2022 (5) TMI 1158

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....tice dated 08/03/2019 and impugned Order dated 28/11/2019 and the assessment proceedings in consequence to the impugned Notice; C) The Hon'ble Court be pleased to grant ad-interim relief in terms of para 'B' above; D) For such other and further reliefs as the nature and circumstances of case may require." 2 The subject matter of challenge is the notice dated 8th March 2019 issued under Section 148 of the Income Tax Act, 1961 (for short, "the Act, 1961") seeking to reopen the assessment for the assessment year 2012-13. It appears that the assessee had filed her original return of income on 29th March 2013 for the A. Y. 2012-13 declaring the total income of Rs.6,47,880/- under ITR - 2. The writ applicant mainly showed the interest income, dividend income and agricultural income. The writ applicant also claimed exempt Long Term Capital Gain from the penny scrip namely M/s. Unisys Softwares and Holding Inds. Ltd. of Rs.11,43,900/-. The scrutiny assessment under Section 143(3) was completed on 5th February 2015 assessing the total income in accordance with the return income. 3 It appears that the Assessing Officer received information from the ADIT (S....

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....rtinent to mention that the investigation Wing, Kolkata has also made deep inquiries and established that the assessee is one of the beneficiaries of accommodation entry by way of investment in penny stock Unisys Softwares and Holding Inds Ltd. Further in the statement recorded u/s. 132(4), Shri Jagadish Purohit one of the Directors of Unisys Softwares and Holding Inds ltd had solemnly affirmed that he was engaged in accommodation entry providing business (Ans. To Q7, 24, & 25). He also stated that with a view to provide accommodation entry he has formed 32 companies and become directors of those companies." 4 To the aforesaid, the writ applicant filed her objections stating as under: "3. It is submitted that for A.Y. 2012-2013, I had filed my return of income disclosing the long term capital gains of Rs. 11,43,900 as exempt. My return was taken up for scrutiny under section 143 and accordingly various queries were raised. During the assessment proceedings a letter dated 25/09/2014 was issued by the Assessing Officer specifically raising query at point 4 and 5 regarding the exempt capital gain of Rs. 11,43,900 and the sale of shares of Unisys Software and Holding Indust....

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....n that no addition is required to be made and therefore passed assessment order dated 05/02/2015 under section 143(3) without making any addition regarding the long term capital gain arising out of the sale of shares of Unisys Softwares and Holding Industries Ltd. It is submitted that in the Assessment Order, the Assessing Officer accepted the returned income without making any addition during the assessment year 2012-13. The said Notice is nothing but a change of opinion on the same issue of Long term capital gain, which was earlier scrutinized and an opinion formed while finalizing the scrutiny assessment u/s 143(3)." 5 The objections came to be disposed of vide order dated 28th November 2019 stating as under: "This contention of the assessee does not hold true since, whatever details available / gathered / received from the investigation wring or from other agencies were to be carried for taxation "no opinion was required to be expressed or given nor any mind was to be applied'. It is not only the evidence in the form of any papers but also the commitment by Shri Manohar Nangaliya. Needless to mention that such admissions are verified by the assessee knowing fully th....

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....xation) In view of these only possibility of escapement of income and reopening of assessment based thereon u/s 148 of the Income Tax, 1961 only has to be considered in the spirit of the judgment of Hon'ble Court in the case of P. Shambu Aithal vs. ITO. Hence from the above, there is tangible material available with the AO and also belief of the undersigned at the time of recording reasons u/s 147/148 of the Income Tax Act, 1961." 6 In such circumstances, the writ applicant is here before this Court with the present writ application. 7 Mr. Nitin Mehta, the learned counsel appearing for the writ applicant would submit that the impugned notice and the order disposing of the objections are in gross violation of the principles of natural justice. He would submit that there is no tangible materials available with the respondent to form any opinion as regards the escapement of income. It is nothing, but a fishing inquiry according to the learned counsel. 8 Per contra, Mr. Bhatt would submit that there is a specific information that M/s. Unisys Softwares is a company run, managed and operated by entry providers. It is a penny stock and has been used by the opera....

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....him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the Court to investigate. The sufficiency of grounds which induce the income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such nondisclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a Court of law." 14 In Phool Chand Bajrang Lal & Ors. vs. Income Tax Officer & Ors., 1993 Supp (1) SCR 28, after reviewing t....

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....be the availability of tangible material, which can lead the AO to scrutinize the returns for the previous assessment year in question, to determine, whether a notice under Section 147 is called for. 17 It is a settled position of law that the adequacy of the reasons provided by the Assessing Officer fall outside the review powers and remains within the domain of the Assessing Officer at this stage of the proceedings where only a preliminary finding under section 147/148 has been made. It is necessary to reiterate that we are at the stage of the validity of the notice under section 148/147. The inquiry at this stage is only to see whether there are reasonable grounds for the Income Tax Officer to believe and not whether the omission/failure and the escapement of income is established. It is necessary to keep this distinction in mind. (See Shri Krishna (P.) Ltd. vs. ITO (1996) 221 ITR 538/87 Taxman 315). 18 Having regard to the materials on record it cannot be said that there is a total non-application of mind on the part of the Assessing Officer while recording the reasons for reopening of the assessment. It also cannot be said that his conclusion was merely based on the obse....