TaxTMI 
TaxTMI 
2025 (3) TMI 1177
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....CASS. Accordingly, statutory notice u/s 143(2) of the Act was issued and served on the assessee and thereafter the Assessing Officer issued a notice u/s 142(1) of the Act along with a questionnaire which was duly served on the assessee, in response to which the AR of the assessee filed the requisite details from time to time. The Assessing Officer completed the assessment u/s 143(3) of the Act on 31.01.2014 determining the total income of the assessee at Rs.13,17,230/- and agricultural income of Rs.7,22,800/-. 3. Subsequently, a search action u/s 132 of the Act was conducted in the premises of the assessee on 04.11.2017. Thereafter, the Assessing Officer reopened the assessment u/s 147 of the Act on 26.03.2018 by recording the following reasons: "02. In response to notices issued, Shri H.G. Sharma, CA Authorized Representatives attended from time to time and explained the return. During the course of assessment proceeding, the assessee has requested to provide the reasons for reopening of the case u/s 148 of the Act. The reasons recorded for reopening have been forwarded to assessee on 12/09/2018 which is reproduced as under: "Shri Manoj Chhajed is engaged in t....
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....d to provide bogus accommodation entries. These companies are paper companies incorporated for making an arrangement so that unaccounted cash can be brought back in the books of accounts of beneficiary without paying any taxes. The details of these companies are as under: Sr. No Name of the Company Address PAN Controller Director 1 M/s. Divyadrishti Traders Pvt Ltd 163, M G Road, 3^rd Floor, Kolkata AABCD8146J Anuj Agarwal 1. Kinkar Bhattacharya 2. Sukanata Chatterjee 2 M/s. Divyadrishti Merchants Pvt Ltd AABCD8147K Parveen Agarwal 1. Umesh Singh 2. Ranjit Gupta 3 M/s. Abhilasha Exports Pvt Ltd. 95A, C R Avenue, Kolkata AAHCA5909J 4 M/s. Pushpanjali Commotrade Pvt Ltd 3, Saklat Place, Kolkata AAECP9727C 5 M/s. Parmeshwar Merchandise Pvt Ltd AAECP9821B 6 M/s. Sampark Advisory Services Pvt Ltd 2B, Grant Lane, Kolkata AAJCS1019D The investigation report revealed that the Directors of above said companies are of no means and they are residing in some chawl and not aware about said companies. They are known to the controllers of the companies and the controllers of the companie....
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....-15 3 Q. 25 What is the modus operandi in respect of the obtaining of accommodation entries from the bogus Kolkata Companies. Ans: For obtaining these accommodation entries we used to give cash to the Sushil Agarwal through angadias or any third person and as advised by him. For equal amount they used to sent the RTGS. Q.26 You are regularly paying interest on such accommodation entries. Do you receive back in cash the interest paid? Ans: The interest amount paid by cheque was received back in cash after deducting some commission by them. Q.27 Why were you obtaining unsecured loans from such bogus companies? Ans: The accommodation entries by way of unsecured loans were taken to purchase properties. I did not have the amounts in the bank accounts but had the cash. Therefore to purchase the properties, I had to do this exercise." The return of income for AY 2011-12 filed on 29/09/2011 by the assessee is in Form ITR-4. On going through the return, the assessee is found to be carrying on proprietary business in the name and style of M/s Siddhi Agency. The Balance-sheet as on 31/03/2011 of the proprietary business forming....
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....ed back to the total income of the assessee. Penalty u/s 271(1)(c) of Income-tax Act, 1961 initiated separately for concealment of income." 5. The assessee filed an appeal before CIT(A) on 11.02.2020. In the meantime, the Ld. PCIT examined the records and noted that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. He noted that during the year under consideration the assessee has taken unsecured loans from various persons including individuals and the outstanding balance of unsecured loan was Rs.12,16,17,647/-. Further, during the course of search action in the case of Ashok B. Jain and others on 04.11.2017, the case of the assessee was also covered. It was found that the assessee has obtained accommodation entries in the form of unsecured loans from shell companies based in Kolkata and such unsecured loan entries are to the tune of Rs.10,42,46,375/-. It was proved by the Investigation Wing that these companies from whom the assessee obtained loans are shell companies and are not doing any business. Therefore, the case of the assessee was reopened u/s 147 of the Act. However, the Assessing Officer in the order passed u/s 143(3) /....
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....eceived by the assessee in the form of unsecured loans and amount of Rs.7,62,67,463/- which was returned back to these companies The AO held that these are mere accommodation entries and considerable amount of money has gone back to these companies. Since the amount of Rs 7.62 crore has gone back to these companies, the addition has been made in the form of net credit available to the assessee during the Financial year 2010-11 by considering the totality of facts and circumstances. 6.2.2 However, during the course of search action under section 132 of the act in the case of assessee, the statement of the assessee was recorded u/s 132(4) of the Act. In the statement recorded under oath the assessee admitted to the fact that he had taken accommodation entries from Kolkata based companies by providing unaccounted cash to them through the mediators by Hawala Channels. In the statement recorded (reproduced in supra in para 3), the assessee explained the detailed modus operandi through which such accommodation entries were taken by routing the unaccounted cash. 6.2.3 Thus, it is clearly seen from the facts revealed in the statement that the assessee has duly admitted to....
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....f Rs.7,62,67,463/- 6.3 Payment of Commission to the entry provider: 6.3.1 As discussed above, it can be seen from the statement of the assessee (replies to question no. 25 & 26) that the accommodation entries were taken by him from Kolkata based entities by paying equivalent amount in cash. Since, these transactions are arranged through entry providers, the same would have been done for a commission to be paid in cash. This was confirmed by the assessee in his statement recorded on oath, in response to question no.26. 6.3.2 Hence, it is a fact that the assessee has paid commission to these Kolkata based shell companies. However, as a quantum was not specified it can be assumed that atleast an amount equivalent to not less than 2% of the total entry amount, would have been paid from unaccounted cash for providing accommodation entry. Thus, the assessee would have incurred this commission expenditure calculated at the rate of 2% on the amount of accommodation entry taken of Rs.10,42,46,373/-, which comes to Rs.20,84,927/-. The same is also required to be added to the total income of the assessee. 6.4 Interest Expenditure claimed thereon: F....
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.... u/s 143(3) of the Act dtd. 28/12/2018 for AY 2011-12, passed by the Assessing Officer as erroneous & prejudicial to the interest of revenue. 9.0 Accordingly, the assessment order u/s 143(3) dtd. 28/12/2018 for AY 2011-12, is hereby set aside to the file of assessing officer to be framed de-novo. While making fresh assessment order the Assessing officer shall take into account the issues already considered/additions made in the order dated 28/12/2018 and complete the assessment after making necessary verification of the issues discussed in para 6 Supra in this order, after giving reasonable, opportunity of being heard to the assessee." 6. The Assessing Officer thereafter passed the order u/s 143(3) r.w.s. 263 of the Act on 23.03.2022 determining total income of the assessee at Rs.10,78,45,690/-, the details of which are as under: Income assessed as per order u/s 143(3) r.w.s. 147 dated 28/12/2018 Rs. 2,92,96,142/- Add: (i) Addition u/s 68 on account of accommodation entries Rs. 7,62,67,463/- (ii) Addition u/s 69C on account of commission paid being unexplained Rs. 20,84,927/- (iii) Addition on account of interest expe....
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....n the Re-Assessment Order as per the directions issued by the Commissioner u/s 263 of the Income Tax Act, 1961 and further, the Commissioner of Income Tax (Appeals) erred in confirming such enhancement. 6. Ld. Assessing Officer erred in making an addition of Rs.10,42,46,375/- (Rs.2,79,78,912/- (original reopening order) and Rs.7,62,67,463/- (fresh order in pursuance of 263 order) which are genuine loan transactions and erred in holding the transactions as accommodation entries. Further, Ld. Commissioner of Income Tax (Appeals) erred in confirming the same. 7. Ld. Assessing Officer erred in making an estimation of commission expenditure on loans and erred in making an addition of Rs. 20,84,927/- and further, Ld. Commissioner of Income Tax (Appeals) erred in confirming the same. 8. Ld. Assessing Officer erred in disallowing the interest expenditure claimed in the returns amounting to Rs.1,97,159/- and further, Ld, Commissioner of Income Tax (Appeals) erred in confirming the same. 9. The Appellant craves leave to add, alter, amend, vary or delete any of the aforesaid grounds. 9. The assessee has also filed an additional ground in ITA No.1178/PUN/....
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....ssessee u/s 147 of the Act and not following the mandatory statutory provisions of section 153A has clearly violated the provisions of law. Since the issue involved in the present case is to assess/re-assess the income as per provisions of section 153A of the Act is a jurisdictional issue and it is mandatory to assume the said jurisdiction u/s 153A of the Act where the assessment / re-assessment is consequent to a search action, therefore, the re-assessment proceedings initiated by the Assessing Officer u/s 147 of the Act instead of u/s 153A of the is viod ab initio. For the above proposition, the Ld. Counsel for the assessee relied on the decision of Mumbai Bench of the Tribunal in the case of Nilesh Bharani vs. DCIT vide ITA No.612/MUM/2020, order dated 28.02.2023. 13. The Ld. Counsel for the assessee in his second plank of argument submitted that the additions were based entirely on the basis of the investigation report from the Kolkata Investigation Wing dt 27.04.2015 on the basis of searches on some shell companies which covers the year under consideration as per the provisions of section 153C of the Act as it fell within the 6 year limitation period. Referring to question ....
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....oceedings. Referring to the reasons recorded, the Ld. Counsel for the assessee submitted that there is no reference by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of assessment. Since the notice u/s 148 of the Act was issued on 26.03.2018, the same is beyond a period of four years from the end of the relevant assessment year. Since there is no allegation of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of assessment, therefore, such re-assessment notice which is issued beyond a period of four years from the relevant assessment year, is bad in law. For the above proposition, he relied on the following decisions: i) ITO vs. Kayathwal Estates Pvt. Ltd. (2022) 442 ITR 507 (SC) ii) Vibrant Securities Pvt Ltd. vs. ITO (2023) 455 ITR 58 (Bom) iii) Gateway Leasing Pvt. Ltd. vs. ACIT (2020) 426 ITR 228 (Bom) 15. The Ld. Counsel for the assessee in his fourth plank of argument submitted that the re-assessment order u/s 143(3) r.w.s. 147 of the Act is invalid since the same is mere change of opinion....
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....nt was completed u/s 143(3) of the Act and in the reasons recorded there is no allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of the assessment, such re-assessment proceedings being not in accordance with law, has to be quashed. Even otherwise also, since the re-assessment proceedings initiated without any tangible material and merely on the basis of report of the Investigation wing, Kolkata, therefore, the same is also not in accordance with law and has to be quashed. 18. The Ld. DR on the other hand strongly relied on the orders of the Assessing Officer and Ld. CIT(A) in conforming the validity of re-assessment. Referring to the decision of the Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC), he submitted that the Hon'ble Supreme Court in the said decision has held that while examining the requirement of the issue of notice u/s 148 of the Act all that is required for issue of such notice u/s 147 of the Act is "reason to believe" that the income has escaped assessment. He submitted that in the instant ca....
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....commodation entry operators were confronted with him during the search proceedings where he has accepted that the true nature of loans was accommodation entries. Therefore, it is clear that at the time of original assessment the assessee had withheld the true facts which were within his exclusive knowledge. 21. So far as the argument of the Ld. Counsel for the assessee that the reasons so recorded does not contain any failure on the part of the assessee to fully and truly disclose all material facts necessary for completion of assessment is concerned, the Ld. DR drew the attention of the Bench to the decision of the Hon"ble Bombay High Court in the case of Kalsha Builders (P.) Ltd. vs. ACIT vide Writ Petition No.3656 of 2018, order dated 08.02.2019 and submitted that the Hon"ble High Court in the said decision has held that if the reasons sufficiently indicate that there was no full and true disclosure by the assessee, same is sufficient for meeting the requirement provided u/s 147 of the Act. 22. So far as the argument of the Ld. Counsel for the assessee that the Assessing Officer could have issued notice u/s 153A or 153C of the Act instead of u/s 147 of the Act is concerned....
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....t be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief." Bombay HC in the case of PCIT vs M/s Shodiman Investments Pvt Ltd. (2018) "11. Further, a reading of the entire decision, it is clear that the reasonable belief on the basis of tangible material could be, prima facie, formed to conclude that income chargeable to tax has escaped assessment. Mr. Mohanty, learned Counsel is ignoring the fact that the words 'whatever rea....
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.... the information from AO or CIT(A), in fact the assessee has submitted the documents during the original proceedings only. Therefore, the above referred decision will not apply to the present case. e. With respect to the admission in the statement about the acceptance of accommodation entries, the appellant has already retracted from the statement on 07.03.2018, much before the passing of assessment order. However, the AO has completely ignored the retraction filed by the assessee. f. Gajjam Chinna Yellappa v. Income-tax Officer (2014) (Telangana and Andhra Pradesh HC) "12... The Assessing Officer made an effort to depict that the withdrawal or retraction on the part of the appellants is not genuine. We do not hesitate to observe that an Assessing Officer does not have any power, right or jurisdiction to tell, much less to decide, upon the nature of withdrawal or retraction. His duty ends where the statement is recorded. If the statements are retracted, the fate thereof must be decided by law meaning thereby, a superior forum and not by the very authority, who is alleged to have exerted force." 8. The appellant has discharged the primary onus as the appel....
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....ger of Sampark Advisory Services Pvt. Ltd. ii. Confirmation from parties g) Ledger of Divyadrishti Traders Pvt. Ltd. h) Ledger of Divyadrishti Merchants Pvt. Ltd. i) Ledger of Parmeshwar Merchandise Pvt. Ltd. j) Ledger of Pushpanjali Commotrade Pvt. Ltd. k) Ledger of Sampark Advisory Services Pvt. Ltd. iii. Quarterly Return Statements and Challans and Interest Ledger" 26. We find on the basis of various replies given by the assessee, the Assessing Officer passed the order u/s 143(3) of the Act on 31.01.2014 determining the total income at Rs.13,17,230/- and agricultural income of Rs.7,22,800/-. We find the Assessing Officer reopened the assessment u/s 147 and the notice u/s 148 of the Act dated 26.03.2018 was issued and served on the assessee, in response to which the assessee submitted that the original return filed may be treated as in response to the notice issued u/s 148 of the Act. The assessee thereafter asked for the reasons and the Assessing Officer supplied the same which has already been reproduced in the preceding paragraphs. A perusal of the reasons so recorded, nowhere shows that there is any allegation ....
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.... 29. We find the Hon"ble Bombay High Court in the case of Vibrant Securities Pvt Ltd vs ITO (supra) has observed as under: "9. We have heard learned counsel for the parties. 10. It is settled law that the validity of reassessment proceedings have to be tested on the touchstone of the reasons recorded by the Assessing Officer, which reasons can neither be added nor substituted by pleadings. 11. Admittedly, the assessment is sought to be reopened beyond the period of four years from the end of the relevant assessment year 2014-15. Since this is a case where an order under section 143(3) of the Act had been passed for the relevant assessment year, the Assessing Officer, in addition to satisfying the jurisdictional conditions of 'reason to believe' that income chargeable to tax had escaped assessment, had to show that there was failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment during the original assessment proceedings. 12. A reference to the reasons recorded would clearly show that not a whisper has been made by the Assessing Officer that there was any such failure on the part of th....
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....said issue had been gone into or disclosed by the assessee during the scrutiny assessment proceedings. The petitioner, on the other hand, has placed on record details of notices and the replies submitted thereto, as referred to in the preceding paragraphs which would show that the information with regard to all transactions had been sought for and supplied by the petitioner. 16. In Aroni Commercials Ltd. Vs. Deputy Commissioner of Income-tax-2(1)2, it was held : "14..........We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contained reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) o....
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.... if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief." 19. In our opinion, the jurisdictional conditions have not been met with in the present case and that reassessment proceedings are nothing but a 'change of opinion', and therefore, would not furnish a sound basis to the Assessing Offcer in the formation of his belief that income had escaped assessment. 20. Be that as it may, the present petition is allowed. Order impugned, dated 8th February 2022 rejecting the objections so also the impugned notice dated 31st March 2021 under section 148 of the Act are held to be unsustainable and are accordingly set aside. No order as to costs." 30. We find the Hon"ble Bombay High Court in the case o....
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....ter expiry of four years but before expiry of six years. 29.1. Of course the limitation point though pleaded in the writ petition, has been given up by the Petitioner following filing of affidavit by the Respondents which clearly shows that the re-opening notice was issued within the limitation period of six years. 30 In such a case, the first condition for invoking section 147 is that the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment for the relevant assessment year. The second condition is that the Assessing Officer must arrive at the satisfaction that income chargeable to tax has escaped assessment for the said assessment year by reason of the failure on the part of the assessee to make a return under section 139 or to respond to a notice under section 142(1) or section 148 or due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. 31 The key or crucial expressions appearing in section 147 are "reason to believe" and "failure to disclose fully and truly all material facts necessary for assessment". 3....
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....eason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to make a return under section 139 for the asessment year under consideration or to disclose fully and truly all material facts necessary for his assessment for that year. 32.1 Both the two conditions must co-exist in order to confer jurisdiction on the Income Tax Officer. Supreme Court observed that duty is cast upon the assessee to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income Tax Officer the books of accounts or other evidence from which material evidence with due diligence could have been discovered by the Income Tax Officer will not necessarily amount to disclosure contemplated by law but the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that, his duty ends. It is for the Income Tax Officer to draw the correct inference from the primary facts. If the Income Tax Officer draws an inference, which appears subsequently to be erroneous, it would amount to change of opinion and mere change of opinion w....
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.... 34 In Prashant S. Joshi -vs- ITO, 324 ITR 154, this Court observed that the basic postulate which underlines section 147 is formation of the belief by the Assessing Officer that any income chargeable to tax has escaped assessment for any assessment year. In other words, the Assessing Officer must have reason to believe that income chargeable to tax for a particular assessment year has escaped assessment for the relevant assessment year before he proceeds to issue notice under section 148. The reasons which are recorded by the Assessing Officer for re-opening an assessment are the only reasons which can be considered when the formation of the belief is impugned. Recording of reasons distinguishes an objective from a subjective exercise of power and is a check against arbitrary exercise of power. The reasons which are recorded cannot be supplemented subsequently by affidavits. The question as to whether there was reason to believe within the meaning of section 147 that income has escaped assessment must be determined with reference to the reasons recorded by the Assessing Officer. Even in a case where only an intimation is issued under section 143(1), the touchstone to be applied i....
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....avit (s). 39 Therefore, in the light of the discussions made above, we are of the view that the attempt made by Respondent No.2 to reopen the concluded assessment is not at all justified and consequently the impugned notice cannot be sustained." 31. We find the Co-ordinate Bench of the Tribunal in the case of DCIT vs. Vista Nirman Pvt. Ltd. vide ITA No.1340/PUN/2023 and CO No.21/PUN/2024, order dated 05.08.2024 has observed as under: "30. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed by both the sides. We have also considered the various decisions cited before us. Before deciding the appeal of the Revenue challenging the order of CIT(A) deleting the addition of Rs.24,11,50,000/- made by the Assessing Officer u/s 68 of the Act, we would first like to adjudicate the grounds raised by the assessee in the CO challenging the validity of re-assessment proceedings. It is an admitted fact that the original assessment was completed u/s 143(3) of the Act on 21.03.2014 and the Assessing Officer in the order passed u/s 143(3) of the Act has observed as under: "1.3 The a....
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....having any allegation of any failure on the part of the assessee to disclose fully and truly all the material facts for completion of assessment for reopening of the assessment has observed as under: "7. It is a settled position in law that where assessment has been completed by scrutiny under Section 143(3) of the Act, an assessment cannot be reopened beyond a period of four years from the end of the relevant assessment year in the absence of any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. This is the mandate of the first proviso to Section 147 of the Act. In the present case, it is undisputed position that the regular assessment for Assessment Year 2010-11was completed under Section S.R.JOSHI 5 of 8 wp-14302-2018 143(3) of the Act. The impugned notice has been issued on 27 th March, 2018 i.e. admittedly, beyond a period of four years from the end of the relevant Assessment Year 2010-11. Thus, the reasons in support of the impugned notice in cases where assessments sought to be re-opened is beyond a period of four years from the end of the relevant assessment year where assessment is completed u/s. 143(3) of....
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.... Court in Hindustan Lever v/s. R. B. Wadkar 268 ITR 332 - wherein this Court has held as under:- " The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assesssee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or declaration is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach the conclusions as to whether there was failure on the part of the assessere to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessin....
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....es - Whether law prevailing on date of issue of impugned notice would apply to instant case, and since new section 147 had come into force with effect from 1-4-1989, provisions of that section were applicable - Held, yes - Whether since admittedly there was no failure on part of petitioner to make return or to disclose fully and truly all material facts necessary for assessment, proviso to new section, which bars issue of notice under section 148 after expiry of four years from end of relevant assessment year, squarely applied to fact of instant case and, therefore, impugned notice was barred by limitation - Held, yes - Whether since notice under section 148 was without jurisdiction, there was no merit in plea that petitioner was to be relegated to alternative remedy - Held, yes." 34. We find the Hon"ble Bombay High Court in the case of Multiscreen Media (P.) Ltd. vs. Union of India (2010) 324 ITR 48 (Bom) has observed as under: "10) In dealing with the merits of the rival contentions, it must at the outset be noted that during the course of the proceedings under section 143(3), the Assessing Officer was duly apprised of the circumstance that the petitioner was ac....
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....ished in the notice for reassessment would at the highest indicate that according to the Assistant Commissioner of Income Tax, allocation of expenses as between the petitioner and the foreign principal ought to have been originally considered by the Assessing Officer when the order of assessment was passed under section 143(3). That however would not give a valid reason to reopen the assessment beyond a period of four years, even assuming that the Assessing Officer had erred in not doing so, unless there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. Absent the existence of the jurisdictional condition precedent, assessment cannot be reopened beyond a period of four years after the expiry of the relevant assessment year, as has been done in the present case. In the circumstances, the notice for reassessment is liable to be quashed and set aside solely on the ground that the Revenue has failed to establish the existence of the jurisdictional condition precedent to the exercise of the power to reopen an assessment beyond a period of four years of the expiry of the relevant assessment year. 13) The petition w....
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....in Idea Cellular Ltd. v/s. Deputy Commissioner of Income Tax 301 ITR 407 has expressly negatived on identical contention on behalf of the Revenue. The Court held that once all the material was placed before the Assessing Officer and he chose not to refer to to the deduction/ claim which was being allowed in the assessment order, it could not be contended that the Assessing Officer had not applied his mind while passing the assessment order. Moreover in this case, it is evident from the letter dated 6 th August, 2007 addressed by the Assessing Officer to the Petitioner containing the reasons recorded for issuing the impugned notice also record the fact that during the regular assessment proceedings, the Petitioner has been asked to furnish details in support of the claim for exemption under Section 80IA/IB of the Act. The letter further records that the details sought for were furnished and it is now observed that there has been a disproportionate distribution of expenses between various units belonging to the Petitioner for claiming deduction under Section 80IA/IB of the Act. This is a further indication of the fact that the Assessing Officer had during the regular assessment proce....
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....h issue where the assessee"s submissions are not acceptable to the Revenue, then the occasion to decide a lis would arise i.e. adjudication. However, where the Revenue accepts the view propounded by the assessee in response to the Revenue"s query, the Assessing Officer has certainly to form an opinion whether or not the stand taken by the assessee is acceptable. Therefore, it must follow that where queries have been raised during the assessment proceedings and the assessee has responded to the same, then the non-discussion of the same or non-rejection of the response of the assessee, would necessarily mean that the Assessing Officer has formed an opinion accepting the view of the Assessee. Thus an opinion is formed during the regular Assessment proceedings, bars the Assessing Officer to reopen the same only on account of a different view. 12. Thus we find that the reasons in support of the impugned notice is the very issue in respect of which the Assessing Officer has raised the query dated 25 September 2017 during the assessment proceedings and the Petitioner had responded to the same by its letters dated 10 December 2017 and 21 December 2017 justifying its stand. The non....
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....s. The assessee was also called upon to furnish various other details which were submitted and the Assessing Officer completed the assessment accepting loss Rs.87,362/-. Subsequently, the case of the assessee was reopened on the ground that the assessee is a new company incorporated on 15.03.2007 only. It is not clear that how can a newly incorporated company with no proven track record command such a huge share premium in the open market that too at 1284.2 times of the face value of a share. The intrinsic value of shares is in fact much less than what it has got. The assessee objected to the reasons recorded which were rejected by the Assessing Officer. The assessee therefore, filed a Writ Petition before the Hon"ble High Court challenging the validity of re-assessment. The Hon"ble High Court quashed the re-assessment holding that the assessment was reopened on account of mere change of opinion which is not in accordance with law. The relevant observations of the Hon"ble High Court read as under: "4. It is petitioner's case that the return of income having been thoroughly scrutinised and an order under section 143 of the Act having been passed, there is no fresh mater....
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....ce, there is no fresh material coming into existence in relation to issue of shares and receipt of share premium. Therefore, the reopening is based on a mere change of opinion. Respondent no.1 has no power of review by engaging in a roving or fishing inquiry under the Act. (d) The charge of tax under the Act is on income. The receipt of share premium on the issue of fresh shares is on capital account and constitutes a capital receipt, which is not chargeable to tax under the Act. There is no provision under the Act to tax the receipt of share premium for the assessment year under consideration. As held in Vodafone India Services (P) Ltd. Vs. Union of India the amount received on issue of shares is admittedly a capital account transaction not separately brought within the definition of income during the relevant period. Thus, capital account transaction not falling within the statutory explanation cannot be brought to tax. As held in SLS Energy (P) Ltd. Vs. Income Tax Officer 2 where a similar situation was considered and the Division Bench of this court came to a conclusion that there was neither any basis for the AO in his reason to believe that income had escape....
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.... of the sum received which is sought to be given by assessee, the ITO has the jurisdiction to enquire from assessee the nature and source of the amount. (b) We have to reject this submission because this is not the basis on which the reasons to believe has been arrived at. It is settled law that the reasons to believe cannot be improved upon. In the affidavit in reply opposing the petition also there are no specific denials. FINDINGS 7 Petitioner's case can be split into three parts:- a) The AO having raised the queries during the course of scrutiny assessment regarding share premium charged and petitioner having explained vide its replies, the issue of share premium, was the subject of consideration during the assessment proceedings even though, it has not been discussed in the assessment order and therefore, re-opening on the same issue of share premium is based on change of opinion. b) Whether the reasons to believe that income has escaped assessment for exercising power under Section 147 of the Act has to be that of the AO and not based on dictates of superior officers. Since admittedly, it is based on dictates of superior office....
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....ng the course of assessment proceedings and this change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Paragraph 14 of the Aroni Commercials Ltd. (Supra) reads as under: 14) We find that during the assessment proceedings the petitioner had by a letter dated 9 July 2010 pointed out that they were engaged in the business of financing trading and investment in shares and securities. Further, by a letter dated 8 September 2010 during the course of assessment proceedings on a specific query made by the Assessing Officer, the petitioner has disclosed in detail as to why its profit on sale of investments should not be taxed as business profits but charged to tax under the head capital gain. In support of its contention the petitioner had also relied upon CBDT Circular No.4/2007 dated 15 June 2007. (The reasons for reopening furnished by the Assessing Officer also places reliance upon CBDT Circular dated 15 June 2007). It would therefore, be noticed that the very ground on which the notice dated 28 March 2013 seeks to reopen the assessment for assessment year 2008-09 was considered by the Assessing Offic....
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..... This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment." (emphasis supplied) 10. In SLS Energy Ltd. (Supra) the reasons for reopening were similar. In that case also the balance sheet indicated that the assessee had issued paid up capital of Rs. 77,00,000/- and Charged Security Premium at Rs. 6,79,32,00,000/- during the year under consideration. According to the AO an analysis of the details and information of the balance sheet shows that Share Premium and value of the shares cannot be justified on the basis of 'intrinsic valuation of shares' and 'Net Asset Value Method', i.e., Share Premium charged is found excessive as the worth of the company is not found in that extent. Hence, there was no justification for issue of shares at such a huge premium. In that case also, petitioner had argued that the very basis for reopening was misconceived inasmuch as, the receipt of premium on issuance of shares was not 'receipt of income', but was a 'capital receipt', and, therefore, could never become the basis for reopening on the ground that income had escaped a....
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....ether in the aforementioned facts the assessing officer could be said to have his reason to believe that income had escaped assessment and whether the material with the said assessing officer could be said to have any tangible material justifying the reopening is the issue that falls for our consideration. 27. There is no dispute that in Vodafone India Services ( P.)Ltd.'s case (supra) it stands concluded that receipt of share capital including the premium was on capital account and gave rise to no income. The amendments incorporated in the definition of income under section 2(24)(xvi) and Section 56(2)(viib) of the Act were amendments which were to apply only from 01st April, 2013 i.e. assessment year 2013-14. The amendment to Section 68 by incorporation of the first Meera Jadhav 15/18 203-wp-804-15(judgment).doc proviso also came into effect by virtue of the Finance Act, 2012 w.e.f. 1st April, 2019 and was to apply for the assessment year 2013-14 and onwards, and, therefore, since the amendments were not applicable to the assessment year in question i.e. 2010-11, there would be no basis for the assessing officer's reason to believe that income had escaped assessm....
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....are premium but not doubting the transaction itself Meera Jadhav 16/18 203-wp-804-15(judgment).doc whereby the share premium had been received. On this ground alone, the impugned notice and order on objections have to be quashed and set aside. 12 In any event, the amendments incorporated in the definition of in- come under section 2(24)(xvi) and Section 56(2)(viib) of the Act were amendments which were to apply only from 1st April, 2013, i.e., assessment year 2013-14. The amendment to Section 68 of the Act by incorporation of the first proviso also came into effect by virtue of the Finance Act, 2012 w.e.f. 1st April, 2019 and was to apply for the assessment year 2013-14 and onwards. Therefore, since the amendments were not applicable to the assessment year in question, i.e., 2009-10, there would be no basis for the AO to form a reason to believe that income had escaped assessment for the said assessment year. 13 Moreover, if one considers the reasons recorded, the AO simply says how a company with no proven track record incorporated on 15 th March 2007 command such a huge share premium. The AO has not bothered to read the balance sheet or the valuation report. AO&....
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....spicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14.Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the Meera Jadhav 18/18 203-wp-804-15(judgment).doc DDIT (Inv.) This is clearly in breach of the settled position in law that re- opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction." (emphasis supplied) 15 In the circumstances, the Rule is made absolute in terms of prayer c....
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....the assessee in ITA No.1178/PUN/2023 is accordingly allowed. ITA No.2017/PUN/2024 33. There is a delay of 291 days in filing of this appeal before the Tribunal, for which the assessee has filed a condonation application along with an affidavit explaining the reasons for such delay. After considering the contents of the condonation application filed along with the affidavit and after hearing the Ld. DR, the delay in filing of the appeal is condoned and the appeal is admitted for adjudication. 34. The grounds raised by the assessee are as under: 1. The ld CIT(A) has erred in confirming the action of the AO in the assessment order passed u/s 143(3) r.w.s.147 r.w.s.263 without appreciating the fact and contention of the appellant that order passed by the AO u/s 143(3) r.w.s. 147 is bad in law and void ab initio. 2. The Id AO erred in enhancing the assessment made in the reassessment order as per the directions issued by the CIT u/s 263 of the Income Tax Act 1961 and further the CIT(A) erred in confirming such enhancement. 3. The Id CIT(A) has erred in confirming addition of Rs.7,62,67,463/-made by the AO in the assessment order passed u/s 143(3) r.w.....