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TMI Blog2021 (2) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... formation received from the Investigation Wing etc. As examined the belief of the Assessing Officer to a limited extent to look into whether there was sufficient or any tangible materials available on the record for the Assessing Officer to form the reasonable belief and whether there was 'live link' existing of the material and the income chargeable to tax that escaped assessment. The case on hand is not one, where it can be argued that the Assessing Officer on absolutely vague or unspecific information, initiated the proceedings of re-assessment without taking pains to form his own belief in respect of such materials. We are convinced that we should not interfere in this matter. In the result, present writ application fails and is hereby rejected. - R/Special Civil Application No. 16265 of 2019 With R/Special Civil Application No. 16266 of 2019 - - - Dated:- 7-1-2021 - Honourable Mr. Justice J.B. Pardiwala And Honourable Mr. Justice Ilesh J. Vora For the Petitioner(s) : Mr SN Divatia For the Respondent(s) : Mrs Mauna M Bhatt COMMON ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. Since the subject matter of both the writ appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation/inquiry has been made with the return of income filed by the assessee. ITS data available on ITBA/ITD for A.Y. 2012-13. It is seen from the profit and loss account forming part of return of income filed by the assessee that the assessee has claimed huge commission expenses of ₹ 85,72,637/and other expenses of ₹ 1,15,26,078/whereas the sundry creditors reflected in the balance sheet is to the extent of ₹ 1,74,17,702/. These figures disclosed in the profit and loss account and balance sheet buttress the information that the assessee has been inflating its expenses by booking bogus expenses without receiving any actual goods/services. 5. In view of above findings, I have reasons to believe that this is a case where income chargeable to tas has escaped assessment by an amount of more than ₹ 1 lakh and it is a fit case for reopening the assessment as the income chargeable to tax has escaped within the meaning of section 147 of the Act. 6. In this case, a return of income was filed for the yer under consideration, but no scrutiny assessment u/s. 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion/belief that the income chargeable to tax has escaped assessment. In the wake of information received by the Assessing Officer, when the Assessing Officer formed a belief that the assessee had booked bogus expenditure, the Assessing Officer has rightly assumed the jurisdiction of initiating the reassessment proceedings. It is also pertinent to mention here that in the objections, the assessee has not denied booking of expenditure against the names mentioned in the reasons. In the present case, since the necessary conditions to reopen the assessment have been duly fulfilled, sufficiency of the reasons is not to be gone into at this stage. Reliance is placed on the recent decision of Hon. Gujarat High Court in Aaspas Multimedia Ltd. Vs. DCIT [2017] 249 Taxman 568 . At the time of recording of reasons for reopening the assessment, the Assessing Officer is expected to form only a prima facie opinion or belief regarding the applicability of the provision in question. At that stage, it was not necessary for AO to conclusively establish that his belief or opinion is correct even on the merits. At the time of recording the reasons, the AO had strong prima facie opinion that the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every step in the proceedings, it cannot be said that the Assessing Officer was about to finalize the proceedings without allowing sufficient opportunity to the petitioner. On the other hand, the petitioner is trying to avoid the legally initiated proceedings and till date has not furnished the details called for under section 142(1) of the Act. ON perusal of the annexure to notice under section 142(1) of the Act dated 14.10.2019, it can be seen that the petitioner assessee was not show-caused about any proposed additions, but only asked to furnish certain details in connection with the facts disclosed in the return of income, and now the assessee has filed part-submission in this office on 25.10.2019 through online ITBA Portal /module vide letter undated. Copy of notice under Section 142(1) of the Act dated 14.10.2019 along with its annexures and reply filed vide submission/forwarding letter are annexed herewith as Annexure-A B. 5.3 With reference to para 4.1 to 4.4, it is submitted that the petitioner assessee has alleged that the notice issued under Section 148 of the Act and order disposing of the objections raised are patently illegal, bad in law and without jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts. However, the respondent place reliance on the judgments mentioned in the order dated 23.07.2019 passed by the respondent for disposing of the objection of the petitioner assessee, more particularly the judgment of Hon. Apex Court in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500. 5.4 With reference to para 4.5to 4.8, it is submitted that as per the information received through the Investigating Wing of the Income Tax Department, it was found that the assessee had booked bogus expenditure in the name of various bogus entities such as Shreeji Trading Co. Harsh Industries, Satyam Steel, Evershine Industries, Mayur Textile Industries, Krunal Industries etc. The information was regarding booking of bogus expenses without receipt of any goods or services and verification of return of income also revealed that the assessee had claimed huge expenses and a good part of such expenses was shown as Sundry Creditors in the balance sheet. It was on the basis of such information received and date reclcted in the return of income, tha the Assessing Officer had formed a prima facie satisfaction regarding existence of 'live link' in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act authorizes and permits the Assessing Officer to assess or reassess the income chargeable to tax, if he has reason to believe that income for any assessment year has escaped assessment. She would submit that the word reason in the phrase reason to believe would mean the 'cause' or 'justification'. If the Assessing Officer has a cause or justification to know or suppose that the income has escaped assessment, it can be said to have reason to believe that an income has escaped assessment. She further submits that, the said expression cannot be read or understood to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. She further submits that in the case on hand, there was no scrutiny assessment under Section 143(3) of the Act and only an intimation under Section 143(1) of the Act was issued. She pointed out that the belief formed by the Assessing Officer is on the basis of the specific information received through the Investigation Wing. The Investigation Wing has informed that the assessee has suppressed its taxable income by booking bogus expenses against different parties without receipt of any goods or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening of the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfieda postmortem exercise of analysing the materials produced subsequent to the reopening will not make an inherently defective reassessment order valid. (v) The crucial link between the information made available to the Assessing Officer and the formation of the belief should be present. The reasons must be self evident, they must speak for themselves. (vi) 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. To put it in other words, something therein, which is critical to the formation of the belief must be referred to. Otherwise, the link would go missing. (vii) The reopening of assessment under Section 147 is a potent power and should not be lightly exercised. It certainly cannot be invoked casually or mechanically. (viii) If the original assessment is processed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression reason to believe appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonable and prudent man on the basis of the information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and the assessments be reopened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require. (xv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer entertained a bona fide belief upon the definite information presented before him. Power under this section cannot be exercised on mere rumours or suspicions. (xvi) The concept of change of opinion has been treated as a built in test to check abuse. If there is tangible material showing escapement of income, the same would be sufficient for reopening the assessment. (xvii) It is not necessary that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O had cause or justification to know or suppose that the income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (supra)]. It is also well settled that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. 12. Having regard to the materials on record, it cannot be said that there is total nonapplication of mind on the part of the Assessing Officer while recording the reasons for reopening of the assessment. It also cannot be said that his conclusion was merely based on the observations and information received from the Investigation Wing as the Assessing Officer could be said to have applied his mind to the same. The Assessing Officer could not be said to have merely concluded without verifying the fact that it is the case of reopening of the assessment. 13. We do not find merit in the submission of Mr. Divatia, the learned counsel appearing for the writ applicant that the contents of the reasons recorded by the Assessing Officer for reopening of the assessment is merely an introduction to the investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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