TaxTMI 
TaxTMI 
TaxTMI 
2025 (1) TMI 649
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.... income & expenditure statements and other details as requisitioned. From the material placed in the Paper Book, it is noted that before passing of the order u/s 143(3) of the Act on 24.06.2016, the AO called for details regarding increase in capital account vide notice dated 07.06.2016. Upon verification of the material collected by him, the AO in his original scrutiny order passed u/s 143(3) of the Act on 24.06.2016, observed that "the Ld.AR of the assessee has explained the increase in capital of Rs. 37,82,856/- which includes exempt income". Thereafter, the case of the assessee was reopened after the expiry of four years vide notice u/s. 148 of the Act dated 31.03.2021. In response, the assessee filed RoI on 12.04.2021 and the AO supplied the reasons recorded prior to reopening of the assessment vide letter dated 17.01.2022, which read as follows: "Reasons for the belief that income has escaped assessment: 1. Brief details of the Assessee: The assessee is an individual and filed the return of his income for the AY 2014-15 19.09.2014, admitting a total taxable income of Rs 12,63,210/-. 2. Brief details of information received by the AO (details and evidences to be submitte....
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....le to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case, more than four years have lapsed from the end of the assessment year under consideration. Hence, necessary sanction to issue notice u/s. 148 is obtained from Principal Commissioner of Income Tax Act as per the provisions of Section 151 of Income Tax. 3. The objections raised by the assessee against reopening of assessment that the essential condition precedents for invoking the jurisdiction to reopen was absent was disposed of by the AO. And the AO issued requisitions u/s 143(2) & 142(1) of the Act inter alia calling for details in connection with sale of shares which fetched LTCG received during the year. From the details submitted, it is noted that the assessee during the original assessment/first round had filed her books, balance-sheet, income & expenditure, has clearly shown at Page No.4, the very same LTCG/exempt income of Rs. 96,73,796/-; and in the computation of total income for AY 2014-15 has given the details of LTCG/exempt income viz. sale of shares in two transactions on 3rd & 4th March, 2014, fetching Rs. 97,....
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....ving furnished all details relating to both income chargeable to tax and income claimed exempt from tax in response to notice u/s. 143(2) of the Act and that the assessment being completed after examination of all details submitted in course of the original assessment, the proceeding u/s. 147 of the Act initiated is totally illegal and without jurisdiction. 4. That the AO failed to provide any material either along with the reasons recorded or during the assessment to bring on record any fresh information relating to the impugned transaction of sale of shares duly considered in the original assessment u/s. 143(3) of the Act. 5. That the impugned proceeding u/s. 147 of the Act is not only illegal but was based on change of opinion on same set of material and therefore the entire proceeding is vitiated and bad in law. 6. That without prejudice to the above, even otherwise, the Ld. CIT(A) failed to appreciate the fact that the completion of assessment u/s. 147 of the Act making disallowance of the exemption claimed on account of Long term capital gain on sale of shares of Sharp trade, duly recorded in regular books of accounts, when the assessee had already furnished sufficient ....
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.... income & expenditure, computation of income but also by enquiry from the assessee by issuing notice u/s. 142(1) of the Act. The Ld.AR therefore submitted that there was no failure on the part of the assessee to disclose true and full material facts prior to completion of order u/s 143(3). In the circumstances therefore the reopening of assessment after four years was claimed to be impermissible. 6. Further according to Ld AR, the AO has re-opened the assessment without application of mind, which fact is evident from reading of para 8 of the reasons recorded which reveals that AO erred in wrong assumption of crucial fact that assessee didn't undergo scrutiny assessment, whereas for AY 2014-15, the assessee's original assessment was framed u/s 143(3) on 24.06.2016. Therefore, it is evident that AO didn't even bother to look into the assessment records before reopening the assessment, and consequently failed to satisfy the proviso to section 147 of the Act, which is sine qua non before reopening the assessment after four years from the end of the relevant assessment year. 7. Moreover, according to the Ld.AR, a perusal of the reasons recorded would reveal that based on the report fr....
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....initiation of reassessment by the AO was in order and correct in law. The Ld.DR submitted that from the information supplied by office of CCIT, it could be gathered that the assessee was beneficiary of accommodation entries received in the form of LTCG. This material information indicated that the assessee did not make full and true disclosure of material facts before the AO during the course of assessment proceedings under Section 143(3). The Ld.DR has also given a written submissions wherein she brought out a new allegation which is not emanating from the assessment records and asserted that the assessee had committed deception while furnishing information at the time of original assessment and invited our attention to the reply filed by the assessee during the original assessment [which is found placed at Page No.10 of the Paper Book] wherein the assessee has replied to the AO explaining the increase in the capital account. In the reply, the assessee had shown that the capital account to be Rs. 1,34,37,662/- which includes balance brought forward of Rs. 96,54,806/- and the remaining Rs. 37,82,856/- is the excess of income over the expenditure for the year [Rs.96,54,806/- plus Rs....
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....hown LTCG of Rs. 96,73,796/- and pointed out that the LTCG of Rs. 96,73,796/- has nothing to do with brought forward capital of Rs. 96,54,806/- and therefore asserted that the Ld.DR was misleading the Tribunal on this count and there was no merit whatsoever about this allegation. Moreover, the Ld.AR brought to our notice that in the computation of total income found placed at Page No.7 of the Paper Book the assessee has duly disclosed the income from LTCG at Rs. 96,73,797/-. Further, the Ld.AR brought to our notice that in the ITR exempting schedule of income shows total exempt income of Rs. 1,27,61,857/- which includes Rs. 96,73,797/- which is the impugned LTCG on the basis of which the AO has made an ad hoc addition of Rs. 98 lakhs. Thus, according to Ld.AR, the allegation made by the Ld.DR is neither emanating from the "reasons recorded" by the AO to re-open the assessment nor emanating from the impugned re-assessment order. Further according to the Ld.AR, even though it is an undisputed fact that original assessment u/s. 143(3) of the Act has been re-opened after four years from the relevant assessment year but the reasons recorded by him does not have a whisper about the failu....
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....pening of assessment, section 147 provides that where the Assessing Officer has reason to believe escapement of income [is the jurisdictional fact & law] he shall record his reasons for doing so and assess or reassess the income which has escaped assessment; and for exercising revisional jurisdiction u/s. 263 the CIT has to find the assessment order of the AO to be erroneous as well as prejudicial to the revenue. Unless the condition precedent is satisfied, the AO or the CIT can't exercise their reopening jurisdiction or revisional jurisdiction respectively. The legislative history is that in respect to the reopening u/s. 147 of the Act, the Parliament by Direct Tax Laws (Amendment) Act 1987 w.e.f. 01.04.1989 had substituted "for reason to believe escapement of income" to 'for reasons to be recorded by him in writing, is of the opinion'' which gave unbridled subjective satisfaction to the AO was later substituted back to 'reason to believe escapement of income'', by the Direct Tax Laws (Amendment) Act, 1989. The Hon'ble Apex Court as well as the Hon'ble jurisdictional High Court as well as other Hon'ble High Courts have already held in plethora of cases the test of a prudent person....
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..../s 143(3)] after four years from the relevant assessment year, then as per first proviso to section 147 of the Act, an additional safeguard or condition that escapement of income was due to fault of the assessee, in not fully and truly disclosing the material facts at the time of original assessment needs to be satisfied. In this context, it is gainful to refer to the Hon'ble Supreme Court decision endorsing the Full Bench decision of the Hon'ble Delhi High Court in CIT vs. Kelvinator of India Ltd. [320 ITR 561] wherein inter-alia, it was held that Assessing Officer has no power to review; and emphasized that AO in absence of "tangible material" should not resort to reopening. The Hon'ble Supreme Court held that merely on "change of opinion" the AO should not re-open the assessment because he doesn't enjoy the power to review his own order. 15. Thus, as noted before the AO assumes jurisdiction to re-open it is necessary that the conditions laid down in the said section 147 has to be satisfied viz., AO should record "reason to believe" that the income chargeable to tax for that assessment year has escaped assessment. And, if the AO intends to re-open an assessment [scrutinized u/s ....
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.... Act, it needs to be examined as to whether the addition condition precedent as laid down in first proviso to section 147 of the Act is also satisfied or not ? For doing that we have to examine on a standalone basis the reasons recorded by the AO to reopen the assessment (refer Page No.2 supra). The AO in the reasons recorded, first of all notes that assessee had filed return admitting Rs. 12,63,210/-; and in second Paragraph states about receiving information from the Office of the CCIT, Coimbatore that assessee is one of the beneficiary of the penny-stock cases forwarded to him; and that assessee has claimed exempt income from bogus LTCG transactions. Further at Para 3 onwards it was stated that the assessee has claimed to have sold shares for a consideration of Rs. 98 lakhs and admitted an income of Rs. 96,73,796/- and claimed it as exempt. According to the AO, pursuant to receiving the aforesaid information he verified from the ITR of assessee and noted that the assessee has received accommodation entry on sale of penny-stocks and has booked bogus capital gain which was claimed as exempt income. On the basis of the aforesaid facts, the AO formed his opinion that income chargeab....
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.... received from office of CCIT, Coimbatore that assessee is a beneficiary in the penny-stock cases cannot be considered as a "tangible material" for reopening the assessment. No details about the contents of the purported information received from the office of CCIT, Coimbatore is stated in the "reasons recorded". There is no mention about which all shares were classified as penny-stock; and what is the link between the shares that assessee sold and the alleged bogus claim made by assessee in this regard; and whether the stock-exchange found any mischief on the part of the assessee/broker regarding sale of shares; whether SEBI carried out any enquiry etc; No relevant information is discernable from reading of the reasons recorded, to connect assessee with any wrong doing to claim LTCG from one line statement given by the AO at Para No.2 of his reasons recorded, which is cryptic and is extremely scanty and vague; and abruptly holds assessee to have dealt with penny-stock to claim bogus LTCG. Thus we find that there is absolutely no relevant details available in the reasons recorded to form such adverse conclusion; and in the light of the same, the initiation of proceedings u/s. 147 o....