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TMI Blog2018 (5) TMI 1489X X X X Extracts X X X X X X X X Extracts X X X X ..... All these four petitions arise in the common factual background. We may record the facts from Special Civil Application No. 20954 of 2017. The petitioner has challenged notice dated 29th March 2017 issued by the respondent-Assessing Officer seeking to re-open the petitioner s assessment for AY 2010-2011. The petitioner is a private limited company and is engaged in the business of share broking. For the assessment year 2010-2011, the petitioner had filed return of income on 31st July 2010 declaring total income of ₹ 9,02,730/=. Such return was processed under Section 143 of the Income-tax Act, 1961 [ the Act for brevity] and accepted without any scrutiny. To reopen such assessment, the Assessing Officer issued the impugned notice. In order to do so, he had recorded the following reasons : In this case the return of income for A.Y 2010-11 was filed on 31/07/2010 declaring total income of ₹ 9,02,730/=. The return was processed under Section 143 [1] of the Act. The assessee company is a registered member [Code No. 3032] of BSE. This office subsequently received information from the BSE through the DDIT [Investigation] Unit 1 [2], Ahmedabad that the above n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clients for getting additional/extra commission income in addition to regular brokerage. The assessee has not disclosed the above income in the return of income filed by him for the relevant assessment year. I have therefore reason to believe that the income exceeding ₹ 1 lac [even if it is considered 0.5% of the CCM] has escaped assessment within the meaning of Section 147 of the Act. A notice under Section 148 of the Act is therefore required to be issued to the assessee for the year under consideration ie., A.Y 2010-11. Upon being supplied with such reasons, the petitioner raised objections to the notice of reopening under a communication dated 29th May 2017. These objections, however, were rejected by the Assessing Officer by an Order dated 8th August 2017. Hence, these petitions. Taking us through the reasons recorded, counsel for the petitioner submitted that the Assessing Officer had no tangible material to enable him to form a belief that income chargeable to tax has escaped assessment. The Assessing Officer has proceeded on presumption and surmises before coming to the conclusion that the assessee had earned undisclosed income. Counsel submitted that reopenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd., (supra) and several other decisions, such reason to believe need not necessarily be a firm final decision of the Assessing Officer. 17. If we accept such proposition, the petitioner's apprehension that the Assessing Officer would arbitrarily exercise powers under section 147 of the Act to circumvent the scrutiny proceedings which could not be framed in view of notice under section 143(2) having become time barred, would be taken care of. To reiterate, even for reopening of an assessment which was accepted previously under section 143(1) of the Act without scrutiny, the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment. With this background in mind, we may analyze the reasons recorded by the Assessing Officer. As per these reasons, according to him, the assessee had during the period between 1st April 2009 to 31st March 2012 carried out as many as 11028 client code modifications [ CCM for short]. The total amount involved in such CCMs was close to ₹ 70 Crores. During the financial year 2009-2010 ie., relevant to AY 2010-2011, the assessee had made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... averi Stock Brokers Prvt. Limited [Supra] in this context had made the following observations : Section 147 authorizes and permits the Assessing Officer to assess or re-assess income chargeable to tax, if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Limited v. ITO [1991] ITR 662, for initiation of action under section 147(a) [as the provision stood at the relevant time] fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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