2026 (8) TMI 395

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..... The respondent-assessee is a registered stock-broker regulated by the Securities and Exchange Board of India (SEBI). For Assessment Year 2017-18, the assessee filed its return of income on 9.9.2017, declaring a total income of Rs. 48,04,980/-. The return was initially processed under Section 143(1) of the Act. Subsequently, the Assessing Officer received information from the Investigation Wing stating that search operations were conducted in the case of one Shirish C.Shah, who was allegedly involved in providing accommodation entries through various shell entities, including Orange Mist Productions Pvt. Ltd. The information indicated that the assessee had received funds amounting to Rs. 7,15,11,173/- from Orange Mist Productions Pvt. Ltd ....

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....appeal. 3.1. Learned Senior Standing Counsel appearing for the appellant submitted that the information received from the Investigation Wing constituted credible "tangible material" establishing a live link with the formation of the belief that income had escaped assessment. 3.2. It is argued that at the stage of issuing notice under Section 148 of the Act, the Assessing Officer is only required to form a prima facie view regarding escapement of income and is not expected to conclusively establish the escapement. 3.2. Relying on the decision of the Supreme Court in ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd [(2007) 291 ITR 500 (SC)], learned Senior Standing Counsel contended that since the original return was merely processed un....

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....he knowledge of the officer and the formation of the belief. Remote, vague, or far-fetched material cannot form the basis of a valid reopening. (c) In CIT v. Kelvinator of India Ltd [(2010) 320 ITR 561 (SC)], the Supreme Court affirmed that post-amendment, the Assessing Officer must possess "tangible material" to conclude that income has escaped assessment, preventing the reassessment power from turning into an arbitrary power of review. 7. Applying these principles to the facts at hand, the reasons recorded by the Assessing Officer reveal a total non-application of mind and a fundamental misconception of law and fact. The Assessing Officer noticed that the assessee received Rs. 7.15 Crore from Orange Mist Productions Pvt. Ltd a....

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....as granting the Assessing Officer a roving mandate to initiate reassessment on arbitrary assumptions or a complete misunderstanding of fundamental business facts. 10. Similarly, the principles governing the limits of reassessment jurisdiction discussed in Raymond Woollen Mills Ltd. (supra) do not assist the Revenue in the instant case. In the said decision, the Supreme Court held that the Court should only have to evaluate whether there is prima facie material on the basis of which the Department could reopen the assessment, without deciding the ultimate correctness of the material. However, prima facie material must still be relevant material. In the case at hand, the requirement of a rational live link fails entirely. 11. We also no....