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TMI Blog2016 (7) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... that such investment may not have been reflected in the books would have been taken care of. Even when the petitioner pointed out this fact to the Assessing Officer in the letter of objection, the Assessing Officer did not advert to this issue while disposing of such objections. Surely, having once issued the notice for reopening, it was not impermissible for the Assessing Officer to drop the same if through objections the assessee pointed out that the reasons for which the notice was issued are completely erroneous. Even in such a case, the Assessing Officer were to stick to his original position, the entire formula provided in case of GKN Driveshafts (India) Ltd. v. Incometax officer and others (2002 (11) TMI 7 - SUPREME Court ) would fail. The contention that there was sufficient other materials suggesting money laundering or other financial irregularities, has not come in the reasons recorded and such ground therefore, cannot be examined to support the notice for reopening. - Decided in favour of assessee - SPECIAL CIVIL APPLICATION NO. 4774 of 2016 - - - Dated:- 20-7-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MR SN DIVATIA, ADVOCATE FO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing supplied with the reasons, the petitioner raised objections under communication dated 23.3.2016 in which besides other, he raised the following contentions : That even the details which were called for vide the summons were in connection with the investment in Mutual Funds which had been duly reflected in the audited annual accounts filed by the ssessee along with its return. Thus even the facts to not require a reopening of the assessment that too when this information was being verified by the DDIT and not A.O. That when an assessee is summoned by an authority on any particular date, How another Authority being the A0 in the present case drafts a note bearing the reasons for reopening based on such summons. These facts highlights that the note is merely an afterthought. Also as the notice u/s 148 was received by the Assessee on 31st evening itself, it clearly goes to show that the notice was drafted much earlier and the note of reasons have been recorded thereafter only to complete the procedural requirement. 4. Such objections were however rejected by the Assessing Officer by order dated 28.3.2016 in the following manner : The facts and submissions have been gon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued. Counsel submitted that in the objections raised by the petitioner also, it was brought to the notice of the Assessing Officer that the said investment was duly reflected in the books of accounts. The Assessing Officer while disposing of such objections did not even advert to such a contention. 6. On the other hand, learned counsel Shri Manish Bhatt for the department submitted that besides doubtful investment of ₹ 25 lacs in Reliance Mutual Funds, there was other evidence collected by investigating wing suggesting various activities in the nature of financial irregularities. The original assessment was framed without scrutiny, reopening therefore, should be permitted. 7. It is by now well settled through series of judgements that validity of notice for reopening an assessment must be judged on the basis of reasons recorded by the Assessing Officer for issuing such notice. The action cannot be supported on the basis of materials outside of the reasons recorded. Division Bench of this Court in case of Dishman Pharmaceuticals and Chemicals Limited v. Deputy Commissioner of Incometax (OSD) (No.1) reported in (2012) 346 ITR 228 (Guj) has observed as under : 8. Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not his duty to lead the Assessing Officer to any particular inference of fact or of law on the basis of such primary disclosures. In other words, once the assessee discharges his duty of stating all the primary facts, what inferences and conclusions should be drawn is the duty of the Assessing Officer. (vi) At the time of ascertaining whether the notice was validly issued, what could be the probable conclusion of fresh assessment if reopening is permitted, is not the inquiry of the Court. In other words, the merits of the proposed action, through opening of the assessment, cannot be gone into by the court beyond prima facie stage. 8. In context of reopening of an assessment where original assessment is made without scrutiny and return is accepted under section 143(1) of the Act, it is recognised in several judgements including in case of Assistant Commissioner of Income tax v. Rajesh Jhaveri Stock Brokers P. Ltd reported in (2007) 291 ITR 500 (SC) that the Assessing Officer enjoys considerable latitude in reopening such assessment. The underlying principle being that when there has been no scrutiny assessment, the Assessing Officer cannot be stated to have formed any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case, however, it is not necessary to examine this fine legal issue. This is because of the following reasons. The petitioner was granted just about 12 hours of time to respond to the notice for production of material and upon the petitioner failing to do so, the Assessing Officer presumed that such investment required further investigation. Further as pointed out by the counsel for the assessee, such investment was very much part of the books of audited accounts of the assessee. If the Assessing Officer had perused such accounts, his anxiety that such investment may not have been reflected in the books would have been taken care of. Even when the petitioner pointed out this fact to the Assessing Officer in the letter of objection, the Assessing Officer did not advert to this issue while disposing of such objections. Surely, having once issued the notice for reopening, it was not impermissible for the Assessing Officer to drop the same if through objections the assessee pointed out that the reasons for which the notice was issued are completely erroneous. Even in such a case, the Assessing Officer were to stick to his original position, the entire formula provided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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