TaxTMI 
TaxTMI 
2023 (2) TMI 922
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.... under section 147 by issuing notice under section 148 of the Income tax Act, 1961, without there being any application of mind by the learned assessing officer and further his such action was based just on suspicion, surmises and conjectures. 2. That on facts and in the circumstances of the petitioner company's case, the learned Commissioner of Income tax (Appeals)-9, New Delhi erred in law and on facts in upholding the order of the learned assessing officer firstly for issuing undated reasons for reopening of assessment and then issuing corrigendum on a subsequent date rectifying some fundamental issue mentioned in the original reasons to believe for reopening assessment. He has further erred in law in wrongly applying the provisions contained in section 292B of the Income tax Act, 1961 and thus such action of the learned assessing officer lacks jurisdiction and bad in law. 3. That on facts and in the circumstances of the petitioner company's case, the learned Commissioner of Income tax (Appeals)-9, New Delhi erred in law and on facts in upholding the order of the learned assessing officer in not passing a speaking order against the objections raised by the peti....
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....r Section 148(1) for reopening of assessment under Section 147 of the Act for Assessment Year 2010-11 as recorded under Section 148(2) of the Act is reproduced hereunder: "The assessee is a company filed its return of income on 30.09.2010 declaring income of Rs.28,95,190/-. The details of the directors of the assessee company obtained from records are hereunder: 2. Thereafter, the return was processed under 143(1) of the I.T. Act. Subsequent to the processing completed U/s 143(1), information through email was received on 14/03/2016 from Asstt. Director of Income Tax [Investigation], Unit 1(3), Ahmedabad by which a Survey Report was disseminated in cases of beneficiary clients who have taken contrived losses & shifted out profits using Client Code Modification. 3. It is a detailed report of 589 pages. 1 have gone through the report and gathered that Client Code is a unique code which is assigned by a broker to its clients, A broker can issue just one code to a client. Client Code Modification means modification / change of the client codes after execution of trades. Vide Circular no. SMD/POL1CY/Cir-/03 dated February 6, 2003 SEBI mandated that the stock e....
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....s undertaken transactions through M/s. SS Corporate Securities Limited. b) The transactions which involved CCM, as per information received under the report of the Investigation Wing are as under: Name of the Beneficiary Client Address of Beneficiary Name of Broker When OC (Ascertained profit shifted out) When MC (Ascertained Losses Shifted In) Net reduction in Income due to CCM M/s Vishwanathan Securities Pvt. Ltd. A-10/2, Vasant Vihar, New Delhi- 110057 M/s. S.S. Corporate Securities Limited (-)1578004.95 0 (-)1578004.95 c) Thus, the assessee has shifted in ascertained loss of (-)1578004.95 through a transaction involving CCM. 5. Thus, a careful scrutiny of information received from the investigation wing and analysis of report, data of transactions and verification of ITR/Assessment Record lead to an irresistible conclusion that Client Code Modification had been carried out in the case of assessee to shift in ascertained losses of (-) Rs.1578004.95. By shifting in the above losses and shifting out the profit through contrived transactions by means of CCM, the assessee has artificially depressed its profits. By withho....
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..../s Vishwanathan Securities Pvt. Ltd. A-10/2, Vasant Vihar, New Delhi- 110057 M/s A to Z Stock Trade Pvt. Ltd. 20,81,710.4 (-)49,443.75 (-)21,31,154.15 In view of the above, assessee has shifted in ascertained loss of (-) 21,31,154.15 through a transaction involving CCM. This corrigendum is in accordance with section 292B of the Income Tax Act, 1961, which states as "No return of Income, assessment, notice, summon or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act". 4.4 The proceedings under Section 147 were accordingly initiated and the assessment was completed by the Assessing Officer under Section 143(3) r.w. Section 147 of the Act wherein addition of Rs.21,31,154/- was made alleging pr....
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....t; firstly, the name of broker was amended from 'S.S. Corporate Services Ltd.' to broker namely 'A to Z Stock Trade Pvt. Ltd.'; secondly, the amount of alleged escapement was modified from Rs.15,78,004.95 to Rs.21,31,154/-. 7.2 At the first blush, we find the action of the Assessing Officer to be wholly untenable in law. By issue of corrigendum, the Assessing Officer has attempted to rectify the very fulcrum of believe derived qua the broker, i.e., S.S. Corporate Securities Ltd. The name of the broker was substituted in the corrigendum which has changed the tone of the entire basis for assumption of jurisdiction under Section 147 of the Act. The amount earlier computed and determined precisely at Rs.15,78,004.95 was also substituted by improved figure of Rs.21,31,154/- in the corrigendum. The whole basis for deriving the belief from the information is thus substantially changed. 7.3 Needless to say 'reason to believe' is the bedrock for usurping jurisdiction under erstwhile provisions of Section 147 for reopening the assessment. The expression 'reason' is objective in nature and denotes the material or any substantive information possessed at the command of the Assessing Offi....
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....nesis of which is not traceable to such recorded reasons. Hence, the supplementation made by the AO by way of corrigendum is totally contrary to the plethora of judicial pronouncement holding the field in this regard. 7.3 We now advert to the plea of the Assessee with reference to Section 292B of the Act. Section 292B of the Act takes care of certain situations and enables the income tax authorities to cure defects in orders, notices, etc. The jurisdiction to reopen flows from reason recorded in writing under Section 148(2) on the strength of 'reason to believe' towards escapement of charitable income. Thus, such reasons confers assumption of jurisdiction of substantive nature. Fundamental defect in the basis for holding 'reason to believe' cannot be seen as a mere irregularity and thus cannot be cured with the aid of Section 292B of the Act. There is a marked distinction between want of basic or inherent jurisdiction and irregular exercise of jurisdiction. Defect on irregular exercise of jurisdiction alone can possibly be cured under Section 292B of the Act. The Assessing Officer, in the instant case, has drawn belief based on the transactions carried out through broker namely ....