TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 134
X X X X Extracts X X X X
X X X X Extracts X X X X
.... completed u/s 153A/143(3) of the Act, assessing the total income at Rs.nil vide order dated 27.03.2014. Thereafter, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 30.03.2018, which was duly served upon the assessee. The reopening was made after obtaining the necessary sanction from the competent authority u/s 151(1) of the Act. The assessee complied with the said notice by filing the return of income on 25.04.2018, declaring nil income. Thereafter, the notice u/s 143(2) and 142(1) along with questionnaire were issued which were not complied with by the assessee. Thereafter, the show cause notice was issued on 20.11.2018, as to why the assessment should not be completed u/s 144 of the Act which was replied by the assessee by filing the objections to the reopening of assessment vide letter dated 28.11.2018, which the ld. AO disposed off vide letter dated 16.12.2018. The assessee again filed the objections for reopening of assessment. Finally, the ld. AO added Rs.50.00 crores received by the assessee from M/s Pahargoomiah Exports Ltd. u/s 68 of the Act. 2.2. The ld. CIT (A) confirmed the order of the ld. AO on legal issue by uphold....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e and formation of belief of the AO that income has escaped assessment but in the present case except the information received, there was no other material in the possession of the ld. AO to remotely suggest that income has escaped assessment. The ld. AR submitted that before reopening of assessment and recording the reasons, the ld. AO has not conducted any independent enquiry to belief that assessee's income has income escaped. The ld. AR submitted that the documents furnished by the assessee at this stage reveals that the assessee has received a loan of Rs.50,00,00,000/- from M/s Pahargoomiah Exports Ltd., as such it is unfound belief of the ld. AO that Rs.50,00,00,000/- has escaped assessment. The ld. AR submitted that the ld. AO has only reasons to suspect as to the escapement of income and not the reasons to believe. The ld. AR submitted that the ld. AO has straightway come to the conclusion that income has escaped assessment. The ld. AR submitted that the ld. AO is bound to conduct enquiry and apply is mind to the information received from outside sources before initiating the proceedings u/s 147 r.w.s 148 of the Act. In defense of his argument the ld. AR relied on the decis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly, the ld. AR submitted that on the issue of borrowed satisfaction the ld. AO simply stated that information was received which was the4 basis for formation of belief and thus, disposed off the objections filed by the assessee in a cryptic manner and not by way of speaking order. Therefore, proceeding u/s 148 of the Act are bad in law and needs to be quashed. The ld. AR therefore prayed that in view of the aforesaid submissions, the reopening of assessment may kindly be quashed. 4.1. The ld. DR on the other hand relied heavily on the orders of the authorities below by submitting that the reopening of assessment has has been made validly after following the procedure laid down under the Act. The ld. DR submitted that information was received from the investigation wing that assessee has received accommodating entry of Rs.50 crores from M/s Pahargoomiah Exports Ltd. and accordingly, the case of the assessee was reopened. The reopening was made after obtaining the sanction of the competent authority. Therefore, the argument of the ld. AR qua reopening beyond four years being bad in law as the same was based on borrowed satisfaction and without disposal of objection filed by the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ormation of belief by the ld. AO. In our opinion, the ld. AO is supposed to conduct an enquiry on the basis of information received which is trigger which is missing in the present case. We note that the ld. AO simply relied on the borrowed satisfaction of the investigation wing. In our opinion, the reopening of assessment on the basis of borrowed satisfaction without application of mind is not permissible under the Act. The case of the assessee find support from the decisions of Meenakshi Overseas (P.) Ltd. (supra) and Shodiman Investments (P.) Ltd. (supra). 4.4. The Hon'ble Delhi High Court in case of Principal Commissioner of Income-tax-6 vs. Meenakshi Overseas (P.) Ltd. [2017] 395 ITR 677 (Delhi)[26-05-2017], has held that reopening made on the basis of borrowed satisfaction cannot be sustained where the reasons failed to demonstrate live link between the tangible material and formation of the reason to believe that the income has escaped assessment, as under:- "26. The first part of Section 147 (1) of the Act requires the AO to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....PC-1 dated 10.01.2018, has not been followed by recording the satisfaction u/s 147 of the Act. Therefore, the same is in violation of standard procedure laid down by the CBDT vide above circular. For the sake of ready reference, the above-mentioned circular is extracted below:- "The CBDT vide Circular 247/140/2017-A7PC dated 10.01.2018 has laid down a standard procedure for recording of satisfaction u's 147 of the IT Act, 1961. Here the reopening relates to a case where regular assessment was completed u/s 1433/153A of the Act and a period of 4 years from the end of the assessment year had already expired. Thus the standard operating procedure to be followed for recording of satisfaction/recordings reasons for reopening in sach cases as prescribed by the CBDT are as under- a. Brief details of the assessee which includes nature of business, ITR, assessment details should be given. b. Brief details if information collection/received by AO should be given c. Analysis of information collected/received d. Enquiries to be made by the AO as a sequel of information received and result thereof e. Findings of the AO on the basis of an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Supreme Court has laid down the procedure as to the manner of dealing with the objections raised against the notice under section 148 of the Act. The Supreme Court has held that when a notice under section 148 of the Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notice. It was further held that the AO is bound to furnish reasons within a reasonable time and upon receipt of reasons, the noticee is entitled to file an objection to issuance of notice and AO is bound to dispose of the same by speaking order. In the case of SABH Infrastructure Ltd. (supra), the Delhi High Court, has held that the exercise of considering the assessee's objections to the reopening of the assessment is not a mechanical ritual. It is a quasi judicial function. The order disposing of the objection should deal with each objection and give proper reason for conclusion. The order should reflect proper application of mind." 4.8. Further the Hon'ble CESTAT in the case of Amway India Enterprises Pvt. Ltd. vs. C.S.T., Delhi (14.05.2015-CESTAT - Delhi): 2015/39/S.T.R.1006(Tri. - Del), has held as under: Impugned o....