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TMI Blog2012 (12) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... cts, necessary for her assessment, in the reason recorded u/s 147, no any specific material related to the income escaped assessment was available with the AO for re-opening of the closed assessment, assessment re-opened u/s 147 is highly unjustified and illegal. Notice issued u/s 148 of Income Tax Act is liable to be annulled. 2. While reopening of the assessment u/s 147, the authorities below have completely ignored the facts, that the reasons recorded for re-opening of the assessment were in respect of Rs. 70,000/- received from Ayushi Broker (part of the short term capital gain duly shown in the return of income filed) while in the re-assessment the addition was made at Rs. 1029566/- in respect of other transactions in respect of the amount received from Deepak Security, thus the reasons recorded for re-opening of the assessment were not reliable, specific, related with the income alleged to be escaped, notice issued u/s 148 on the above reasons is not as per law, liable to be cancelled." 4. The brief facts of the case are that information was received from Investigation Wing, Agra that the assessee had taken bogus entries of sale of shares. The Assessing Officer (A.O.) after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the A.O. was right in issuing notice under section 148 of the Act and the same has to be held as valid. Accordingly, the ground of appeal raised by the assessee was dismissed. However, the CIT(A) while deleting the addition on merit followed the decision of I.T.A.T. Agra Bench. It is relevant to note that on similar set of facts the CIT(A) has followed the same decision of I.T.A.T., Agra Bench in other cases. The I.T.A.T., Agra Bench found that the CIT(A) deleted the addition without recording complete facts of the case. The I.T.A.T., Agra Bench has sent back those matters to the file of Revenue Authorities. 6. We have heard the ld. Representatives of the parties and records perused. The assessee has raised legal ground in Cross Objection, therefore, we think it proper to first decide the grounds raised in Cross Objection. The short legal issue raised by the assessee in Cross Objection whether under the facts and circumstances of the case the A.O. recorded reason for escapement of income but while completing re-opening assessment the A.O. did not make any addition on reasons recorded and made different addition, the action of the A.O. is correct or not ? To examine thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court." 7.2 Hon'ble Delhi High Curt in the case of CIT vs. Atul Jain & Smt. Vinita Jain, 299 ITR 383 held - "There must be "reason to believe" warranting the issuance of a notice of reassessment by the Assessing Officer. If there are no reasons, then the entire foundation for initiating the proceedings is bad and the notice initiating proceedings must be quashed. Mere satisfaction of the Assessing Officer for the issuance of a notice is not enough, there must be reasons on record which led him to believe that a notice should be issued. After a foundation based on information is set up, there must still be some reasons which warrant the holding of a belief so as to necessitate the issuance of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148 of the Income-tax Act, 1961, but set aside the assessment on the addition made by the Assessing Officer and remitted the matter to him to frame a fresh assessment. On second appeal, the Tribunal held that since the Assessing Officer failed to incorporate the material and its satisfaction for reopening the assessment, the same was invalid. On a reference : Held, that the Assessing Officer had not examined the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income chargeable to tax had escaped income. The Assessing Officer had to act on the basis of "reasons to believe" and not on "reasons to suspect". The Tribunal rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and therefore the issuance of notice under section 148 of the Act for reassessment proceedings was not valid." 7.4 Hon'ble High Court of Allahabad in the case of Jamna Lal Kabra vs. ITO & Others, 69 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 80-1. The Commissioner (Appeals) held that in the original assessment the powers of the Assessing Officer were limited to the extent of prima facie adjustment only. On the merits of the additions, the Commissioner (Appeals) followed his order of assessment year 1996-97. On appeal the Tribunal held that the assumption of jurisdiction by initiating reassessment proceedings was valid and reassessment could not be annulled. It was a separate issue that after validly assuming jurisdiction the points on which reassessment was proposed were not added/disallowed. At the same time under section 147 the Assessing Officer could also assess such income which had escaped assessment and which comes to his notice subsequently in the course of the proceedings under section 147. On appeal: Held, that section 148 was supplementary and complementary to section 147. Sub-section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has escaped assessment, when such issue comes to his notice subsequently in the course of the proceedings. Parliament having used the words "assess or reassess such income and also any other income chargeable to tax which has escaped assessment", the words "and also" cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive. It is of some significance that Parliament has not used the word "or". The legislature did not rest content by merely using the word "and". The words "and" as well as "also" have been used together and in conjunction. Evidently, what Parliament intends by use of the words "and also" is that the Assessing Officer, upon the formation of a reason to believe under section 147 and the issuance of a notice under section 148(2) must assess or reassess : (i) such income; and also (ii) any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his agricultural income which was lying deposited with a company and filed the return accordingly. The Assessing Officer made an addition to the income of the assessee on the ground of unexplained investment. The Commissioner of Income Tax (appeals) upheld the addition made by the Assessing Officer on the ground that the assessee had failed to prove the source of the deposits. The Tribunal held that the proceedings for reassessment under section 148 of the Act were initiated by the Assessing Officer based on non-existing facts. On appeal : Held, dismissing the appeal, that the Tribunal was justified in holding that the proceedings for reassessment under section 148 of the Act were initiated by the Assessing Officer based on non-existing facts, because ultimately the assessee had been able to explain the income, which the Assessing officer believed to have escaped assessment. The Assessing Officer was justified in initiating the proceedings under section 147 of the Act. But once the Assessing Officer reached the conclusion that the income which he believed to have escaped investment had been explained, the Assessing officer did not continue to possess jurisdiction to tax any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the Tribunal set aside the order levying penalty. On a reference : Held, that although the Income-tax Officer noticed that there were discrepancies in the dates of payment and receipt as disclosed by the assessee and the seller, yet the addition of Rs. 16,250 was made by the Income Tax Officer on account of infringement of the provisions of section 40A(3) only. The Inspecting Assistant Commissioner was of the view that the addition of Rs. 16,250 to the total income of the assessee could be justified on two grounds, namely, infringement of the provision of section 40A(3) of the Act and also on account of the fact that those transactions represented unexplained investments on the part of the assessee, as the assessee was showing the cash balances without corresponding withdrawals in respect of the amounts alleged to have been paid to the sellers. It was open to the Inspecting Assistant Commissioner to initiate fresh penalty proceedings on the basis of the aforesaid conclusion arrived at by him in his penalty order dated February 11, 1972, but in the absence of initiation of any fresh proceedings, the Inspecting Assistant Commissioner of Income Tax could not modify the basis on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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