TaxTMI 
TaxTMI 
2021 (5) TMI 746
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....return of income on 10.10.2015 declaring nil income. The reasons recorded for reopening assessment under section 148(2) of the Act are reproduced as under for the sake of ready reference: "In this case, the assessee has not filed return of income for the year under consideration. The information gathered from ROC, it is noticed that the assessee has received share premium to the tune of Rs. 1,12,41,000/- during the F.Y. 2007-08 relevant to A.Y. 2008-09. Further, the share premium is also not verifiable from the record, as the assessee has not filed any return of income for the above mentioned assessment year and therefore, I have reason to believe that income chargeable to tax as indicated above to the tune of Rs. 1,12,41,000/- has escaped assessment within the meaning of section 147 of the Income Tax Act,1961. Therefore, I am satisfied that this is a fit case to issue notice u/s 148 r.w.s. 147 of the Income-tax Act, 1961." 4. The AO framed the assessment under section 143(3) read with section 147 of the Act vide order dated 09.03.2016 by making an addition of Rs. 4,79,90,000/- being unexplained cash credit under section 68 of the Act. 5. The assessee has ch....
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....reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922 at one time before its amendment in 1948 arc not there in section 147 of the Act of 1961 would not lead to the ....
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....ssment framed by the AO are void ab-initio and bad in law. The Ld. A.R. while taking us through the reasons recorded for reopening the assessment contended that the reasons to believe as recorded by the AO under section 148(2) of the Act have only stated in the last para that assessee has raised share premium to the tune of Rs. 1,12,41,000/- and all these facts and information need verification. Thus in view of these facts , the AO have reason to believe that income chargeable to tax has escaped assessment and therefore the case is required to be reopened under section 147 of the Act to tax the said escaped income. The Ld. A.R. vehemently argued before the Bench that the recourse can not be had to the provisions of section 147 of the Act just for making verification of facts and information which have been received by the AO. The Ld. A.R. contended that the AO is required to form a belief on the basis of said information received that income of the assessee has escaped assessment failing which the AO has no jurisdiction to initiate the proceedings under section 147 read with section 148 of the Act. The Ld. A.R. argued that the AO is required to form a reasonable belief that that....
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.... in favour of the assessee by holding the proceeding under section 147 is bad in law and therefore prayed before the Bench that appeal of the Revenue on this legal issue may kindly be dismissed. 9. We have heard the rival submissions of both the parties and perused the material on record including the impugned order and the reasons recorded under section 148(2) of the Act. We note that in this case the assessee has raised share capital and share premium to the tune of Rs. 4,79,90,000/-. The AO has recorded the reasons as required u/s 148(2) of the Act to reopen the assessment after receiving information from ROC and recorded in the concluding para of the reasons that facts and information as to receipt of share premium to the tune of Rs. 1,12,41,000/- by the assessee are not verifiable as the assessee has not filed the return of income. For the sake of convenience and ready reference the said paras are extracted again as under: "In this case, the assessee has not filed return of income for the year under consideration. The information gathered from ROC, it is noticed that the assessee has received share premium to the tune of Rs. 1,12,41,000/- during the F.Y. 2007-08 re....
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....le Court has held that had the AO on the basis of information made available to him and upon applying his mind to such information formed a belief that income chargeable to tax has escaped assessment, the court would have rightly allowed him to reassess the income but in the present case he recorded that information required deep verification and later reconstitution of mandatory words that he believed that income chargeable to tax has escaped assessment would not cure this fundamental defect. The Hon'ble Supreme Court has dismissed the special leave petition filed by the Revenue in the above case as reported in (2019) 101 taxmann.com 259 (SC) wherein thereby upholding the view taken by the Hon'ble Gujarat High Court in the above case. (b) In the case of Inductotheran (India) P. Ltd. v DCIT (supra) the Hon'ble Gujarat High Court has held that the reassessment notice is not permissible merely for verification of claim made under section 80HHC of the Act. The relevant extract of the decision of the Hon'ble Gujarat High Court is reproduced below: "18. Reverting to the facts of the present case, we notice that in two out of the four reasons recorded by the As....
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....e Act. (d) In the case of Nivi Trading Ltd v Union of India (supra) & others (supra) the Hon'ble Bombay High Court has held that if more details are sought or some verification is proposed that can not be a substitution for reason which led the AO to believe that income chargeable to tax has escaped assessment. The court has held as under: "Held, allowing the petition, that the return of income was filed. There was a processing and verification thereof. In the return of income and on the respondents' own showing on its verification, the long-term capital gains and dividend income in the sum came to be disclosed and equally another sum (Rs. 1,21,33,429) as gift. The Revenue proceeded on the footing that these shares were gifted without consideration. It was this fact which it wanted to verify and particularly whether the value of these shares had been computed on the market value. The tax authorities did not state that any income chargeable to tax had escaped assessment: All that the Revenue desired was verification of certain details and pertaining to the gift. That was not founded on the belief that any income which was chargeable to tax had escaped assessmen....