TaxTMI 
TaxTMI 
2025 (1) TMI 1009
X X X X Extracts X X X X
X X X X Extracts X X X X
....s are identical for different assessment years, they have been heard together and would be disposed of by this common judgment. For the sake of convenience, facts are recorded from Special Civil Application No. 2036 of 2022. 5. By this petition under Article 226 of the Constitution of India, the petitioner has challenged notice dated 31.03.2021 issued by the respondent under section 148 of the Income Tax Act, 1961 (For short "the Act") proposing to reopen the assessment of the petitioner for Assessment Year 2016-2017 as well as order dated 13.12.2021 dismissing the objections raised by the petitioner against reopening of the assessment. 6. Brief facts of the case are that the petitioner is an HUF and is regularly assessed to tax. The petitioner filed its return of income on 30.07.2016 for the Assessment Year 2016-2017 whereby the petitioner claimed Long Term Capital Gain exemption under section 10 (38) of the Act. 7. It is the case of the petitioner that petitioner bought 60,000 equity shares of M/s. Kaushal Limited on 10.12.2013 in the Financial Year 2013-2014 relevant to Assessment Year 2014-2015 having face value of Rs. 10/- each which were split in face value of Rs. 2/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....petitioners name during the search proceedings at M/s. Kushal Tradelink Limited is reflected. 17. It was submitted that the respondent has merely attempted to establish that Kushal group is involved into accommodation entries and thereafter the respondent has vaguely claimed that the petitioner is also a beneficiary of such actions of Kushal group without any tangible material available with the department since the petitioner was one amongst the buyers who had bought the shares of M/s. Kushal Limited. It was further submitted that issuance of notice is nothing but to initiate action against all the investors of a public listed company thereby imposing liability over all the investors for the alleged wrong committed by the public listed company. 18. It was further submitted that the respondent has issued impugned notice only and solely upon suspicion and has presumed that the alleged capital gain is bogus without there being any nexus or live link with the information gathered and reflected in the reasons recorded for reopening the assessment inasmuch as the respondent has completely failed to establish any nexus between the petitioner and M/s. Kaushal Limited including its a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....refrom. 23. Thus, the crucial link between the information available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing. 24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually ог mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons." 20. It was submitted that the respondent has completely relied upon the information of Investigation Wing, Ahmedabad and has completely failed to apply its own mind and therefore, it amounts to borrowed satisfaction, meaning that there is no satisfaction recorded by Assessing officer himself, wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o form an independent opinion on the basis of the material on record that the income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment for the verification." 22. Reliance was also placed on the judgment of Hon'ble Supreme Court in the case of ACIT vs Rajesh Zaveri Stock Brokers Pvt. Ltd. reported in [2007] 161 Taxmann 316 (SC) wherein it is observed as under: ".........At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief." 23. Learned Senior Advocate Mr. Hemani invited the attention of the Court to an RTI application dated 24/12/2021 whereby the Petitioner sought information about the documents which have been relied upon in issuing the Impugned Notice. 24. Reliance was also placed on the decision of Hon'ble Calcutta High Court in case of S.P. Agarwalla alias Sukhdeo Prasad Agarwalla vs. ITO reported in (1983) 140 ITR 1010 (Cal.). 25. It was therefore, submitted that the respondent has not formed any independent opinion about escapem....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in case of Chhugamal Rajpal vs. S.P. Chaliha, reported in (1971) 1 SCC 453 wherein it is held as under: "... Further the report submitted by him under Section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under Section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under Section 148. To Question 8 in the report which reads "whether the Commissioner is satisfied that it is a fit case for the issue of notice under Section148", he just noted the word "yes" and affixed his signatures thereunder. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under Section 148. The important safeguards provided in Sections 147 and 151 were lightly treated by the Income Tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld that where Joint Commissioner nodded in favour of Assessing Officer by writing 'yes' to reasons recorded and accorded permission for reopening of assessment, notice of reopening on that count alone cannot fail holding that assumption of jurisdiction under section 147 was invalid, if application of mind is otherwise demonstrable from material on record. It was therefore, submitted that assessee's contention regarding issuance of notice without jurisdiction is not tenable and the notice issued under section 148 of the Act is as per law. 34. Relying upon the decision in case of ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in (2007) 291 ITR 500 and in case of GVK Gautami Power Ltd. v. Asstt. CIT reported in (2011) 336 ITR 451 it was submitted that the phrase "reasons to believe" means cause or justification for the Assessing Officer to know or suppose that income had escaped assessment. It does not mean that the Assessing Officer should have finally ascertained the facts by legal evidence or conclusion. At the stage of reopening of assessment, the final outcome of the proceedings is not relevant. The only question is whether there was relevant material on which a reaso....
X X X X Extracts X X X X
X X X X Extracts X X X X
....obtaining bogus Long Term Capital Gain. It was submitted that Special Leave to Appeal No.26864/2019 against the said judgment of Delhi High Court was also dismissed vide order dated 22.11.2019. It was therefore, submitted that notice issued under section 148 of the Act is legal and valid and requires no interference by this Court. 39. Having considered rival submissions made by learned advocates for the respective parties and on perusal of the material on record as well as documents placed by the petitioner, it appears that the details of shares purchased and sold as per Contract note, copy of ledger of broker ASE Capital Markets Ltd and copy of bank statement of assessee for purchase of share and sale of shares were produced by the petitioner and the purchase and sale of share have order number, order time, trade number and trade time mentioned in the contract. The assessee purchased 60,000 shares of Kushal Ltd. The assessee has sold 1,05,465/- shares for Rs. 1,09,98,307/- leaving the balance of 1,94,535 shares as closing investments as on 31.03.2016 which is disclosed in the balance sheet and part of demat statement. It, therefore, cannot be said that the petitioner has not di....