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TMI Blog2021 (5) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... er materials on record, he formed an opinion that, the income has escaped assessment - when the information was specific with regard to transactions of penny stock entered into by the assessee with the Tuni Textiles Ltd., and the Assessing Officer had applied his independent mind to the information and upon due satisfaction, led to form an opinion that, the amount of claim of LTCG claimed by the assessee is chargeable to tax has escaped assessment, which facts suggests that, there is live link between the material which suggested escapement of income and information of belief. Under the circumstances, we are satisfied that, there was enough material before the Assessing Officer to initiate proceedings under Section 147 of the Act. We do not agree with the contention that, merely on the information, the Assessing Officer has recorded the reasons and on the basis of borrowed satisfaction, he formed an opinion with respect to the income chargeable to tax has escaped assessment. As examined the issue of valid sanction as raised by the learned counsel for the writ applicant - the copy of the approval has been provided to the assessee at the stage of passing the order of disposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice has recorded the following reasons for reopening of the assessment. Reasons for reopening of the assessment for u/s 147 of the Income-tax Act. . 1. Brief details of the Assessee: The assessee is an individual and has efiled her return of income vide Ack No. 591844330260313 for the year under consideration on 26/03/2013 declaring total income at ₹ 2,45,900/-. 2. Brief details of information collected/received by the AO: The information in respect of the penny stock transaction made in FY 2011-12 was made by the assessee as per information received from the ITO(CIB) I, Mumbai on 03/04/2013 at DIT (I CI), Mumbai uploaded in the [TS data. 3. Analysis of information collected /received: As per the information of penny stock transaction data available, assessee has made sale transactions of shares of Tuni Textile Limited trade qty. 30,000 share for ₹ 25,72,500/-. 4. Enquiries made by the AO as Sequel to information collected /received: As per information received from the ITO(CIB)I, Mumbai on 03/04/2013 at DIT (I Cl), Mumbai uploaded in the ITS data. 5. Findings of the AO: As per information received the ITO(CIB)l, Mumbai on 03/04/2013 at DIT (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have heard learned Senior Counsel Mr. Tushar Hemani, assisted by Ms. Vaibhavi Parikh, the learned counsel appearing for the writ applicant and Mr. Manish Bhatt, the learned Senior Counsel assisted Mr. Karan Sangani, the learned advocate appearing for the revenue. 8. Mr. Tushar Hemani, the learned Senior Counsel appearing for the writ applicant, raised the following contentions: a. It was submitted that the impugned notice is bad in law and without jurisdiction because the conditions precedent for reopening under Section 147 of the Act are not satisfied; b. It was submitted that, reasonable belief as contemplated under Section 147 /148 of the Act must be that of an honest and reasonable person based upon reasonable ground and it should not be based on some suspicious and vague reason. Whereas, in this case, the reasons are vague and do not reveal any income having escaped assessment and furthermore, reasons recorded made it clear that, this is a case of borrowed satisfaction without any independent application of mind. c. It was further submitted that, in case of reopening beyond period of 4 years, it is mandatory to obtain sanction from the competent Authority as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y opposed the writ application, contending that the Assessing Officer was in receipt of information from the ITO (CIB1), Mumbai, that the writ applicant had sold 30,000 penny stock shares of Tuni Textiles Ltd., worth of ₹ 25,72500/-during A.Y 201213 and after in depth investigation into the transaction of the scrip of Tuni Textiles Ltd., it was found that the transaction was penny stock and the assessee had availed accommodation entry to the tune of sale consideration received on sale of such shares by way of entering into dubious transactions in penny stock scrip. In this background of the facts, the writ applicant is the beneficiary of the accommodation entries of long term capital gain on penny stock transactions and therefore, the Assessing Officer has reasons to believe that the income chargeable to tax has escaped assessment. Mr. Bhatt placed reliance upon the decision of this Court in the case of Purvi Snehalbhai Pachhigar Vs. Asst. Commissioner of Income Tax, (2019) 101 Taxman.com.393, to submit that, in a similar set of facts, this Court had dismissed the petition challenging the notice issued under Section 148 of the Act. 12. Mr. Manish Bhatt, learned Senior Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tuni Textile Ltd. being a penny stock transactions, he has reason to believe that the income of ₹ 25,72,500/-chargeable to tax has escaped assessment. While forming the opinion with regard to income has escaped assessment, the Assessing Officer has noticed that the price rise in the share of Tuni Textiles Ltd., for the relevant year had not been supported by financial fundamental of scrip and there was a manipulation by group of syndicate like promoters, brothers and controllers who played major role in rising the price for fictitious long term capital gain and the assessee has availed accommodation of entry to the tune of sale consideration received on sale of such shares by way of entering into dubious transaction in penny stock scrip. 17. It appears that, in the affidavit in reply filed by the revenue, it has been stated that, Principal Director of Income Tax (Inv) Kolkata, had undertaken the accommodation entry of long term capital gain, and identified large number of beneficiaries who had availed huge amount of bogus entries of LTCG and identified 64811 beneficiaries involving bogus LTCG amounting ₹ 38000 crores. In reply affidavit, the revenue has highlighted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, by way of affidavit in reply, the revenue has improved the reasons recorded, has no any merit and cannot be accepted to hold that, the exercise to reopen the assessment is without jurisdiction. 20. The next contention is that, the Assessing Officer failed to record an independent finding as to how the income has escaped assessment. Under such facts and circumstances, it is vehemently contended that, the Assessing Officer while recording the reasons for reopening the assessment did not have any valid reasons to believe that, the income earned by the assessee by way of long term capital gain has escaped assessment. 21. A bare perusal of the reasons recorded and further clarification of the information made by the revenue by way of affidavit in reply would make it clear that, the company Tuni Textile Ltd., was used in providing bogus accommodation entries of long term capital gain by certain entities like broker etc. Undisputedly, the assessee had purchased 30000 shares on 03.08.2010 at a total cost of ₹ 55,500/- and sold it on 20.03.2012, for total consideration of ₹ 25,72,500/-. It further appears that, on the basis of information received from the concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of the matter . And, .....His formation of belief is not a judicial decision but an administrative decision. It does not determine anything at the initial stage, but the Assessing Officer has a duty to proceed so as to obtain, what the taxpayer was always bound to pay if the increase is justified at all. The decision to initiate the proceedings is not to be preceded by any judicial or quasijudicial enquiry. His reasoning may be the result of official information or his own investigation or may come from any source that he considers reliable. His reason is not to be judged by a Court by the standard of what the ideal man would think. He is the actual man trusted by the legislature and charged with the duty of forming of a belief for the mere purposes of determining whether he should proceed to collect what is strictly due by law, and no other authority can substitute, its standard of sufficient reason in the circumstances, or his opinion or belief for his. Unless the ground or material on which his belief is based, is found to be so irrational as not to be worthy of being called a reason by any honest man, his conclusion that it constitutes a sufficient reason, cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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