TaxTMI 
TaxTMI 
2023 (3) TMI 620
X X X X Extracts X X X X
X X X X Extracts X X X X
....ht therein are as under : a) That, the petitioner filed its return of income for the assessment year 2013-14 on 30.03.2014 declaring an income of Rs.30,90,670/-, which was accepted under Section 143(1) of the Act ; subsequently, a notice under Section 148 of the Act was issued by respondent No.1 on 22.09.2016 (first notice), seeking reopening of the assessment year of the petitioner. Thereafter, notice under Section 143(2) of the Act was issued to the petitioner on 04.09.2017, pursuant to which the petitioner filed written objections to the reasons recorded by the Revenue for reopening by letter dated 21.11.2016, which objections were rejected by order dated 31.08.2017. On 27.11.2017, the petitioner received a summons under Section 131(1) of the Act directing him to file documents and information in respect of his investments in shares, to which the petitioner filed a reply on 28.11.2017 along with all the required material ; the material was considered along with the petitioner's submissions and assessment order under Section 143 read with Section 147 of the Act was passed on 28.12.2017, which was challenged in Appeal before the Commissioner of Income Tax (appeal) on 20.0....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... above, learned counsel for the petitioner contents two reasons are recorded by the Assessment Officer for reopening of the assessment. The reasons as stated in Communication dated 09.11.2021, are that, it was observed from the ITD, ITBA and Insight portals that the assessee has entered into high value suspicious transactions, which information was received on the Insight portal after investigation was carried out by the department. The reasons further cite that it was found from the Verification module on the Insight portal for the financial year 2012- 13, that the assessee has done high volume/value transactions with fictitious profits in Equity/Derivative Trading and Bogus long term and short term transactions in the script of M/s. Confidence Finance & Trading Ltd., in the value of Rs.12,73,78,478/- (Rs.6,36,89,239/- + Rs.6,36,89,239/-), while the petitioner in his returns for assessment year 2013-14 has claimed exemption for long term capital gains for Rs.6,40,84,146/-. Further information states that the script of M/s. Confidence Finance & Trading Ltd., has been used by broker and syndicate members for providing bogus long term capital gains and loss to the beneficiaries by in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y/Derivative Trading" and bogus long term capital gain transactions under Section 10 (38) and short term capital loss cases in the script of M/s. Confidence Finance & Trading Ltd. From these statements made in the reasons for the reopening, it appears that the revenue was of the opinion that the transactions referred to therein were of suspicious nature purely on the basis of some information received by it, from the Insight portal. The conclusion is arrived at without actually examining the information and on the basis of pure suspicious. (10) It is further stated in the reasons for reopening that it was found and proved by SEBI and from investigation, that the script of M/s. Confidence Finance & Trading Ltd., has been used by brokers and syndicate members for providing bogus long term capital gains and loss to beneficiaries by inflating the share price through doctored transactions of which the assessee is one of the beneficiaries. Further, it is stated that the petitioner has resorted to suspicious mode of obtaining gains and not offered those gains to tax by not showing the same as income. This statement also appears to be based on the surmise of the officer that the tran....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Assessment Officer must be based for reopening assessment. The Supreme Court, in considering this position has held : "In our judgment, the law laid down by this Court in the above case is fully applicable to the facts of the present case. There can be no manner of doubt that the words "reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income Tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court. There is no material or fact which has been stated in, the reasons for starting proceedings in the present case on which any belief could be founded of the nature contemplated by Section 34 (1-A). The so-called reasons are stated to be beliefs thus leading to an obvious self-contradiction. We ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the Assessing Officer was that the petitioner was found to have entered into a transactions in a script of M/s. Confidence Finance & Trading Ltd., which is the very same allegation made in the reasons cited by the Revenue in the reopening notice in the present case. (16) While considering whether such reasons could form the basis for reopening, the High Court held that if such disclosures had been made during the Assessment proceedings of that relevant year, the action of re-opening of assessment would amount to a change of opinion by the Assessment Officer, which was impermissible. Paragraph 4 of Rehana Anwar Shaikh, hold thus: "4. Petitioner replied by its letter 30 November, 2015. This letter was exhaustive and contains every detail that the Assessing Officer had called for. Thereafter, the Assessment Order dated 29 January, 2016 has been passed, accepting the return of income declared by the Petitioner in the sum of Rs.12,45,910/-. It is true that in the Assessment Order dated 29 January 2016, there is no reference and/ or discussion to disclose the Assessing Officer's satisfaction in-respect of the query raised but as held in Aroni Commercials Limited Vs. Deputy....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce against the Revenue. 7. Thus, we are of the view that even in cases where the return of income has been accepted by processing under Section 143(1) of the Act, reopening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed under Section 143(1) of the Act, does not give the Assessing Officer a carte blance to issue a reopening notice. The condition precedent of reason to believe that income chargeable to tax has escaped assessment on correct facts, must be satisfied by the Assessing Officer so as to have jurisdiction to issue the reopening notice. In the present case, the Assessing Officer has proceeded on fundamentally wrong facts to come to the reasonable belief conclusion that income chargeable to tax has escaped assessment. Further, even when the same is pointed out by the Petitioner, the Assessing Officer in its order disposing off the objection does not deal with factual position asserted by the Petitioner. Thus, it would safe to conclude that the Revenue does not dispute the facts stated by the Petitioner. On the facts as f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ort his tentative conclusion. In case of challenge, it is open to the court to examine whether there was material before the assessing officer, having rational connection or relevant bearing to the formation of the belief that is claimed to have been held at the time when he issued the notice. But the court cannot for the purpose of ascertaining validity of the notice examine the sufficiency of the reasons for the belief (See S. Narayanappa & Ors. v. CIT (1967) 63 ITR 219 (SC))." "It is, thus, trite, that when a challenge is made to the action under section 147 of the Act what the court is required to examine is whether some material exists on record for the assessing officer to form the requisite belief and the reasons for the belief have a rational nexus or a relevant bearing to the formation of such belief and are not extraneous or irrelevant for the purpose of the said section. But the sufficiency of the grounds, which induced the assessing officer to act under the said section is not a justiciable issue." (20) In Hindustan Lever Ltd. (supra), this Court allowed a petition challenging notice issued under Section 148 on the contention that once it is accepted during ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....allenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the court, on the strength of the affidavit or oral submissions advanced. Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of the proviso to Section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under Section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessed under Section 143 (3) of the Act. Further, where the reopening of an assessment is sought to be made after the expiry of four years from the end of the relevant Assessment Year a further check by the further superior officer is contemplated. In the present case, having started off on a wrong note that the original assessment was scrutinized and an order was passed under Section 143(3) of the Act, the Assessing Officer proceeded to put up the note to the Director of Income-Tax as is evident from the title of the note but, through the Additional Director of Income-Tax. Both the Additional Director of Income-Tax and the Director of Income-Tax appear to have concurred with the reasons for reopening the assessment but without applying their minds to the fact that the return originally filed was only processed under Section 143(1) of the Act and not under Section 143(3) of the Act. Had the Additional Director of Income-Tax realised this mistake, he would not have put up the file further for the approval of the Director of Income-Tax. Clearly, therefore, at the level of Additional Director of Income-Tax there was non- application of mind. Had the Additional Direc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material." 8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration." Commissioner of Income Tax Vs. S. Goyanka Lime Chemicals Ltd., was carried in appeal to the Supreme Court, which has affirmed the view taken by the Madhya Pradesh High Court by its order dated 08.07.2015 in Special Leave Appeal No.11916/2015. (24) After considering all the above case law on the issues raised before us, we are clear in our mind that the impugned notice, other than merely quoting that the Insight portal contains information as stated by the Assessing Officer in his reasons for the reopening, does not further investigate the information or come to an independent assessment connecting the pe....