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TMI Blog2021 (10) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... Year: 2011-12) - - - Dated:- 25-8-2021 - Shri A. T. Varkey, Hon ble Judicial Member And Dr. M. L. Meena, Hon ble Accountant Member For the Appellant Shri Ajoy Kr. Gupta, AR For the Respondent Shri Supriyo Pal, Addl. CIT ORDER Per Shri A.T. Varkey: This is an appeal preferred by the assessee against the order of Ld. CIT(A)-4, Kolkata dated 29.11.2019 for assessment years 2011-12. 2. At the outset the Ld. A.R. of the assessee Shri Ajoy Kr. Gupta drawing our attention to the grounds of appeal preferred by it submitted that the assessee has challenged the action of AO to have invoked the reopening jurisdiction u/s 147 of the Act without satisfying the essential condition precedent i.e. the AO recording reason to believe escapement of income as per well settled law on the same. According to Ld. A.R. from a perusal of reasons recorded by the AO to reopen the assessment which is placed at page 4 of the PB it would reveal that the AO has reopened the assessment on the basis of certain information from the Investigation Wing that the assessee is a beneficiary of accommodation entry from Shri Gautam Jain (Surat Based Diamond Concern) to the tune of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment of an income of an assessee. First of all, we have to keep in mind that the concept of assessment is governed by the time barring rule and assessee acquires a right as to the finality of proceedings. Quietus of the completed assessments can be disturbed only when there is information or evidence regarding undisclosed income or AO has information in his possession showing escapement of income. Even if the AO has information in his possession that there is escapement of income of an assessee, then also the AO cannot legally/validly reopen the assessment u/s. 147 of the Act unless the jurisdictional fact and law which is required to reopen an assessment exist i.e. the AO should have reasons to believe escapement of income . Reasons to believe postulates a foundation based on information and belief based on reasons. Even after a foundation based on information is made, there still must be some reason which should warrant holding of a belief that income chargeable to tax has escaped assessment. This condition precedent is sine-quanon for validity reopening an assessment. And the AO has to record the reasons thus formed and thereafter only he can successfully reopen and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry which may result in detection of an income escaping assessment. Undoubtedly at the stage of recording the reasons for reopening the assessment; all that is necessary is the formation of prima facie belief that an income has escaped the assessment; and it is not necessary that the fact of income having escaped is proved to the hilt. What is however, necessary is that there must be something which indicates even if not establishes the escapement of income from assessment. It is only on this basis that the AO can form the belief that an income has escaped assessment. And merely because some further investigation have not been carried out, which if made, could have led to detection to an income escaping assessment, cannot be reason enough to hold the view that income has escaped. It is also important to bear in mind the subtle but important distinction between factor which indicate an income escaping the assessment and the factors which indicates a legitimate suspicion about income escaping the assessment . The former category consists of the facts which, if established to be corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee has not a true reflection of income and the assessee did not disclose his true and correct income during the assessment proceedings also. Hence, income of the assessee to the extent of ₹ 1233210/- has escaped assessment. From a perusal of the reasons recorded it is discerned that in the case of the assessee the original assessment u/s 143(3) was framed on 05.02.2014 and subsequently the AO based on information received from DGIT(Inv.) that the assessee has taken accommodation entry from Shri Gautam Jain Ors (Surat Based Diamond Concern) for ₹ 12,33,210/- alleged that the assessee had earned undisclosed income and thereby has not disclosed true and correct income during the assessment proceedings. So according to AO an income of ₹ 12,33,210/- has escaped assessment. Pursuant to the receipt of the reasons recorded for reopening, the assessee filed objection before the AO contending that the assessee did not had any transaction with the purported accommodation provider Shri Gautam Jain Ors. Thereafter, it is noted that the AO while framing the re-assessment has come out with two different accommodation entry providers i.e. M/s Ranjan Gems for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed pursuant to reopening after recording reason, and totally new facts have emerged, so in the absence of the foundational facts, the reasons to believe formed by the AO falls and the AO in such an event ought to have dropped the proceedings and initiated reopening by recording reason to believe escapement of income subject to limitation and in accordance to law. At this juncture we would like to point out an important legal principle that information adverse may trigger reason to suspect ; then the AO to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of income. And the reason to believe occurring in Section 147 of the Act is stronger than the expression is satisfied (Refer M/s Ganga Saran vs. ITO, 130 ITR 1). Here in this case, the AO if had made some preliminary enquiry after receipt of information then this kind of goof up could have been avoided. Thus in this case the AO has erroneously assumed the existence of jurisdictional fact/incorrect fact, so the reasons recorded to form the believe fails to stand the scrutiny of law, and the same was on an erroneous assumption of facts since the AO s reason to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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