TaxTMI 
TaxTMI 
2021 (6) TMI 750
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....f the reassessment order dated 21.12.2017 itself and therefore need to be adjudicated at the first instance; and since it is a legal issue it is noted that it can be raised for the first time even before this Tribunal as held by the Hon'ble Supreme Court in National Thermal Power Co. Ltd. vs. CIT in [1998] 229 ITR 383 (SC). 4. Brief facts of the case is that the assessee had filed the return of income showing Rs. 2,84,100/-. The return of income (ROI) was processed u/s 143(1) of the Act. Thereafter in March 2017, the AO issued notice u/s 148 of the Act conveying his desire to reopen the assessment u/s 147 of the Act. Pursuant to the assessee seeking the reasons for reopen, the assessee was given a copy of reason recorded for reopening and thereafter the AO passed the reassessment order u/s 147/143(3) of the Act on 21.12.2017 wherein he treated the long term capital gain (hereinafter referred to as LTCG) earned by the assessee on sale of shares of M/s Essar India Ltd. as bogus and added back the LTCG earned by assessee of Rs. 9,70,583/-. 5. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the order. 6. Aggrieved the assessee is bef....
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....rom DIT(Inv) has rightly reopened the assessment and made addition of bogus LTCG and so he does not want this Tribunal to interfere in the action of AO / Ld. CIT(A). 9. I have heard both the parties and perused the records. The assessee has raised the legal issue of reopening the assessment u/s 147 of the Act. One has to bear in mind that the concept of assessment is governed by the time barring rule and the assessee acquired a right as to the finality of proceedings. Quietus of the completed assessments can be disturbed only when there is information or evidence regarding undisclosed income or AO had tangible material/ information in his possession showing escapement of income. So if the AO has reason to believe that in an assessment year, if there is an escapement of income, he can reopen the assessment provided the legal requirements as prescribed in the Statute is satisfied. The legal requirement as prescribed by section 147 of the Act is that AO should have "reason to believe, escapement of income". In this regard it is settled principle of law that that reason to believe postulates a foundation based for information and a belief based on reason. After a foundation based on....
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....O received an information for investigation regarding suspicious transaction of LTCG in shares amounting to Rs. 10,67,310/- by the assessee on different dates during the financial year 2012-13 in sham script namely M/s Essar India. According to AO, the DIT (Investigation) has communicated that the assessee has made bogus transaction with M/s Essar India and shown bogus LTCG by resorting to accommodation entry. Thereafter, the AO concludes that the assessee has carried out bogus transaction and thereby the amount of Rs. 5,55,624/- has escaped assessment for which he has reopened the assessment u/s 147 of the Act. From a mere perusal of the aforesaid reasons recorded it is clear that the AO has borrowed the satisfaction of the Director of Income Tax that the assessee has transacted in P a g e bogus shares of M/s Essar India and thereby there has been an escapement of income of Rs. 5,55,624/- which prompted him to reopen the assessment. However it has been pointed out to me that when the AO framed the assessment order he has stated that the amount of LTCG in respect of shares of M/s Essar India was to the tune of Rs. 9,70,583/- and not Rs. 5,55,624/- as he has recorded in the reasons ....
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....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 amount of such transactions particularly that of Rs. 5,00,000 (as mentioned above) has escaped the assessment within the meaning of the proviso to Section 147 and clause (b) to the Explanation 2 of this section. Submitted to the Additional CIT, Range -12, New Delhi for approval to issue notice under Section 148 for the assessment year 1997-98, if approved." 30.2. The AO was not merely reproducing the information received from the investigation but took the effort of referring to the deposition made d....
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.... 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 under Section 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." 35. In the decision of this Court dated 16th March 2016 in W.P. (C) No. 9659 of 2015 (Rajiv Agarwal v. CIT) it was emphasized that "even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment." 36. In the present case, as already noticed, the reasons to believe contain not....
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..... in the reasons has even mentioned that he has gone through the information so received which is lacking in the instant case. The A.O. being a quasi-judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. The A.O. however, merely repeated the report of Investigation Wing in the reasons and formed his belief that income chargeable to tax has escaped assessment without arriving at his satisfaction. The reason to believe contain no reason but the conclusion of A.O. without any basis. Thus, there is no independent application of mind by the A.O. to the report of Investigation Wing which form the basis for reasons to believe that income has escaped assessment. The conclusion of the A.O. in the reason are at best reproduction of conclusion of the Investigation report. It is borrowed satisfaction not permissible in law. The reasons fail to demonstrate the link between the alleged tangible material and the formation of the reason to believe that income has escaped assessment. The issue is therefore, identical in the present appeal as has been considered and decided by the Hon'ble Delhi High Court in the case of Meenakshi Overs....