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TMI Blog2019 (8) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... geable to tax u/s147. In view of the position settled by the Supreme Court in the case of Kelvinator of India [ 2010 (1) TMI 11 - SUPREME COURT] after taking note of the transitory change in Section 147, the legal position as to the prerequisites for such exercise, has not undergone a change and which is that, there had to be tangible material at the disposal of the AO for reopening of such proceedings and which power cannot be exercised for initiating a roving enquiry. There was no tangible material in possession of the AO for formation of belief of escaped income chargeable to tax. In view of the clear fact situation available on the record where such reopening is simply founded on the advisory dated 10.03.2016 issued by the department and where the reasons so present for the formation of belief is not resting on any tangible material, in possession of AO as confirmed from the discussions above, in our opinion, the entire exercise is illegal and dehors the provisions of Section 147/148. Since the entire exercise is held de hors the statutory prescriptions, we do not consider it necessary to express our opinion on the expanded scope of Explanation 3 attached to Section 147 and lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner to furnish the information detailed in the notice. A plain look of the directions present in the notice would confirm that the documents so directed to be produced related to the agricultural income disclosed by the petitioner in his return which is to the tune of ₹ 4,85,905/- for the assessment year 2011-12, a copy of which is at Annexure-2. The petitioner did not respond to this notice which was followed by a notice under Section 148 of 'the Act' charging the petitioner of escaped assessment for the reasons to believe in possession of the said officer and thereby proposing to reassess the income/loss for the assessment year 2011-12. A copy of such notice is at Annexure-3 to the writ petition and it is in compliance of the direction that the return was again submitted by the petitioner before the Income Tax Officer vide Annexure- 4 to the writ petition which is identical to the one originally filed and placed at Annexure-1 series to the writ petition. The petitioner along side requested for supply of the 'reason' which led the Income Tax Officer to believe that some part of income had escaped assessment within the meaning of Section 148 of 'the Act' which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Mr. Pathy, in case the Assessing authority is in possession of materials which leads to a reasonable belief that any part of income had escaped assessment that a proceeding of such kind under Section 147 can be carried out but such power cannot be abused for holding a roving enquiry where the petitioner was being directed to produce evidence against himself. It is submitted by Mr. Pathy, that although the petitioner questioned the authority of the Income Tax Officer to reopen the proceedings but the same has been ignored to result in the order impugned at Annexure-10 series. Learned counsel has next turned to the satisfaction recorded by the Commissioner on such reopening and the copy of which has been placed on record by the department in its counter affidavit at Annexure- B. According to Mr. Pathy, while Section 151 of 'the Act' casts an obligation on the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner to record satisfaction on the reasons recorded by the Assessing Officer that it is a fit for issuance of a notice, a plain look at the remarks recorded by the Joint Commissioner and the Principal Commissioner of Income ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Ors.). In reference to the opinion expressed by the Bombay High Court at paragraph 6 of the judgment, he submits that the grounds for reopening an assessment has to be recorded before a notice is issued and which reason must disclose live link between the tangible material in possession of the assessing Officer as well as the reason to believe that income chargeable to tax has escaped assessment. It is submitted that in so far as the present case is concerned, there is no material in possession of the Assessing Officer to reopen a proceeding rather it is to gather material that documents etc. are being directed to be produced as manifest from notice issued under section 133 of 'the Act' impugned at Annexure-2. (4) (2016) 91 VST 1(SC) (State of Uttar Pradesh versus Aryaverth Chawal Udyog and Ors.) In reference to the position settled by the Supreme Court at paragraphs 19 to 27 it is submitted by Mr. Pathy that the legal position on reopening of assessment has been settled to hold that unless there is a tangible material in possession of the Assessing Officer for formation of reason to believe that any income chargeable to tax has escaped assessment, such exercise cannot be ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 'the Act' vide Direct Tax Law (Amendment) Act, 1987 which came into force with effect from 01.04.1989. According to Mr. Sinha, the enunciation of law as found in the judgments relied upon by Mr. Pathy is in consideration of the unamended provisions of Section 147 of 'the Act' but since after its amendment with effect from 01.04.1989, the Assessing officer has been given a wider play field. According to Mr. Sinha, learned Senior Standing Counsel for the Department, a disclosure towards agricultural income was made by the petitioner in his returns which was not supported with material. He submits that it is in the light of an order passed by this Court on a pubic interest litigation that an advisory was issued to all Assessing Officers to carefully examine the claim on agricultural income and in cases where the assessment was completed or pending, to verify, whether such income has been rightfully claimed by the assessee. It is submitted by Mr. Sinha, that it is in course of such exercise that the case of the petitioner also was taken into consideration and since the claim was not supported with material that the notice under Section 148 was issued enclosing the reasons. In refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at certain expenses had been wrongly claimed by the assessee petitioner that it is within the powers so vested under Section 147 to assess or reassess, the Assessing officer has proceeded to pass the order in respect of the expenses claimed as well and which would suffer no infirmity. In sum and substance, it is the argument of Mr. Sinha that there is absolutely no infirmity in the exercise complained of which warrants any interference. Briefly responding to the arguments of Mr. Sinha, Mr. Pathy has made reference to the statutory provisions of Section 143 of 'the Act' to submit that when a return is filed under Section 139 of 'the Act' it is processed in the manner prescribed in Section 142, 143(2) and 143(3) which inter alia allows the Assessing Officer to satisfy himself on the claim of loss, deduction, allowance or relief etc. and whether it is inadmissible and if he has reasons to believe that the claim is inadmissible then he is at liberty to direct the assessee to produce or cause to be produced any evidence or particulars which may be required in support of such claim. In reference to Sub section (3) of Section 143 he submits that in case on the date fixed, the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the petitioner in his return at Annexure-1 of the writ petition has been disbelieved and it is to satisfy himself on this account that an enquiry is initiated by the Assessing officer under Section 133(6) of 'the Act'. No less than 14 documents/records/registers have been demanded by the Income Tax Officer respondent No.2. It is rather fairly informed by Mr Sinha that such exercise was initiated in view of an advisory issued which had the approval of the Principal D.G.I.T. (S) New Delhi. Such advisory contained in a letter dated 10.3.2016 was issued in the light of an order passed by this Court on a public interest litigation and required verification of agricultural income for the periods, which also included the assessment year in question. The advisory directs the Assessing Officer to verify whether there is any data entry error in the returns filed; to provide feedback where assessment is complete and in cases where assessment is pending, to thoroughly verify the claims on agricultural income. We are persuaded to take notice of the advisory issued, a copy of which was handed over during the course of the proceedings, because, in case it is the said advisory which lies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is argument would not hold good for extensive powers has been vested in the Assessing Officer to reopen assessments where he has reasons to believe that any income chargeable to tax has escaped assessment and in such exercise, the Assessing Officer can also direct for production of the documents/records needed for the purpose. It is also his argument that in this course, the Assessing Officer can also go beyond the reasons supplied, to comment upon any other matter that my arise during such exercise under Explanation 3 attached to Section 147. In our opinion the argument advanced on behalf of the department is fallacious. The transitory provision of Section 147 came up for consideration in the case of Commissioner of Income Tax versus Kelvinator of India reported in (2010)2 SCC723. The Supreme Court after taking note of the preamended provision of Section 147, its amendment vide Amendment Act, 1987 as well as the Amendment Act, 1989 has observed thus in paragraphs 5,6 and 7: "5.On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfillment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e link with the formation of belief. Testing the case in hand in the backdrop of the position so settled in the judgments relied upon by Mr. Pathy as well as on the transitory change as clarified in the judgment of Kelvinator of India (supra), it is to be seen whether the case in hand would pass the test. The reasons in possession of the Assessing Officer finds mention in the enclosure to Annexure -B to the counter affidavit and runs under. "The assessee has not produced concrete evidence like land adanga register, nature of crop cultivated expenses incurred to whom the agricultural produce was sold, who cultivated the land and how the income was derived. In the absence of any material produced to substantiate the receipt an agricultural income therefore, I have reason to believe that the quantum of agriculture income as claimed in ITR for the A.Y.2011-12 is not his agricultural income. Accordingly, the same is treated as the income from undisclosed source which escaped for assessment. Hence income chargeable to tax to the extent of ₹ 4,85,905/- has escaped assessment within the meaning of Sec. 147 of the Act, 1961. Proposal for issuing notice u/s 148 of the Act may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the judgment rendered in the case of Kelvinator of India(supra), whatsoever doubts that may be present are in the mind of the department is set at rest. In this contest we are persuaded to reproduce the opinion of the Division Bench of this Court recorded in the case of Rina Sen (supra) relied upon by Mr. Pathy, which not only relates to the period after amendment to Section 147 but also discusses the extent of power exercised by an Assessing Officer under Section 147 when it records at page 226 as under: "…………….……..It is well settled that the object of Section 147 of 'the Act' is not to make a roving or fishing enquiry. While it is open to the authority in an appropriate case to make an enquiry confidentially or otherwise -in order to obtain information or verify facts disclosed to him by the assessee or coming to his notice, before reaching the stage of reasonable believe, he cannot compel the assessee to associate himself in such roving or fact finding enquiry. The assessee can be required to appear only after the Assessing Officer has come to the conclusion as to the reasonable believe within the meaning of Section 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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