9911796707
TMI Blog2021 (11) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the assessee was with DCIT, Circle (2)(1), Bangalore or ACIT, Circle 4(2)(1) ceased to have jurisdiction over the assessee. The jurisdiction enjoyed by Circle 2(1) in terms of section 127 stood abrogated. Accordingly, after 15.11.2014, ACIT, Circle 1(2)(1) could exercise power conferred on him for the purpose of proceedings against the assessee. Being so, when ACIT, Circle 1(2)(1) received the case records in terms of order u/s. 127 dated 15.11.2014, he is having right to issue notice u/s. 148 so as to frame assessment u/s. 143(3) of the Act. In the present case, jurisdiction over the assessee was conferred by law in terms of section 127 of the Act and the case has been rightly transferred from Circle 4(2)(1) to Circle 1(2)(1), Bangalore. There is no error in assuming jurisdiction over the assessee by the present AO i.e. ACIT, Circle 1(2)(1), Bangalore. This ground of the assessee is dismissed for AY 2006-07. Eligibility of reason to believe - Whether Reasons recorded were not actually Reason to Believe and that no speaking order was passed by the Assessing Officer on the objections filed on the reasons recorded? - The expression reason to believe cannot be a mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial in his possession to prove that the assessee is the owner of the bank account or having beneficial interest in this bank account in these two assessment years. Therefore, we are of the opinion that the reopening of assessments are bad in law, which cannot be sustained. Accordingly, we quash the reassessments. Addition u/s. 69 - addition made by AO is that there was an account in HSBC Bank, Geneva in the name of TIC and the assessee was one of the beneficiary / nominee of the account - HELD THAT:- It is clear that to hold that assessee is beneficial owner of bank account of TIC, the revenue must prove that assessee is owner of asset or value articles. Unless, the Revenue proves with necessary material that the bank account belongs to the assessee or assessee is beneficial owner of such account, the provisions of section cannot be applied against the assessee. This clear proposition is further supported by the judgment Ellis Bridge Gymkhana,[ 1997 (10) TMI 2 - SUPREME COURT] - the onus to prove fully lies on the department. The department cannot be asking the assessee to prove the negative. As per KP VARGHESE case [ 1981 (9) TMI 1 - SUPREME COURT] to throw the burden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer passing the order lacking jurisdiction makes the impugned order bad in law and such order is liable to be quashed. 3. Without prejudice to above, the Assessing Officer has erred in reopening the assessment for the following: a) Conditions precedent for reopening being absent; b) The legal compliances required for reopening having not been done; c) The noting made calling it to be reasons being not qualified to be -reason to believe d) Not passing separate speaking order disposing of the objections raised. All this makes the reopening bad in law and consequentially all subsequent proceedings including the impugned order become bad in law. The CIT(A) instead of quashing the order in toto has erred in confirming the same. The Order passed being bad in law and is liable to be quashed. 4.1 In any case and without prejudice, the Authorities below have erred in adding a sum of ₹ 2,89,69,405/- to the income of the appellant U/s. 69 of the I.T. Act, for the reasons: a) That the provisions of Section 69 of the I.T. Act, are not applicable to the case of the appellant; b) There is no basis for arriving at such figure; c) There is no basis to st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,89,69,405/- 2005-2006 143(3) RWS 147 27.03.2015 ACIT/C-1(2)(1) Unexplained investment deposit in HSBC Bank Account 2,89,69,405/- 2006-2007 143(3) RWS 147 27.03.2015 ACIT/C-1(2)(1) Unexplained investment deposit in HSBC Bank Account 2,89,69,405/- 2007-2008 143(3) RWS 147 12.11.2014 ACIT/C-2(1) Unexplained investment deposit in HSBC Bank Account 2,89,69,405/- 4. The above chart would show that for all the years, identical addition has been made by the AO by stating as follows (for AY: 2002-03):- I accordingly consider the aggregate amount of cash credit of ₹ 2.89 Crores (Rupees Dollar Exchange rate in the Financial Year 2001-2002 has been considered at 40.26 i.e., 719558 X 40.26) as unexplained investment within the meaning of Section 69 of I.T. Act, 1961 and adding it to the total income of the assessee . 5. It can be seen that identical amount i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as much as, I am not keeping good health and any furthering of proceedings in this matter will cause stress and worries to me and greatly affect my existing ill health. Therefore, in order to avoid the hassles and to buy peace, subject to the verification of the records and documents, I agree to offer for declaration and account balance, based on the information provided by your goodself to my tax advisor over phone, of USD 719558. The calculation is as under:- USD - 719558@ ₹ 40.26/- (being average rate for the year 2007-08- Source www.ananda.com) . This letter is given without prejudice, and subject to no other consequences, and no penalties under any law, and is given only to have the matter closed. 8. The assessee was originally assessed to Income tax by Income tax Officer, Ward-10(1), Bengaluru. Later, by a notification, the case of the assessee was specially assigned to Deputy Commissioner of Income tax, Circle-2(1), Bengaluru. As per the Notification, the assessee s case was specifically assigned u/s. 127 of the Act to DCIT, Circle-2(1), Bengaluru and therefore the assessee came out of the territorial jurisdiction and the case was assigned to a specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2003-04 Assessment Year 2004-2005: Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2004-05 Assessment Year 2005-2006: Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864 which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e went in appeal before the CIT(Appeals). 13. The CIT(Appeals) upheld the validity of reassessment proceedings by the AO. He observed that the assessee undeniably had an account in HSBC, Geneva. The name of the assessee, family members and TIC clear appear in the statement and bank account particulars and the amounts of deposit in the bank. The assessee never denied existence of the bank account, but only expressed ignorance about the transactions. The address in the bank account is also statedly of the assessee s premises / residence. On being confronted with the bank account, in the statement recorded during the course of survey, the assessee acknowledged the bank account and admitted to offer certain tax for the AY 2007-08. The impugned transactions were conducted on behalf of the assessee in individual capacity of the sole Director of TIC. The assessee s plea that TIC had an independent existence apart from the assessee was not found tenable on the peculiar facts and circumstances on record. The assessee had not disclosed the relevant bank receipts in his return of income. The assessee made deposits in the said bank account at least to the extent of US $ 719568 upto end of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer Deputy Commissioner of Income tax, Circle-2(1), Bangalore. 16. Thereafter, one more notification U/s. 127 was passed on 15.11.2014, whereby the case of the assessee was transferred from Assistant Commissioner of Income tax, Circle-4(2)(1), Bangalore to Assistant Commissioner of Income tax, Circle-1(2)(1), Bangalore. This is how it is contended by the Department that the jurisdiction of the appellant is vested with Assistant Commissioner of Income tax, Circle-1(2)(1), Bangalore. 17. The ld. AR further submitted it is admitted by the department that jurisdiction over the assessee was with Income tax Officer, Ward-10(1), Bangalore and vide order U/s. 127 of the Act, the jurisdiction changed to Deputy Commissioner of Income tax, Circle-2(1), Bangalore. However, the Department contends that after the restructuring, the jurisdiction of the assessee changed to Principal Commissioner of Income tax-4, Bengaluru and therefore, he could pass a fresh order U/s. 127 of the I.T. Act. 18. It is submitted that the assessee being out of the territorial jurisdictional area was not hit or covered by territorial restructuring done on 22.10.2014 because his jurisdiction was with desig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not correct that the assessee has not raised any specific grounds objecting to the jurisdiction. 21. It was submitted that, in any case, the assessee s case was with DCIT, Circle-2(1), Bangalore, who was not a territorial jurisdictional officer but was a designated officer and therefore territorial restructuring by the Board did not affect jurisdiction over the assessee and therefore the PCIT, Bangalore-4 having no jurisdiction over the assessee could not have passed an order U/s. 127 of the Act, transferring the case to ACIT/DCIT, Circle-1(2)(1), Bangalore. Therefore, it is submitted that the impugned order as passed by the DCIT, Circle-1(2)(1), Bangalore is without jurisdiction and therefore requires to be quashed. 22. The ld. DR submitted that the assessee was assessed under Ward 10(1), Bangalore prior to 2.5.2013. Consequent to the order u/s. 127 of the Act dated 2.5.2013, the jurisdiction of the assessee changed to Circle 2(1), Bangalore. She drew our attention to the copy of the order passed u/s. 127 of the Act. Subsequently, based on CBDT Notification No.S.O. 2752(E) dated 22.10.2014 published in the Gazette of India : Extraordinary [PART II SEC. 3(ii)], the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the jurisdiction of the assessee was transferred from ITO, Ward 10(1) to DCIT, Circle 2(1), Bangalore. 25. The argument of the ld. AR is that ACIT, Circle 1(2)(1) has no jurisdiction so as to frame the assessment for the AY 2006-07 since the assessee s case was with the Central Circle which is the designated office to frame the assessment in view of the order passed by the CIT-IV, Bangalore, Bangalore on 2.5.2013. It cannot be taken away by CBDT Notification dated 22.10.2014 published in the Official Gazette of India as the assessee is out of territorial jurisdictional area and this Notification dated 22.10.2014 cannot be applied and the assessee continued to be under the jurisdiction of PCIT-2, Bangalore and it is wrong on the part of the department to state that jurisdiction of the assessee transferred to PCIT-4, Bangalore by Notification dated 22.10.2014. 26. For understanding the legal position, we will go through the provisions of section 120, 124, 127 and 129 of the Act reproduced below:- 120. Jurisdiction of income tax authorities (1) Income tax authorities shall exercise all or any of the powers and perform all or any of the functions Conferred on, or, as the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Act requiring approval or sanction of any such authority shall not apply. (6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette,, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as maybe specified in the notification. 124. Jurisdiction of Assessing Officers (1) Where by virtue of any direction or order issued under sub-section (1) or subsection (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction- ( a ) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich he has been vested with jurisdiction by virtue of the directions or orders issued under subsection (1) or sub- section (2) of section 120.] 127. Power to transfer cases (1) The Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner,- ( a ) where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer (AO) has been vested with the jurisdiction by virtue of the directions or orders issued by the Board under sub-section (1) or sub-section (2) of section 120 of the Act. The direction u/s. 120(1) is given by the Board, for the exercise of the powers and performance of the functions by all or any of the Income Tax Authorities, as specified u/s. 116 of the Act. As per subsection (2) of Section 120 of the Act, the Board may delegate its powers to Income tax authorities as specified in Section 116, for issuing the orders in writing, for the exercise of the powers and performance of the functions by all or any of the other Income Tax Authorities who are subordinate to that authority. We also note that the concurrent jurisdiction can be vested in more than one Assessing Officer, which is discernible by a conjoint reading of Section 120(5) with Section 120(2) of the Act. Section 124(1) of the Act confers jurisdiction on an AO, by virtue of jurisdiction vested by any direction or order issued by CBDT under sub-section (1) and/or (2) of section 120 of the Act. The AO is vested with the jurisdiction u/s. 124 of the Act, over any area within the limits of such area, he shall have j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the limits of his territorial area as conferred to him (Assessing Officer) by order under sub-sec. (1) or (2) of sec. 120 of the Act and not otherwise. So, this saving provision will come into play only in the first place the Assessing Officer is vested with the jurisdiction by an order/direction issued under sub-sec. (1) or (2) of section 120 of the Act. Thus, as per the scheme of the Act, it can be seen that sections 120 and 124 vest jurisdiction on Income Tax Authorities and on Assessing Officer respectively and, therefore, both sections i.e ., sections 120 and 124 of the Act must be read in conjunction and harmoniously to decide the territorial jurisdiction which is prescribed by the direction or orders by the CBDT under sub-sec. (1) or (2) of sec. 120 of the Act. 28. Having taken note of the provisions of Sections 120 124, we however find that Section 127 is a separate code of its own. Section 127(1) empowers, the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, as stipulated therein, to transfer any case from one or more Assessing Officer subordinate to him. In other words, under Section 127 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or direction of any year. This definition of the expression 'case' implies that, once a transfer is made by the authority specified in sub-section (1) or (2) of section 127 of the Act who had the jurisdiction over an Assessing Officer who in turn had jurisdiction over the assessee/person/entity, by virtue of direction/order issued under section 120(1) or (2) of the Act, then the entire assessment of the person i.e . pre-transfer and post-transfer as on date of transfer will stand transferred and thereafter for all purposes of the Income Tax Act, the AO of the assessee to whom the case is transferred, will be the Assessing Officer in respect of the said the assessee for pre and post proceedings from the date of transfer. In other words, once transfer order of a case of an assessee is issued u/s. 127 of the Act the effect will be that (i) all the proceedings of the assessee under the Act in respect of any year which maybe pending on the date of such order will stand transferred, (ii) all the completed assessment order of the assessee on or before the date of transfer will stand transferred and (iii) all proceedings under the Act in respect of the assessee which maybe commen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder u/s. 127 dated 2.5.2013 and according to the ld. AR, CBDT Notification dated 22.10.2014 cannot be applied to assessee s case as the assessee continued with the designated officer, DCIT, Circle 2(1), Bangalore. For adjudicating this contention, we will examine the provisions of sub-section (5) of section 124 and subsection (4) of section 127 of the Act which reads as follows:- Section 124(5):- Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or sub- section (2) of section 120. Section 127(4):- The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation: In section 120 and this section, the word case , in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment on 9.12.2014. The argument of the ld. AR is not in accordance with the provisions of section 124(5) r.w.s. 127 of the Act. In our opinion, once an order under u/s. 127 is passed on 15.11.2014 by CIT-4, Bangalore, the jurisdiction of the assessee was with DCIT, Circle (2)(1), Bangalore or ACIT, Circle 4(2)(1) ceased to have jurisdiction over the assessee. The jurisdiction enjoyed by Circle 2(1) in terms of section 127 stood abrogated. Accordingly, after 15.11.2014, ACIT, Circle 1(2)(1) could exercise power conferred on him for the purpose of proceedings against the assessee. Being so, when ACIT, Circle 1(2)(1) received the case records in terms of order u/s. 127 dated 15.11.2014, he is having right to issue notice u/s. 148 so as to frame assessment u/s. 143(3) of the Act. In the present case, jurisdiction over the assessee was conferred by law in terms of section 127 of the Act and the case has been rightly transferred from Circle 4(2)(1) to Circle 1(2)(1), Bangalore. There is no error in assuming jurisdiction over the assessee by the present AO i.e. ACIT, Circle 1(2)(1), Bangalore. This ground of the assessee is dismissed for AY 2006-07. 33. For AY 2007-08 , the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under which DTAA the info was received. d. State that how the Asssessing Officer is informed of an account with HSBC Bank. e. State that in which branch of the bank the account is opened. f. State that when was the account opened. g. State that even if there is account in whose name account is there. h. State that how it is concluded that the figure has not been admitted to tax. i. State that how it is concluded that income chargeable to tax has escaped assessment. 38. It is submitted that the reasons recorded should be based on tangible materials and based on independent application of mind. For this proposition reliance was placed on case laws:- i) PCIT v. Meenakshi Overseas P. Ltd., 82 taxmann.com 300 (Del) ii) PCIT v. G G Pharma India Ltd., 384 ITR 147 [2017] 81 taxmann.com 109 (Del) iii) CIT v. Sfil Stock Broking Ltd., 325 ITR 285 iv) CIT v. Insecticides (India) Ltd., 357 ITR 330 39. Therefore, it is submitted that there was no recording of any reasons to believe for reopening for the year and in any case there was no reasons and material for the AY 2006-07 in the reasons so recorded. Therefore, issue of notice u/s. 148 of the Act, for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no infirmity in the reopening of assessment. 43. We have heard both the parties and perused the material on record. Section 147 of the Act states that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income . , Hence the basic requirement for initiating proceedings u/s. 147 is that the AO should have reason to believe that any income chargeable to tax has escaped assessment . 44. We have gone through the reasons recorded for these two assessment years which are as follows:- Assessment Year 2006-2007: Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC,-Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e formation of belief. The existence or otherwise of such a belief on the part of the AO, is the very foundation for him to assume jurisdiction u/s 147. In the present case, it is established that the AO did not have any reason to believe as judicially interpreted by various courts. So the initiation of proceedings u/s 147 is bad in law. Reliance was placed on CIT v. Lalit Kumar Bardia, 84 taxman.com 212. 48. The Hon ble Supreme Court in Sheo Nath Singh v. Appellate Asstt. CIT [1971] 82 ITR 147 (SC) observed as under:- There can be no manner of doubt that the words reason to believe suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstances evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court. 49. A three-Judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts on this facet of the lis, therefore, is the existence, relevance and rationale of the reason on which the Assessing Officer proceeds to act under Section 147 and the bearing it has on the process of formation of the belief that income has escaped assessment. If either of these two essentials is absent, the proposed action would be ex facie unauthorized. Not only the reason has to be one, which is relevant and recognized in law, the same has to have a rational and logical link with the belief that there has been an escapement of taxable income. The belief has to have its roots in the reasons and obviously has to be genuine and bona fide and not merely a pretence. The subjective satisfaction metamorphing into the belief has to be guided by objectivity based on existing relevant reasons acknowledged and recognized by law. A tangible and bona fide legal necessity to scuttle tax avoidance is the essence of the power and no roving enquiry on vague-hunches or indeterminate and impertinent consideration is envisaged. 52. The entire law as to what would constitute reason to believe was summed up by the Hon ble Supreme Court in ITO v Lakhmani Mewal Das [1976] 103 ITR 437. The follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words definite information which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. . 54. In Commissioner of Income-tax v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), the Hon ble Supreme Court held as under: There should, in our opinion, be some direct nexus between the conclusion of fact arrived at by the authority concerned and the primary facts upon which that conclusion is based. The use of extraneous and irrelevant material in arriving at that conclusion would vitiate the conclusion of fact b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no assessment order is passed when the return is merely processed under Section 143(1) and an intimation to that effect is sent to the assessee. However, it has been recognised by the Supreme Court itself in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P). Ltd. [2007] 291 ITR 500/ 161 Taxman 316, a decision that was relied upon by the revenue, that even where proceedings under Section 147 are sought to be taken with reference to an intimation framed earlier under Section 143(1), the ingredients of Section 147 have to be fulfilled; the ingredient is that there should exist reason to believe that income chargeable to tax has escaped assessment. This judgment, contrary to what the Revenue would have us believe, does not give a carte blanche to the Assessing Officer to disturb the finality of the intimation under Section 143(1) at his whims and caprice; he must have reason to believe within the meaning of the Section. ..There is nothing in the language of Section 147 to unshackle the Assessing Officer from the need to show reason to believe . The fact that the intimation issued under Section 143(1) cannot be equated to an assessment , a position which has been elaborate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interpretation of the expression when it is applied to the reopening of an assessment earlier made u/s. 143(3) cannot apply where only an intimation was issued earlier u/s. 143(1). It would in effect place an assessee in whose case the return was processed u/s. 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 143(1) and thereafter issue notices to reopen the assessment. An interpretation which makes a distinction between the meaning and content of the expression reason to believe in cases where assessments were framed earlier under Section 143(3) and cases where mere intimations were issued earlier under Section 143(1) may well lead to such an unintended mischief. It would be discriminatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return. For the purpose of clause (b) to Explanation (2), the Assessing Officer must notice that the assessee has understated his income or has claimed excessive loss, deduction, allowance or relief in the return. The taking of such notice must be consistent with the provisions of the applicable law. The act of taking notice cannot be at the arbitrary whim or caprice of the Assessing Officer and must be based on a reasonable foundation. The sufficiency of the evidence or material is not open to scrutiny by the Court but the existence of the belief is the sine qua non for a valid exercise of power. In the present case, having regard to the law laid down by the Supreme Court it was impossible for any prudent person to form a reasonable belief that the income had escaped assessment. The reasons which have been recorded could never have led a prudent person to form an opinion that income had escaped assessment within the meaning of section 147. In these circumstances, the petition shall have to be allowed by setting aside the notice under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d faith, it cannot merely be pretence. In addition, suspicion, gossip or rumour would not form the basis for such belief. 63. In Rambagh Palace Hotels Pvt Ltd Vs DCIT 2013-TIOL-45-HC-DELIT, the Hon ble Delhi High Court held as under:- Even so, it is necessary that the assessing officer must have reasons to believe that income chargeable to tax had escaped assessment. There must be tangible material before him on the basis of which he could form the belief, bona fide and in good faith, that there was escapement of income. The material must have a live link or nexus with the formation of the belief. The belief cannot be a mere pretence. These are the most basic and indispensable requirements for the validity of the notice under Section 148 64. The Third Member in M/s. Telco Dadajee Dhackjee Ltd. Vs. The DCIT, Circle 2(3) 2012-TIOL-532-ITAT-MUM-TM held as under:- section 147 applies both to section 143(1) as well as section 143(3) and, therefore, except to the extent that the reassessment notice issued under section 148 in a case where the original assessment was made under section 143(1) cannot be challenged on the ground of a mere change of opinion, still it is ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at income chargeable to tax has escaped assessment. He also has to record reasons under section 148(2) for reopening the earlier assessment made under section 143(1). All that has been excluded is that the assessee, in whose case the return was first processed under section 143(1), cannot challenge the notice of reopening on the ground that it is prompted by a mere change of opinion. Only to this limited extent there is a disability on the part of the assessee to challenge the notice of reopening in a case where his return was earlier processed under section 143(1) of the Act. ..the notice of reopening issued in a case where the return was first processed under section 143(1) is open to challenge on all grounds available to the assessee, including the ground that there was no reason to believe that income chargeable to tax had escaped assessment or that the materials before the Assessing Officer had no live link or nexus with the formation of such belief or that the reasons are based on gossip or rumour or were a mere pretence. This is made clear by the observations of the Court at page 512 of the report where it was held that so long as the ingredients of section 147 are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . R. Rajkumari [1973] 96 ITR 78 (Mad.): TC 51R 430].The requisite belief u/s. 147 must be that of the ITO concerned and not of any other officer. If the ITO does not form, his own belief but merely act at the behest of any superior authority, it must be held that the assumption of jurisdiction under section 148 was bad for non-satisfaction of the conditions precedent [Sheo Narain Jaswal Ors. v. ITO Ors. [1989] 176 ITR 352 (Pat.); TC 51R 432.. See also Vishal Swamp Agrawilla v. ITO [1976] CTR (Cal.) 296: TC 51R 432A and Chunnilal Onkarmal (Pvt) Ltd., (1983) 349 ITR 380 (MP): TC 51R 435]' .. The reasons for reopening must be recorded by jurisdictional AO because he is keeping all relevant and primary record. The basic requirement of section 147 of the Act is that the AO has reason to believe that any income chargeable to tax has escaped assessment. Such belief must be the belief of jurisdictional AO and not any other AO or authority of the department. Therefore, it is well settled that the AO's jurisdiction to reopen an assessment u/s. 147 depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason the entire proceedings ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r mandatory condition is that the satisfaction recorded should be independent and not borrowed or dictated satisfaction. Law in this regard is now sell-settled. In Sheo Narain Jaiswal v. ITO [1989] 176 ITR 352/ 45 Taxman 213 (Pat.), it was held: Where the Assessing Officer does not himself exercise his jurisdiction under Section 147 but merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was bad for non-satisfaction of the condition precedent. 70. The Apex Court in the case of AnirudhSinhji KaranSinhji Jadeja v. State of Gujarat [1995] 5 SCC 302 has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether. 71. The Hon ble High Court in Mrs.Vinita Jain v. ITO 158 Taxman Magazine 167 held that where Assessing Officer reopened assessee s assessment merely because DDIT (Inv.) believed that transaction of capital gains shown by assessee was bogus and no separate reason disclosing sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court held that initiation of reassessment proceedings based upon the opinion of the Assessing Officer of the lessor at Mumbai was borrowed satisfaction and was not sufficient reason to believe that income had escaped assessment proceedings under section 147 has been dismissed. [CIT v. Shree Rajasthan Syntex Ltd. [2009] 313 ITR (Statutes) 27] 75. The Hon ble Bombay High Court in ICICI Home Finance Co Ltd Vs ACIT, Mumbai 2012-TIOL-590-HC-MUM-IT held as under:- The belief u/s 147 that income has escaped assessment has to be the reasonable belief of the AO himself and cannot be an opinion and/or belief of some other authority. The AO cannot blindly follow the opinion of an audit authority for the purpose of arriving at a belief that income has escaped assessment. On facts, the recorded reasons are identical to the objection of the audit authority. The reasons do not rely upon any tangible material in the audit report but merely upon an opinion and the existing material already on record. This itself indicates that there was no independent application of mind by the AO before he issued the s. 148 notice (India Eastern Newspaper Society 119 ITR 996 (SC) followed). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L-72-HC-MUM-IT), the reasons for reopening as recorded must be clear and not suffer from any vagueness so to keep the assessee guessing for the reasons. It is the reasons which provide the link between the evidence and the conclusion. In this case the reasons as recorded do suffer from the vice of vagueness. 80. The reasons recorded for reopening the assessment for AY 2006-07 are as follows:- Assessment Year 2006-07: Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC,-Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2006-07 81. As per reasons recorded, the assessee has invested along with his ex-wife in HSBC Bank, Geneva and the transaction with HSBC Bank were not disclosed to the department. However, it has not been stated that the said investment in HSBC was out of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of suspicion and initiation of reassessment proceedings u/s. 148 of the Act on the basis of this aspect was invalid in the eye of law. 84. Further, the AO framed assessment in AYs 2002-03 to 2007-08 which clearly shows that he was not sure as to whether assessee was having income which escaped assessment in all these assessment years. In similar circumstances, the Bangalore Bench in the case of DCIT vs. Bullion Investments Financial Services (P) Ltd. [2010] 123 ITD 568 held as under:- The fact of undisclosed investment in the share capital of the assessee-company was found during the course of search and material was collected during the course of search that such investment belonged to 'G'. If such income was to be assessed in the hands. of a person other than 'G'; then the revenue should have taken recourse under section 158BD. If the revenue was not sure as to whose hands the assessment was to be made, then the revenue could have initiated proceedings against both the assessees. In the instant case, the assessment in the case of 'G' was completed on 31-7-1997. Notice under section 148 had been issued to the assessee-company on 27-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot he owned by two persons, each one having independent and exclusive right over it. Hence for the purpose of s. 9, the owner must he that person who can exercise the rights of the owner, not on behalf of the owner but in his own right. 17. ... It is not necessary for our present purpose to examine what the word owner means in different contexts. The meaning that we give to the word owner in s. 9 must not be such as to make that provision capable of being made an instrument of oppression, must be in consonance with the principles underlying the Act. 87. Therefore, considering the facts and circumstances of the case and also by following the precedents discussed above, we are of the considered opinion that the AO reopened the assessment merely on suspicion and surmise, without there being any positive material in his possession to prove that the assessee is the owner of the bank account or having beneficial interest in this bank account in these two assessment years. Therefore, we are of the opinion that the reopening of assessments are bad in law, which cannot be sustained. Accordingly, we quash the reassessments. 88. Common Ground Nos.4.1 4.2 by the assessee are in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they do not have a copy of so called bank account statement. e) The addition was sought to be made solely on the basis of admission made in the course of survey. f) The details of bank accounts and the transactions therein if available were not made available to the appellant and source of materials were not revealed thus violating the principles of natural justice. g) The legal authenticity of the paper on the basis of which the addition is made is not shown and proved. h) The addition is made without independent application of mind and without providing opportunity of cross examination. i) The statements given u/s. 133A of the Act have no evidentiary value. j) Further, it is also submitted that the so called papers show that the account was in the name of corporate entity and the. corporate entity is an independent person and it cannot be equated to its shareholders or directors. The corporate entity has a separate legal entity and perpetual succession. Therefore even it is held that there are deposit in the bank account, the same belongs to corporate entity itself and the appellant has nothing to do with it. Therefore the addition made in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year. The addition made by the AO is only on the basis of admission made by the assessee in the course of survey. As held by the Supreme Court in S. Khader Sons, 352 ITR 480 (SC), the admission made u/s. 133A of the Act has no evidentiary value. On this count, addition cannot be made. 94. Further in the present case, department was in possession of information received through diplomatic channel. Survey action was conducted on 28.7.2011. Statement was recorded u/s. 131 of the Act. Subsequent to this, statement was recorded from late Mr. Ramesh Madhok u/s. 133(6) of the Act wherein he stated that there is an account being held in the name of TIC in which he is associated as a director. He further stated that TIC is a corporate entity incorporated at British Virgin Island and the debits in the HSBC account are inter-group transactions and the account was closed in the year 2008. The assessee paid the tax of ₹ 5 lakhs for AY 2007-08 on the amount involved voluntarily and filed letter to this effect on 5.9.2011. The tax has been paid by the assessee in order not to prolong the proceedings and to have amicable relations with the department. As seen from the above, additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. 97. From the above, it is clear that to hold that assessee is beneficial owner of bank account of TIC, the revenue must prove that assessee is owner of asset or value articles. Unless, the Revenue proves with necessary material that the bank account belongs to the assessee or assessee is beneficial owner of such account, the provisions of section cannot be applied against the assessee. This clear proposition is further supported by the judgment of the Supreme Court in CWT v. Ellis Bridge Gymkhana, [1998] 1 SCC 384 . Further, the onus to prove fully lies on the department. The department cannot be asking the assessee to prove the negative. The department cannot force impossible burden of proving negative on the assessee. This legal proposition is reiterated in the case of K.P. Varghese v. ITO, [1981] 4 SCC 137 wherein it was held that moreover to throw the burden of showing that there is no understatement of the consideration on the respondent would be attached and almost impossible burden upon him to establish the negative, namely, that he did not receive any consideration beyond that declared by him. Therefore, the addition made by the AO u/s. 69 of the Act is on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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