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TMI Blog2023 (7) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... pt by way of sale consideration from the transaction in question and has bifurcated the said amount under the head of Building (Depreciable Assets) and under the head of Land (Other Assets) towards the sale consideration, which have been shown. Petitioner has also paid STCG and LTCG - Therefore, it cannot be said that the income chargeable to tax has escaped assessment in the hands of the assessee. Thus looking to the aforesaid facts of the present case, we are inclined to entertain the present petition. Decided in favour of assessee. - HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI AND HONOURABLE MR. JUSTICE DEVAN M. DESAI Appearance: For the Petitioner(s) No. 1 : Mr Tushar Hemani, Sr. Adv. with MS Vaibhavi K Parikh (3238) For the Respondent(s) No. 1 : Mr. Varun K. Patel (3802) ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI) 1. Looking to the issue involved in the present petition, learned advocates appearing for the parties have requested that this petition be taken up for final disposal at an admission stage and, hence upon their request, it is taken up for final disposal at an admission stage. 2. Rule. Learned advocate, Mr. Varun Patel waives service of notice of rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and balance sum of Rs.70,00,000/- was paid to two confirming parties. It is also stated that as per the case of the respondent, the petitioner has not offered capital gain on sale of the property in question in the return of income. Accordingly, the respondent has reason to believe that the income of Rs. 40,00,000/- has escaped assessment in the hands of the petitioner for the year under consideration and, hence, the case of the petitioner has been reopened. 4.3 It is stated that the objections were raised by the petitioner against the reopening of the assessment by filing reply dated 25.11.2021, wherein it was pointed out that entire sum of Rs. 40,00,000/- is duly shown in its return of income. It is the case of the petitioner that though the said objections were raised, the respondent vide order dated 02.12.2021, disposed of same by observing that such information would be verified in re-assessment proceedings. 4.4 It is stated that thereafter, the impugned notice dated 03.12.2021 came to be issued under Section 142(1) of the IT Act, which has been challenged in the present petition. 5. Heard learned Senior Counsel, Ms. Tushar Hemani assisted by learned advocate, Ms. Vaibhavi Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment. Such reason to believe must be based on some tangible material and must prima facie establish that there is escapement of income chargeable to tax. In the present case, such pre-requisite as to reason to believe does not stand satisfied. In fact, the petitioner has disclosed the receipt of Rs. 40,00,000/- in the return of income. Thus, there is no escapement of Rs. 40,00,000/-. Hence, subsequent assumption of jurisdiction on such incorrect facts are bad in law. In support of the said contentions, learned Senior Counsel has placed reliance upon the decision rendered by this Court in case of Sheth Bros. Vs. JCIT, reported in (2003) 251 ITR 270 (Gujarat). 9. Learned Senior Counsel, after referring to the affidavit-in-reply filed by the respondent, submitted that the validity of reopening is to be decided on the basis of the reason recorded prior to issuance of the notice under Section 148 of the IT Act. It is submitted that the reason cannot be improved upon at later stage by filing affidavit. It is also submitted that no new ground or argument can be taken into consideration so as to enlarge the scope of reason beyond what is stated in the reasons recorded for reopening. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same by assigning reasons while passing an order dated 02.12.2021. It is submitted that the Assessing Officer is not expected to come to a definite conclusion about the escapement of income based on information received by him while recording reasons for reopening for issuance of notice under Section 148 of the IT Act. Learned Standing Counsel would further submit that sufficiency or correctness of the information or material cannot be the issue for examining the validity and legality of the notice under Section 148 of the IT Act for initiating the assessment proceedings under Section 147 of the IT Act. Thus, the contention taken by learned Senior Counsel appearing for the petitioner with regard to no escapement of income cannot be gone into at this stage as it is a matter to be adjudicated during the course of assessment proceedings based on evidence on the record. Learned Standing Counsel, therefore, urged that this Court may not exercise the power under Section 226 of the Constitution of India in favour of the petitioner. 13. Learned Standing Counsel has placed reliance upon the decision rendered in case of ACIT Vs. Rajesh Jhaveri Stock Broker Pvt. Ltd., reported in (2007) 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) Explanation .-For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.] 18. In case of Sajani Jewels Ltd. (supra), this Court has observed in Paragraph Nos.10, 11 and 12 as under, 10. This brings us to the last contention of the petitioner. We may recall, the argument is that in any case, the entire income of the assessee being tax exempt, even if the stand of the department as reflected in the reasons recorded is correct and ultimately established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not satisfactory, the amount covered by such expenditure or the part, as the case may be, would be deemed to be the income of the assessee for such financial year. The present is not a case where the assessee has incurred expenditure, but failed to offer explanation about the source of such expenditure. The source of expenditure in question was very much available since in the reasons recorded itself, the Assessing Officer points out that the purchases were made by making cheque payments. Section 69C of the Act therefore has no applicability. 19. In case of Sheth Bros. (supra), this Court has observed as under, 9. Before the Assessing Officer can initiate any proceedings under section 147 of the Act, he is required to establish existence of jurisdictional facts. The Supreme Court in case of Calcutta Discount Co.Ltd. vs. ITO Anr.(1961) 41 ITR 191 (SC) has stated thus : That to confer jurisdiction under section 34 to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year, two conditions had to be satisfied. The first was that the Income-tax Officer must have reason to believe that income, profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inferred or gathered from the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material is not a thing to be considered at that stage. (iii) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. (iv) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening of the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied-a postmortem exercise of analysing the materials produced subsequent to the reopening will not make an inheren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression tangible material does not mean the material alien to the original record. (xiii) The order, disposing of objections or any counter affidavit filed during the writ proceedings before the Court cannot be substituted for the reasons to believe . (xiv) The decision to reopen the assessment on the basis of the report of the Investigation Wing cannot always be condemned or dubbed as a fishing or roving inquiry. The expression reason to believe appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonable and prudent man on the basis of the information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and the assessments be reopened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts indicating incorrect allowance of the expense, such disclosure would constitute information as contemplated in clause (b) of Section 147. (xx) The reasons recorded or the material available on record must have nexus to the subjective opinion formed by the A.O. regarding the escapement of the income but then, while recording the reasons for the belief formed, the A.O. is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the A.O had cause or justification to know or suppose that the income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (supra)]. It is also well settled that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. 35. The power to reopen a completed assessment under Section 147 of the Act 1961 has been bestowed on the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act has been given to the Assessing Officer if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. 22. In case of Rajesh Jhaveri Stock Broker Pvt. Ltd. (supra), the Hon ble Supreme Court has observed in Paragraph No.16 as under, 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR 662], for initiation of action under section 147(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court as well as this Court, if the facts of the present case, as discussed hereinabove, are carefully examined, it can be said that in the reasons recorded by the respondent while issuing notice under Section 148 of the IT Act to the petitioner, it is stated that the petitioner has not shown capital gain on sale of the property in question in the return of income and the officer has reason to believe that the income of Rs. 40,00,000/- has escaped assessment at the hands of the petitioner for the year under consideration. However, the petitioner has submitted objections/ reply, wherein it has been specifically pointed out that he had already disclosed the receipt of Rs. 40,00,000/- by way of sale consideration from the transaction in question and has bifurcated the said amount under the head of Building (Depreciable Assets) at Rs. 28,43,841/- and under the head of Land (Other Assets) at Rs. 11,56,159 towards the sale consideration, which have been shown. The petitioner has also paid STCG of Rs. 26,736/- and LTCG of Rs. 10,869/-. Therefore, it cannot be said that the income chargeable to tax has escaped assessment in the hands of the assessee. Thus looking to the aforesaid fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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