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TMI Blog2021 (11) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, whereupon, the assessee should have been given an opportunity to file his objections and the Assessing Officer was accordingly supposed to proceed in accordance with law. However, in this case, despite, it was brought to the knowledge of the Assessing Officer that the information on the basis of which he has formed belief of escapement of income of the assessee, was wrong, still the Assessing Officer proceeded to frame the assessment on the basis of the aforesaid wrong information which was basis for formation of his belief. Under these circumstances, it cannot be said that the Assessing Officer has proceeded in accordance with law. Framing of the assessment on the basis of information, which was wrong information to the very knowledge of the Assessing Officer, in our view, cannot be held to be justified, nor the same can be said to be an information to form the belief that the income of the assessee has escaped assessment. The reassessment framed on the basis of such wrong information and wrong belief is not sustainable in the eyes of law and the same is hereby quashed. - Decided in favour of assessee. - ITA No.6925/Del/2018 - - - Dated:- 6-10-2021 - Shri R.K.Panda, Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Assessing Officer letter dated 30.12.2013 rejecting assessee objection to issuance of s.148 notice dated 05.02.2013 Merely comprehensiveness of Assessing Officer disposal letter does not make it speaking order. 4. Challenge to assessment being only change of opinion-Tax Effect ₹ 65,79,313/- 4.1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order was void, invalid, non est as assessment was merely change of opinion. 5. Challenge to assessment being made during pendency of earlier assessment proceedings. -Tax Effect- ₹ 65,79,313/- 5.1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that assessment order was void, invalid, non est as Assessing Officer could not have done assessment proceedings when assessment proceedings were already pending in an earlier proceeding challenged. 6. Challenge to violation of natural justice.-Tax Effect ₹ 65,79,313/- 6.1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract completion method. 9.2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that bifurcation of receipts cannot be said to be prima facie arbitrary without appreciating the fact that bifurcation had been done as per mercantile accounting system of accounting. 9.3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that Assessing Officer could not have made addition without seeking reasons for difference in receipts as per Form No.s26AS (at ₹ 1,76,11,272/-) and as shown by the appellant at ₹ 37,80,885/-. 10. Challenge to making assessment order not as per provisions of s.143(3)-Tax Effect-₹ 65,79,313/-. 10.1 On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that AO had claimed in his order that s.148 notice was issued on 30.03.2013 while factually it was 05.02.2013 made assessment order invalid. 10.2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in not appreciating that use of forged sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , from the examining of the Form No.26AS , the Assessing Officer noticed that the total receipts of the assessee during the year was of ₹ 1,76,11,272/-. On this basis of these reasons, the Assessing Officer formed belief that the income amounting to ₹ 1,76,11,272/- of the assessee had escaped assessment. He, therefore, issued notice u/s 148 of the Income Tax Act, 1961 (hereinafter referred to the Act ) to the assessee. On receipt of the notice, the assessee filed his objection against the aforesaid reasons recorded by the Assessing Officer for reopening of the assessment. The contents of the said objections 30.12.2013, the sake of ready reference are reproduced under:- Date: 25/07/2013 The Income Tax Officer Ward 22(1) New Delhi Sub Objections to the issue of Notice u/s 147/148 of the Income- Tax Act, 1961 in the case of Shri Madan Mohan Tiwari for Assessment Year 2308-09 Sir In connection with the above it is submitted as follows - (1) The original return in the above case for Assessment Year 2008-09 was filed declaring therein an income ojf ₹ 2,80,070/- in response to notice u/s 142 of the Income Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year); Provided that where an assessment under sub-section (3) of' Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lete and direct conclusion as to income escaping assessment so as to resort to the reassessment provisions. (v) Section 148 to 151 set out the frame work, procedure and the conditions -governing the reassessment provisions incorporated in section 147. The said sections successively deal with:- (a) Form of notice and recording of reasons for issue (S. 148); (b) Time limit for issue (S, 149); (c) (c) Enlargement of time limit in certain cases and restriction thereon(Section 150); (d) (d) Sanction to be obtained for issue of notice (S. 151); (vi) The relevant parts of Section 148 relating to issue of notice and recording of reasons for the same read as follows'- Issue of notice where income has escaped assessment 148 - (1) Before making the assessment, reassessment or re-computation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realizing that price should familiarize themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. The essential principle as to the rule of finality of an assessment is that the Assessing Officer cannot change his mood and try to reopen a closed state of affairs. But if it is a case where the reopening is sought in consequence of some default on the part of the assessee or in consequence of information in possession of the officer which leads to a reasonable belief that there has been an escapement and if that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned, as a result of mental exercise made by him on the information received. But, the reason due to which the decision is reached can always be examined. When it is said that reason to believe is not open to scrutiny what is meant is that the satisfaction arrived at by the officer concerned is immune from challenge .but where the satisfaction is not based on any material or it cannot withstand the test of reason, which is an integral part of it, then it falls through and the court is empowered to strike it down. Belief may be subjective but reason is objective. ' Gangs Prasad Maheshwari Others vs ClT - [(1983) 139 ITR 1043 (All.)] Mahesh Kumar Agrawal v. DCIT - [(2003) 180 GTR 517 (Cal.)] No Reason to believe on suspicion, gossip or rumor 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 Assessing Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumor. The Assessing Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer that the assessee had duly filed the return of income for the year under consideration. Further, the assessee had duly pleaded that the aforesaid amount of ₹ 1,76,11,272/- was not income of the assessee rather the same was contractual receipts and that the assessee had returned the income in his return of income. However, the Assessing Officer dismissed the objections of the assessee by observing as under:- Office of the Inconre Tax Officer, Ward-22(1) Room No. 1015, E-2 Block, Pratyaksh Kar Bhawan Civic Centre, J.L. Nehru Marg, New Delhi. ****** F.No. ITO/W-22fl)/Scrutiny/2012-13/1048 Dated:30.12.2013 To, Shri Madan Mohan Tiwari Prop. M/s M.M. Engineering. J-145, Kalkaji, New Delhi - 110019. Sir, Sub: Proceedings u/s 148 of the I.T. Act, 1961 in the case of Shri Madan Mohan Tiwari for the A.Y. 2008-09 - Objection to the issue of Notice u/s 147/148 of the I.T.Act, 1961 - reg. Please refer to you letter dated 25.07.2013 raising objections against initiation of reassessment proceedings u/s 148 of the I.T. Act for the A.Y. 2008-09. 2. In this connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of income does not exist in the instant case. 3.3. In the light of these facts, it is clear that issue of notice u/s 148 is only based on a change of opinion and the reasons to believe for the conclusion as to escapement of income are only conjectural and not tangible and concrete which are the touchstones against which any such action has to be judged. Accordingly, it is humbly submitted that the action of issues of notice u/s 148 is void, ab-initio and deserves to be filed and not dealt with further at this stage itself. In support of his contention on reason to believe assessee has given references to the following judicial decisions: a. Ganga Prasad Maheshwari Others vs CIT [(1983) 139 ITR 1043 (All.)] b. Mahes Kumar Agrawal v DCIT-[(2003) 180 CTR 517 (Cal.)] c. Sheo Nath Singh v ACIT Central, Calcutta [(1971) 82 ITR 147( d. SC)] e. Ajit Jain v. Union of India and others [(1992) 242 ITR 302 (Delhi)] f. C. Ventakata Reddy vs ITO [(1967) 66 ITR 212 (Mysore)] g. L. R. Gupta vs Union of India and others [(1992) 194 ITR 32 (Del)] h. Calcutta Discount Co. Ltd. vs Assessing Officer-[(1961) 41 ITR 191 (SC)] i. Bhadarmal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt Ltd filed an application before the Hon ble Settlement Commission, Chennai Bench and the Hon ble Commission permit enquiry in connection with the transactions with M/s M.M. Engineering Enterprises. As part of the enquiry, Sri M.M. Tiwari was summoned u/s 131 5.3 by the undersigned to produce books of accounts etc. and give evidence. However, Sri M.M. Tiwari did not bother to appear in response to the summons nor did he file any evidence. To understand the correct facts, Investigation Wing, Delhi was requested to conduct a survey. 5.4 A survey u/s 133A was conducted by Unit-IV, Directorate of Investigation, New Delhi. During survey it was revealed that Sri M.M. Tiwari, is not maintaining books of accounts and could not furnish any evidence related to his income and expenditure. He did not produce even copies of returns of income for verification. H simply stated that all the information is available with Income Tax Department. It is also noticed that he and his family members are maintaining 61 bank accounts at various banks in New Delhi and Patna and that they are maintaining 31 debit/credit cards. Wife of Sh M.M. Tiwari also owns two flats. 5.5 Preliminary enqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.02.2013 c) Approval of Addl. Commissioner of Income Tax was obtained. d) Notice u/s 148 dated 05.02.2013 was issued and served. As well as the assessment was reopened on valid reasons after due application of mind as before reopening of assessment all the relevant material pertaining to the relevant assessment year was gone through. 8. As far making available the details and result of enquires conducted by the Investigation wing is concerned, the same has already been briefed and contained in the reasons recorded and provided to the assessee. At this stage, the full disclosure of details and result of enquiries are not required to be made available. However during the course to assessment proceeding, the principle of natural justice shall be duly followed. 9. In view of the above, I am of the considered view that there is no merit in the various argument put forward by you against the reopening of assessment. Accordingly, I intent to proceed, further with the reassessment providing. 10. You are further requested to provide certain information / explanations in respect of the points as under: a) Your education qualification 85 Source of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 1.76 crores as per Form No.26AS and further that the assessee had not filed the return of income for the year under consideration. However, on the receipt of notice u/s 148 of the Act, the assessee filed objections against the reopening of the assessment stating therein that the information on the basis of which the Assessing Officer had form belief of escapement of income was, in fact, a wrong information. In fact, the assessee had duly filed his return of income and further all the receipts could not be construed as the income of the assessee. In our view, as per the above factual position, when it has been brought to the knowledge of the Assessing Officer that the information on the basis of which he (Assessing Officer) had formed belief of escapement of income was in fact a wrong information, then the very belief of the Assessing Officer of escapement of income of the assessee on the basis of such information also ceased to exist. The Assessing Officer, under the circumstances, should have applied his mind afresh to the fresh information brought to his knowledge. If after duly considering the records including the ITR of the assessee, the Assessing Officer would have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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