TaxTMI 
TaxTMI 
2022 (4) TMI 1191
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....titioner that, on 25th December, 2018, the then Assessing Officer passed the assessment order for the Assessment Year 2016-2017 after considering all the documents regarding derivative transaction and accepted the loss claimed by the petitioner arising out of said derivative transaction. The Assessing Officer accepted the income claimed by the petitioner in his return for assessment year 2016-2017. On 20th October, 2018, the petitioner supplied all the relevant information regarding derivative transaction. On 10th December, 2018, the assessing officer once again called upon the petitioner for the information regarding account statement, demat account, details of broker and contract notes issued by the broker for derivative transaction. It is the case of the petitioner that all the information was duly submitted by the petitioner to the assessing officer on 14th December, 2018. On 31st March, 2021, the respondent No. 2 on the same set of facts issued notice U/Sec. 148 of the I. T. Act and started proceeding of re-assessment U/Sec. 147 of the I. T. Act. 4. On 19th July, 2021, the petitioner after receipt of copy of the reasons recorded by the assessing officer filed his objection ....
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.... and without considering the material on record to be placed before the sanctioning authority by the assessing officer. He submits that, from the copy of the sanction produced by the assessing officer U/Sec. 151 of the I. T. Act, it is clear that all the documents alleged to have been possessed by the assessing officer were not produced before the Joint Commissioner of Income Tax while seeking sanction U/Sec. 151 of the I. T. Act. 9. The learned counsel for the petitioner invited our attention to the order dated 02nd December, 2021 passed by the Assessing Officer, Government of India, Ministry of Finance, Income Tax Department, National Faceless Assessment Centre, Delhi rejecting the objection raised by the petitioner and informing that the proceedings U/Sec. 147 of the I. T. Act would be further continued. The petitioner was informed that, notice U/Sec. 142(1) of the I. T. Act was being issued for necessary compliance. 10. The learned counsel for the petitioner submits that, all the information along with ledger of capital account, balance sheet, audit report were already submitted by the petitioner in compliance to the notice U/Sec. 142(1) of the I. T. Act and were already ....
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....12(3)(2) and others in Writ Petition No. 1917 of 2019 and in particular paragraph Nos. 6, 7 and 10 to 12 and would submit that, after adverting to the judgment of the Hon'ble Supreme Court in a case of CIT Vs. Kelvinator of India Ltd. reported in (2010) 320 ITR 561, this Court held that non rejection of explanation in the assessment order would amount to the assessing officer accepting the view of the assessee, thus taking a view for forming an opinion would be completely without jurisdiction. He submits that, even if assessing officer in the original assessment order had not recorded any specific reasons while dealing with documents and details furnished by the petitioner, which were specifically called for by the assessing officer, reopening of assessment on the same facts is not permissible, otherwise it would amount to review of the earlier order, which is not permissible. He submits that, the Hon'ble Supreme Court has rejected the SLP bearing Diary No. 7367 of 2020 on 01.06.2020 arising out of the said judgment delivered by this Court on 21st August, 2019 in a case of Marico Ltd. Vs. The Assistant Commissioner of Income Tax-12(3)(2) and others (supra). 14. The learned couns....
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....d also to the 1st proviso and would submit that, once notice U/Sec. 148 of the I. T. Act is issued within four years of the completion of assessment, assessment can be reopened. He submits that, reasons are already recorded by the assessing officer before issuance of notice. In support of this submission, the learned counsel for respondents invited our attention to the reasons recorded by the assessing officer at page No. 92 to 94 of the writ petition. He submits that, in the said reasons the assessing officer has clearly provided that, fresh information was received by the assessing officer after completion of the assessment order earlier on 25th December, 2018 and based on fresh information received by the assessing officer, sanction U/Sec. 151 of the I. T. Act was rightly obtained from the Joint Commissioner of Income Tax on 31st March, 2021. 18. Learned counsel for respondents placed reliance on the judgment of the Supreme Court in a case of Raymond Woollen Mills Ltd. Vs. Income Tax Officer and others reported in (1999) 236 ITR 34 (SC) and also another judgment of the Supreme Court in a case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd. rep....
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....eliance on the judgment of this Court in a case of Chhagan Chandrakant Bhujbal Vs. Income Tax Officer Ward 20 (1) (3), Mumbai, Commissioner of Income Tax-20 Mumbai reported in (2021) TaxCorp (DT) 86184 (HC BOMBAY) and in particular paragraph no.13 in support of the submissions that, since the petitioner had participated in the assessment proceedings before the Assessing Officer, this Court shall not exercise its extraordinary jurisdiction under Article 226 of the Constitution of India for interfering with the proceedings before the Assessing Officer. 23. Learned counsel for respondents placed reliance on the judgment of the Hon'ble Supreme Court in a case of ACIT VS. Rajesh Jhaveri Stock Brokers (P) Ltd. reported in (2007) 291 ITR 500 (SC) and would submit that, after interpreting 'reason' in the phrase 'reason to believe' would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to belief that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. Th....
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....ection 143(3) of the Income Tax Act, 1961, but in this case the assessment was passed on random basis for limited purpose. There was limited scrutiny under CASS. 28. Mr. Chandak, learned counsel for the petitioner in his rejoinder arguments submits that, for the purpose of reopening assessment, there shall not be change of opinion on the part of the Assessing Officer. If notice for reopening of the assessment is issued after four years and before six years, the Assessing Officer has to satisfy additional requirement prescribed under the said provisions. The Assessing Officer could not have been formed a different opinion on the basis of the same facts and documents. It is not the case of the respondents that, there were any fresh reason for reopening of the assessment. On the contrary, the case of the respondents in that order recording reasons is that, all the documents are already on record. He submits that, purpose of obtaining prior sanction from the competent authority under Section 151 of the Income Tax Act, 1961 is to check unwarranted use of powers under Section 148 of the Income Tax Act so as not to harass the assessee. He submits that, no reasons are recorded by the Jo....
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....nt of purchase and sales of derivatives, (ii) copies of brokers note, (iii) copies of ledger account of broker maintained by the petitioner and (iv) copies of Demat account. In para No. 7 of the said notice it was specifically held that, according to the assessing officer there was no profit and loss account maintained by the petitioner HUF. In the capital account net business income had not been credited/debited. The petitioner was accordingly called upon to show as to why set off of lossess of F & O Trading against remuneration and interest earned from partnership firm should not be disallowed and added to your total income of the petitioner. It was made clear in the notice that, if those details were not submitted electronically, non compliance, part compliance or incomplete compliance may entail penal action and/or adverse inference in respect of the said issue and/or taking recourse to rejection of books results and assessment U/Sec. 144 of the I. T. Act without any further reference to the petitioner in that regard. 32. The petitioner, through its Chartered Accountant vide letter dated 20th October, 2018 furnished various details to the assessing officer. The petitioner in....
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....s. 56,92,100/-. A perusal of the said assessment order indicates that, according to the said assessment order, the case of the petitioner was selected for scrutiny under CASS for limited purpose to examine whether the share capital was genuine and from disclosed sources. It was stated in the assessment order that, on verification of return filed and on verification of details and documents filed during the assessment proceedings vis-a-vis reason for selection of case for scrutiny, the assessment was completed. In paragraph No. 4 of the said assessment order it was stated that, on verification of details and documents furnished and on going through the return of income furnished, the total income of the assessee was accepted as declared in the return of income filed as Rs. 56,92,100/-. The said assessment order was passed U/Sec. 143(3) of the I. T. Act. 35. A perusal of the reasons recorded by the assessing officer for initiation of proceedings U/Sec. 147 of the I. T. Act indicates that, according to the assessing officer as per the information received from I.T.O. (I&C), Aurangabad through insight portal, it was seen from the trade activity of the petitioner that, the same scrip....
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....t no action could be taken and thus only requirement to initiate proceedings in this case U/Sec. 147 was reason to believe which had been recorded in paragraph Nos. 5 and 6 of the said reasons. 38. A perusal of the sanction/approval granted by the Joint Commissioner of Income Tax on 31st March, 2021 U/Sec. 151 of the I. T. Act indicates that, the assessing officer had sent the proposal for approval of the Joint Commissioner of Income Tax on 30th March, 2021. The approval was granted on 31st March, 2021. In the said approval U/Sec. 151 of the I. T. Act, the Joint commissioner of Income Tax has referred to the reasons to believe as per the annexure to the said approval. In the remarks column, the Joint Commissioner of Income tax observed that, "in view of the details and quantum of undisclosed transactions discussed by the assessing officer in the reasons recorded, I am satisfied it is a fit case for the issue of notice under section 148 of the Income-tax Act, 1961. Sanction under section 151(2) for the issue of notice under section 148 is therefore accorded in this case." 39. In response to the reasons recorded by the assessing officer and conveyed to the petitioner, the petit....
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....e day or the next day. It was further observed that, there were several entities who consistently made significant loss and others who consistently made significant profit by executing reversal trades in stock options on the BSE. 42. It is further stated in the said communication that, the notice U/Sec. 133(6) dated 26.06.2019 was issued to the assessee. The Assessee however, did not submit details of stock trading properly. The assessee was once again called upon to submit proper details. 43. In the said communication it is stated that from the trade activity of the assessee it is seen that the same scripts have been bought and sold immediately within seconds and huge loss has been booked on such transactions. It was stated that in so far as script TITAN is concerned, the total transaction was conducted within six seconds showing the loss of Rs. 5,00,000/- on the same day. The assessee had booked a non genuine loss of Rs. 5,00,000/-. The said analysis would show that trade rates were completely out of sync with the movement in the price of underlying asset. One Lac shares were sold on 26th March, 2015 at 11.11.36 @ 0.2 per script for the total sum of Rs. 20,000/- and on the ....
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....er (I&C), Aurangabad from insight portal. Based on the said information and after application of mind, the assessing officer recorded the reasons that as the case was selected for limited scrutiny issue, initially no additions were made. It appears that on the information available on record, assessing officer is of reasonable belief that the petitioner had entered into a sham transaction to obtain loss for the purpose of set off of his taxable income. In our view, there is no substance in the submissions made by Mr. Chandak, the learned counsel for the petitioner that, there was no application of mind on the part of the assessing officer while issuing notice U/Sec. 148 of the I. T. Act. 47. A perusal of the assessment order dated 25th December, 2018 for the assessment year 2016-2017 clearly indicates that, it is recorded in paragraph No. 2 that the case was selected for scrutiny under CASS for limited purpose to examine whether the share capital was genuine and from disclosed sources. Notices were accordingly issued to the petitioner for seeking various details. In paragraph No. 3 of the said order, the assessing officer in that context recorded a limited finding that the asses....
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....umption of facts made in the notice was erroneous. The assessee may also prove that new facts came to the knowledge of the Income Tax Officer after completion of the assessment proceedings. The Hon'ble Supreme Court did not express any opinion on the merits of the case and left open the question of fact and law to be investigated and decided by the assessing authority. The Supreme Court also granted liberty to the assessee to take all the points before the assessing authority. 51. This Court in a case of Ajeet Seeds Pvt. Ltd. Vs. The Union of India through Assistant Commissioner of Income Tax Aurangabad (supra) after adverting various judgments of the Supreme Court including in case of Raymond Woollen Mills Ltd. Vs. Income Tax Officer and others (supra), CIT Vs. Kelvinator of India Ltd. (supra), ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. reported in (2007) 291 ITR 500 (SC) has held that, it cannot be said that reopening of the assessment was only based on change of opinion. The petitioner had failed in his duties to disclose fully and truly the fact and accordingly did not interfere with the notice U/Sec. 148 of the I.T. Act by exercising jurisdiction under Article 226 of th....
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....sis for formation of such belief was several enquiries and the investigation by the Investigation Wing, and report thereof. The reasons for the formation of the belief by the assessing officer appear to have a rational connection with or relevant bearing on the formation of belief that there had 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. The Gujarat High Court followed the principles laid down by the Supreme Court in a case of Raymond Woollen Mills Ltd. Vs. Income Tax Officer and others (supra) that at the time of recording the reasons for satisfaction of the assessing officer, there should be prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. It will be open to the assessee to prove that the assumption of fact made in the notice was erroneous at the time of assessment proceedings. 55. In our view the opinion formed by the assessing officer being based on the new information available to the assessing officer after passing of the original as....
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....e of Phool Chand Bajrang Lal Vs. Income Tax Officer reported in (1993) 203 ITR 456 (SC), in which it was held by the Supreme Court that, acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment which goes to expose the falsity of the statement made by the assessee at the time of original assessment proceedings, the two situations are distinct and different. Thus, where the transaction itself on the basis of subsequent information is found to be a bogus transaction, the mere disclosure of that transaction at the time of original assessment proceedings cannot be said to be a disclosure of the 'true' and 'full' facts. It is held that, the income tax officer would have the jurisdiction to reopen the concluded assessment in such a case. 58. The Supreme Court also held in the said judgment that one of the purposes of Section 147, appears to be to ensure that a party cannot get away by willfully making a false and untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say "you accepted my lie, now your hands are tied and you can do nothing." It is held that, it would be travest....
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....f the I. T. Act while exercising extra-ordinary jurisdiction under Article 226 of the Constitution of India and to prohibit the authorities from proceeding further in the matter. In our view principles laid down by this Court in a case of Chhagan Chandrakant Bhujbal Vs. Income Tax Officer (supra) apply to the facts of this case. 61. In our view, the judgment of this Court in a case of Ashok Manikrao Khopade Vs. Principal commissioner of Income Tax 1, Nasik and others (supra) relied upon by the learned counsel for the petitioner would not assist the case of the petitioner in view of the fact that, the erstwhile assessing officer had not considered the material produced by the petitioner pursuant to the directions issued by the assessing officer regarding derivative transactions, but had passed the said order under CASS for a limited purpose to examine whether the share capital was genuine and from disclosed courses or not. 62. Similarly the judgment of this Court in a case of Marico Ltd. Vs. The Assistant Commissioner of Income Tax-12(3)(2) and others (supra) relied upon by the learned counsel for the petitioner would not assist the case of the petitioner on the ground that th....
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....ecorded in support of the reopening of the notice in its entirety to the assessee. This Court in the said judgment held that, mere obtaining of material by itself does not result in reason to believe that income has escaped assessment. In this case, the assessing officer formed the belief independently in the context of the material obtained when there was an escapement of income. The reasons recorded by the assessing officer indicated the material which formed the basis of reopening of assessment which would evidence linkage/nexus to the conclusion that income chargeable to tax has escaped assessment after applying his mind to the information received by him from the Income Tax Officer (I&C). The assessing officer was fully satisfied that the income chargeable to the tax had escaped assessment. This Court, therefore, cannot interfere with the satisfaction and reasonable belief derived after applying his mind by the assessing officer that income chargeable to assessment has escaped assessment. 65. In so far as judgment of this Court in a case of Gagan Omprakash Navani Vs. Income Tax Officer (supra) relied upon by the learned counsel for the petitioner is concerned, this Court in....