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TMI Blog2023 (10) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction has been entered into. In case of Harikishan Sunderlal Virmani ( 2016 (12) TMI 1558 - GUJARAT HIGH COURT ) this Court held that from the reasons recorded, if the same are on borrowed satisfaction without forming an independent opinion, the assumption of the jurisdiction to re-open the assessment u/s 147 was bad in law. The entire exercise of re-opening would depend upon the reasons recorded by the AO and therefore the reasons recorded to re-open the assessment by the AO must disclose all relevant facts to the assessee so as to refute the reasons by filing objections. Unless the AO records his independent satisfaction in the reasons recorded on the basis of the information received and communicates the same to the assessee, right of the assessee to file objections would remain an empty formality. Therefore, recording of reasons in the facts of the case not disclosing the nature of the transactions, date of transactions and other relevant details would render the entire exercise of reopening vitiated as the respondent-assessing officer has failed to record independent reason to believe that income chargeable to tax has escaped the assessment. Decided in favour of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsight Portal along with the report of the Deputy Commissioner of Income Tax, Central Circle, Surat which reveals that the petitioner has entered into unaccounted transaction of Rs. 44,34,265/during the year under consideration. The respondent was therefore of the view that such unaccounted transaction represents income of the petitioner which has escaped assessment. The petitioner filed objections on 09.10.2021 contending that no escapement of income chargeable to tax emanates from the reasons for reopening as the same are vague and nonspecific. 6.4. The respondent by order dated 08.12.2021 disposed of the objections holding that the reopening is justified. Being aggrieved, the petitioner has preferred this petition. 7.1. Learned Senior Advocate Mr. Tushar Hemani for the petitioners submitted that in the case of the petitioner of Special Civil Application No. 19280 of 2021, the respondents-Assessing Officers on the similar facts reopened the assessment relying upon the information made available through Insight Portal along with report of the Deputy Commissioner of Income Tax, Central Circle, Surat which reveal that the assessee has done unaccounted transactions of Rs. 44,41,360/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of reopening the assessment is reason to believe based on some tangible material so as to prima-facie establish that there is escapement of any income chargeable to tax. It was pointed out that law is well settled that condition prescribed for the purpose of reopening under Section 147 of the Act is escapement of any income chargeable to tax and in absence of escapement of any income chargeable to tax, it is not open for the respondents to initiate the proceedings for reopening of the assessment. 7.6. It was therefore submitted that in absence of the basic details emanating from the reasons recorded, no reasonable person would reach to the reasonable belief as regards escapement of any income and therefore, such reasons must fail. 7.7. Learned Senior Advocate Mr. Hemani would submit that the foundational facts as regard escapement of so-called unaccounted transactions are absent and therefore, merely on such assumption, the respondent cannot have the jurisdiction for re-opening. In support of his submissions, reliance was placed on the decision in case of Sheth Brothers Versus JCIT [2003] 251 ITR 270 (Gujarat). 7.8. Learned Senior Advocate Mr. Hemani submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is evident in paragraph No. 4 of the reasons recorded. 7.12. It was submitted that the Assessing Officer has not even verified the return filed by the petitioner wherein the petitioner has disclosed income in accordance with the provisions of Section 44AD of the Act under the head profit and gains from business or profession which shows that there is sheer non-application of mind of the respondents prior to reopening of the case of the petitioner. 7.13. It was submitted that it is settled law that no new ground or argument can be taken into consideration so as to enlarge the scope of the reasons recorded for reopening. Reliance was placed on the decision in case of Kantibhai D. Narola Versus ACIT reported in 436 ITR 302 (Gujarat) wherein it is held that for assumption of jurisdiction, reasons are the foundation and therefore, the reasons alone need to be taken into consideration while testing the validity of reopening and later explanations, affidavit or any material would not help the respondent in expanding the scope of reopening if the reasons lack in establishing that any income chargeable to tax has escaped the assessment while recording the same. 8.1. On the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at stage of initiation of reassessment, the only thing required to be seen is that whether there is a prima-facie material on the basis of which the case can be reopened or not and sufficiency and correctness of the material are not the things to be considered at this stage. 8.4. Learned Senior Standing Counsel Mr. Patel referred to and relied upon the decision of this Court in case of Dishman Pharmaceuticals and Chemicals Limited Versus Deputy Commissioner of Income Tax reported in 2012 346 ITR 228 wherein, it is held as under: 15. We have taken note of reasons recorded by the Assessing Officer for re-opening of the assessment. The Assessing Officer may not have stated in so many words that income escaped assessment on account of the assessee not truly and fully disclosing all material facts. Suffice it to say, the reasons recorded clearly envisages escapement of income on account of nondisclosure by the assessee; its holding in SDBL for the relevant Assessment Year. Such discrepancy came to light only while framing the assessment of the subsequent year i.e., 2006-07, while during the course of inquiry, the assessee was asked to submit such details, through which, it was found th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. 4. Enquiries made by the AO as sequel to information collected/ received: In this case, necessary enquiries/verification were conducted by the Investigation Wing. On going through the return file profile and assessment particulars, it is noticed that such unaccounted transaction needs to be considered for the year under consideration. 5 Findings of the AO: Information made available with this office through Insight Portal along with Report of Dy. Commissioner of Income-tax, Central Circle, Surat reveals that assessee has done unaccounted transaction of Rs. 44,34,265/during the year. Thus, it represents income of the assessee which has escaped assessment. Thus I have reason to belief that income to the tune of Rs. 44,34,265/- has escaped assessment within the meaning of section 147 of the I.T. Act. 6. Basis of forming reason to believe and details of escapement of income: In this case, the assessee has filed return of income for A.Y. 2017-18 on 21.06.2017. No assessment in Anis case was completed U/s.143(3). Information made available with this office through {insight Portal along with. Report of Dy. Commissioner of Income-tax, Central Circle, Sur t reveals that assessee has do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed an opportunity of being heard. Secondly, the concerned authority should provide a fair and transparent procedure and lastly, the authority concerned must apply its mind and dispose of the matter by a reasoned or speaking order. This has been uniformly applied by courts in India and abroad. (para 10) 6.1 In S. N. Mukherjee vs. Union of India [(1990) 4 SCC 594], the insistence of and importance of recording reasons for decision by the administrative authorities and Tribunals was justified by observing that, administrative process will best be vindicated by clarity in its exercise . It was stated in Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota (supra) that in exercise of powers of judicial review, the concept of reasoned order has been equally enforced by the courts in India. Absence of reasons by the administrative authorities and the Tribunals, would render the order liable to judicial chastisement. The reasons are necessary to enable the appellate or higher courts to exercise their jurisdiction appropriately. 6.2 It was then observed in Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota (supra), .It is the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. j. Insistence on reason is a requirement for both judicial accountability and transparency. k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubberstamp reasons' is not to be equated with a valid decision making process. m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737). n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... know whether the person deciding the issue is faithful to the doctrine of precedent or to the principles of incrementalism. (vi) Reasons in support of decisions must be cogent, clear and succinct. A pretense of reasons or rubberstamp reasons cannot be equated with a valid decision-making process. (vii) Reasons also facilitate the process of judicial review by superior courts. 7. In light of the above discussion highlighting the indispensability of reasons in the order passed by any authority administrative, quasi judicial or judicial, when it comes to exercise of powers under sections 147 and 148 of the Income Tax Act, 1961, there has to be a greater thrust for necessity of recording reasons. The entire exercise of reopening hinges on the reasons recorded by the Assessing Officer. It is the reasons which weigh with him. 7.1 When the concluded assessment is to be revisited with by the Assessing Officer, recording of reasons for exercise of such powers has to be viewed as vested rights for the assessee. While exercising powers under the Act to reopen the assessment, the Assessing Officer would harbour reasons to believe that on particular set of facts, the income had escaped assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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