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TMI Blog2016 (9) TMI 1528X X X X Extracts X X X X X X X X Extracts X X X X ..... closed information in the particular case and must be based on firm and concrete facts that some income has escaped assessment. In case of there being a change of opinion, there must necessarily be a nexus that requires to be established between change of opinion and the material present before Assessing Authority. Discovery of an inadvertent mistake or non-application of mind during assessment would not be a justified ground to re-initiate proceedings on the basis of change in subjective opinion. When we go through the reasons assigned in the notice dated 31.3.2015, we find that Assessing Authority has failed to decide the objections raised by petitioner in accordance with law. The authorities had already assessed and passed final order for the said assessment year. All the material was before the authorities, no rational is disclosed in the order passed by Assessing Authority regarding escapement of income which was already assessed. We find that return to the tune for a total income of ₹ 4,47,70,070/- and ₹ 5,42,80,400/- were filed for A.Y. 2011-12 and A.Y. 2012-13 respectively. Assessment with respect to A.Y. 2011-12 was subsequently rectified for a mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for petitioner submits that all the transactions for relevant assessment years were disclosed by petitioner to Assessing Officers thereafter regular assessment was made. The Assessing Officer issued a notice under Section 148 of Act, 1961. In reply to the said notice the petitioner requested that the return of income filed on 9.9.2011 and 10.9.2012 be considered as mode of returns of income filed in compliance to the notices dated 31.3.2015. 4. The respondents have filed counter affidavit sworn by Sri Prem Prakash, Income Tax Inspector, DCIT-VI, Kanpur and it has been contended that the petition deserves to be dismissed and there was a reason to believe that the income has escaped assessment as re-assessment proceedings were initiated on the basis of material discovered in search and seizure proceedings in case of Rajendra Jain Group, Sanjay Chaudhary Group and Dharmichand Jain Group of Companies wherein it has been found that Assessee i.e. M/s Kays Jewels Private Limited had received accommodation entries in A.Y. 2012-13 in the shape of bogus purchase amounting to ₹ 68,380/- and ₹ 60,137/- from various entry providers namely M/s Avi Export and Kailash Enterp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in response to a notice issued under sub-section (1) of Section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.--Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :-- (a) where no return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that in a case-- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case-- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o form opinion of escaped assessment is a jurisdictional issue. 9. In the context of Act 1961, Section 147 came up for constitution in Ganga Saran Sons P. Ltd Vs Income Tax Officer others, (1981) 130 ITR 1 (SC) and Court said; It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income Tax Officer can assume jurisdiction to issue notice under section 147 (a). First, he must have reason to believe that the income of the assessee has escaped assessment, and, secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under section 147 (a) are has reason to believe and these words are stronger than the words is satisfied . The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 147 and 148, Court said as under:- From the plain phraseology of the above Sections of the Act, it appears that two conditions precedent which are required to be satisfied before an Income Tax Officer can acquire jurisdiction to proceed under Clause (a) of Section 147 read with Sections 148 and 149 of the Act, beyond the period of four years but within a period of eight years, from the end of the relevant year, are: (a) that the Income Tax Officer must have reason to believe that the income, profits or gains chargeable to tax had either been under assessed or escaped assessment and (b) that the ITO must have reason to believe that such escapement or under-assessment was occasioned by reason, of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Both these conditions must co-exist in order to confer jurisdiction on the Income Tax Officer. The Income Tax Officer is obliged, before initiating proceedings under Section 148 of the Act to record the reasons for the formation of his belief to reopen the assessment. (emphasis added) 12. Court further said that, an Income Tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation stage, what is required is reason to believe', but not the established fact of escapement of income. 14. All these authorities have been considered and reiterated recently in State of Uttar Pradesh and others Vs M/s Aryaverth Chawal Udyog Others, 2016 (91) VST 1 (SC), Court after referring its earlier authorities, said that consistently it has been held that, such material on which Assessing Authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. It must bring home the appropriate rationale of action taken by Assessing Authority in pursuance of such belief. In case of absence of such material, Court in clear terms has held that the action taken by Assessing Authority on such reason to believe as arbitrary and bad in law. The standard of reason exercised by Assessing Authority is laid down as that of an honest and prudent person who would act on reasonable grounds and come to a cogent conclusion. The necessary sequitur is that a mere change of opinion while perusing the same material, cannot be a reason to believe that a case of escaped assessment exists requiring assessment proceedings to be reopened. If a conscious ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to justify re-assessment proceedings under Section 148 of Act, 1961. 17. In notice dated 31.3.2015 and order dated 21.8.2015, height of non application of mind is evident from the fact that Assessing Authority while rejecting objection has observed that here is a case of seizure operation though admittedly there was no search and seizure in case of petitioner. This clearly shows that while passing order notice dated 31.3.2015 and order dated 21.8.2015, competent authority did not care even to go through relevant record and apply its mind. 18. In the entirety of facts and circumstances as discussed above, we are satisfied that the so called reasons mentioned by authority concerned, for all Assessment Years in question, for justifying re-assessment proceedings under Section 147/148 of Act 1961, are illegal, showing non application of mind and an arbitrary exercise on the part of authority concerned. 19. The writ petitions are allowed to the extent of notices issued by authority concerned under Section 148 and orders rejecting objection filed by petitioner against re-assessment under Section 147/148 of Act 1961, are hereby quashed. 20. The writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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