TaxTMI 
TaxTMI 
2026 (5) TMI 1133
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....identical, therefore, these appeals and cross-objections have been clubbed and heard together and are being disposed of by way of this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No.647/Rjt/2025, for assessment year (AY) 2013-14, and Revenue's CO.No. 03/RJT/2026, for assessment year 2013-14, have been taken into consideration for deciding the above appeals en masse. 3. The grounds of appeal raised by the assessee, in lead case in ITA No. 647/Rjt/2025 are as follows: "1. Learned A.O. erred in providing incorrect reasons for re-opening of assessment. Hence, the re-opening of assessment is invalid. Hon'ble CIT(A) erred in confirming the same with his observations that the assessee had stated that new reasons provided were correct which was not in reality. 2. Re-opening of assessment u/s. 147 is not valid as the same is based on "Reason to Suspect & not "Reason to believe". Hon'ble CIT(A) erred in confirming the reassessment. 3. Re-opening of assessment u/s. 147 is not valid as the procedure for obtaining approval of Hon. PCIT is not properly followed. Hon'ble CIT(A) erred in confirming the ....
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....Nos.4 and 5, therefore, I dismiss ground Nos.4 and 5, as not pressed. 6. The relevant material facts, as culled out from the material on record, are as follows. The assessee is an individual and assessed to tax under the PAN:AZAPS7092M and has filed his return of income for the assessment year (AY) 2013-14, on 13.11.2013, declaring total income of Rs. 3,93,400/-. The information was received that Shri Jagdish V. Sedani was working as Dy. Executive Engineer, in-charge town planning officer, Jamnagar Municipal Corporation. A FIR was lodged by ACB, Jamnagar, against Sh. Jagdish V. Sedani. As per FIR, Jagdish V. Sedani invested Rs. 24,09,807/-, which was earned by illegal means. Further Sh. Jagdish V. Sedani could not produce documentary evidences regarding moveable and immovable properties held by him and his family members. The assessee was family member of Sh. Jagdish V. Sedani. The assessee credited amount of Rs. 3,22,934/- in the bank account. The assessing officer issued notice u/s. 148 dated 31.03.2021. In response to that the assessee filed objection against reopening of the assessment vide letter dated 08.11.2021 and the same was disposed of by the assessing officer. The as....
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....nt, loans, movable and immovable property etc. In absence of any documentary evidences regarding source of credit entry of Rs. 41,000/- in the bank account No.2511 with The Nawanagar Bank Ltd., the assessing officer made addition of Rs. 41,000/-as unexplained money u/s. 68 of the Act. 7. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before learned CIT(A), who has confirmed the action of the assessing officer. During the appellate proceedings, the assessee has challenged the reopening of assessment under section 147 of the Act and assessee has also challenged the addition made by the assessing officer, on merit. 8. The findings of the Ld. CIT(A) on technical issue, under section 147 of the Act are as follows: During the appellate proceedings, the assessee has challenged the reopening of assessment under section 147 of the Act, stating that reopening of assessment under section 147 of the Act is bad in law. The assessee has submitted before learned CIT(A) that in the reasons recorded, the assessment year, date of filing, acknowledgment no. and returned income were wrongly mentioned by the assessing officer. Further, as mentioned i....
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....id by ld.CIT(A). 9. On merit, the assessee submitted before the learned CIT(A) that assessee, during the assessment proceedings against the Show Cause Notice dated 24.03.2022, submitted its reply on 26.03.2022, wherein the assessee stated to be received Rs. 41,000/- from Ms. Kunjan Jagdish Sedani and submitted copy of income tax return (ITR) bank statement, and computation of total income etc. to establish creditworthiness and genuineness of unsecured loan, therefore, no addition should be made in the hands of the assessee. However, Ld. CIT(A) rejected the above contention of the assessee and confirmed the addition made by the Assessing Officer. 10. Aggrieved by the order of the CIT(A), the assessee is in further appeal before this Tribunal. 11. On technical issue Ld. counsel for the assessee submitted that the reasons recorded by the Assessing Officer is bad in law on several counts for that Ld. Counsel relied on the submission made before Ld. CIT(A) on technical issue. Apart from this Ld. Counsel submitted that approval u/s. 151 of the Act, in all the assessment year is unsigned i.e. not signed by Ld. PCIT, hence the reassessment proceedings initiated by AO, may be quash....
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....ment at to low a rate, assessment which has been made the subject of excessive relief or allowing of excessive loss or depreciation. The case has NOT been selected for scrutiny assessment 10 Reasons for the belief that income has escaped assessment. As per enclosed sheet Date : 26.03.2021 (N. P. Solanki) Income tax Officer, Ward 1(3), Jamnagar. 11 Whether the Pr. Commissioner of Income tax is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice u/s.148. Reasons for reopening of the assessment u/s. 147 of the Income-tax Act, 1961 Name and address of the Assessee: PRAFULLA JAGDISH SEDANI 101, SHALIBHADRA APPARTMENT, MOMAI DAIRY STREET, NEAR VIRAL BAUGH, JAMNAGAR. PAN of the Assessee: AZAPS7092M Assessment Year: 2013-14 Details of the Assessing Officer having jurisdiction over the Assessee: Income-Tax Officer, Ward-1(3), Jamnagar Reasons for reopening of the assessment in case of PRAFULLA JAGDISH SEDANI for A.Y.2013-14. 1. Brief details of the Assessee :- The assessee has e-filed the Return of income for A Y 2013-14 on 13.11.2013 declarin....
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....B/Information/2019-20/453 dtd.13-03-2020 that the assessee has deposited cash into HDFC bank and Bank of Baroda, RTGS from Artham Developers, paid for HDFC Life Policy and also deposited cash in HDFC in minor account aggregating Rs. 69,74,000/- during the year under consideration. Under the circumstances, the source of cash deposits and other transactions remain unexplained. Hence, I have reason to believe that income chargeable to tax of Rs. 69,74,000/- has escaped assessment within the meaning of section 147 of the I. T. Act. Hence it is fit case for re-opening the assessment under section 147 of the Income tax Act, 1961 for the A.Y.2013-14. 7. Escapement of income chargeable to tax: - The income chargeable to tax of Rs. 69,74,000/- has escaped. 8. Applicability of the provisions of section 147/151 of the facts of the case :- In this case no scrutiny assessment u/s. 143(3) of the Act was made. Accordingly, in this case, no assessment was made and the only requirement to initiate proceeding u/s. 147 is reason to believe which has been recorded above (refer paragraphs - 5). The assessee has e-filed the Return of income for A Y 2014-15 vide acknowledgement....
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.... stating that it is a fit case for reopening the assessment, not the Principal Commissioner of Income tax made the signature on such document, hence, there is no formal permission by the Principal Commissioner of Income Tax, to reopen the assessment. The fourth major defect, which I have noted in the reasons recorded, which is dated 26th March 2021, where I find that there is no signature of the Assessing Officer on the reasons recorded by him. The fifth major defect is that approval obtained by the Assessing Officer from Principal Commissioner of Income Tax as per the provision of section 151 of the Act is not signed i.e. it is neither signed digitally nor signed manually. Therefore, on account of these reasons, there is no tangible material in the hands of the assessee, to record the reasons and the reasons so recorded by the Assessing Officer is without authority of law, without permission of Principal Commissioner of Income Tax. Hence, such reasons are not considered valid reasons for reopening u/s. 147 of the Act, and therefore, should be quashed. 16. I also find merit in the submissions of learned Counsel for the assessee to the effect that there is no application of mind ....
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.... has been made the subject of excessive relief or allowing of excessive loss or depreciation. The case has NOT been selected for scrutiny assessment 10 Reasons for the belief that income has escaped assessment. As per enclosed sheet Date : 26.03.2021 (N. P. Solanki) Income tax Officer, Ward 1(3), Jamnagar. 11 Whether the Pr. Commissioner of Income tax is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice u/s.148. Reasons for reopening of the assessment u/s. 147 of the Income-tax Act, 1961 Name and address of the Assessee: PRAFULLA JAGDISH SEDANI 101, SHALIBHADRA APPARTMENT, MOMAI DAIRY STREET, NEAR VIRAL BAUGH, JAMNAGAR. PAN of the Assessee: AZAPS7092M Assessment Year: 2013-14 Details of the Assessing Officer having jurisdiction over the Assessee: Income-Tax Officer, Ward-1(3), Jamnagar Reasons for reopening of the assessment in case of PRAFULLA JAGDISH SEDANI for A.Y.2013-14. 1. Brief details of the Assessee :- The assessee has e-filed the Return of income for A Y 2013-14 on 13.11.2013 declaring total income at Rs. 3,93,396/ -. 2. Brief details....
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....tion received from the ADIT. (Inv.) Jamnagar it is found that, the assesses Bank account was credited By Rs. 322934/- during the year under consideration. The source of this amount remain unexplained and required to be verified. 6. Basis of forming reason to believe and details of escapement of income :- In this case as per report received from the ADIT. (Inv.) Jamnagar, A TEP report No.UIN 110205842Y received in his office in the case of Shri Jagdish V. Sedani (PAN:ALHPS8892A). In the case of Shri Jagdish V. Sedani working as Deputy Executive Engineer in charge of town planning officer in JMC. In the case of Shri Jagdish V. Sedani FIR lodged by ACB Jamnagar, The ACB Jamnagar reported that, Shri Jagdish V. Sedani has invested Rs. 24,09,807/- beyond his capacity, which he has earned by illegal means. Shri Jagdish V. Sedani has not produced any document regarding Movable and Immovable properties held by him and his family members. The above named assessee was also a family members of Shri Jagdish V. Sedani. After providing ample opportunity to the assessee for explain the credit made in his bank account, he has failed to explain the cash/ other credited in his accou....
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..... 148 of the Act. At Sr. No.11 of the form for reopening, the approval of the Principal Commissioner of Income Tax is not there, and there is no comments and no signature of the Principal Commissioner of Income Tax. Hence, the Principal Commissioner of Income Tax has not given his permission or formal permission by making comments in front of column No.11 of the form. There is no signature of the Principal Commissioner of Income Tax for the approval u/s. 151 of the Act, hence the approval is defective. Besides, I note that there is no provision under the Income Tax Act especially u/s. 147 of the Act to record the reasons twice by the Assessing Officer, if the reasons recorded by the Assessing Officer, on first occasion were wrong. The assessing officer, when he came to know his non- application of mind and mistake in the reasons recorded, then the Assessing Officer recorded the new reasons again, which is not permitted as per the provisions of section 147 of the Act. Such provisions are not available u/s. 147 of the Act. When a particular thing is to be done in a particular way then that thing should be done in that particular way only and other mode is not permitted. The scheme of....
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....sessee. Therefore, it is merely a "suspect" not "reason to believe". Therefore, reasons are not recorded based on the tangible material. The assessee submitted that the reason for formation of belief must have rational connection with the relevant bearing on the formation of belief. The words of statute are "reason to believe and not "reason to suspect. For this the ld.Counsel for the assessee relied upon the decision in the case of Vijay Ramanlal Sanghvi [2023] 146 taxmann.com 55 (Gujarat), Harikishan Sunderlal Virmani vs. DCIT [2017]] 88 taxmann.com 548 (Gujarat), PCIT vs. RMG Polyvinyl (1) Ltd [2017] 83 taxmann.com (Delhi) and CIT (Jabalpur) vs. S. Goyanka Lime & Chemical Ltd [2015] 64 taxmann.com 313 (SC). Thus, reopening of assessment was incorrect. As the assessee has also raised the objection, during the assessment stage that the reopening was based on incorrect facts, therefore, the reopening of the assessment was invalid. 20. I rely on the following decisions in which it was held that re-opening of assessment is not valid if the reasons recorded are based on factual error: (i) Sagar Enterprises v. ACIT (2002) 257 ITR 335 (Guj.) "Notice under section 14....
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....are not based on tangible material, that is, "reason to believe". In the new reason for re-opening provided by assessing officer, it is mentioned that the in the case of Shri Jagdish V. Sedani FIR lodged by ACB Jamnagar. The ACB Jamnagar reported that Shri Jagdish V. Sedani has invested Rs. 24,09,807/- beyond his capacity which he has earned by illegal means. Further, it is also mentioned that Mr. Jagdish Sedani failed to explain the cash / other credits in his bank accounts and assessee is a family members of Shri Jagdish V. Sedani. Hence, on the basis of above, assessing officer suspected the escapement of income in case of assessee also and no other tangible material was available with assessing officer for re-opening of assessment. Therefore, I note that contention of assessing officer is not sufficient to prove "Reason to believe" in case of assessee, as the assessing officer is not sure about the escapement of income. The assessing officer only wanted to make roving enquiry by suspecting the entire amount credited in bank account as escaped income. From reading of Section 147 of the Act prior to amendment made by Finance Act 2021, it is clear that the provisions of the sectio....
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....assessment. 10. In case of Inductotherm (India) (P) Ltd. v. M. Gopalan, Deputy CIT reported in (2013) 356 ITR 481, the Division Bench of this Court observed that for a mere verification of the claim, the power of reopening of assessment could not be exercised and the Assessing Officer cannot seek to undertake a fishing or a roving inquiry and seek to verify the facts which are already on record, as if it were a scrutiny assessment. Similar view was expressed by the Division Bench in case of Deep Recycling Industries v Dy. CIT (judgment dated 2.08.2016 passed in Special Civil Application No.3611/2013) as well as in case of Krupesh Ghanshyambhai Thakkar (supra) Applying the above decision to the facts of the present case as well as the reasons recorded to reopen the assessment, we are of the opinion that under the guise of reopening the assessment, the Assessing Officer wants to have a roving inquiry. Under the circumstances, in absence of any tangible material to form an opinion that the income chargeable to tax has escaped assessment and in absence of any satisfaction recorded by the Assessing Officer by merely relying upon the information received from the Office of DCIT ....
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....material for the belief. - Circumstances must exist and cannot be deemed to exist for arriving at an opinion; - Reasons to believe must be honest and not based on suspicion, gossip, rumour or conjecture; - Reasons referred to must disclose the process of reasoning by which the AO holds "reasons to believe" and change of opinion does not confer jurisdiction to reassess; - There must be nexus between material and belief; and - Reasons recorded must show application of mind by the AO. In CIT vs. Kelvinator of India Ltd. 256 ITR 1 the Full Bench of the Delhi High Court was considering a case of reopening u/s. 147 within 4 years from the end of the assessment year. The Court held that when a regular order of assessment is passed in terms of section 143(3) of the Act, a presumption can be raised that such an order has been passed on application of mind. It was held that if it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-j....
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....ome-tax Officer to reopen assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed." 25. The purpose behind the relevant provisions imposing condition precedent for initiating reassessment proceedings is to ensure finality of proceedings. The Act also provides that such reason must be recorded in writing before issue of notice of reassessment so as to judge the existence of such belief before initiating reassessment proceedings by issue of notice u/s.148 of the Act. The above requirements are meant to ensure that powers to initiate reassessment proceedings are not exercised in an arbitrary manner. The Courts have analysed and explained in several cases as to what could be th....