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2024 (2) TMI 428
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....he ld.CIT(A) confirming levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short]. Remaining appeals are in relation to orders passed by the ld.CIT(A) in quantum proceedings for the impugned years. 2. We shall first be dealing with the appeals filed in quantum proceedings for A.Y 1996-97 to A.Y 2000-01. ITA 435 & 332/Ahd/2005 : Asst. Year 1996-97 appeal by assessee and Revenue resp. ITA 1152/Ahd/2005 Asst. Year 1997-1998 ITA 529/Ahd/2006 ....
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....ssessing Officer within the meaning of section 148(2)." 5. The ld.counsel for the assessee contended that he would begin his arguments on the legal ground first. The ld.counsel for the assessee pointed out that the assessment in all the impugned years was framed under section 147 of the Act, and he wished to challenge the validity of the assessment so framed on the following grounds: i) The reasons recorded of escapement of income for reopening the case of the assessee was one consolidated reason for all the years involved. There was no specific finding of escapement of income for any of the specific years, and it was a just a general reason for all the years involved; ii) That there was no belief of the AO of income of the assessee having escaped assessment but it was a borrowed belief ; iii) That in Asst. Year 1999-2000, reopening had been sanctioned/ approved by the CIT which was against the provisions of law in this regard, as prescribed under section 151 of the Act. 6. The Ld.DR countered by stating that - • Before the ld.CIT(A) in Asst. Year 1996-97, the assessee had withdrawn his objection to the approval to the reopening of t....
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.... assessee had acquired assets disproportionate to his income to the tune of Rs. 47,20,831/-. Basis this report of the CBI the AO reopened the case of the assessee by issuing notice u/s 148 of the Act and framed assessment for all the impugned years before us, making addition on account of investment in the disproportionate assets found by the CBI as being from unexplained sources. The facts as aforestated are derived from para 2-5 of the assessment order for A.Y 1996-97which are reproduced hereunder: 11. Since the assessee has challenged the validity of the assessment framed u/s 147 of the Act in all the impugned years before us, pointing out insufficiency in the reasons recorded for reopening the case of the assessee, it is pertinent first to reproduce the reasons filed before as under: 12. A perusal of the reasons as above reveals: • that one common reason was recorded for all the years reopened by the AO i.e. 1996-97 to 2000-01 which are impugned before us. • that the AO has picked up consolidated figure of the disproportionate assets attributed by the CBI report to the assessee for all the impugned years i.e A.Y 1996-97 amounting to Rs. 47.20 lak....
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....apement of income for a valid assumption of jurisdiction to assess income u/s 147 of the Act must be year specific. Law does not permit reopening basis a consolidated belief of escapement of income for several years together, particularly which does not specify AO's belief of income escaping assessment for the different years concerned. AO u/s 147 of the Act can reassess income only when he forms a belief of income of that year having escaped assessment. Reasons recorded therefore for reopening cases have to provide basis of belief of escapement of income year specific. 16. Further the AO's belief must be based on some tangible material, having a live link or nexus with the income allegedly escaping assessment. Reassessment cannot be resorted to on the basis of vague, indefinite or remote information. The Hon'ble apex court has laid down the law in this regard in the case of Income Tax Officer Vs Lakhmani Mewal Das 103 ITR 437 wherein they have categorically held as under: "..The reasons for the formation of the belief contemplated by section 147(a) of the Income-tax Act, 1916 for reopening of an assessment must have a rational connection with or relevant bearing on the....
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.....). The second sentence was a direction given by the very same Deputy Director of Income-tax (Inv.) to issue a notice under section 148 and the third sentence again comprised a direction given by the Additional Commissioner of Income-tax to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. It was clear that the Assessing Officer referred to the information and the two directions as 'reasons' on the basis of which he was proceeding to issue notice under section 148. These could not be the reasons for proceeding under section 147/148. From the so-called reasons, it was not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Therefore, the reassessment was not valid. Principal Commissioner of Income Tax-5 vs Shodiman Investments (P) Ltd (2020) 422 ITR 337 (Bom) wherein the Hon'ble High Court reiterated the proposition holding as under: 14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received b....
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.... of the AO is not his own but that of the CBI. The AO has merely borrowed the belief of the CBI. There is nothing in the reasons to suggest that the AO made any effort to cross check and verify the information contained in the CBI report in any manner. He has not even considered the information in the report that certain assets were in the name of his wife and father who had regular sources of income. The CBI report mentions the date of investment also. The AO has made no effort to even determine the quantum of income escaping assessment as per his belief for each year involved. The AO appears to have simply borrowed the belief of the CBI in its preliminary report attributing all assets found during search to the assessee and recording consolidated belief of escapement of income based on the figure mentioned by the CBI in its report. There is complete lack of application of mind by the AO, we hold, while forming belief of escapement of income. 24. Pertinent is the law laid down by the apex court that such preliminary report of CBI does not constitute information for forming any adverse belief against an assessee. The Hon'ble Apex Court in the case of Union of India Vs Ajit Jain ....
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.... the said amount in the possession of the petitioner represented his undisclosed income which had not been and would not be disclosed by him for the purposes of the Act. The information provided by the CBI was very general in nature. The mere fact that the petitioner was in possession of the said amount could not straightaway lead to the inference that it was his undisclosed income." 25. Though the Hon'ble court in the said case dwelt on the existence of information for validating search action u/s 132 of the Act on the assessee, the principles of the interpretation of the term "reason to believe", based on information that an assessee is in possession of assets undisclosed, to conduct a valid search operation u/s 132 of the Act, was adopted by the Hon'ble court from its interpretation in terms of section 147 of the Act. The Hon'ble court held that mere intimation by CBI of assessee being in possession of assets was not sufficient information to form belief of escapement of income. 26. In the present case the report of the CBI lists all assets clearly mentioning the fact of the names of different persons in which it was found invested, including his wife and father. The repor....
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....tified. As pointed out by the ITAT or that the AO seems to have done is to simply borrow the conclusions drawn by the ED without making any independent inquiry himself into the matter. Even before the ITAT, the Revenue was unable to show the precise documents or material on the basis of which the AO formed the reason to believe that 60,000 US$ had been paid as bribe to the Iraqi officials and therefore was required to be added to the income of the Assessee." 28. In view of the above, the CBI report, we hold, could not have constituted information for the AO to form belief of escapement of income. For reasons detailed above, we have no hesitation in holding that reopening resorted to by the AO in all the impugned years before us being not in accordance with law. The orders passed by the AO u/s 147 of the Act in all the impugned years, we hold, are invalid and accordingly quashed. The appeal of the assessee in quantum proceedings are therefore allowed on the legal ground. 29. Since we have quashed the assessment orders, we are not dealing with the grounds raised by the assessee on merits, since it is only an academic exercise. 30. The appeal of the Revenue for A.Y 1996....
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....PF withdrawals by him self and his wife, housing loan taken by Smt. Shubhaji Chavan, rent of the floor of Ratna Jyoti Building and rent of cellar etc. within the check period i.e. from 01.01.1995 to 29.05.2000. Further investigations revealed that Shri S.R. Chavan had accumulated assets within the period from 01/01/1995 to 29/05/2000. The final position of the assets/disproportionate assets of Shri S.P.. Chavan as worked out by the CBI Gandhinagar was as under. 3) b) Assets at the beginning of check period (1.1.95) Assets at the end of the check period (29.5.2000) Rs.02,52,597.83 Rs.64,22,791.26- Assets acquired during check period (b-a-c) Rs.61,70,193.43 Income during the check period Rs.22,52,869.87 Expenditure during the check period Rs.08,03,508.08 f) g) Rs.14,49,361.87 Disproportionate Assets (c-f=g) Rs.47,20,831.56 (ii) Likely savings during check period (d-e = f) The CBI observed that against the likely saving of Rs.14,49,361.87, the assets acquired by Shri S.R. Chavan during the check period were of Rs.61,70,193.43. and there are disproportionate assets worth Rs.47,20,831.56 during the check pe....