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TMI Blog2022 (5) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... and held that the power to reopen an assessment must be conditioned on the existence of tangible material and that reasons must have a live link with the formation of the belief . Since the impugned notice under Section 148 of the Act, 1961 is a jurisdictional notice and the reasons to believe recorded by the Assessing Authority was totally unfounded and not bonafide, therefore, the notice itself was without jurisdiction and the Assessing Authority could not have assumed jurisdiction to issue notice under Section 148 of the Act, 1961. Therefore, the impugned notice under Section 148 of the Act, 1961 issued by the Assessing Authority can not be sustained and deserves to be quashed. Consequently, the impugned reassessment order can also not stand and, therefore, it also deserves to be quashed. WP Allowed. - Writ Tax No. - 379 of 2022 - - - Dated:- 6-5-2022 - Hon'ble Surya Prakash Kesarwani And Hon'ble Jayant Banerji JJ. For the Petitioner : Prakhar Tandon For the Respondent : A.S.G.I.,Gaurav Mahajan ORDER 1. Heard Sri Prakhar Tandon, Advocate, in person and Sri S.P. Singh, learned Additional Solicitor General of India assisted by Sri Dinesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment Centre, Delhi. Suffice would be to refer to some of the writ petitions in this regard, namely, Writ Tax No. 465 of 2022 (Harish Chandra Bhati Vs. Principal Commissioner of Income Tax Noida and 2 others) in which in respect of one co-owner of the same property the land was held to be agricultural land beyond eight kilometers of the municipal limits and thus sale thereof not liable to long term capital gain tax, while in respect of the same property the other co-owner was held to be liable to tax and capital gain tax has been assessed, in Writ Tax No. 202 of 2022 (Katiyar Cold Storage Private Limited Vs. Union of India and 2 others) the challenge is to the notice under Section 148 of the Act, 1961, which has been issued on the basis of an anonymous information about some other person regarding cash deposit and despite the petitioner-assessee repeatedly disclosed every fact before the assessing authority and the National Faceless Assessment Centre that neither the information relates to him nor any such transaction was entered by him and yet National Faceless Assessment Centre baselessly created huge tax liability even after admitting that the information which was made basis t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shows that there was no material before the assessing authority to issue notice under Section 148 of the Act, 1961, the notice itself would be without jurisdiction and no proceeding for re-assessment could have been carried against the petitioner and yet the respondents in continuation of their journey to harass the assessee, continued with the reassessment proceedings. It is informed by Shri Gaurav Mahajan, learned Senior Standing Counsel for the respondents that as per oral instructions received by him, re-assessment order has been passed. 7. Matter requires consideration not only because, prima facie, the entire proceedings under Section 148 of the Act, 1961 are without jurisdiction but also on account of arbitrary exercise of powers and harassment of assessee, which prima facie, is becoming a practice of the respondents which needs to be checked by the higher authorities. 8. Learned counsel for the respondents prays for and is granted a week's time to file a counter affidavit. Petitioner shall have three days, thereafter, to file a rejoinder affidavit. 9. Put up as a fresh case for further hearing on 18.4.2022 at 2:00 PM along with records of Writ Tax No. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice is being issued after obtaining the necessary satisfaction of the PCIT, Kanpur-1 Rakesh Kumar Gupta Ward 1(3)(5), Kanpur 5. In this case there is information on INSIGHT PORTAL that during the F.Y. 2012-13 relevant to A.Y. 2013-14 the Assessee was engaged in sale of immovable property with a capital gain of Rs.26,02,150/- was occurred, as per insight verification details. The petitioner filed objection to the aforesaid notice under Section 148 of the Act 1961, reasons to believe in which the petitioner has specifically stated in paragraphs 4, 5, 6 7 of the reply as under :- 4. That in reply to the reason recorded by the AO, it is submitted that the reason recorded is based on conjecture and surmises. It is most truly submitted that assessee has not sold any property in the year F.Y. 2012-13 and as such there is no alleged capital gain of Rs.26,02,150/- out of sale of immovable property in the year F.Y.2012-13 relevant to A.Y. 2013-14 . The reason has been recorded without due application of mind. There is no reason to believe that the income of the assessee in the F.Y. 2012-13 chargeable to tax has escaped assessment. 5. That the finding of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance amount of Rs.9,17,990/- in the total income of the petitioner . Aggrieved with the aforesaid impugned notice under Section 148 of the Act, 1961 and the reassessment order, the petitioner has filed the present writ petition. 8. It is wholly undisputed that reasons to believe recorded by the Assessing Authority for assuming jurisdiction under Section 148 of the Act, 1961 by issuing impugned notice, was totally unfounded and non existent . The Assessing Authority formed the reasons to believe on the ground that petitioner Assessee has sold an immovable property and gained the capital gain of Rs.26,2,0150/- during the F.Y. 2012-13 relevant to A.Y. 2013-14 but has not shown the same in his return of income, which was totally unfounded and not bonafide. Reason to Believe Meaning, Scope and Consequence:- 9. In the case of State of Uttar Pradesh Others vs. Aryaverth Chawal Udyog Others reported in (2015) 17 SCC 324 (paragraphs 28 to 30), the Hon'ble Supreme Court has held as under: 28. This Court has consistently held that such material on which the assessing Authority bases its opinion must not be arbitrary, irrational, vague, distant or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subjective opinion (CIT v. Dinesh Chandra H. Shah, (1972) 3 SCC 231; CIT v. Nawab Mir Barkat Ali Khan Bahadur, (1975) 4 SCC 360). (emphasis supplied) 10. In the case of The Commissioner of Sales-Tax U.P. vs. M/s. Bhagwan Industries (P) Ltd., Lucknow, AIR 1973 SC 370 (Paras 9 10) , Hon ble Supreme Court has held as under: 9. The controversy between the parties has centered on the point as to whether the assessing authority in the present case had reason to believe that any part of the turnover of the respondent had escaped assessment to tax for the assessment year 1957-58. Question in the circumstances arises as to what is the import of the words reason to believe , as used in the section. In our opinion, these words convey that there must be some rational basis for the assessing authority to form the belief that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax for some year. If such a basis exists, the assessing authority can proceed in the manner laid down in the section. To put it differently, if there are, in fact, some reasonable grounds for the assessing authority to believe that the whole or any part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for some year. If such a basis exists, the assessing authority can proceed in the manner laid down in Section 21 of the Act, 1948. If the grounds are of an extraneous character, the same would not warrant initiation of proceedings under the above section. If, however, the grounds are relevant and have a nexus with the formation of belief regarding escaped assessment, the assessing authority would be clothed with jurisdiction to take action under the section. Whether the grounds are adequate or not is not a matter which would be gone into by the High Court for the sufficiency of the grounds which induced the assessing authority to act is not a justiciable issue. The question as to whether that material in sufficient for making assessment or re-assessment under section 21 of the Act would be gone into after notice is issued to the dealer and he has been heard in the matter or given an opportunity for that purpose. The assessing authority would then decide the matter in the light of material already in its possession as well as fresh material procured as a result of the enquiry which may be considered necessary. 12. In the case of Sheo Nath Singh vs. Appellate Assistant CIT, (19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cannot be taken for reopening assessment even if the information is wholly vague, indefinite, farfetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. 12. The powers of the Income-tax Officer to reopen assessment though wide are not plenary. The words of the statute are reason to believe and not reason to suspect . The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147 (a). It there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to he struck down as invalid. 16. In the case of Income Tax Officer, Ward No.62 vs. TechSpan India (P.) Ltd. and another, (2018) 6 SCC 685 (Paras 14 to 18) , Hon ble Supreme Court held as under: 14. The language of Section 147 makes it clear that the assessing officer certainly has the power to re-assess any income which escaped assessment for any assessment year subject to the provisions of Sections 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. 7. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. 18. Before interfering with the proposed reopening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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