TaxTMI 
TaxTMI 
2023 (12) TMI 1164
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....tioner filed his return of income for the Assessment Year 2011-12 relevant to the Financial Year 2010-11 in Form No. ITR-4 on 21.09.2011 vide acknowledgement No. 287799831210911 disclosing total income chargeable to tax at Rs. 14,30,000/-. In the return of the income so filed by the Petitioner, it is the case of the Petitioner that the Long Term Capital Gains which were exempted under Section 10(38) of the Act of 1961 were duly reflected. The Petitioner had stated in the writ petition that in the said return, the Petitioner duly incorporated the details of the Long Term Capital Gains earned by him from the sale of the shares at Rs. 57,58,923/- on the basis that the sale price was Rs. 60,41,458/- and the purchase price was Rs. 2,82,535/-. In the month of March, 2013, as stated in the writ petition, a detailed scrutiny assessment was made in respect to the income of the Petitioner for the Assessment Year 2011-12 under the provisions of Sub- Section (3) of Section 143 of the Act of 1961. 4. On 30.03.2016, the Respondent No. 1 i.e. the Assistant Commissioner of Income Tax, Circle Jorhat issued a notice to the Petitioner under Section 148 of the Act of 1961 stating inter alia that he h....
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....he basis of information received from the ITD - penny stock, I have reason to believe that income has been escaped from assessment. Consequently, the case for A.Y. 2011- 12 is re-opened u/s 147 by issuing notice u/s 148 of the I.T. Act." 6. Pursuant thereto, on 11.07.2016, the Respondent No. 1 issued a notice to the Petitioner under Section 143(2) of the Act of 1961. In the said notice, the Respondent No. 1 stated that there were certain points in connection with the return of income submitted by the Petitioner on 10.06.2016 for the Assessment Year 2011-12 in respect to which he would like some further information. In the said communication, the Petitioner was also requested to attend his Office on 25.07.2016 at 11:30 AM either in person or by a representative duly authorized in that behalf or produce or cause there to be produced at the said time, any documents, accounts and other evidence on which the Petitioner may rely in support of the return filed by the Petitioner. The Petitioner thereupon submitted a written submission objecting the notice under Section 148 of the Act of 1961. Thereupon, on 18.07.2016, the Respondent No. 1 issued an order whereby the objections which were ....
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....ion was filed by the Respondent No. 3. In the said affidavit, it was mentioned that as per the data available from the Income Tax Department as well as from official records, no assessment under Section 143(3) of the Act of 1961 in respect to the assessment year in question was made by the Respondent Authority. It was mentioned that there was a direction of the Central Board of Direct Taxes to examine whether any assessee had made any transaction of the so called penny stock and it was confirmed from the data available from the investigation wing that the Petitioner had made transaction in respect to such stocks. It was further mentioned that the jurisdiction to be exercised by this Court is only to see whether the commencement of the reassessment proceedings was made on the basis of prima facie materials or not. Sufficiency or Insufficiency, Correctness or otherwise of the materials is not a thing that is required to be considered at the stage of recording of reasons is the specific stand taken by the Respondents. It was mentioned that the correctness of the reasons can only be verified and examined in the order under Section 147 of the Act of 1961 i.e. in the next stage. It was a....
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....le of shares at Rs. 57,51,915/- where the sale price was Rs. 60,61,154 and the purchase price was Rs. 2,89,239/-. It was alleged that the Respondent No. 1 had on 25.03.2013 passed a scrutiny assessment order in respect to the income of the Petitioner for the Assessment Year 2011-12 under the provisions of Sub-Section (3) of Section 143 of the Act of 1961. It was stated that in such assessment, the return of the income filed for the Assessment Year 2011-12 on 29.07.2011 was accepted by the said authority after going through the documents like tax computation sheet, personal balance sheet, statement of income, bank statement etc. as were required by the said authority during the course of the said assessment proceedings. 12. On 30.03.2016, the Respondent No. 1 issued a notice to the Petitioner under Section 148 of the Act of 1961 stating inter alia that he had reasons to believe that the income of the Petitioner chargeable to tax for Assessment Year 2011-12 had escaped assessment within the meaning of Section 147 of the Act of 1961 and he therefore proposed to assess/reassess the income for the said Assessment Year. The Petitioner was directed to deliver to Respondent No. 1 within 3....
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....ted to attend his Office on 25.07.2016 either in person or by an authorized representative or produce or cause there to be produced at the said time any documents, accounts or other evidence on which the Petitioner may rely in support of the return filed by her. The Petitioner without waiting for the date which was fixed on 25.07.2016 submitted a written submission dated 05.07.2016 on 11.07.2016. On 18.07.2016, the Respondent No. 1 vide a communication informed the Petitioner that the objections dated 05.07.2016 furnished to the Respondent No. 1 on 11.07.2016 were rejected. 14. The record further reveals that the Petitioner on 21.07.2016 sought for adjournment of the proceedings which was fixed on 25.07.2016 as her husband was physically unfit and the hearing be adjourned for one and half months. From the said communication, it reveals that the Petitioner in WP(C) No. 5437/2016 is the husband of the Petitioner of the instant case. Thereupon on 11.08.2016, a notice was issued under Section 142(1) of the Act of 1961 requiring the Petitioner to produce before the Respondent No. 1 in connection with the Assessment Year 2011-12 on 23.08.2016, the accounts or the documents specified and....
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....he earned Long Term Capital Gains from sale of shares to the extent of Rs. 16,97,115/- where the gross sale price was Rs. 17,55,250/- and the net sale price was Rs. 17,47,115/- and the purchase price was Rs. 50,000/-. On 07.06.2014, the Central Possessing Centre of the Income Tax Department passed non-scrutiny assessment order under Sub- Section (1) of Section 143 in respect to the aforesaid return filed on 07.02.2014 and the Petitioner was duly communicated. In the said order, the income as assessed in the return was accepted and an amount of Rs. 6,150/- was found refundable. 18. The record further shows that on 26.05.2016, the Respondent No. 1 issued a notice to the Petitioner under Section 148 of the Act of 1961 stating inter alia that she has reason to believe that the income of the Petitioner chargeable to Tax for the Assessment Year 2013-14 had escaped assessment within the meaning of Section 147 of the Act and she therefore proposed to assess/reassess the income for the said Assessment Year. She further required the Petitioner to deliver to her within 30 days from the service of the notice, a return in the prescribed form of the Petitioner's income for the said Assessment Y....
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....sentative duly authorized in that behalf or produce or cause there to be produced at the said time any documents, accounts and other evidence on which the Petitioner may rely in support of her return. On the same date, another notice was issued under Section 142(1) of the Act of 1961 requiring the Petitioner to produce the accounts and/or documents before the Respondent No. 1 in connection with the Assessment Year 2013-14 on 27.07.2016. The Petitioner thereupon submitted a written submission dated 26.07.2016 on 27.07.2016 objecting to the initiation of the reassessment proceeding as illegal. Thereupon, on 04.08.2016, the Respondent No. 1 issued a communication intimating the Petitioner that her written objection dated 26.07.2016 furnished to the Authority on 27.07.2016 was rejected. The records reveal that the instant writ petition was filed on 14.09.2016 challenging the reasons for issuing notice under Section 148 as referred to in the letter dated 11.07.2016; the notice under Section 148 dated 26.05.2016; the notice under Sub-Section (2) of Section 143 dated 12.07.2016 as well as the notice under Sub-Section (1) of Section 142 dated 12.07.2016. 20. This Court vide an order dated....
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....the said return dated 07.02.2014 and in the said order, it was intimated that the income was assessed/accepted as per return and an amount of Rs. 1,910/- was found refundable. 23. On 26.05.2016, the Respondent No. 1 issued a notice to the Petitioner under Section 148 of the Act of 1961 stating inter alia that she had reasons to believe that the income of the Petitioner chargeable to tax for the Assessment Year 2013-14 had escaped assessment within the meaning of Section 147 of the Act of 1961 and therefore she proposed to assess/reassess the income for the said Assessment Year. The Petitioner was asked to deliver within 30 days from the service of notice, a return in the prescribed form of the Petitioner's income for the said Assessment Year. It was further mentioned that she had obtained necessary satisfaction of the Commissioner of Income Tax, Jorhat/the Central Board of Direct Taxes. The Petitioner thereupon on 28.06.2016 again filed her return of income in Form No. ITR-4 which was identical to the original return filed on 07.02.2014. On 04.07.2016, the Petitioner intimated the Respondent No. 1 vide a communication that the original return filed by her might be considered as a ....
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....essment Year 2013-14 on 27.07.2016, the accounts or the documents specified therein. It was also stipulated that that all details would be required to be signed by the Principal Officer/Authorized person and that non-compliance etc. would entail penal action and/or adverse inference, rejection of books of accounts and assessment order under Section 144 of the Act of 1961. The Petitioner thereupon submitted a written submission dated 26.07.2016 on 27.07.2016 which was however rejected by the Respondent No. 1 vide a communication dated 04.08.2016. From the records, it is seen that on 14.09.2016, the instant writ petition was filed challenging the recording of reasons for issuance of notice under Section 148 of the Act of 1961 as referred to in the letter dated 11.07.2016; the notice under Section 148 dated 26.05.2016; the notice under Sub- Section (2) of Section 143 dated 12.07.2016, the notice under Sub-Section (1) of Section 142 dated 12.07.2016. 26. On 19.09.2016, this Court issued notice and in the interim, the proposed reassessment for the Assessment Year 2013-14 was kept in abeyance until the returnable date. Thereupon, it reveals that the instant writ petition was tagged alon....
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....nsel submitted that in the said reasons, it was mentioned that there was no income/loss in respect to the sales of shares were disclosed which on the face of it would show that the said reasons were non- existent for the formation of the belief. In respect to the Petitioner in WP(C) No. 5535/2016, the learned counsel again drew the attention of this Court to the return so filed along with the computation of income enclosed therewith wherein the purchase cost was shown at Rs. 50,000/- and the net sale price was shown at Rs. 17,47,115/- and the capital gain was shown at Rs. 16,97,115/-. The learned counsel further referring to the reasons which were furnished on 11.07.2016 submitted that the reasons assigned therein were that from the information extracted from the ITD Application, the assessee had made bogus Long Term Capital Gain/Short Term Capital Loss by way of transaction made through penny stocks amounting to Rs. 17,55,360/- during the Financial Year 2012-13 and upon investigation conducted by the Directorate of the Income Tax Department it revealed that the trading in the said penny stocks were manipulated affairs to generate entries of bogus Long Term Capital Gain/Short Term....
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....ecessary satisfaction of the Commissioner of Income Tax. He submitted that in respect to writ petitions i.e. WP(C) No. 5437/2016 and WP(C) No. 5530/2016, the Assessment Year in question was 2011-12 and as such, as per Section 151 of the Act of 1961, the end of the relevant Assessment Year would be 31.03.2012. He submitted that as the notice was issued on 30.06.2016 in both the writ petitions, the necessary satisfaction or the approval of the specified authority would be in terms with Section 151(2) that would be the Joint Commissioner. However in the said two cases the satisfaction was obtained from the Commissioner of Income Tax as stated in the said notices, the issuance of notices under Section 148 of the Act of 1961 were without jurisdiction. In the same manner, the learned counsel further submitted that in respect to the Petitioners in WP(C) No. 5435/2016 and WP(C) No. 5536/2016, the Assessment Year in question was 2013-14 and therefore, the end of the said assessment year would be 31.03.2014. The learned counsel appearing on behalf of the Petitioners submitted that in both the cases, notices were issued on 26.05.2016 and in those notices, it has been mentioned that the necess....
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....arned Standing counsel for the Income Tax Department submitted that the records pertaining to the proceedings of the writ petitioner in WP(C) No. 5437/2016 could not be traced out in spite of various endeavors. 32. During the course of the hearing on 18.11.2023, the records pertaining to the writ petitioners in WP(C) No. 5530/2016, WP(C) No. 5535/2016 and WP(C) No. 5536/2016 were duly perused. In the records pertaining to WP(C) No. 5530/2016, it was mentioned that on 30.03.2016, an online request was submitted for approval of the JCIT Range and on 30.03.2016, it was approved and the notice under Section 148 of the Act of 1961 was generated as per form and the notice was duly served on 31.03.2016. 33. In respect to the records pertaining to the writ petitioner in WP(C) No. 5535/2016, the satisfaction note on the basis of which the Assessing Officer had issued the notice under Section 148 of the Act of 1961 is reproduced as under: SATISFACTION NOTE Name of the assessee & Address Laxmi Chandak, Rupahi Ali,Jorhat Status Indl. Asstt. Year 2013-14 PAN AFOPC8095C Reasons for reopening: The return of income filed by the assessee on 07.02.2014 showing total income of Rs. ....
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....me is hereby granted u/s 151 of the Act." 35. In respect to the writ petitioner in WP(C) No. 5536/2016, the records upon being perused also reveal that the reasons for issuance of the notice under Section 148 of the Act of 1961 was contained in the form of a satisfaction note which is reproduced hereinunder: SATISFACTION NOTE Name of the assessee & Address Shilpa Chandak, Rupahi Ali, Jorhat Status Indl. Asstt. Year 2013-14 PAN AEJPC4450P Reasons for reopening: The return of income filed by the assessee on 07.02.2014 showing total income of Rs. 4,55,760/-. The return was processed u/s 143(1) on 01.08.2014. It is seen that the assessee, under the heard profit and gains speculative business and specified business has shown an income of Rs. 1,76,281/- Income from Profit and gains from speculative business Rs. 1,27,928/-. Income from Short term capital gain Rs. 297/- and Income from other sources Rs. 2,51,000/. The assessee declaring exempt income in schedule El an income of Rs. 17,97,975/- from Long Term Capital Gain, Interest Income Rs. 18,956/- and Dividend income Rs. 1677/-. As per information extracted from the ITD application the assessee had made bogus long te....
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..... C. Keyal, the learned Standing counsel appearing on behalf of the Income Tax Department submitted that the jurisdiction of this Court in respect to a challenge to a reassessment proceedings under Article 226 of the Constitution is limited inasmuch this Court cannot look into the sufficiency of the reasons, as the same has been held to be non-justiciable by the Supreme Court in various judicial pronouncements. The learned Standing counsel however submitted that there is no bar to the Petitioners to contend before this Court that there existed no reasons for the formation of the belief for the purpose of exercise of power under Section 147 of the Act of 1961 or in other words the existence of reasons can be challenged by the assessee. In that regard, the learned Standing counsel referred to the judgment of the Supreme Court in the case of S. Narayanappa Vs. CIT reported in (1967) 63 ITR 2019. The learned Standing counsel further submitted that the Central Board of Direct Taxes had placed certain information to the jurisdictional Assessing Officers pertaining to the Investigation Wing of Kolkata and SEBI regarding bogus capital gains through transactions of unlisted shares being pen....
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.... the records in respect to the petitioners in WP(C) No. 5530/2016, WP(C) No. 5535/2016 and WP(C) No. 5536/2016 would clearly show that the approval was duly taken from the Joint Commissioner of Income Tax, Range prior to the issuance of the said notice under Section 148 of the Act of 1961. He further submitted that as per his instructions though the records of the Petitioner in WP(C) No. 5437/2016 are not traceable, then also due permission was taken from the Joint Commissioner of Income Tax prior to the issuance of notice under Section 148 of the Act of 1961. 40. The learned Standing counsel for the Income Tax Department further submitted that the reasons so furnished to the Petitioners in WP(C) No. 5535/2016 and WP(C) No. 5536/2016 were the exact reasons which formed the basis of the satisfaction note. He submitted that the Constitution Bench of the Supreme Court in the case of K. S. Rashid and Son and Another Vs. Income Tax Officer and Another reported in AIR 1964 SC 1190 had observed in the context of Section 34 of the Income Tax Act 1922 that the condition precedent for initiation of proceedings for reassessment is for recording of reasons and not for furnishing the same. Be ....
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....ing on the question of under assessment and the existence of such reasonable ground(s) would be sufficient to give jurisdiction to the Income Tax Officer to issue notice under Section 34 of the Income Tax Act, 1922. It was further opined that whether the grounds would be adequate or not is not a matter for the Court to investigate or in other words, the sufficiency of the grounds which induce the Income Tax Officer to act is not a justiciable issue. However, it was also opined that it was open to the assessee to contend that the Income Tax Officer did not hold the belief that there has been such non-disclosure or in other words, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. It was categorically opined that the expression 'reason to believe' appearing in Section 34 of the Income Tax Act, 1922 did not mean a purely subjective satisfaction on the part of the Income Tax Officer. The belief must be in good faith and cannot be merely pretence. Paragraph 2 of the said judgment is quoted hereinbelow: "2. On behalf of the appellant Mr Gopalakrishnan contended in the first place that the reasons which induced the Income....
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....art of the Income Tax Officer. The belief must be held in good faith : it cannot be merely a pretence. To put it differently it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income Tax Officer in starting proceedings under Section 34 of the Act is open to challenge in a court of law. (See Calcutta Discount Co. Ltd. v. Income Tax Officer, Companies District I, Calcutta)." 43. In the backdrop of the above propositions so settled by the Supreme Court insofar as Section 34 of the Income Tax Act, 1922, this Court now finds it relevant to take note of another judgment of the Supreme Court in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in (2008) 14 SCC 208 wherein the Supreme Court considered the import of the phrase 'reasons to believe' as provided in Section 247(a) of the Act of 1961. While interpreting the said phrase, the Supreme Court considered both Section 147 and Section 247(a) of the Act of 1961 and obs....
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....unbridled to reopen assessment. It was observed in paragraph No. 7 that post 01.04.1989, the Assessing Officer would have the power to reopen, provided that there is/are "tangible material" to come to the conclusion that there is escapement of income from assessment. Paragraph Nos. 5, 6 and 7 of the said judgment are quoted hereinbelow: "5. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in Section 147 of the Act (with effect from 1-4-1989), they are given a go-by and only one condition has remained viz. that where the assessing officer has reason to believe that income has escaped assessment, confers Jurisdiction to reopen the assessment. Therefore, post 1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of ....
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.... which he had reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gain, chargeable to income tax had escaped assessment. It was further opined that the Assessing Officer may start reassessment proceedings either because some fresh facts comes to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession, which tends to expose the untruthfulness of those facts. In such circumstances, it is not a case of mere change of opinion or the drawing of a different inferences from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income Tax Officer, it was opined that the sufficiency of the reasons for forming his belief is not for the Court to judge but it is open to an assessee to establish that there, in fact, existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. T....
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....riginal assessment proceedings on the basis of material facts and subsequently finds it erroneous, it is not a valid reason for reassessment. 48. This Court further finds it relevant to take note of the judgment of the Supreme Court in the case of Income Tax Officer, Ward No. 16(2) Vs. Techspan India Pvt. Ltd. and Another reported in (2018) 6 SCC 685. This judgment in the opinion of this Court is very pertinent for the purpose of deciding the issues in the present writ petitions in view of the fact that the assessment orders which were sought to be reopened are non speaking assessment orders. Paragraph Nos. 14, 15, 16 and 18 being relevant are reproduced herein below: "14. The language of Section 147 makes it clear that the assessing officer certainly has the power to reassess any income which escaped assessment for any assessment year subject to the provisions of Sections 148 to 153. However, the use of this power is conditional upon the fact that the assessing officer has some reason to believe that the income has escaped assessment. The use of the words 'reason to believe' in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have ....
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....erefore from the above analysis of the settled principles of law, the following propositions emerges. (a) The power of the Assessing Officer to initiate proceedings for reassessment has to be based upon the existence of some reasonable grounds for the Income Tax Officer to believe that there has been a non- disclosure as regards any fact which would have a material bearing on the question of under assessment. (b) The jurisdiction of the Assessing Officer under Section 147 to initiate reassessment proceedings is subject to the Assessing Officer having reasons to believe that the income had escaped assessment. (c) The power to reassess cannot be confused with the power to review. (d) To reopen an assessment under Section 147 read with Section 148 of the Act of 1961, the same can be done only on the basis of specific, reliable and relevant information coming to the possession of the Income Tax Officer subsequently, for which he has reasons to believe on the basis of tangible materials that the income had escaped assessment. For the purpose of starting reassessment proceedings, the Assessing Officer either should have some fresh facts which were not previously disclosed or some....
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....required to verify whether the assessment earlier made had either expressly or by necessary implication expressed an opinion on a matter which is the basis of alleged escapement of income that was taxable. However, if the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the Assessing Officer any opinion on a question that are raised in the proposed reassessment proceedings. It is also required to take into account that every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the reassessment proceedings. (l) Section 147 of the Act of 1961 confers jurisdiction upon the Assessing Officer to reopen assessment upon having reasons to believe that the income for the relevant assessment year had escaped assessment. This conferment of jurisdiction cannot be confused with the manner in which the jurisdiction is to be exercised. The exercise of the jurisdiction is to done in terms of and satisfying the provisions of Section 148 to 153 of the ....
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....the assessee a notice requiring the assessee to furnish within such period as may be specified in the notice, a return of his income or the income of any other person in respect to which he is assessable. It also says no notice under Section 148 shall be issued unless the Assessing Authority records reasons for doing so. 53. This Court also finds it relevant to take note of Section 149(1)(a) of the Act of 1961 wherein it is stipulated that no notice under Section 148 shall be issued for the relevant assessment year if four years have elapsed from the end of the relevant assessment year, unless the case falls under Clause-(b) or Clause-(c). Clause-(b) of Section 149(1) provides that if four years, but not more than six years have elapsed from the end of the relevant assessment year, unless the income chargeable to for which had escaped assessment, amounts to or is likely to amount to Rs. 1,00,000/- or more for that year. Sub-Section (2) of Section 149 stipulates that the provisions of Sub-Section (1) of Section 149 as to issue of notice shall be subject to the provisions of Section 151. 54. Therefore, a conjoint reading of Section 147, 148 and 149 of the Act of 1961 would show tha....
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....term "Commissioner" to mean a person appointed to be a Commissioner of Income Tax or a Director of Income Tax or a Principal Commissioner of Income Tax or a Principal Director of Income Tax under Sub-Section (1) of Section 117. In the same way, Section 2(28C) defines "Joint Commissioner" as a person appointed to be a Joint Commissioner of Income Tax or an Additional Commissioner of Income Tax under Sub-Section (1) of Section 117. This Court finds it relevant to observe that there is no provision in the Act of 1961 under which a power to be exercised by an Officer can be exercised by a superior officer. 56. In the backdrop of the above, if this Court takes note of various judicial pronouncements as regards Section 151 of the Act of 1961 and who would be the authority to give the prior approval for issuance of a notice under Section 148 of the Act of 1961, this Court finds it relevant to take note of the judgment of the Bombay High Court in the case of Ghanshyam K. Khabrani (supra) wherein the Division Bench of the Bombay High Court held that the Commissioner of Income Tax is not a Joint Commissioner as per the definition contained in Section 2(28C) of the Act of 1961. It was also o....
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....uthority would be the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner who had to arrive at the satisfaction on the reasons recorded by the Assessing Officer for issuance of such notice. On the other hand, in respect to all other cases, i.e. up to four years, the authority would be the Joint Commissioner which is the authority defined in Section 2(28C). It is also pertinent that the Act of 1961 does not stipulate that the power which had been entrusted by the Act to an Officer can be exercised by any superior officer. 59. Now let this Court take up the Issue No.(C) which more particularly arises in WP(C) No. 5535/2016 and WP(C) No. 5536/2016 as to whether the non-communication of the entire satisfaction note would vitiate the reassessment proceedings. The amendments to Section 147 and 148 brought into effect by the Act 3 of 1989 w.e.f. 01.04.1989 assumes importance inasmuch as the words 'for reasons to be recorded by him in writing, is of the opinion' was substituted by the words 'has reasons to believe'. Further to that Sub-Section (2) of Section 148 was inserted which reads as under: "2. The Assessing Officer shall, before....
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....dings that the reasons which induced to the Commissioner to accord sanction to proceed under Section 34 must also be communicated to the assessee. Paragraph No. 4 of the said judgment rendered in S. Narayanappa (supra) is quoted herein below: "4. It was also contended for the appellant that the Income Tax Officer should have communicated to him the reasons which led him to initiate the proceedings under Section 34 of the Act. It was stated that a request to this effect was made by the appellant to the Income Tax Officer, but the Income Tax Officer declined to disclose the reasons. In our opinion, the argument of the appellant on this point is misconceived. The proceedings for assessment or re-assessment under Section 34(1)(a) of the Income Tax Act start with the issue of a notice and it is only after the service of the notice that the assessee, whose income in sought to be assessed or re-assessed, becomes a party to those proceedings. The earlier stage of the proceeding for recording the reasons of the Income Tax Officer and for obtaining the sanction of the Commissioner are administrative in character and are not quasi-judicial. The scheme of Section 34 of the Act is that, if th....
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....rticulate the legislative intent clearly, Explanation-3 was inserted in Section 147 to provide that the Assessing Officer may examine, assess/reassess any issue relevant to the income which comes to his notice subsequently in the course of proceedings under Section 147 of the Act of 1961, notwithstanding that the reasons for such issue has not been included in the reasons recorded under Sub-Section (2) of Section 148 of the Act of 1961. The above Explanation-3 therefore gives a clear indication that, if the Assessing Officer has reasons to believe on the basis of tangible materials to come to a conclusion that there is escapement of income from assessment, the Assessing Officer would have the jurisdiction to reopen assessment not only on the reasons recorded but he would also have the jurisdiction to touch upon other issues for which no reasons were recorded. 64. The above analysis therefore would show that the furnishing of the reasons is not required as per the provisions of the Act of 1961 and the said aspect had been judicially also accepted. Now therefore the question arises as to why the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) had observed that the ....
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.... of the belief cannot be challenged before the Assessing Officer as it touches upon his own jurisdiction. However, as the sufficiency of reasons for forming the belief cannot be challenged in a proceeding under Article 226 of the Constitution, the assessee would have a right to file objections against the sufficiency of the reasons for forming the belief by the Assessing Officer. It is in that context, the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) made the said observations. 66. In the backdrop of the above, let this Court apply the above propositions of law to the facts already delineated supra. ISSUE (A) :- WP(C)/5437/2016 67. In the instant writ petition, a perusal of the return so submitted on 21.09.2011 by the Petitioner revealed that the Petitioner earned capital gains to the tune of Rs. 57,58,923/- which as per the Petitioner was exempted under Section 10(38) of the Income Tax Act, 1961. From the said computation of income, it is seen that Odycorp (6500) shares were purchased at Rs. 1,03,208/- on 24.11.2008 and were sold at Rs.9,89,824/- on 20.09.2010. In respect to the company Splash M (35000), shares were purchased on 16.06.2009 at Rs. 1,79,327/....
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....seen that Odycorp (6500) shares were purchased at Rs. 1,09,912/- on 24.11.2008 and were sold at Rs. 9,89,824/- on 20.09.2010. In respect to the Company Splash M (35000), shares were purchased on 16.06.2009 at Rs. 1,79,327/- and was sold at Rs. 13,56,029/- on 21.03.2011. It is also seen that in respect to Company Splash M (35000) shares, Splash M (35000) shares and Splash M (35000) shares, all such shares were purchased on 24.12.2009 at zero purchase cost and were sold at Rs. 12,67,288/- on 22.03.2011, at Rs. 12,29,542/- on 23.03.2011 and at Rs. 11,98,471/- on 28.03.2011 respectively thereby earning a long term capital gain of Rs. 57,51,915/-. Now coming to the reasons so assigned, it has been stated that the assessee sold shares (penny stocks) as identified by SEBI and Investigation Wing, Kolkata during FY 2010-11 totaling to Rs. 37,21,973/- but as per the return filed for assessment year 2011-12 relating to Financial Year 2010-11, no income/loss in respect to sale of shares were disclosed. It is on the basis of such information received from the ITD - Penny Stock which formed the reasons for the Assessing Officer to believe that the income had escaped from assessment. 70. From th....
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.... for which the capital gain was raised was from the Petitioner's sources which was not declared in the return of income, for which it was opined that the assessee had undeclared income in the return furnished which has escaped assessment. It was also mentioned that the income of the assessee from long term capital gain was not shown as income and the source for purchase of the said script for the assessment year 2013-14 was also not shown in the return of income for which the income has escaped assessment. From the above reasons which were furnished to the Petitioner as well as the satisfaction note which have been quoted hereinabove, the computation of income so filed by the Petitioner for the assessment year 2013-14 in the opinion of this Court cannot be said that there was no existence of reasons for formation of the belief for initiating of proceedings under Section 147 of the Act of 1961. Further to that, the reasons so assigned were neither vague nor indefinite. The reasons had a live link for the formation of the requisite belief. WP(C)/5536/2016 72. A perusal of the return so submitted by the Petitioner on 07.02.2014 for the assessment year 2013-14 revealed that in the co....
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....e of reasons for formation of the believe for initiating of proceedings under Section 147 of the Act of 1961. Further to that, the reasons so assigned were neither vague nor distant. The reasons had a live link for the formation of the requisite belief. ISSUE B :- 73. The Issue-B pertains to the question of non-compliance to Section 151 of the Act of 1961. Surprisingly, in none of the writ petitions such plea was taken. It is only during the course of the hearing that the said submission was made which led this Court to call for the records to see as regards the compliance to Section 151 of the Act of 1961. From the record so produced pertaining to the Petitioners in WP(C) No. 5535/2016 and WP(C) No. 5536/2016, it is apparent that there is effective compliance. In respect to the writ petitioner in WP(C) No. 5437/2016, no records have been produced on the grounds that the same could not be traced. However, Mr. S. C. Keyal, the learned Standing counsel for the Income Tax Department submitted on instructions that due permission was taken from the Joint Commissioner, Income Tax, Range by making an online request for approval. He further submitted that on 30.03.2016, the said approval....
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....th the contention that the reservation of vacancies for members of the Scheduled Castes and Scheduled Tribes by the Office Memorandum dated July 20, 1974 was invalid. It was urged that the office memorandum possessed at best the status of departmental instructions and could not amend the Central Secretariat Service Rules. It is not, it was said, a case of administrative instructions filling any gap or area left uncovered by that body of rules but, on the contrary, it is a case where administrative instructions have been made inconsistently with the Rules. At the outset an objection was taken by the respondents to our entertaining the contention because, they point out, it is not a contention raised in the writ petitions and should not be allowed to be raised for the first time by way of oral submission in the course of arguments during the final hearing of the writ petitions. It is not denied by learned counsel for the petitioners that the point has not been specifically and clearly raised in the writ petitions, but he asks us to consider it by reason of what he describes as ''its fundamental importance'', We have carefully perused the writ petitions, and it is plain that the entir....
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....at such callous attitude on the part of the Assessing Authority in maintaining the records should be strictly viewed by the Department and more particularly by the Central Board of Direct Taxation. Be that as it may, if the records are not available pertaining to the Petitioner in WP(C) No. 5437/2016, it is not known as to how any reassessment proceedings initiated against the said Petitioner in WP(C) No. 5437/2016 can be brought to a logical conclusion. Further to that, in WP(C) No. 5530/2016, the material on record suggests that the online request was made to the Joint Commissioner of Income Tax and the said was duly approved. This Court is not inclined to disbelieve the said materials on record on the basis of just oral submissions that too when such plea have not been taken. As regards WP(C) No. 5535/2016 and WP(C) No. 5536/2016, the said issue of non-compliance does not arise. ISSUE C :- 77. The contention in respect to Issue No.(C) have been permitted to be raised by this Court even without pleadings on the ground that the Petitioners in WP(C) No. 5535/2016 and WP(C) No. 5536/2016 were furnished reasons on 11.07.2016 and the said Petitioners bonafidely believed that those....