TaxTMI 
TaxTMI 
2021 (9) TMI 517
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....otice issued under Section 148 of the Act. 3. Petitioner is a partnership firm engaged in the business of trading in shares and securities. For the Assessment Year 2014-2015, petitioner filed its income tax returns on 27th September 2014. In the income tax returns, petitioner has provided particulars of each loan or deposit taken exceeding the limit specified in Section 269SS and 269T during the previous year. The particulars are contained in the annexures submitted with the returns. 4. Petitioner received a notice dated 28th July 2016 under Sub-Section 1 of Section 142 of the Act calling upon petitioner to produce or cause to be produced the accounts and/or documents specified at Annexure 'A' to the said notice. Annexure 'A' contained 14 items on which information was called for but what is relevant to this petition are the information sought at serial no.6 and serial no.12 in the Annexure 'A' and it reads as under : 6. Other Liabilities :- Details of Unsecured loans/deposits taken, whether squared up or not, in the following format. Also furnish confirmations from loan creditors showing PAN, names and designations of their assessing officers, copy of account and fu....
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.... Rs. 8,75,00,000/- being maximum outstanding loan balance as on 25th February 2014 under Section 68 of the Act and brought that amount to tax. Respondent no.1 also disallowed certain amounts shown as interest and also commission paid on these loans. Respondent no.1 added a total sum of Rs. 9,01,20,042/- to the total income of petitioner. Respondent no.1 did not deal with the notice issued regarding penny stock company and the reply that was received from petitioner with regard thereto. 6. Aggrieved by this order of respondent no.1 adding a sum of Rs. 9,01,20,042/- to its total income, petitioner filed an appeal before the Commissioner of Income Tax (Appeals) [CIT (Appeals)]. The CIT (Appeals), by an order dated 6th November 2017 allowed petitioner's challenge to the assessment order. The CIT (Appeals) relied upon the orders passed in petitioner's case for Assessment Year 2012-2013 and Assessment Year 20132014 where it is observed that petitioner had done everything in its power to prove the satisfactory nature of the loan transactions by providing PAN details of creditors, constitution and address of the creditors, particulars of income tax returns filed by the creditors, confir....
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....g addition u/s. 68 of the Act, of unsecured loans aggregating to Rs. 8,75,00,000/- taken by the appellant from various parties belonging Bhanwarlal Jain Group by treating the same as bogus or non-genuine". Revenue, unhappy with this order of the CIT (Appeals), challenged it before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal by its order pronounced on 8th February 2019, dismissed the appeal of the Revenue. We are not made aware of any appeal filed challenging this order of the Income Tax Appellate Tribunal. 7 Before the order was passed by the Income Tax Appellate Tribunal, respondent no.1 issued a fresh notice dated 11th October 2018 under Section 148 of the Act stating that he had reasons to believe that petitioner's income chargeable to tax for the Assessment Year 2014-2015 has escaped assessment within the meaning of Section 147 of the Act. In the reasons for reopening, respondent no.1 after mentioning about the loan taken by petitioner from the 13 entities mentioned in paragraph 5 above simply says : "In addition to the above loans, there are certain other loans taken by M/s. Jainam Investment from the concerns owned by Shri Rajesh Jain a....
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....re that reassessment is proposed (a) merely on account of change of opinion and (b) there is no fresh tangible material to come to a different conclusion. During the course of arguments, Mr. Agrawal submitted an additional ground that there was total non-application of mind both by respondent no.1 in recording the reasons for initiating proceedings under Section 147 of the Act and by Additional CIT in granting the approval. We shall discuss with that later. 9. Dealing with the reopening for the five allegedly bogus loan transactions, Mr. Agrawal submitted (a) it is settled law that reassessment proposed merely on account of change of opinion is not permissible; (b) review in the garb of reassessment is absolutely prohibited and the Courts have consistently held that reassessment cannot be allowed in such situation of change of opinion; and (c) presence of fresh tangible material is a sine-qua-non for a valid reassessment. According to Mr. Agrawal, the statement of Mr. Bhawarlal Jain is the sole basis for the proposed addition that was recorded on 11th October 2013. The statement of Mr. Hemal Jhaveri recorded in survey proceedings, post the search on Bhanwarlal Jain group was als....
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....mitted that explanation 2(b) to Section 147 is where a return of income has been furnished but no assessment has been made, whereas what would have been applicable was 2(c) which applies to the case where an assessment has been made but income chargeable to tax has been under assessed. Mr. Agrawal also submitted that in column 8, respondent no.1 has said that the assessment is proposed to be made for the first time, whereas the answer should have been negative. These points were not disputed by Mr. Suresh Kumar. Mr. Agrawal further submitted that in the reason for reopening, in the first paragraph itself, it is mentioned that previous assessment was completed on 20th December 2016 and if only the Additional CIT had read that, he would not have signed the form seeking his approval. Therefore, even the approval has been granted without application of mind, which is one more ground to set aside the reassessment notice and the rejection of the objections raised by petitioner. 11. Mr. Suresh Kumar in response submitted that it was not a change of opinion but new material was obtained. Mr. Suresh Kumar read out the reasons for reopening to submit that fresh material was obtained. Mr. ....
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.... AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre- condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an inbuilt test to check abuse of power by the AO. Hence, after 1 st April, 1989, AO has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to s. 147 of the act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in s. 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the AO". In the case at hand, the assessment is sought t....
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....war Lal Jain from which M/s. Jainam Investments has also taken unsecured loan? Please provide the years-wise details of loan taken from such parties. Ans. Apart from the concerns mentioned in Q. No.14 above, there are certain parties which are introduced to me by Shri Rajesh Jain and Shri Manish Jain son of Shri Bhanwarlal Jain from whom unsecured loan has been taken. The details are as follows : Sr.No. F.Y. Name of party Amount of loan taken 2 2010-11 Money Diam 2,00,00,000 Total 2,00,00,000 1 2011-12 Manav Diamonds Pvt. Ltd. 1,00,00,000 2 2011-12 Money Diam 50,00,000 3 2011-12 Royal Diamond 1,00,00,000 Total 2,50,00,000 1 2012-13 Money Diam 80,00,000 2 2012-13 Royal Diamond 3,30,00,000 Total 4,10,00,000 2 2013-14 Manav Diamonds Pvt. Ltd. 49,00,000 4 2013-14 Rama Exports 1,50,00,000 5 2013-14 Samta Exports 1,20,00,000 6 2013-14 Saroj Diamonds 1,00,00,000 7 2013-14 Yash Exports 51,00,000 Total 4,70,00,000 1 2014-15 Saroj....
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....er has provided all details including submission of transactions recorded in the annual information report in the script of Shreenath. The assessment order does not deal with these submissions nor the first assessment order referred to any penny stock. In the reasons for reopening, it is not respondents' case that in the original assessment order it was missed out. The reasons for reopening of assessment, as held in Aroni Commercials Ltd. (Supra), has to be tested/examined only on the basis of the reasons recorded at the time of issuing a notice under Section 148 of the Act seeking to reopen an assessment. These reasons cannot be improved upon and/or supplemented much less substituted by affidavit and/or oral submissions. Moreover, the reasons for reopening an assessment should be that of the Assessing Officer alone who is issuing the notice and he cannot act merely on the dictates of any another person in issuing the notice. Moreover, the tangible material upon the basis of which the Assessing Officer comes to the reason to believe that income chargeable to tax has escaped assessment can come to him from any source, however, reasons for the reopening has to be only of the Assessin....