TaxTMI 
TaxTMI 
2023 (9) TMI 988
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....ived notice under Section 148 of the Act and those notices are all dated 25th March 2014, six days prior to the expiry of the limitation. The reason to believe in all these 14 matters are identical and it reads as under : "A letter dated 18.03.2014 was received from DCIT 4(1), Mumbai intimating that cash worth Rs. 7,00,000/- had been deposited in the bank account of the assessee and immediately after ward the amount was transferred through cheque in the bank account of M/s. Crown Consultants Pvt. Ltd. during the Financial Year 2006-07 relevant to A.Y. 2007- 08, and the above assessee is a Director/family member of M/s. Crown Consultants Pvt. Ltd. It is required to examine the case of the assessee for A.Y. 2007-08 so that such unaccounted money could be brought to tax. In view of the above, I have reason to believe that such income chargeable to tax and also any other income chargeable to tax exceeding Rs. 1 lakh for A.Y. 2007-08 has escaped assessment within the meaning of provision of sec. 147 and hence I propose to re-open the case of the assessee u/s. 147 of the I.T. Act for A.Y. 2007-08. Date: 20.03.2014." 2. Rule was issued in all the Petitions on....
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....picious transaction. That material is not further linked to the conclusion that Petitioner has indulged in any activity which can give rise to reason to believe on the part of AO that income chargeable to tax has escaped assessment. 6. Relying on the order of this Court in The Principal Commissioner of Income Tax-5 v. M/s. Shodiman Investments Pvt. Ltd. [2018] 93 taxmann.com 153 (Bombay)., Mr. Pardiwala submitted that re-opening of an assessment is an exercise of extraordinary power on the part of AO as it leads to unsettling the settled issue and assessments. The reasons to believe must have rational connection with or relevant bearing on the formation of belief, i.e., there must be a live link between material coming to the notice of AO and the formation of belief regarding escapement of income. 7. Mr. Pardiwala also submitted that reason clearly shows that AO has not applied his mind to the information received by him from the Deputy Director of Income Tax ("DDIT"') (Investigation). The AO has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from DDIT (Investigation). This is clearly in breach of the settled position in law that re-o....
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....r has claimed excessive loss or deduction or allowance or relief in the return. 11. Mr. Chhotaray, relying on a judgment of the Apex Court in Income Tax Officer, Cuttack and Others v. Biju Patnaik 1991 (188) ITR 247., submitted that even if the notice does not prima facie disclose the satisfaction of the conditions precedent enjoined under Section 147 of the Act, it is an administrative action and, therefore, it does not per se become illegal. Mr. Chhotaray submitted that the Apex Court in Biju Patnaik (supra) has held that even if the notice does not disclose the satisfaction of the requirement of Section 147 of the Act, if it indicates that the AO has applied his mind to the facts and after prima facie satisfying himself of the existence of conditions precedent reached the conclusion for re-opening the assessment, the notice issued should be held to be valid. 12. In our view, this judgment in Biju Patnaik (supra) would not help Mr. Chhotaray because in the cases at hand except the sketchy, more of a fishing inquiry kind of reason to believe, which also does not disclose any application of mind by the AO, there is nothing on record in the form of an affidavit or otherwise to....
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.... the reasons recorded as reproduced above, only indicates that the AO wants to examine the case of assessee to ascertain whether there is any escapement of income. In the case of Commissioner of Income Tax v. Smt. Maniben Valji Shah 2006 (283) ITR 453., this Court emphasized that the important words in Section 147 of the Act are "has reason to believe" and they are stronger than the words "is satisfied" and the belief entertained by the ITO must not be arbitrary or irrational and must be reasonable and based on the reasons which are relevant and material. 17. While the Court cannot investigate into the adequacy or sufficiency of the reasons, which have weighed with the ITO in coming to the belief, the Court can certainly examine whether the reasons are relevant and have a bearing on the matter in regard to which the AO is required to entertain the belief before he can issue notice under Section 148 of the Act. If there is no rational or intelligible nexus between the reasons and the belief, the exercise undertaken by the ITO can be interfered with. 18. The reason recorded only indicates that the officer was only wanting to examine the case of assessees with regard to the depo....