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TMI Blog2019 (11) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Revenue : Shri S.L. Anuragi ORDER This appeal by the assessee is preferred against the order of the CIT(A)-6, Delhi, dated 28/03/2019, pertaining to Assessment Year 2009-10. 2. The grievance of the assessee is twofold. Firstly, the assessee is aggrieved by the action of the CIT(A) to uphold the proceedings initiated u/s 148 of the Act as valid and lawful proceedings and secondly, the assessee is aggrieved by the addition of ₹ 46,05,594/- made by the AO to the returned income of the assessee. 3. Representatives of both sides were heard at length. Case records were carefully perused and the judicial decisions relied upon by the representatives were carefully considered. 4. Briefly, stated the facts of the case are that the returned income of ₹ 2,45,888/- was accepted u/s 143(1) of the Act. Later on proceedings were initiated u/s 148 of the Act the reasons for reopening of the assessment read as under:- Reason for issue of Notice u/s 148 for the A.Y. 2009-10 in the case of Shri Magan Behari Lal. 1. The assessee is a director of the company which was incor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid, mostly in cash, by the beneficiaries of such entries. I have perused the information received from the Investigation Wing. The report explains at length the modus operandi of the entry operators along with the relevant evidence unearthed during the Survey u/s 133A of the I.T Act, 1961. The report brings out the fact that the flow of funds from between these share broking entities/concerns and the beneficiaries do not represent any genuine or actual business transaction. The aggregate reduction in income of the assessee comes to ₹ 46,05,094/- on account of such Client Code Modification. Having perused and considered the information received from the Investigation Wingh, as discussed above and in the circumstances of the case. I have reason to believe that income of the assessee to the extent of ₹ 46,05,094/- has escaped assessment and the case is fit for issuing notice u/s 148 of the Income Tax Act, 1961. Income Tax Return in the case for the A.Y. 2009-10 was filed by the assessee company on 04.08.2009 declaring income of ₹ 2,45,890/- vide acknowledgment no.209. the assessee has intentionally avoided furnishi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was made accordingly, in this case, the only requirement to initiate proceedings u/s 147 is reason to believe as recorded above. Since, the assessee has filed return of income for the year but no scrutiny assessment was made clause (b) of explanation 2 to section 147 is applicable and this is a deemed to be case where income chargeable to tax has escaped assessment. In this case the four years but not more than six years have elapsed from the end of the assessment year under consideration and income chargeable to tax which has escaped assessment is more than 1 lakh necessary sanction to issue notice u/s 148 of the Act is being obtained separately from the Pr. Commissioner of Income Tax-06, Delhi under amended provisions of section 151 of the Act w.e.f. 01.06.2015. 5. At the very outset, the counsel for the assessee drew my attention to the aforementioned reasons recorded for the reopening of the assessment and pointed out that the AO has simply relied upon the information received from Pr. DIT(Inv.), Ahmeadabad without applying his own mind. It is the say of the counsel that in plethora of judgments, the Hon ble High Courts and the Tribunals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h him. This information and application of mind has led the Assessing Officer to form a reasonable belief that there is not only an escapement of income but there has been failure to truly and fully disclose all material facts and information as the modus operandi of shifting profits was not known to the Revenue as not disclosed by the petitioner when the Assessing Officer passed the order in regular assessment proceedings. 4. We note that the reasons in support of the impugned notice accept the fact that as a matter of regular business practice, a broker in the stock exchange makes modifications in the client code on sale and / or purchase of any securities, after the trading is over so as to rectify any error which may have occurred while punching the orders. The reasons do not indicate the basis for the Assessing Officer to come to reasonable belief that there has been any escapement of income on the ground that the modifications done in the client code was not on account of a genuine error, originally occurred while punching the trade. The material available is that there is a client code modification done by the Assessee's broker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income escaped assessment. However, there is no assertion regarding the basis on which material on record, he has come to such conclusion. Therefore, the material on the basis of which the A.O. seeks to assume the jurisdiction under section 147 if the Act is the information received from the external source viz. the Principal Director of Income Tax (Investigation), Ahmedabad. It cannot be disputed that on the basis of the information received from another agency, there cannot be any reassessment proceedings. However, after considering the information/material received from other source, A.O. is required to consider the material on record in case of the assessee and thereafter is required to form an independent opinion on the basis of the material on record that the income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment for the verification. 5.4 At this stage it is required to be noted that even in the reasons recorded, there is no allegation that there was any failure on the part of the assessee in not disclosing truly and fully m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing. 24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act. 25. At this stage it requires to be noted that since the original assessment was processed under Section 143 (1) of the Act, and not Section 143 (3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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