2024 (3) TMI 253 - HC - Income Tax

Reopening of assessment u/s 147 - Reasons to believe or suspect - huge share transaction - HELD THAT - Since the admitted position is that the AO does not have reason to believe but only reason to suspect, as held by this Court in Darpan P. Chandaliya V/s. Income Tax Officer 2023 (9) TMI 1041 - BOMBAY HIGH COURT reopening of assessment is not satisfactory. In the case at hand, the AO does not say that any income has escaped assessment. All that the AO desires is examination of certain details pertaining to the actual extent of escapement of income which can be established only after detailed investigation. Even in the reasons recorded, it says In this case as per the CIB information you have entered into huge share transaction and it is necessary to verify the above aspect, it is necessary to reopen the case . That cannot be stated to be founded on the belief that any income which is chargeable to tax has escaped assessment and hence, such verification is necessary. Just because some information has been received from CIB does not entitle the AO to reopen assessment. The reasons must be founded on the satisfaction of the AO that income chargeable to tax has escaped assessment. Once that is not to be found, then, the impugned notice cannot be sustained. As noted earlier, what we find is that there are no reasons to believe but only reasons to suspect. Hence, reopening of assessment is not satisfactory. Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of reopening assessments for the years 2010-2011, 2011-2012, and 2012-2013 under Section 148 of the Income Tax Act, 1961.
2. Validity of the reasons to believe that income chargeable to tax has escaped assessment.
3. Admissibility of the information received from CIB as a basis for reopening assessments.

Summary:

Legitimacy of reopening assessments:
Petitioner, a Chartered Accountant, received identically worded notices dated 20th March 2015 for reopening assessments for the years 2010-2011, 2011-2012, and 2012-2013. The notices were based on CIB information indicating huge share transactions. The petitioner filed detailed objections which were rejected on 6th November 2015, leading to the filing of the present petition.

Validity of the reasons to believe:
The Court observed that the reasons recorded for reopening the assessments did not indicate any link between the material obtained from the CIB and the reasons to believe that income chargeable to tax had escaped assessment. The Court emphasized that the reasons must be founded on the satisfaction of the Assessing Officer that income chargeable to tax has escaped assessment, not merely on suspicion.

Admissibility of CIB information:
The Court noted that the information from CIB was admitted to be potentially non-genuine, and the actual extent of escapement of income could only be established after detailed investigation. The Court held that such verification does not constitute a reason to believe that income chargeable to tax has escaped assessment.

Conclusion:
The Court ruled that the reopening of assessments was not justified as it was based on suspicion rather than a reason to believe. The impugned notices dated 20th March 2015 and the order on objections dated 6th November 2015 were quashed and set aside.