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2024 (8) TMI 1189
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.... 1,14,329/- was made to the returned income. In compliance with the same, the additional tax amount as assessed was paid on 12^th April, 2016. 3. On 31st March, 2021 i.e. seven years after the end of the relevant assessment year, a notice under Section 148 ("Impugned Notice") was issued to the Petitioner by the Assistant Commissioner of Income-tax, Circle 7 in Pune, Respondent No. 2. The sanction for the issuance of the notice under Section 148 had been issued by the Principal Commissioner of Income-tax-4, Pune, Respondent No. 3. In response, the Petitioner submitted that he had no change to make to the originally filed returns and therefore, the very same returns were again filed by him on 28th April, 2021. On 30th June, 2021 Respondent No. 2 issued a notice under Section 143 (2) along with the reasons for reassessment. The stated reason provided for the proposed reassessment was that the returns had not been subjected to scrutiny assessment. 4. On 3rd July, 2021, the Petitioner submitted his written objections to the impugned notice questioning the validity of the reasons for which reassessment had been proposed. The Petitioner asserted that his returns for AY-2013-14 had i....
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....of all relevant facts during the original assessment. It was asserted by the Revenue that so long as there is some information in the possession of the Revenue which gives the Revenue "reason to believe" that income has either escaped assessment or is under assessed, the existence of such belief would confer jurisdiction for conducting a reassessment. The "information" in question was stated to be the modification of client codes by the stock broker, which could have led to fictitious profits and fictitious losses being claimed by different clients of the stock broker. Such information, according to the Revenue, pointed to the Petitioner having had a benefit of Rs. 20,69,450/-, due to which the Revenue had "reason to believe" that income had escaped assessment. Such reason to believe would suffice to shift the onus to the Petitioner to substantiate and prove the genuineness of the transactions about which information was not in the possession of the Revenue. 7. The Petitioner also questioned the manner of approval of the reassessment proceedings. According to him, since a period of four years from the end of AY-2013-14 had expired on 31st March 2018, when reassessment was being ....
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....ay have become available from any source that is considered to be reliable, that would be adequate to justifying reopening the assessment. It has been asserted that in the instant case, the information was the receipt of information from the Deputy Director of Income-tax (Investigation), Mumbai that stock brokers had misused client code modification facility and created fictitious profits and losses to benefit their clients. Since such information had not been available at the time of original assessment, the affidavit averred, it would be deemed that the Petitioner had failed to disclose material facts during the original assessment. 11. In rejoinder, by an affidavit dated 11th August, 2022, the Petitioner asserted that once scrutiny assessment had been conducted, when there has been an expiry of four years after the end of the assessment year, for the Revenue to initiate reassessment, it must be demonstrated that the escapement of income from assessment was due to failure on the part of the assessee to disclose material facts during the original assessment. In the instant case, the Revenue has asserted that no scrutiny assessment had taken place. Therefore, the very foundation....
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....fected to the returns. The consequential tax demand notice u/s 156 of the Act was raised for Rs. 49,760/-, which was paid on 12th April, 2016. It is also evident that a questionnaire had been served on the Petitioner asking for various details, during the scrutiny assessment. On 20th January, 2016, among the information sought from the Petitioner was a calculation of short-term and long-term capital gains, with details and explanation of dividend income. On 29th January, 2016, as part of the scrutiny assessment, proof of purchase of various shares that had been sold during the relevant year was demanded in order to ascertain whether the transactions indeed qualified for long-term capital gains. There is also a reference to charges said to have been paid by the Petitioner to the securities depository, stock exchange, and other transaction charges, with explanations being sought for justification of such amounts. Likewise, certain securities and bonds routed through the capital account were picked up for scrutiny and questions were raised. 16. In reply, various submissions had been made by the Petitioner including replies dated 13th August, 2015, 15th October, 2015, 18th January, ....
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.... of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further ***** Provided also ***** Explanation 1 to Explanation 4 ***** [Emphasis Supplied] 19. Even a plain reading of the foregoing would show that a vital precondition for invoking Section 147 of the Act after the expiry of four years from the end of the relevant assessment year, is that during the original assessment, the assessee ought to have failed to fully and truly disclose all material facts necessary for the assessment. 20. We note from the record that in his objections to the proposed reassessment, the Petitioner had indeed pointed out that client code modifications for orders placed by the stock broker on the stock market system, are a matter of what the stock broker may have done as part of his operations. The Petitioner pointed....
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....dent that the necessary ingredient of the provisions is to establish that there is a failure on the part of the Petitioner to furnish material facts. In other words, there ought to have been a fact that is material to the assessment in question and there ought to have been a failure on the part of the Petitioner to fully and truly disclose such fact. Put differently, the Petitioner ought to have been in possession of facts for him to be able to disclose the same and despite him having such facts in its possession he ought to have failed to make a disclosure. In the absence of such necessary ingredients, it would be impossible to invoke a provisions under Section 147 unless such jurisdictional facts are present. In our opinion, it would not be open to the Revenue to initiate reassessment on the premise that it can simply form a belief and that such belief is supported by its own reasons, thereby ignoring the explicit formulation of the jurisdiction within which reassessment may be initiated. 24. It is a matter of public knowledge that client codes entered by a stock broker at the time of execution of the trades are permitted to be modified within a stipulated time after execution....
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.... That vital element is sorely missing in the instant case. 27. The imperative requirement of compliance with the ingredients of Section 147 and Section 148 is underlined in innumerable judgments. However, we note with approval, a judgment of a Division Bench of this Court cited on behalf of the Petitioner, in case of Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR 332 (Bombay) (per V.C. Daga and J.P. Devadhar JJ.), and profitably extract the following: 18. Reading of proviso to section 147 makes it clear that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under section 147, or recompute the loss or the depreciation allowance or any other allowance, as the case may be for the concerned assessment year. However, where an assessment under sub-section (3) of section 143 has been made for relevant assessment year, no action can be taken under section 147 afte....