TaxTMI 
TaxTMI 
2021 (11) TMI 406
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.... opportunity during assessment proceedings. The question of Jurisdiction is not an internal matter and mere participating in assessment proceedings does not give jurisdiction to the Officer. The CIT(A) has erred in simply going by the conclusion of Assessing officer without considering specific ground raised by the Appellant. The Assessing officer passing the order lacking jurisdiction makes the impugned order bad in law and such order is liable to be quashed. 3. Without prejudice to above, the Assessing Officer has erred in reopening the assessment for the following: a) Conditions precedent for reopening being absent; b) The legal compliances required for reopening having not been done; c) The noting made calling it to be reasons being not qualified to be -reason to believe d) Not passing separate speaking order disposing of the objections raised. All this makes the reopening bad in law and consequentially all subsequent proceedings including the impugned order become bad in law. The CIT(A) instead of quashing the order in toto has erred in confirming the same. The Order passed being bad in law and is liable to be quashed. 4.1 In any case and without prejudice, the A....
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....147 27.03.2015 ACIT/C-1(2)(1) Unexplained investment deposit in HSBC Bank Account 2,89,69,405/- 2006-2007 143(3) RWS 147 27.03.2015 ACIT/C-1(2)(1) Unexplained investment deposit in HSBC Bank Account 2,89,69,405/- 2007-2008 143(3) RWS 147 12.11.2014 ACIT/C-2(1) Unexplained investment deposit in HSBC Bank Account 2,89,69,405/- 4. The above chart would show that for all the years, identical addition has been made by the AO by stating as follows (for AY: 2002-03):- "I accordingly consider the aggregate amount of cash credit of Rs. 2.89 Crores (Rupees Dollar Exchange rate in the Financial Year 2001-2002 has been considered at 40.26 i.e., 719558 X 40.26) as unexplained investment within the meaning of Section 69 of I.T. Act, 1961 and adding it to the total income of the assessee". 5. It can be seen that identical amount in dollar is considered as unexplained investment for all the years and for all the year identical conversion rate of Rs. 40.26 is adopted. the conversion rate of dollar at the end of each of previous year relevant to year under appeal was as under:- As at Asst. Year Dollar rate in Rs. 31.03.2002 2002-2003 48.73 31.03.2003 2003-2004 47.47 31.....
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....The assessee was originally assessed to Income tax by Income tax Officer, Ward-10(1), Bengaluru. Later, by a notification, the case of the assessee was specially assigned to Deputy Commissioner of Income tax, Circle-2(1), Bengaluru. As per the Notification, the assessee's case was specifically assigned u/s. 127 of the Act to DCIT, Circle-2(1), Bengaluru and therefore the assessee came out of the territorial jurisdiction and the case was assigned to a specifically designated officer. 9. After the survey, the notices u/s. 148 of the Act were issued by DCIT, Circle-2(1), Bengaluru. However, the impugned assessment orders for Assessment Years 2002-2003 to 2006-2007 were passed by Assistant Commissioner of Income tax, Circle-1(2)(1), Bengaluru. The assessee objected to the jurisdiction of the Assessing Officer, Circle 1(2)(1), Bengaluru but the objection has not been accepted to, on the ground that by an order dated 15.11.2014, passed consequent to implementation of cadre restructuring, the Assessing Officer, Circle-1(2)(1) assumed jurisdiction. 10. It is submitted that since the assessee's case had moved out of territorial jurisdiction and was assigned to a specific officer, the orde....
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....rmation received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864 which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A. Y. 2005-06" Assessment Year 2006-2007: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC,-Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2006-07" Assessment Year 2007-2008: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madho....
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....ns were conducted on behalf of the assessee in individual capacity of the sole Director of TIC. The assessee's plea that TIC had an independent existence apart from the assessee was not found tenable on the peculiar facts and circumstances on record. The assessee had not disclosed the relevant bank receipts in his return of income. The assessee made deposits in the said bank account at least to the extent of US $ 719568 upto end of March, 2007. On query by the AO to furnish bank transaction statement of the respective account, the assessee contended that the account in HSBC was in the name of firm, TIC having operating powers with all the 4 members of his family, though it was accepted he was the sole director of TIC. According to the CIT(A), the additional income offered for AY 2007-08 in his individual capacity corroborated the above fact. The assessee stated that the bank account was closed in 2006, but in the statement recorded before the Investigation Wing of the department, the assessee stated that the account was closed in 2008. He observed that the assessee was not in a position to either refute or substantially explain the sources or the nature of investment/deposit into b....
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.... However, the Department contends that after the restructuring, the jurisdiction of the assessee changed to Principal Commissioner of Income tax-4, Bengaluru and therefore, he could pass a fresh order U/s. 127 of the I.T. Act. 18. It is submitted that the assessee being out of the territorial jurisdictional area was not hit or covered by territorial restructuring done on 22.10.2014 because his jurisdiction was with designated officer U/s. 127 of the Act. Thus, the assessee continued to be under the jurisdiction of PCIT- 2, Bengaluru and it is wrong on the part of the department to state that the jurisdiction of the assessee reverted to PCIT-4, Bengaluru. Being so, the notification U/s. 127 of the Act, dated 15.11.2014 itself was erroneous and without jurisdiction and therefore the ACIT/DCIT, Circle-1(2)(1) never assumed proper jurisdiction over the case of the assessee. 19. Further, for the first time, the assessee received a communication from ACIT, Circle-1(2)(1), Bangalore as per his letter dated 18.12.2014 and the assessee immediately vide letter dated 19.01.2015 objected to the very assumption of jurisdiction by ACIT, Circle-1(2)(1), Bengaluru as under:- "8. It may be ment....
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....assessed under Ward 10(1), Bangalore prior to 2.5.2013. Consequent to the order u/s. 127 of the Act dated 2.5.2013, the jurisdiction of the assessee changed to Circle 2(1), Bangalore. She drew our attention to the copy of the order passed u/s. 127 of the Act. Subsequently, based on CBDT Notification No.S.O. 2752(E) dated 22.10.2014 published in the Gazette of India : Extraordinary [PART II - SEC. 3(ii)], the jurisdictional structure in the CBDT was redrawn and jurisdiction of the AO was changed to be assessed under PCIT-4, Bangalore. She drew our attention to the said Gazette Notification dated 22.10.2014 which is kept on record. According to her, this Notification came into effect from 15.11.2014. Further, she drew our attention to the order u/s. 127 of the Act dated 15.11.2014 of the CIT-4, Bangalore, changing the jurisdiction of the assessee from Circle 4(2)(i) to Circle 1(2)(1) in view of the administrative requirement. 23. We have heard both the parties and perused the material on record. For objectively adjudicating the issue it is necessary to look at the facts of the case which is brought on record so as to decide this legal issue as follows:- AY 2006-07 02.05.2013 The....
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....ties (1) Income tax authorities shall exercise all or any of the powers and perform all or any of the functions Conferred on, or, as the case maybe, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities. (2) The directions of the Board under sub-section (1) may authorise any other income tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income tax authorities who are subordinate to it. (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income tax authority authorised by it may have regard to any one or more of the following criteria, namely:- (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases. (4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as maybe specified therein,- (a) authorise any Dir....
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....e his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area. (2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief Commissioner or the Commissioner; or where the question is one relating to areas within the jurisdiction of different Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned or, if they are not in agreement, by the Board or by such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, specify. (3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer- (a) where he has made a return under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or after the completion of the assessme....
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....s are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceeding....
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....24 of the Act, over any area within the limits of such area, he shall have jurisdiction over any person (assessee) carrying on a business or profession and if the place at which he (assessee) carries on his business or profession is situated within the area earmarked for him (Assessing Officer); or if that person's (assessee's) business or profession is carried on in more places than one, then if the principal place of his business or profession is situated within the jurisdictional territorial area, the Assessing Officer gets jurisdiction. Other than the assessees who are not in Business or Profession, in their cases, the Assessing Officer will be vested with the jurisdiction if the person (assessee) is residing within the territorial area earmarked by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120 of the Act speaks about. However, when there is a question to be determined as to whether an Assessing Officer has jurisdiction to assess any person then it would be decided by the authorities as stipulated in sub-section (2) of section 124 of the Act by Directors General or Chief Commissioners or Commissioners, by the Directors....
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.... Assessing Officer subordinate to him. In other words, under Section 127(1) the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, as stipulated therein, can transfer the case records of an assessee from one Assessing Officer to another functioning under his own charge. On the contrary, Section 127(2) empowers the foregoing authorities to transfer of cases from the Assessing Officers from his jurisdiction to the Assessing Officers who are not functioning under his jurisdiction and therefore who are not subordinate to such authority. In the cases covered u/s. 127(2) therefore, if the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, of the Assessing Officer to whom the case of an assessee is proposed to be transferred, agrees for the transfer, then the transfer can made u/s. 127(2)(a) of the Act. In case however there is any disagreement between such stipulated authorities, the matter is required to be referred to the Board which in turn decides the issue of transfer or the Board can then authorize an Income Tax authority by a notific....
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....edings under the Act in respect of the assessee which maybe commenced after the date of such transfer order have to be undertaken by the transferred new Assessing Officer. 29. In the light of the above discussion, we now examine the facts of the present case for AY 2006-07 and ascertain whether ACIT, Circle 1(2)(1) assumed jurisdiction over the assessee properly so as to frame the assessment u/s. 143(3) of the Act. Originally the assessee was assessed under ITO, Ward 10(1), Bangalore prior to 2.5.2013. Consequent to order u/s. 127 dated 2.5.2013, the jurisdiction of the assessee was changed to DCIT, Circle 2(1) / ACIT 4(2)(1), Bangalore. Subsequently, based on CBDT Notification dated 22.10.2014, the jurisdiction of the assessee was changed to be assessed u/s. PCIT-4, Bangalore. Afterwards, there was an order u/s. 127 of the Act dated 15.11.2014 wherein the CIT-4, Bangalore changed the jurisdiction from ACIT, Circle 4(2)(1) to Circle 1(2)(1). There are two notices u/s. 148 of the Act brought on record by the ld. AR. One is notice u/s. 148 dated 10.5.2013 which is as follows:- 30. The next notice u/s. 148 dated 26.3.2014 is as follows:- 31. In the assessment order it was mentioned....
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....n 120 and this section, the word "case", in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which maybe pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which maybe commenced after the date of such order or direction in respect of any year." 32. From a plain reading of sub-section (5) of section 124 of the Act, it is noted that though it is an overriding provision yet it has inherent limitation as prescribed in law. If one carefully reads sub-section (5) of section 124 of the Act, then it will be noted that it starts with the words "Notwithstanding anything contained in this section or in any direction or order issued under section 120 of the Act". The express language employed by the Legislature clearly shows that provisions of sub-section (5) of section 124 overrides only the other provisions of Section 124 of the Act and any orders/directions issued u/s. 120 of the Act, which necessarily means that non-obstante clause is limited to operation of sub-sections (1) to (4) of se....
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.... 33. For AY 2007-08, the ground relating to assumption of jurisdiction by the AO i.e., ACIT, Circle 1(2)(1), Bangalore is not pressed and accordingly this ground is dismissed as not pressed. 34. Vide next common ground No.3, the assessee objects to the very re-opening of the assessments mainly on the ground that reasons recorded were not actually "Reason to Believe" and that no speaking order was passed by the Assessing Officer on the objections filed on the reasons recorded. 35. The assessee received notice U/s. 148 of the Act for AYs 2002-03 to 2007-08 and when asked for the reasons for reopening for these years, the assessee received the copies of reasons for the years which are identically worded except for the change of assessment year in the last line of the reasons. The reasons for Assessment Year 2006-07 read as under: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 51" Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/-....
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....eopening of assessment is without any reasons and therefore bad in law and consequently, the impugned order is also bad in law and liable to be quashed. 40. In any case, on receipt of copy of the reasons, the assessee had filed detailed objections to which, the AO has passed an order dated 03.02.2015. The perusal of the order shows that the AO has not considered various points raised by the assessee in the objections filed and further it was not a speaking order. For this reason also, the impugned order is bad in law and liable to be quashed. 41. The ld. DR submitted that the assessee has opened an account with HSBC, Geneva on 18.10.2001. In the reason, the opening date of bank account was mentioned and not the closing date. There was information received through diplomatic channel in this case from Govt. of France. The assessee has paid taxes to the extent of Rs. 5 lakhs for the AY 2007-08 on account of bank account held at HSBC, Geneva. The assessee has not produced the comprehensive year wise analysis of the transaction in the impugned bank account. He deliberately withheld such information, as such it is not appropriate to question the validity of the reassessment proceedings....
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....07-2008: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of' USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the come chargeable to tax has been escaped assessment for the A. Y. 007-08" 45. On a perusal of the above reasons recorded do not state what is the amount of income chargeable to tax that as escaped assessment in the hands of assessee in the assessment years under consideration. The reasons recorded in all the years is stereotyped an the amount mentioned is same as in other years and only change in the assessment year. According to the AO, based on the information received by the department, the assessee has opened an account with HSBC Bank, Geneva. The assessee opened an account with HSBC Bank, Geneva on 18.10.2001 by depositing an amount of US $ 669864. The same has not been admitted as income in the return of income filed before the tax au....
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.... Narayanappa v. CIT [1967] 63 ITR 219 held as under:- "Again the expression "reason to believe" in section 34 of the Income-tax Act does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith: it cannot be merely a pretence. To put it different, it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under section 34 of the Act is open to challenge in a court of law (see Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District 1, Calcutta)." 50. In Ganga Saran & Sons (P.) Ltd. v. Income-tax Officer [1981] 130 ITR 1 (SC), the Hon'ble Supreme Court observed as under:- "The important words in section 147(a) are "has reason to belief" and these words are strong than the words "is satisfied". The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words, it must be based on reasons, which ....
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....powers of the Assessing Officer to reopen an assessment, though wide, are not plenary. (b) The words of the statute are "reason to believe" and not "reason to suspect". (c) The reopening of an assessment after the lapse of many years is a serious matter. Since the finality of a judicial or quasi-judicial proceedings are sought to be disturbed, it is essential that before taking action to reopen the assessment, the requirements of the law should be satisfied. (d) The reasons to believe must have a material bearing on the question on escapement of income. It does not mean a purely subjective satisfaction of the assessing authority; the reason be held in good faith and cannot merely be a pretence. 53. The reasons to believe 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 AO and the formation is belief regarding escapement of income. The fact that the words "definite information" which were there in section 34 of the Act of 1922 before 1948, are not there in section 147 of the 1961 Act would not lead to the conclu....
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.... the extraneous and irrelevant material has influenced the authority in arriving at the conclusion of fact." 55. A Constitution Bench of the Hon'ble Supreme Court in M. Ct. Muthiah v. CIT AIR 1956 SC 269, considered the expressions "reason to believe" and distinguished the same from "reason to suspect" comparing the provisions with the un-amended provisions of section 34(1) of the Income-tax Act, 1922 and held that after amendment, the expressions "reason to believe" had to be based as a consequence of "definite information" which came into possession of the Revenue. However, there must be some material in possession of the Revenue on the basis of which an objective opinion can be formed that the person concerned has undisclosed amount for the purpose of the Act. 56. There is no nexus between the material coming to the notice of the AO and the formation of his belief that there has been escapement of income. The amount in the bank account with HSBC Geneva is not relating to the assessment years under consideration. Hence, the very basis for assuming jurisdiction is not factually correct, no reasonable belief can be formed based on such incorrect facts. 57. It is observed that th....
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.... in our opinion lead to the conclusion that the requirements of Section 147 can be dispensed with when the finality of an intimation under Section 143(1) is sought to be disturbed. We are at pains to point out this position, which seems fairly obvious to us, because of the argument frequently advanced before us on behalf of the Revenue in other cases as well, under the misconception, if we may say so with respect, that an intimation under Section 143(1) can be disturbed on any ground which appeals to the Assessing Officer. The consequence of countenancing such an argument could be grave. The expression "reason to believe" has come to attain a certain signification and content, nourished over a long period of years by judicial refinement painstakingly embarked upon by great judges in the past. The expression has been judicially interpreted in a particular manner. When Section 147 was recast with effect from 1st April, 1989, the legislature sought to replace the expression "reason to believe" with the expression "for reasons to be recorded by him in writing". But there were representations against the proposal and bowing to them the original expression was restored. This aspect of th....
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....ults or mischief is to be eschewed. ..................In other words, the expression "reason to believe" cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under section 143(3) and another applicable where an intimation was earlier issued under section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under section 148(2) on the ground that they do not meet the standards set in the various judicial pronouncements. 59. In the present case the reasons disclose that the AO reached the belief that there was escapement of income after he accepted the return for the assessment years and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the AO, both strongly d....
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....essment had been carried out u/s 143(3) or 144 of the Act. Only intimation u/s 143(1) had been issued. In the present case for AY 2006-07, there was assessment u/s. 143(3) of the Act and for AY 2007-08 only intimation was issued. 62. The Hon'ble Tribunal in Grey Worldwide (India) Private Limited Vs. Asst Commissioner Of Income Tax 2011-TIOL-291-ITAT-MUM held as under:- "13. The expression 'reason to believe' still continues to be part of main section 147. There is no distinction at all between the assessment deemed to be completed under section 143(1) and the assessment completed under section 143(3) of the Income Tax Act. The Hon'ble Bombay High Court in the case of Prashant S. Joshi vs. ITO 324 ITR 154(Bom) = (2010-TIOL-146-HC-MUMIT) after considering the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500 (SC) = (2007-TIOL-95-SC-IT) has held that even when an intimation is issued u/s. 143(1) of the Act, the validity of initiation of reassessment proceedings has to satisfy the test of existence of "reason to believe" that income chargeable to tax has escaped assessment. The law regarding existence of reason to bel....
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....nd that there is no reason to believe that income chargeable to tax has escaped assessment. The reason to believe must have a live link with the formation of the belief that income chargeable to tax had escaped assessment when the return was processed and accepted under section 143(1). To hold that in every case where a return was processed and accepted under section 143(1) the Assessing Officer will be free to reopen the same under section 148 even in the absence of a live link between the reasons recorded and the formation of belief would be to make the conditions of section 147 and section 148 otiose as regards notices reopening issued in cases where the return was originally processed under section 143(1). There is no exclusion in section 147 to the effect that where the return was earlier processed under section 143(1) it is not necessary for the Assessing Officer to hold or entertain a belief that income chargeable to tax had escaped assessment for the reasons recorded by him. Therefore, the condition that the Assessing Officer must have reason to believe and the further condition that those reasons must have a live link with the formation of the belief is applicable equally ....
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.... the proceedings even where intimation under section 143(1) had been issued. Thus fulfillment of the conditions of section 147, including the one that there should be "reason to believe", is essential for the validity of the notice under section 148. It is while expounding the words "reason to believe" that the Supreme Court in the later judgment in CIT vs. Kelvinator of India Ltd. (supra) held that there should be "tangible material" to come to the conclusion that income had escaped assessment. Thus, in my humble understanding of both the judgments, while resorting to section 147 even in a case where only an intimation had been issued under section 143(1)(a) it is essential that the Assessing Officer should have before him tangible material justifying his reason to believe that income had escaped assessment." 65. Reliance is also placed on following decisions wherein it has been held that the proceedings initiated under section 147 are liable to be quashed on the ground that there was no tangible material before the Assessing Officer, even though no assessment u/s 143(3) or 144 had been made before and the return was merely processed u/s 143(1) of the Act:- * Indivest Pte. Ltd.....
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.... of jurisdiction." 68. The Tribunal in Assistant Commissioner of Income-tax v. Radheshyam Mohanlal Maheshwari [2011] 12 ITR(TRIB.) 429 (AHD.) held as under:- "reopening of the assessment under section 147 of the Income-tax Act as per its plain language provided in the Act provides prerogative to the Assessing Officer to reopen the assessment if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Even if the learned Commissioner of Income-tax (Appeals) has issued a direction in the appellate order dated December 11, 2003 to reopen the assessments, it is the prerogative of the Assessing Officer to reopen the assessment by satisfying the requirements of the law as mentioned above and shall have to record in writing, the reasons to believe that any income chargeable to tax has escaped assessment for any assessment year. However, the reasons recorded by the Assessing Officer in all the above cases do not find mention such facts and the satisfaction of the Assessing Officer for escapement of income. In the absence of the fulfilment of the requirements of section 147 of the Income-tax Act for initiation of the re....
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....elief that income of assessee had escaped assessment had been recorded, notice issued under section 148 was to be quashed and assessment made in pursuance thereof was to be annulled. 72. The Hon'ble Supreme Court in ACIT v. Dhariya Construction Co. [2010] 328 ITR 515 (SC) held that the opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. It was held that the Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon and without the same, the Department was not entitled to reopen the assessment. 73. The Hon'ble Rajasthan High Court in CIT v. Shree Rajasthan Syntex Ltd. [2009] 313 ITR 231 (Raj) held that it has been very intelligibly projected that the factum of the Assessing Officer at Mumbai having allowed depreciation allowance to the lessee did constitute a fact which came to the notice of the Assessing Officer here and that furnished reason to believe that the income of the assessee chargeable to tax had escaped assessment but then if properly appreciated all that it comes to is that a set of lease deeds had been appreciated by the Assessing Offi....
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....T, Bangalore 2012-TIOL-114-ITAT-BANG held that issue of notice u/s. 148 of the Act only after the audit party raised certain objections is invalid. 77. In the present case, the reasons recorded do not show as to how the AO has come to the conclusion that income chargeable to tax has exceeded Rs. 1 lac merely based on certain bank entries. The AO considered the bank entries itself to represent the income chargeable to tax that has escaped assessment. It is submitted that the reasons recorded must disclose the process of reasoning by which the AO holds that he has reason to believe that income chargeable to tax has escaped assessment. The AO in the present case has recorded his conclusion itself as reason. 78. In the case of VXL India Ltd. v. Asst. CIT [1995] 215 ITR 295 the Gujarat High Court has held as under:- " In a case where the Assessing Officer holds the opinion that because of excessive loss or depreciation allowance the income has escaped assessment, the reasons recorded by the Assessing Officer must disclose by what process of reasoning he holds such belief that excessive loss or depreciation allowance has been computed in the original assessment. Merely saying that ex....
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....s that he was satisfied that the above income escaped assessment. He simply relied on the information received in his possession to come to the conclusion that this HSBC bank account belonged to the assessee. From the provisions of section 147, it is clear that the AO must have reason to believe that any income chargeable to tax has escaped assessment. However, it cannot be said that if there is any investment or bank account it is sufficient to believe that income to that extent escaped assessment because there may be so many sources for making such investment and it is not necessary that only on the basis of investment it can be presumed that income to that extent escaped assessment. There should be concrete finding before coming to the conclusion that any income escaped assessment and merely on the basis of information provided by any other wing of the department, the AO cannot believe that there was income which has escaped assessment. 82. In the present case, the AO simply relied upon the information received by him and stated that the investment with HSBC Bank which has not been disclosed in the return of income filed by the assessee is the income which escaped assessment i....
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....nged to 'G' and the assessment order was passed, then it could not be said that the Assessing Officer was having reason to believe that income had escaped in the hands of the assessee. Reassessment cannot be made on mere suspicion. The Assessing Officer has to form a belief that income has escaped assessment in the hands of the assessee. Once it had been held that such investment belonged to 'G', then there was no further material to come to the conclusion that such escaped income belonged to the assessee. [Para 2.5]. In the instant case, the revenue held that such undisclosed income belonged to 'G' and the assessment was made in the hands of 'G' on substantive basis. The case of the assessee was not reopened during the pendency of proceedings in the case of 'G'. Had the revenue made protective assessment in the case of 'G', then it could have taken action against the assessee. Thus, the basic requirement for reopening the assessment that the Assessing Officer should have reason to believe that income has escaped assessment, was not satisfied in this case. Hence, the Commissioner (Appeals) was justified in holding that the assessmen....
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....he crux and basis of addition made by AO is that there was an account in HSBC Bank, Geneva in the name of TIC and the assessee was one of the beneficiary / nominee of the account. It is held that there was a deposit of US dollars 719558 in this bank account and this amount converted into Indian at Rs. 40.26 per dollar in each assessment year was treated as unexplained investment, though it was USD 669864 recorded in the reasons for reopening the assessments in these assessment years. The AO stated that assessee did not submit the bank account statements nor did she sign a consent waiver form to enable the department to get the bank account statement. The entire transaction of deposit in the bank account remained under cloud of secrecy and therefore it is concluded that the deposit in HSBC Account is unaccounted income and thus added to the income of the assessee. 89. The assessee submitted that the figure of deposit 719558 USD is of May 2006 relevant to AY 2007-08. The figures as on 31.03.2006 is USD 691876.83. The CIT(A) has confirmed the fact of addition but has stated that for the year under consideration the addition of USD 719558 is not correct but the addition should be rest....
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....Hemant Mansukhlal Pandya [2018]100 taxmann.com 280 (Mum Trib) ii) DCIT v. Dipendu Bapalal Shah [2018] 95 taxmann.com 280 (Mum Trib) iii) Shyam Sunder Jindal v. ACIT, CC 30, [2017] 81 taxmann.com 123 (Del Trib) 91. On merits, the ld. DR submitted that in this case as per the information was received from diplomatic channel, Govt. of France, about the impugned bank account at HSBC, Geneva which was not disclosed to the department in the return of income filed by the assessee. The assessee failed to explain the genuineness, source or nature of investment with regard to deposits to this bank account. The ld. DR relied on the decision of Renu T. Tharani v. DCIT (IT), ITA No.2333/Mum/2018 for AY 2006-07 dtd. 16.7.2020 and Manish Periwal in ITA No.5157-5162/Del/2014 for AY 2007-08 to 2012-13 dtd. 8.6.2017. Hence it was considered as unexplained income of the assessee and taxed accordingly. 92. We have heard both the parties and perused the material on record. The AO made addition u/s.69 of the Act in these assessment year @ USD 719558 equivalent to Rs. 289,69,405 for AY 2006-07. However, CIT(Appeals) observed that it is only USD 691876.83 in the assessment year under consideration a....
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....at the account related to TIC which is a corporate entity incorporated at British Virgin Island and the debits related to inter-group transactions. Therefore, the deposit in the name of TIC cannot be brought to tax in the hands of assessee. On this count also, the addition cannot be sustained. Reliance is placed on the decision of Salomon v. Salomon & Co. [1897] AC 22. 95. In our opinion, the corporate veil cannot be lifted by the AO so as to make the addition. There was no compelling reason as to why the corporate veil has to be lifted. It cannot be lifted for an asking. In this connection, we place reliance on the judgment of Allahabad High Court in the case of CIT v. Sahu Investments Mutual Benefit Co. Ltd. V. CIT, 396 ITR 595 wherein the High Court observed that Hon'ble Allahabad High Court observed that the doctrine of "lifting of corporate veil" is not to be applied as a matter of course unless the relevant facts, circumstances and conditions exist. It is adopted exceptionally whenever and wherever, the situation warrants. It means a detailed investigation into the facts and affairs of the company to find out whether the veil of corporate personality needs to be lifted in....
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.... 98. Further the Hon'ble Supreme Court judgment in the case of Vodafone (341 ITR 43) lays down a clear proposition that the companies being incorporated entities under the respective law possess independent and distinct status than their share holder or contributories. In case of structured investment transactions should not be disturbed on suspicions or casual considerations. In assessee's case, the company TIC is duly incorporated in respective legal jurisdictions. All of these transactions are being disturbed on surmises and conjectures, assessee having furnished proper explanation supported with documents has discharged his burden. In the interest of justice, the additions have to be deleted. 99. Further, the Hon'ble Supreme Court in the case of Daulat Ram Rawatmull (87 ITR 349(SC) has held as follows:- "A person can still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money is found to be not correct. From the simple fact that the explanation regarding the source of money furnished by A, in whose name the money is lying in deposit, has been found to be false, it would be a remote and far-fetched conclusion....