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TMI Blog2016 (3) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... no tangible material in regard to any of the transactions pertaining to the relevant assessment years. Although the AO may have entertained a suspicion that the Assessee’s income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe – not reason to suspect - is the precondition for exercise of jurisdiction under Section 147 of the Act. - Decided in favour of assessee - W. P. (C) 1289/1999, W.P.(C) 1290/1999 , W.P.(C) 1293/1999, W.P.(C) 1291/1999, W.P.(C) 1292/1999 - - - Dated:- 24-2-2016 - S. Muralidhar And Vibhu Bakhru, JJ. For the Petitioner : Mr S. Krishnan, Advocate. For the Respondent : Mr Ashok K. Manchanda, Senior Standing Counsel with Ms Vibhooti Malhotra, Junior Standing Counsel ORDER Vibhu Bakhru, J: 1. These petitions have been filed by M/s Ess Aar Universal (P) Ltd (hereafter the Petitioner ), inter alia, impugning the notices issued by the Assessing Officer (hereafter AO ) under Section 148 of the Income Tax Act, 1961 (hereafter the Act ) for re-opening the assessments to re-assess M/s Rustagi Engineering Udyog Private Limited (hereafter the Assessee ) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt orders. 6. An order under Section 394 of the Companies Act, 1956 sanctioning the scheme of amalgamation of the Assessee with the Petitioner was passed by this Court on 21st May, 1997. In terms of the said scheme, the Assessee was amalgamated with the Petitioner Company with effect from the appointed date, i.e., 1st April 1995. 7. Thereafter, the Assessee received a notice under Section 142(1) of the Act calling upon the Assessee to file its return of income for the AY 1996-97. The Assessee responded to the said notice by a letter dated 3rd October, 1997 and informed the AO that it was not required to file a return as the Assessee stood dissolved with effect from 1st April, 1995 in terms of the scheme sanctioned by this Court. Thereafter, the Assessee received four separate notices dated 26th December, 1997 issued under Section 148 of the Act for re-assessing the income of the Assessee for AY 1989-90, 1990-91, 1991-92 and 1992-93. The Assessee had also received a similar notice dated 9th July, 1997 for AY 1993-94. 8. The Assessee sought reasons for re-opening of assessments and issuance of notices under Section 148 of the Act. However, the same were not provided to the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100% 68,04,665.8 1991-92 1. Plant Machinery (Below ₹ 5000) 100% 24,35,144.62 1990-91 1. Plant Machinery 100% 19,93,819.00 1989-90 1. Plant Machinery (Below ₹ 5000) 100% 6,99,999.36 1988-89 Plant Machinery (Below ₹ 5000) 100% 1,38,854 From the above it is very clear that the assessee company has adopted systematically a method to evade tax by creating paper transactions to claim substantial depreciation (100%). Due to this the assessment for the A.Y. 1993-94 has been re-opened u/s 147 of the I.T. Act, 1961 and accordingly notice u/s 148 has been issued on 9.7.1997. The assessment for the assessment year 1990-91 to 1992-93 is required to be re-opened u/s 148 since the income claimed as depreciation amounting to ₹ 19,93, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called upon on several occasions to produce the approval but had failed to do so. 15. Mr Ashok Manchanda, learned Senior Standing Counsel countered the arguments advanced by Mr Krishnan and contended that a survey team had found that the transaction relating to purchase of MS moulds costing ₹ 60,62,500/- in the financial year 1993-94 (relevant to AY1994-95) was a sham transaction and this would also give reason for the AO to believe that other transactions relating to purchase of other assets were also sham transactions. He submitted that the survey conducted in respect of the transaction for the purchase of MS moulds had disclosed the modus operandi of the Assessee and thus, all other transactions, where the Assessee had claimed 100% depreciation, were suspect. He argued that at the stage of issuance of notice, the AO was not required to finally determine whether the income of an Assessee had escaped assessment but was only required to form a prima facie opinion. 16. We have heard the learned counsel for the parties. 17. It is well settled that the in a case of amalgamation, the amalgamating company would stand dissolved from the date on which the amalgamation/tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe not reason to suspect - is the precondition for exercise of jurisdiction under Section 147 of the Act. In Income Tax Officer, Calcutta Ors. vs. Lakhmani Mewal Das: [1976] 103 ITR 437 (SC) the Supreme Court held that there must be a live link or a close nexus between the material available with the AO and his reason to believe that income of an assessee had escaped assessment. The court further observed as under: The powers of the Income-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. The provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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