 ITR 853, Gujarat v. N.B. Bhatt Inspecting Asst. Commissioner of Income Tax Vs. I.B.M. World Trade Corporation (1995) 216 ITR 811, Bom. vi. Hindustan Lever Limited Vs. R.B. Wadkar (2004) 137 taxman.479 (Bom) Krupesh Ghanshyambhai Thakkar Vs. Dy. Commissioner of Income ....
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....ars from the end of the relevant assessment year, it is not necessary for the assessing officer to show that, there was any failure to disclose fully or truly all material facts necessary for the assessment. When return is processed under Section 143 (1) of the Act and intimation sent to the assessee, it is not an "assessment". Therefore, when reopening is sought of an assessment, the initial return was processed under Section 143(1) of the Act, the assessing officer can form ''reason to believe'' that income has escaped assessment by examining the return and/or the documents accompanying the return. It is not necessary in such case for the assessing officer to come across some fresh tangible material to form ''reason to believe'' that the income has escaped assessment. 16.A plain reading of reasons recorded reveals that, the case of the assessee is reopened under Section 147 of the Act, since the information dated 02.04..2013 received from ITO (CIB-1), Mumbai at DIT (I & CI, Mumbai) that as per the penny stock transaction data, the assessee had sold 2900 shares of Karma Ispat Ltd., for the consideration of Rs. 7,99,530/-. After receiving the information, the assessing office....
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....On the other hand, the learned counsel for the revenue would submit that, the attempt on the part of the revenue is to make further clarification of the information received by the assessing officer and it is permissible in law. We have examined the reasons recorded as indicated above for reopening of the assessment. It appears that, the assessing officer has made reference of the information received from the concerned investigation wing with regard to bogus accommodation entries of long term capital gain provided by the certain entities. Though, full details of the information and enquiry conducted by Kolkata wing having not been reflected in the reasons recoded, but a specific reference made in the reasons recorded by the assessing officer that, the transactions made by the assessee is penny stock. In this context, we may place reliance on the decision of this Court in the case of Aayojan Developers Vs. ITO, [335 ITR 234], wherein, this Court after referring the decision of the Calcutta High Court in the case of East Cost Commercial Com. Ltd., [128 ITR 324], held that, the income tax officer in his affidavit filed in the Court could explain or elaborate or clarify the reasons re....
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....as escaped assessment. We may place reliance on the case of Central Prominces Mangnese Ore Company ltd. (191 ITR 662 SC), wherein the Apex Court interpreted the word "reason to believe". It was held that, the word "reason" in the phrase "reason to believe" in Section 147, would means cause or justification. If the assessing officer has cause or jurisdiction to know or suppose that income has escaped assessment he can be said to have reason to believe that income has escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. 22. In Praful Chunilal Patel Vs. M.J.Makwana Vs. CIT, [236 ITR 832], this court while interpreting the term 'reason to believe', held that, the word "reason to believe" cannot mean that the assessing officer should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination he makes and, if he likes, from any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he had reason to believe that s....
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.... the reasons recorded for reopening and further clarification of the information made by the revenue, we are of the view that, the assessing officer himself was satisfied with regard to the information and other material on record, he formed an opinion that, the income has escaped assessment. Therefore, when the information was specific with regard to transactions of penny stock entered into by the assessee with the Karma Ispat Ltd., and the assessing officer had applied his independent mind to the information and upon due satisfaction, led to form an opinion that, the amount of claim of LTCG claimed by the assessee is chargeable to tax has escaped assessment, which facts suggests that, there is live link between the material which suggested escapement of income and information of belief. Under the circumstances, we are satisfied that, there was enough material before the assessing officer to initiate proceedings under Section 147 of the Act. 24. In the discussions made hereinabove, we do not agree with the contention that, merely on the information, the assessing officer has recorded the reasons and on the basis of borrowed satisfaction, he formed an opinion with respect to the....