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TMI Blog2024 (2) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide basis of belief of escapement of income year specific. AO s belief must be based on some tangible material, having a live link or nexus with the income allegedly escaping assessment. Reassessment cannot be resorted to on the basis of vague, indefinite or remote information. Where reassessment proceedings are initiated on the basis of information received from other departments/sources without examining them, it cannot be said that the same was based on belief of the AO that income had escaped assessment. Applying the law on reopening of assessments u/s 147 of the Act as noted above by us to the facts of the case we find merit in the contention of assessee that the jurisdiction assumed by the AO to reopen the case of the assessee was invalid. The reasons for arriving at this finding are very obvious. No specific recording of escapement of income for the assessment year reopened by the AO. Consolidated reasons recorded for all impugned years. Reasons are vague - The reasons record the consolidated figure of disproportionate assets found by the CBI pertaining to all the impugned years before us. There is no recording of income escaping assessment for each particular assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EMBER AND SMT. MADHUMITA ROY, JUDICIAL MEMBER, JUDICIAL MEMBER For the Appellant : Shri Sakar Sharma, A.R. For the Respondent : Ms. Saumya Pandey Jain, Sr. DR ORDER PER BENCH: These appeals relate to the same assessee and are filed against separate orders passed by the ld. Commissioner of Income-Tax (Appeals), Ahmedabad (in short "CIT(A)) u/s 250(6) of the Income Tax Act, 1961( hereinafter referred to as "Act').The orders passed pertain to Assessment Years(A.Y) 1996-97 to 2000-01. While the assessee and the Department have filed cross appeal for Asst. Year 1996-97, for the remaining years only the assessee has come up in appeal. The three appeals of the assessee in ITA No.1751-1753/Ahd/2008 are in relation to the orders passed by the ld.CIT(A) confirming levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short]. Remaining appeals are in relation to orders passed by the ld.CIT(A) in quantum proceedings for the impugned years. 2. We shall first be dealing with the appeals filed in quantum proceedings for A.Y 1996-97 to A.Y 2000-01. ITA 435 & 332/Ahd/2005 : Asst. Year 1996-97 appeal by assessee and Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopening the case of the assessee was one consolidated reason for all the years involved. There was no specific finding of escapement of income for any of the specific years, and it was a just a general reason for all the years involved; ii) That there was no belief of the AO of income of the assessee having escaped assessment but it was a borrowed belief ; iii) That in Asst. Year 1999-2000, reopening had been sanctioned/ approved by the CIT which was against the provisions of law in this regard, as prescribed under section 151 of the Act. 6. The Ld.DR countered by stating that - * Before the ld.CIT(A) in Asst. Year 1996-97, the assessee had withdrawn his objection to the approval to the reopening of the case not being in accordance with provision of section 151 of the Act; * that the satisfaction of the AO was not a borrowed satisfaction, and it was based on the report of the CBI of the disproportionate assets found with the assessee, which was shared with the Income Tax authorities, and the assessee was a non-filer of the return of income. 7. This was countered by the ld. counsel for the assessee stating that the report of the CBI in any case was only a preliminary rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged the validity of the assessment framed u/s 147 of the Act in all the impugned years before us, pointing out insufficiency in the reasons recorded for reopening the case of the assessee, it is pertinent first to reproduce the reasons filed before as under: 12. A perusal of the reasons as above reveals: * that one common reason was recorded for all the years reopened by the AO i.e. 1996-97 to 2000-01 which are impugned before us. * that the AO has picked up consolidated figure of the disproportionate assets attributed by the CBI report to the assessee for all the impugned years i.e A.Y 1996-97 amounting to Rs. 47.20 lakhs, to reopen the case for all the years. * the AO has also recorded the fact that the income relating to the disproportionate assets has not been disclosed by the assessee and which exceeds Rs. 1 lac in all the years. 13. On the basis of this information, he has assumed jurisdiction to reopen the case of the assessee for all the impugned years i.e. 1996-97 and 2000-01. The charge sheet filed by the CBI basis which the reopening was resorted to was also perused by us. The same reveals the CBI to have found the family background of the assessee revealing his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belief must be based on some tangible material, having a live link or nexus with the income allegedly escaping assessment. Reassessment cannot be resorted to on the basis of vague, indefinite or remote information. The Hon'ble apex court has laid down the law in this regard in the case of Income Tax Officer Vs Lakhmani Mewal Das 103 ITR 437 wherein they have categorically held as under: "..The reasons for the formation of the belief contemplated by section 147(a) of the Income-tax Act, 1916 for reopening of an assessment must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, it was not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Therefore, the reassessment was not valid. Principal Commissioner of Income Tax-5 vs Shodiman Investments (P) Ltd (2020) 422 ITR 337 (Bom) wherein the Hon'ble High Court reiterated the proposition holding as under: 14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that re- opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction. 20. Applying the law on reopening of assessments u/s 147 of the Act as noted above by us to the facts of the case we find merit in the contention of the Ld. Counsel for the assessee that the jurisdiction assumed by the AO to reopen the case of the assessee was invalid. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its preliminary report attributing all assets found during search to the assessee and recording consolidated belief of escapement of income based on the figure mentioned by the CBI in its report. There is complete lack of application of mind by the AO, we hold, while forming belief of escapement of income. 24. Pertinent is the law laid down by the apex court that such preliminary report of CBI does not constitute information for forming any adverse belief against an assessee. The Hon'ble Apex Court in the case of Union of India Vs Ajit Jain and Another 260 ITR 80 (SC) affirmed the order of the Hon'ble Delhi High Court in Ajit Jain vs Union of India reported in 242 ITR 302 (Del) holding so. The relevant findings of the Hon'ble High Court in this regard are as under: "14. It is in the light of the above principles of law that we take up the question whether the intimation given by the CBI to respondent No. 5 would constitute 'information' and could it be said to be relevant for formation of the belief that the money found in the possession of the petitioner had not been or would not be disclosed for the purpose of the Act. We called for the file containing the reasons reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed, to conduct a valid search operation u/s 132 of the Act, was adopted by the Hon'ble court from its interpretation in terms of section 147 of the Act. The Hon'ble court held that mere intimation by CBI of assessee being in possession of assets was not sufficient information to form belief of escapement of income. 26. In the present case the report of the CBI lists all assets clearly mentioning the fact of the names of different persons in which it was found invested, including his wife and father. The report notes the fact of both the relatives having sources of income and thereafter goes on to state that the assets are disproportionate to the disclosed source of income of the assessee and his wife. Clearly it is just a preliminary report of the CBI, who have in a general manner attributed all assets found to belong to the assessee. This report of the CBI certainly cannot be said to qualify as information leading to belief of escapement of income of the assessee. 27. The decision of the Hon'ble Delhi High Court in the case of PCIT vs Andaleep Sehgal (2021), 124 taxmann.com 246(Del), affirmed by the Hon'ble Apex court (2021) 124 taxmann.com 247(SC) strengthens our findi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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