TaxTMI 
TaxTMI 
2023 (10) TMI 1203
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1961 (for short 'the Act') for the Assessment Year 2017-18. The petitioner of Special Civil Application No. 922 of 2022 is husband of petitioner of Special Civil Application No. 19280 of 2021. 3. Rule, returnable forthwith. Learned Senior Standing Counsel Mr. Varun K. Patel waives service of notice of rule for and on behalf of the respondents. 4. With regard to the controversy in these petition is in narrow compass, with the consent of learned advocates of both the sides, these petitions are heard analogously and are being disposed of by this common judgment and order. 5. For sake of convenience, Special Civil Application No. 922 of 2022 is treated as a lead matter. 6. Brief facts of the case are as under: 6.1. The petitioner who is an individual filed his return of income for the Assessment Year 2017-18 on 21.06.2017 declaring total income of Rs. 7,67,190/- including the income under the head "Profit and Gains from business or profession" in accordance with the provisions of Section 44AD of the Act. 6.2. The respondent-Assessing Officer issued impugned notice dated 31.03.2021 under Section 148 of the Act for reopening the assessment. The petitioner filed return ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... would have escaped the assessment. 7.3. Learned Senior Advocate Mr. Hemani would submit that even though the petitioners have categorically pointed out in the objections against the reopening that the nature of transaction is not mentioned in the reasons recorded and hence, such reasons are vague and not definite or relevant, however, while passing the order disposing of such objections, respondent has not put in any effort to provide clarity on the nature of the transaction referred to in the reasons recorded for reopening. It was therefore submitted that the respondent assessing officer is not having any detail in relation to the so-called unaccounted transactions and therefore, the respondent would not have any reason to believe that income chargeable to tax has escaped the assessment. Learned Senior Advocate Mr. Hemani would therefore submit that on this short ground only, the impugned notices deserve to be quashed. 7.4. In support of such submissions, reliance is placed on the decision of this Court in case of Bharatkumar Nihalchand Shah versus Income Tax Officer dated 07.03.2023 in Special Civil Application No. 5353 of 2022 wherein, it is held that non-specific and gen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....espondent has not applied mind independently so as to reach to have reason to believe that any income has escaped the assessment and in absence of any such exercise to have the satisfaction to form the reason to believe by the respondent, it is apparent that the respondent has issued the impugned notice merely based on "borrowed satisfaction" as against statutory requirement of "independent satisfaction" and therefore the impugned notice deserves to be set aside as such action is not tenable in the eye of law. 7.10. Learned Senior Advocate Mr. Hemani would submit that it is a settled law that an Assessing Officer would not assume jurisdiction to reopen an assessment unless he records his own independent satisfaction to the effect that he has reason to believe that any income chargeable to tax has escaped the assessment after application of mind. It was therefore submitted that such satisfaction cannot be based on application of mind by third person which is emerging from the facts of the case on perusal of the reasons recorded. In support of his submissions, learned Senior Advocate Mr. Hemani relied upon the decision in case of Harikishan Sunderlal Virmani Versus DCIT reported i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....el Mr. Patel referred to and relied upon the copy of the information received by the respondents placed on record along with the affidavit-in-reply at Annexure R1. It was submitted that the respondent is not enlarging the scope of the reasons recorded by placing such information but it is only to demonstrate of what has already been considered for the reasons recorded. It was submitted that the basis for formation of the reasons was specifically noted in the reasons record which in turn based on the case specific information and therefore, it cannot be said that the reasons are vague as sought to be contended by the petitioner. 8.2. It was submitted that the petitioner has not made out any case in view of the fact that the petitioner failed to disclose all the material facts and in absence of the scrutiny assessment conducted by the Assessing Officer, the impugned notice may not be quashed because what is to be seen at the stage of recording the reasons is existence of the belief based on faithful appreciation of the material which has live link to income escaping assessment. It was submitted that the respondent-Assessing Officer is not required to establish the truth of escapem....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee has entered into unaccounted transactions so as to assume jurisdiction to re-open the assessment. 9. Having heard the learned advocates for the respective parties and having considered the rival submissions, it would be germane to refer to the relevant extract of the reasons recorded for reopening of the assessment which reads as under : "ANNEXURE 1. Brief details of the Assessee: The assessee is an HUF and the address of the assessee as per ITBA/ITD is Plot No. 510, Adarsh Society, Vijaynagar, Bhavnagar. The PAN of assessee is ALSPB7684E and assessee has filed return of income for A.Y. 2017-18 on 21.06.2017 showing total income at Rs. 7,67,190. (a) Nature of business activity: Not known. (b) Details of previous filing of ROI processing and scrutiny: Sr.No A.Y. Date if filling ROI Whether selected for scrutiny/re-open 1. 2015-16 14/07/2015 No 2. 2016-17 07/06/2016 No 3. 2017-18 21/06/2017 No 2. Brief details of information collected/ received by the AO: Information made available with this office through Insight Portal along with Report of Dy. Commissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) in similar facts has held as under : "5. Without going into any aspect on the merits of reopening, the ground of assailment by the petitioner-assessee that the reasons are cryptic and that they did not furnish details, on the basis of which the petitioner could defend his case, merited acceptance. Looking at the reasons again, what is only stated by the Assessing Officer is that, "From the data made available under Project Falcon, it is seen that the assessee has created a profit/loss of Rs. 74,62,860/-". Both buying and selling of trades have been are executed at the Bombay Stock Exchange". This statement is a non-detailed and completely escapist. It does not give any fact regarding the transactions or other attendant facts except saying that assessee had engaged in the trading at the Bombay Stock Exchange to create profit or loss. Though styled as reasons, the ground of reopening is unreasoned. 6. The necessity to incorporate reasons in the administrative, quasi judicial or judicial orders are repeatedly emphasised by the supreme court. In Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota vs. Shukla and Brothers [(2010) 4 SCC ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the Courts should record reasons for its conclusions..." (para 12) 6.3 Recording of reasons in order is essential feature of dispensation of justice. In Kranti Associates Private Limited and Another vs. Masood Ahmed Khan and Others [(2010) 9 SCC 496], the supreme court stated that order passed by the quasi judicial authority or even administrative authority affecting the rights of the parties must speak and that is must not be like the "inscrutable face of a sphinx". 6.4 The principles for recording reasons came to be summarised by supreme court in Kranti Associates Private Limited (supra), "a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative pow....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... requires, "adequate and intelligent reasons must be given for judicial decisions. o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process." (para 47) 6.5 In Sant Lal Gupta and Others vs. Modern Cooperative Group Housing Society Limited and Others [(2010) 13 SCC 336], the supreme court stated importance of reasons referring to other decisions on the point thus, "The reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same, the order becomes lifeless. Reasons substitute subjectivity with objectivity. The absence of reasons renders an order indefensible/unsustainable particularly when the order is subject to further challenge before a higher forum. Recording of reasons is principle of natural justice and every judicial order must be supported by reasons recorded in writing. It ensures transparency and fairness in decision making. The person who is adversely affected must know why his application has been rejected." (par a 27) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reasons which hold good in the eye of and with the Assessing Officer must be made known to the assessee. Assessee has right to refute the reasons for reassessment by filling objections. Unless the Assessing Officer appropriately delineates and communicates the reasons for reassessment, right of the assessee to file objections would remain an eye-wash. 7.3 Whether the reassessment powers are adverted to on objective basis, whether the element of assessment of income is noticed from the facts and whether formation of opinion by the Assessing Officer is based on some relevant facts or not, could be judged provided the reasons are properly recorded and the details are given with regard to reopening of assessment that the reasons to believe with the Assessing Officer must be reflected in recording of such reasons to be communicated to the assessee. 7.4 The cryptic way of recording of reasons like found in the instant case, would render the exercise of powers vitiated. With such vague reasons the respondent could be said to have failed to demonstrate that there was any escapement of income chargeable to tax. He could demonstrate such element, if he gives reasons for th....