TaxTMI 
TaxTMI 
2023 (7) TMI 380
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....o as "IT Act"), by which, the respondent is seeking to reopen the assessment of the petitioner for the assessment year 2014-15 (hereinafter referred to as year under consideration). 4. The factual matrix of the present case is as under, 4.1 It is the case of the petitioner that during the year under consideration, the petitioner sold immovable property comprising of industrial plot of land along with industrial shed constructed thereon (hereafter referred to as "property in question") to M/s. Pooja Industries, for which, the petitioner received sum of Rs. 40,00,000/-. It is further stated that sale consideration of Rs. 40,00,000/- received by the petitioner was bifurcated into two parts i.e. an amount of Rs. 11,56,159/- was attributable to the industrial plot of land and an amount of Rs. 28,43,841/- was attributable to industrial shed constructed thereon. It is further stated that since the land is non-depreciable asset, Long Term Capital Gain (LTCG) on sale thereof was computed at Rs.10,869/- after taking into consideration sale consideration of Rs. 11,56,159/-. However so far as building (industrial shed) is concerned, it is a depreciable asset and, hence, Short Term Capital Ga....
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....t that the petitioner has not shown capital gain of the sale of the property in question in the return of income, however in fact, the petitioner has already declared the capital gain of sale of property in question in the return of income. It is submitted that the petitioner has declared LTCG of Rs.10,869/- and STCG of Rs.26,736/- on the sale of property in question while filing return of income. Thus, very foundation for reopening would be belied, therefore, the reopening is not justified. It is also submitted that the respondent did not question the factum of receipt of Rs. 40,00,000/- being shown and offered for tax in the return of income while disposing the objections submitted by the petitioner. Thus, when the said fact has not been disputed, the question of assumption of jurisdiction cannot arise. 7. Learned Senior Counsel would further submit that the condition precedent for the purpose of resorting to reopening proceedings under Section 147 of the IT Act is that there must be 'escapement of any income chargeable to tax' and in absence of escapement of any income chargeable to tax, it is not open for the respondent - department to reopen the case of the assessee. It is su....
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.... therefore, urged that the impugned notice be quashed and set aside. 11. On the other hand, learned Standing Counsel, Mr. Varun Patel has opposed this petition. Learned Standing Counsel has referred to the averments made in the affidavit-in-reply filed on behalf of the respondent. It is submitted that in the present case, the Assessing Officer has received information from ITO, Ward-3(2)(9), Ahmedabad dated 27.10.2016 regarding purchase of the land at Ashlali, Narol by M/s. Pooja Industries from the petitioner - assessee and the petitioner - assessee was paid Rs. 40,00,000/- by M/s. Pooja Industries for the sale transaction. It is submitted that the Assessing Officer, after analyzing such information and after making inquiries in connection with the said information, observed that the assessee has not shown capital gain on the sale of such immovable property (land). Thereafter, the Assessing Officer has recorded independent satisfaction that the income of Rs. 40,00,000/- has escaped assessment in case of the petitioner - assessee. It is further submitted that the Assessing Officer has also observed in the reasons for reopening that no scrutiny assessment under Section 143(3) of th....
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....4. Having heard learned advocates for the parties and having gone through the material placed on record, it would emerge that the respondent issued impugned notice dated 29.03.2021 under Section 148 of the IT Act seeking reopening of the case of the petitioner for the year under consideration. The reason stated in the said notice is that the case has been reopened broadly on the alleged ground that the petitioner has not shown capital gain on sale of the property in question in the return of income. The said notice was issued on the basis of the information received from the concerned officer that M/s. Pooja Industries has purchased the property in question from the petitioner for Rs. 1,10,00,000/-, out of which, Rs. 40,00,000/- was paid to the petitioner and balance sum of Rs.70,00,000/- was paid to two confirming parties. Therefore, the respondent has reason to believe that the income of Rs. 40,00,000/- has escaped assessment in the hands of the petitioner for the year under consideration. Thus from the said reasons stated in the notice, it can be said that as per the case of the respondent, income of Rs. 40,00,000/- has escaped assessment at the hands of the petitioner, for whic....
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....sit the modus operandi adopted by the petitioner as alleged by the department. According to the department, the petitioner had shown purchases of goods worth Rs. 90.17 lakhs from one of the bogus entities created by Bhanwarlal Jain. There was no genuine purchase. All that was done was that the assessee had paid such amount in cheque without making any purchases. The seller after receiving such amount, would return substantial portion thereof in cash retaining his commission. This circuitous route would ensure that cost of purchases made by the assessee would be artificially inflated, thereby deflating the profit. In that view of the matter, even if the department is correct, all that would be done even if the assessment is permitted, is to disallow the expenditure of Rs. 90.17 lacs. Correspondingly, the income of the assessee would increase by the said sum of Rs. 90.17 lacs. However, if the entire income is exempt under section 10AA of the Act, there would be still no tax implication. With this background in mind, we had noted the history of petitioner's claim for exemption under section 10AA of the Act while recording facts. The assessee having succeeded upto High Court level ....
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.... omission or failure on the part of an assessee to make a return of his income under section 22, or (2) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions were conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years but within the period of eight years, from the end of the year in question". 9.1 This Court in case of P.V.Doshi Vs. CIT (1978) 113 ITR 22 (Guj) stated : "The conditions precedent for initiating reassessment proceedings are : (i) reasonable belief reached by the Income-tax Officer under clause (a) or clause (b) of section 147; (ii) recording of reasons by the Income-tax Officer under section 148(2); (iii) sanction before issuing the notice of reassessment by the higher authorities under section 151. These three conditions have been introduced by way of safeguards in public interest so that the finally concluded proceedings, which at the time of the original assessment could be reopened through the initial procedure of appeal, revis....
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....ation of the belief should be present. The reasons must be self evident, they must speak for themselves. (vi) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. To put it in other words, something therein, which is critical to the formation of the belief must be referred to. Otherwise, the link would go missing. (vii) The reopening of assessment under Section 147 is a potent power and should not be lightly exercised. It certainly cannot be invoked casually or mechanically. (viii) If the original assessment is processed under Section 43(1) of the Act and not Section 143(3) of the Act, the proviso to Section 147 will not apply. In other words, although the reopening may be after the expiry of four years from the end of the relevant assessment year, yet it would not be necessary for the Assessing Officer to show that there was any failure to disclose fully or truly all the material facts necessary for the assessment. (ix) In order to assume jurisdiction under Section 147 where assessment has been made under sub-section (3) of section 143, two c....
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....er probe into the matter and reassess the assessee in detail if circumstances require. (xv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer entertained a "bona fide" belief upon the definite information presented before him. Power under this section cannot be exercised on mere rumours or suspicions. (xvi) The concept of "change of opinion" has been treated as a built in test to check abuse. If there is tangible material showing escapement of income, the same would be sufficient for reopening the assessment. (xvii) It is not necessary that the Income Tax Officer should hold a quasi judicial inquiry before acting under Section 147. It is enough if he on the information received believes in good faith that the assesee's profits have escaped assessment or have been assessed at a low rate. However, nothing would preclude the Income Tax Officer from conducting any formal inquiry under Section 133(6) of the Act before proceeding for reassessment under Section 147 of the Act. (xviii) The "full and true" disclosure of the material facts would not include that material, which is to ....
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....s escaped assessment for any assessment year. However, this belief that income has escaped assessment has to be the reasonable belief of the Assessing Officer himself and cannot be an opinion and/or belief of some other authority. On the basis of the information by itself received from another agency, there cannot be any reassessment proceedings. However, upon receipt of the information/material received from other source, the Assessing Officer is required to consider the material on record in case of the assessee by applying his mind and thereafter is required to form an independent opinion on the basis of the material on record that the information has bearing on the income of the assessee and such income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction re....
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....fillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believeμ, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)]." 23. In case of Raymond Woolen Mills (supra), the Hon'ble Supreme Court has observed as under, "In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was 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. We are of the view that the co....