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TMI Blog2021 (3) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. On the date of recording of reasons by the AO, only piece of information in possession of the AO was the CIB report that the assessee has sold certain immoveable property and the AO was not even having a copy of the sale deed or the specifics of the immoveable property, which to our mind, raises a question mark on the tangible nature of such information in terms of whether it is real or actual rather than imaginary and whether it actually relates to the assessee or not. Where the AO still wishes to rely on the report of CIB, given that such report is more of a generic report and not containing exact specifics of of immoveable property and other particulars of the transaction, it is expected that the AO on receipt of such report should carry out further examination before arriving at the prima facie view that income has escaped assessment and the matter is fit for issuance of notice u/s 148 - Such examination is required to be carried out before issuance of notice u/s 148 as the same is required for the Assessing officer to form his own independent opinion that the income has escaped assessment. In the instant case, there is no such examination and investigation carried out by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indly be deleted. 2.₹ 7,17,286/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the addition of ₹ 7,17,286/- made on account of STCG. The addition so made & confirmed by the ld. CIT(A), is contrary to the provisions of law and facts hence, kindly be deleted in full. 3. The ld. AO further erred in law as well as on the facts of the case in charging interest u/s 234A, 234B & 234C of the Act. The interest so charged, being contrary to the provisions of law and facts, kindly be deleted in full." 2. Briefly the facts of the case are that the case of assessee was reopened U/s 147 of the Act and notice U/s 148 was issued on 25.03.2015, in response to which ROI was filed on 16.06.2015 declaring total income of ₹ 1,04,500/- as income from commission. The case was reopened on the ground of alleged sale of immovable property by the assessee for sale consideration of ₹ 7,00,000/-, the value of which was adopted at ₹ 7,17,826/- by stamp valuing authority. The assessment U/s 143(3) r.w.s 147 was completed after making addition of ₹ 7,71,826/- being alleged undisclosed short term capital gain on alleged sale of immovable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty for ₹ 7,00,000/- and on this ground, the action of initiation U/s 148 of the Act was taken, whereas in fact, the assessee never sold any property as he was the mere power of attorney holder acting on behalf of seller and owner of property was Shri Nishikant Khopkar. Therefore, the ground so taken by the AO to form belief of escapement is factually incorrect. To sale something in someone's own right, firstly, the person must own the same and there is no such evidence that the assessee was having ownership of said property. Once, it is an established fact that assessee was not the owner of property, how can he sell the same. Therefore, the reasons so recorded were on wrong presumption and without looking into the correct facts of the case. In support of our contention we rely upon the decision of Hon'ble Coordinated Bench in the case of Shailesh Kumar Chaturvedi Vs ITO (ITA No.1026/JP/2019 order dated 07.07.2020). 6. It was further submitted that in the instant case, the reasons were recorded by the AO on 25.03.2015 on the basis of CIB information available that a property has been sold by the assessee for sale consideration of ₹ 7,00,000/- and on the basis of said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion at the time of recording of reasons is further supported by the fact that in the reasons, the assessee was termed at seller, whereas in the registered sale deed, the name of assessee is clearly mentioned as GPA Holder of Nishikant Khopkar. Thus, the information in the possession of AO and obtained u/s 133(6) were contradictory to each other. As mentioned above, after recording the reasons, the AO has subsequently written a letter u/s 133(6) to sub registrar-2 to obtain the copy of Sale deed. Given that, on the basis of this transaction, AO formed a reason of escapement in the hands of the assessee, therefore, it was essential on his part to at least examine the correct facts of the transaction beforehand. There is no dispute that the AO can rely upon the information received but at the same time, where he is assuming jurisdiction u/s 147, he is required to carry out further examination to make a establish formation of belief that income has escaped, whereas, nothing of this sort was done. In support of his contentions, he has relied upon the decision of Jaipur Bench in the case of M/s. Balaji Health Care Pvt. Ltd vs. ITO (ITA Nos. 566 & 567/JP/2018 vide order dated 30.1.2019). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has formed the reasonable belief that the income of the assessee has escaped assessment for the impugned assessment year. For assumption of jurisdiction u/s 147, the Assessing Officer must form a prima facie view on the basis of tangible material in his possession that there is an escapement of income, the opinion so formed may be subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion, the reasons recorded and/or the documents available on record must show a link/nexus and relevancy to the opinion formed by the Assessing Officer regarding escapement of income and the reasons are required to be read as they were recorded by the Assessing officer. It is for the Assessing officer to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons that the income chargeable to tax has escaped assessment. In the present case, the reasons recorded by the Assessing officer before issuance of notice u/s 148 read as under:- "As per information available on record, during the period under consideration, the assessee has sold immovable property for consideration of ₹ 7,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing at the prima facie view that income has escaped assessment and the matter is fit for issuance of notice u/s 148 of the Act. Such examination is required to be carried out before issuance of notice u/s 148 as the same is required for the Assessing officer to form his own independent opinion that the income has escaped assessment. In the instant case, there is no such examination and investigation carried out by the AO and infact, only after recording of the reasons, he has sought copy of the sale deed from the Sub-Registrar where the assessee has been shown as power of attorney holder of the owner of the immoveable property which again raises a question mark on the tangible nature of the CIB report. We therefore find that the AO has merely gone by the CIB report and was not even in possession of the sale deed and the exact specifics of the transaction at the time of recording of reasons and therefore, it is a case where the proceedings are vitiated for want of tangible material in possession of the AO and lack of reason to believe which is more in the realm of suspicion rather than formation of opinion that income has escaped assessment. The reasons thus recorded and/or the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has filed its return of income u/s 139(1) was very much in the knowledge of the Assessing officer and the latter could have verified the transactions with the reported transactions in the financial statements and could have asked for more information to establish the necessary nexus, however nothing of that sort has been done by the Assessing officer and he has merely gone by the report of DIT, Investigation Wing. It is true that the Assessing officer can rely on the report of DIT, Investigation Wing but at the same time, where he is assuming jurisdiction u/s 147, he is required to carry out further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment and in absence thereof, the assumption of jurisdiction u/s 147 has no legal basis and resultant reassessment proceedings deserve to be set-aside. Our viewis fortified by the decision of the Hon'ble Delhi High Court in case of Meenakshi Overseas Pvt. Ltd. (supra) wherein it was held as under:- "19. A perusal of the reasons as recorded by the AO reveals that there are three parts to it. In the first part, the AO has reproduced the precise in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent, 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 Act, the proviso to Section 147 will not apply. In oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding reopening of assessments where the return filed at the initial stage was processed under Section143(1) of the Act and not under Section 143(3) of the Act. The reasons for the reopening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding accommodation entries provided by a 'known' accommodation entry provider. There, on facts, the Court came to the conclusion that the reasons were, in fact, in the form of conclusions "one after the other" and that the satisfaction arrived at by the AO was a "borrowed satisfaction" and at best "a reproduction of the conclusion in the investigation report." 13. As in the above case, even in the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived himself of that opportunity by p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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