TaxTMI 
TaxTMI 
2025 (10) TMI 1447
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act to reopen the assessment for the assessment year 2009-10 together with the order of Respondent dated 24/02/2016 dealing with the Petitioner's objections enclosed as Annexure - "G" bearing F.No. AAACD7081R/DCIT-C-2[1][1]/2009-10; (b) Issue a Writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India ordering and directing Respondent to forthwith withdraw and cancel the notice dated 05/09/2014 enclosed as Annexure- "A" bearing AAACD7081R/DCIT-C-11[1]/BLR/148/2014-15 dated 05/09/2014 issued by Respondent under section 148 of the Act to reopen the assessment for the assessment year 2009-10 together with the order of Respondent dated 24/02/2016 dealing with the Petitioner's objections enclosed as Annexure "G" bearing F.No. AAACD7081R/DCIT-C-2[1][1]/2009-10; (c) Issue a Writ of Prohibition or a writ in the nature of Prohibition or any other appropriate writ, order or direction under Article 226 of the Constitution of India ordering and directing Respondent to permanently refrain from giving effect to and/or proceeding further by way of reassessment or otherwise in any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....025. It is also submitted that the aforesaid judgment in Sesa Sterlite's case (supra), has been followed by the Bombay High Court and Allahabad High Court and Gujarat High Court in the following judgments: (i) ACIT Vs. M/s. Venture Real Estate & Another - Speal Leave to Appeal (C) No.4575/2020 dated 05.03.2025. (ii) Sociedade de Fomento Industrial (P) Ltd. Vs. ACIT (2024) 464 ITR 261 (Bom.). (iii) Mudra Exports Vs. DCIT (2024) 161 taxmann.com 811(All.). (iv) Balaji Mines and Minerals Pvt. Ltd. And Others v. ACIT (TS-5200-HC-2024 (Bombay)-O) In view of the above judgments, It is submitted that the impugned notice and all further proceedings thereto including the impugned order deserves to be quashed. 4. Per contra, learned counsel for the respondent submits that there is no merit in the petition and the same is liable to be dismissed. 5. Before adverting to the rival contentions, it is necessary to extract the reasons recorded in writing by the respondents, which form the basis of the impugned notice at Annexure-E dated 02.11.2015, which are as hereunder: "To The Principal Officer, M/s Deccan Mining Syndicate Pv....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Taking this into account, the actual sale value of the above transaction will be Rs.19,83,30,260-00 (Rs.91231920 x 100 / 46) and the concealed value of sale price will be Rs.10,70,98,340/- (Rs.19,83,30,206 - Rs. 9,12,31,920). This has resulted in under assessment to the extent of Rs.10,70,98,340/-. In view of the above, the taxable income to this extent has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the AY 2009-10. Under the circumstances, I have the reason to believe that the taxable income to the extent of Rs.10,70,98,340-00 has escaped assessment within the meaning and scope of section 147 of the Income Tax Act, 1961 for the AY 2009-10." 3. It is further directed that notice u/s 142(1) may be complied with and documents as called for in the notice u/s 142(1) dated 05.10.2015 may be submitted by 09-11-2015. Yours faithfully, Sd/- (Dr. K.J. Divya, I.R.S.) Deputy commissioner of Income-tax, Circle -2(1)(1), BANGALORE" 6. The reasons recorded by the respondent for issuance of notice under Section 148 of the I.T. Act, for the assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onnection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been escapement of income of the assessee from assessment in the particular year. In case such reassessment is to be made in respect of an assessment made under Sub-section (3) of Section 143 or 147 after the expiry of four years from the end of the relevant assessment year, the Assessing Officer must additionally believe that the escapement of income had occurred as a result of the Assessee's failure to disclose fully and truly all material facts necessary for the assessment. No doubt, the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income Tax Officer on whether action should be initiated for reopening assessment. At the same time, it is to be borne in mind, as explained in Lakhmani Mewal Das (supra), that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of belief relati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessing authorities. Besides, it must be noted that when the Shah Commission matters were argued before this Court, the Union of India made an express statement on the same lines as was made before the Supreme Court in the Goa Foundation petition. Learned Counsel appearing for the Union stated before this Court, and which statement has been noted in our orders dated 02/07/2019, that the Union would not take any action against mining lessees or traders for exports of ore only on the basis of the Commission's report without making its own assessment of facts and without first giving opportunity of producing evidence to the affected parties. For the reasons stated above, which bear generally on the status of the Commission's report and its findings, as well as the statement made by the Union of India as noted above, it is impermissible to the department to act exclusively on the basis of the Commission's report. It must make its own assessment of facts before any action is initiated. In the present case, since it is a reopening notice under Section 148, it may not be necessary to give any pre-notice opportunity of hearing or producing of evidence to the affected parties. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of A. Raman and Co. (supra), the law does not oblige a trader to make maximum profit out of his trading transactions. It is the income which accrues to a trader which is taxable in his hands; not the income which he could have, but has not earned. No doubt, by adopting a device, if it is made to appear that income which really belonged to the assessee had been earned by some other person or by the Assessee in some other form or means, that income may be brought to tax in the hands of the Assessee and if such income has escaped tax in a previous assessment, a case for reassessment under Section 147(b) maybe made out. There is nothing, however, in the reasons indicated by the Assessing Officer in the present case to suggest that any such income has accrued to any person or the Assessee. The reasons do not indicate that the Assessing Officer has formed any belief that under-pricing was adopted by the Assessee as a device by which income had accrued to any other person or the Assessee himself in any other form and such income had escaped assessment. 18. In any event, as we have explained above, there must be a direct nexus or live link between the information found by the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce sheets, trading accounts and profit and loss accounts at its head office in London. The customs authorities came to know that the appellant had declared very low prices in respect of all its consignments of manganese ore exported out of India. It was also found that most of its export was only to 2 to 3 buyers, who in turn did not purchase ore from any other company except the appellant. After due inquiry/investigation, customs authorities had found that the appellant was systematically showing lesser value for the manganese ore exported as compared with the prevailing market prices for the same grade of manganese ore. The customs authorities accordingly came to a definite conclusion that the prices mentioned in the relevant contracts between the Assessee and its buyers were lesser than contemporaneous market prices and it was found as a fact that the appellant company was indulging in under-invoicing. Final orders were accordingly passed under the Customs Act. It is in the context of these facts that the Supreme Court countenanced a reopening notice under Section 148 in that case. It is to be noted, firstly, that what the customs authorities found was by way of an order passed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....td. [1996] 217 ITR 597 (SC), Rattan Gupta v. Union of India [1998] 234 ITR 220 (Delhi), AGR Investment Ltd. v. Addl. CIT [2011] 9 taxmann.com 62/197 Taxman 177/333 ITR 146 (Delhi), Raymond Wollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC) and Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316/291 ITR 500 (SC), cited by learned Counsel for the revenue, bear on the aspect of sufficiency or otherwise of the material used for formation of belief. These judgments make it clear that what can be submitted to judicial scrutiny is whether or not there was material on the basis of which belief could have been formed about escapement of income from assessment, and not whether the material was actually adequate or sufficient for formation of such belief. There is no quarrel with this proposition here. Here, we are precisely concerned with whether or not such belief could have been formed on the basis of such material as was available with the Assessing Officer. In every State action or order submitted to judicial scrutiny, the matter is assessed from the point of view of Wednesbury unreasonableness. The focus of the scrutiny is, firstly, on whether the authority has kept ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elieve that income has escaped assessment. The entire case of the revenue is founded on the so-called under-invoicing of exports. It is difficult to fathom what information or particulars was the Assessee expected to disclose in its assessment insofar as the export prices charged by it are concerned and which is now available to the Assessing Officer so as to enable him to form a belief that income has indeed escaped assessment. 22. When we come to the third reason alleged by the Assessing Officer for reopening the case, namely, illegality of the business and taxation of income derived from it as income from other sources, the department is on an even thinner ground. In the first place, when the income from the activity of mining and export of ore arose and also when it was assessed to tax, there was nothing to suggest that the activity was illegal. Six years later, when the Supreme Court decided the case of Goa Foundation, and declared that deemed mining leases had already expired and mining carried out thereafter was illegal, the question of illegality of the activity arose for the first time. But be that as it may, even if it is assumed that at all times the activity ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugned notice issued by the Assessing Officer under Section 148 of the Act cannot be sustained and must be set aside. 24. The following companion writ petitions, Writ Petition Nos.1015, 1016, 328, 329, 955, 959, 1019 of 2015, 3, 5, 22, 23, 99, 100, 113, 116, 117, 120, 133, 142, 166, 190, 191, 224, 225, 261, 263, 270 of 2016 are all matters which involve all four aspects referred to above as in the case of Writ Petition No.329 of 2015. Mr. Diniz appearing in WP Nos.22 and 23 of 2016 and Ms. Kakodkar appearing in WP No.120 of 2016 make additional submissions in support of their respective cases. Mr. Diniz relies on the case of Sarada Mines (P.) Ltd. v. State of Orissa [W.P. (C) No. 24421 of 2012, dated 20-42017], decided by Orissa High Court. The case was in respect of value added tax under Odisha Value Added Tax Act, 2004. There was a tax evasion report in that case against the assessee. Based on the report, reassessment proceedings were initiated against the assessee. This was also a mining lease case and concerned trade of iron ore. The error purportedly discovered by the Assessing Authority was on a reconsideration of the same material which was before the Authority at th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rities cited additionally on behalf of the assessees. 25. The following writ petitions, Writ Petition Nos.102, 325,327, 956, 958 of 2015, and Writ Petition Nos.4, 6, 15, 16, 17, 24, 25, 101, 102, 114, 115, 118, 141, 143, 144, 145, 150, 165, 167, 207, 226, 227, 777, 791 of 2016, are all cases where reassessment notices are issued within four years from the end of the relevant Assessment Years. There is no requirement or failure on the part of the assessee to disclose fully and truly material facts in these cases. So far as the information and belief formed on such information of escapement, of income from taxation, however, are concerned, the above discussion in Writ Petition No. 329 of 2015 squarely applies to these cases. Mr. Rivankar appearing in WP No.791 of 2016, makes a few additional submissions. Learned counsel submits that in his case, the assessee is a mere trader and not a mining lessee and that there is accordingly no case for any illegal activities so far as his business is concerned. Learned counsel submits that there is no response on the part of the Revenue to this aspect of the Petitioner's case. This is one more instance which exposes lack of applicati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as to sustain a belief on the part of the Assessing Officer of income having escaped assessment. 27. The following cases, Writ Petition Nos.8, 10, 11, 125 of 2016, 1020 of 2015, 1022 of 2015, 173 of 2016, 174 of 2016, are on the same footing as the group of petitions referred to in the paragraph above inasmuch as the reopening is only on the basis of under-invoicing of exports and not accrual of income from illegal activities. They are, however, all cases of reopening within four years from the end of the relevant Assessment Years. For the reasons stated above, even these petitions deserve to be allowed and reopening notices quashed. 28. The following petitions, Writ Petition Nos.141 and 233 of 2015, and Writ Petition Nos. 198,199, 262, 264, 265, 271, 272, 879, 880, 881, 882, 883 of 2016, are all petitions where reopening notices contained additional reasons involving issues under Section 10B of the Act or Section 14A of the Act or commission paid to foreign agents, etc. These petitions deserve to be detagged from the group of petitions to be disposed of by this order. 29. Rule is accordingly made absolute and Writ Petition Nos.102 of 2016, 325, 327, 328....
X X X X Extracts X X X X
X X X X Extracts X X X X
....angerous and impermissible to read that purely subjective opinion of the Commission as a finding of any receipt more than the invoice price. 24. To that extent the decision of the Hon'ble Supreme Court in Dhariya Construction Company (supra) remains relevant. Though that Civil Appeal was dismissed by a short order, the reasoning contained therein is relevant. In paragraph 1 of that two paragraph order of the Hon'ble Supreme Court it was observed as below:- "1. Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the District Valuation officer (DVO). The opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income-Tax Act, 1961. The Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment. 2. Civil appeal is, accordingly, dismissed. No order as to costs." 25. An opinion expressed by an expert howsoever, revered and respected remains....