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TMI Blog2024 (5) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... of forming independent opinion of the AO, which is infact not formed in all the matters. Thus, as far as the re-opening on the basis of borrowed material from DRI is concerned, we are firm on our opinion that such material without application of mind of the Assessing Officer could not have been directly borrowed and used. As far as the report of Justice M.B. Shah Commission is concerned, the Co-ordinate Bench of this Court [ 2019 (8) TMI 16 - BOMBAY HIGH COURT] (S.C. Gupte N.D. Sardessai, JJ.) clearly observed that the third report of Justice M.B. Shah Commission contains merely the expression of its opinion and it lacks finality as well as authoritativeness. Only on the basis of expression of such opinion by the commission, there cannot be any prima facie belief which could be recorded by the Assessing Officer, without any independent material for the purpose of re-opening. In the present matters, the reasons for re-opening clearly goes to show that Assessing Officer, except borrowing the information from the third report of Justice M.B. Shah Commission, failed to record independently to his own satisfaction any reason so as to direct re-opening of assessment. We do not see any r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies were illegally carried out and that too while filing returns for the assessment year 2009-10 would not arise. In this regard the observation in the case of Calcutta Credit Corporation [ 1969 (12) TMI 30 - CALCUTTA HIGH COURT] would clearly attract. Thus, we are of the considered opinion that notices issued for re-opening and assessment in all these matters failed to satisfy twin conditions. The Assessing Officer, therefore, could not have exercised jurisdiction for re-opening of assessment which were concluded way back. The additional affidavit filed in two petitions cannot be looked into for the above reason as Revenue or the AO is not entitled to supplement material beyond the reasons recorded at the time of issuance of notice under section 147/148 of Income Tax Act. We hold that the impugned re-opening notices and the orders passed rejecting the objection needs interference and are required to be quashed and set aside. Decided in favour of assessee. - BHARAT P. DESHPANDE VALMIKI MENEZES, JJ. For the Petitioner : Mr. Percy Pardiwala, Senior Advocate with Mr. Ashwin D. Bhobe, Ms. Farnaz Shah, Ms. Shaizeen Shaikh, Ms. Sonam Dessai and Ms. C. Mashelkar (through V.C.) Advocates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of observation of the Apex Court holding that the mining leases in Goa expired on 22.11.2007 and consequently, activities beyond 22.11.2007 were illegal and thus income derived for the financial year 2010-11 relevant for assessing year 2011-12 cannot be considered as legitimate business income. 7. The third ground is that the income has escaped assessment on failure on the part of Assessee to disclose fully and truly all material facts necessary for his assessment. Again for this ground the report of Justice M.B. Shah Commission is referred claiming that several consignments of the assessee were found under invoiced and this information has been suppressed. Further, it is observed that the activities beyond 22.11.2007, were illegal and since, such activities continued with impugnity without disclosing that the assessee was indulged in illegal activities. The Fourth reason is again based on Shah Commission s Report and more particularly, the illegal activities beyond 2007. The fifth reason is regarding under-invoicing and export of Iron ore to the extent of commission paid to the foreign agents. 8. The Petitioner filed objections to such reasons, however, by the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 148 of Income Tax Act dated 30.01.2015 disclosing therein that the revenue is having reason to believe that the income chargeable to tax for the assessment year 2010-11 has escaped assessment within the meaning of Section 147 of the Income Tax Act. The Petitioner sought reasons for re-opening which were furnished vide letter dated 04.01.2016. There are total 5 reasons disclosed for re-opening. The first reason is under-invoicing of export. It is claimed that from the report of Justice M.B. Shah Commission it is observed that there is prima facie under-invoicing of export and therefore, there is reason to believe that the income has escaped assessment and needs to be assessed for assessing year 2010-11. The second reason is again on the decision of the Apex Court thereby declaring the mining leases in Goa expired on 22.11.2007 and subsequent activities considered to be illegal. The third ground is that the income escaped assessment because of failure on the part of assessee to disclose fully and truly all the material facts. Here again the observations of justice Shah Commission report is the basis for considering failure on the part of assessee to disclose fully and truly all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order dated 01.02.2016, such objections were rejected and the Petitioner was directed to file the returns for re-opening which is challenged in the present petition. FACTS IN WRIT PETITION NO. 272/2016 14. The Petitioner received a notice under Section 148 of Income Tax Act dated 24.12.2014 claiming that there is reason to believe that the income of the assessee chargeable to tax for assessment year 2010-11 has escaped assessment within the meaning of Section 147 of the said Act. The Petitioner sought reasons for re-opening which were furnished to them vide letter dated 04.01.2016. In all there are 5 reasons for re-opening. The first reason is under-invoicing of export based on Justice M.B. Shah Commission s report. The second ground is based on the decision of the Apex Court holding that mining leases in Goa expired on 22.11.2007 and consequently, all further activities including the financial year 2009-10 and assessment year 2010-11 were not to be considered as legitimate business income and to be treated as income from other sources. Ground no. 3 is that the income has escaped assessment because of failure on part of the assessee to disclose fully and truly all the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2016, such objections were rejected, which are challenged in the present petition. FACTS IN WRIT PETITION NO. 881/16 18. The Petitioner received notice dated 28.07.2015 under Section 148 of Income Tax Act stating there in that there is reason to believe that the income of the petitioner chargeable to tax for assessment year 2011-12 has escaped assessment within the meaning of Section 147 of the said Act. The Petitioner sought reasons which were provided vide letter dated 08.01.2016. The reason for re-opening is the information received from Directorate of Revenue Intelligence (DRI), Mumbai, and some new facts came into light regarding under-invoicing of export of Iron Ore. The Petitioner filed objections to such reasons, however, order dated 25.07.2016. Such objections were rejected which is challenged in the present petition. FACTS IN WRIT PETITION NO. 882/2016 19. The Petitioner received notice dated 10.08.2015 under Section 148 of Income Tax Act stating that there is reason to believe that the income of the petitioner chargeable to tax for assessment year 2009-10 has escaped assessment within the meaning of Section 147 of the said Act. The Petitioner sought reasons which were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the most the lease could be considered as illegal beyond November 2007, however, the activities continued till the decision passed by the Supreme Court on the premise that there is provision for renewal of lease, cannot be termed as illegal activities. He submits that such activities were carried out in normal course of business and even the Petitioners paid royalty towards the extracted minerals. 24. Mr. Pardiwala would submit that in respect of the information received from the Directorate of Revenue Intelligence (DRI), Mumbai, the same was in different context and with regard to the customs duty. The contention of the Assessing Officer that such information was received to re-open, could not have been accepted for the simple reason that there was no independent inquiry conducted by the Assessing Officer to come to the conclusion, which is the mandate. 25. Mr. Pardiwala would submit that the findings of this Court and the earlier Bench would clearly cover the present petitions and accordingly, the notices and the impugned orders required to be quashed and set aside. SUBMISSIONS OF RESPONDENTS 26. Per Contra, the learned standing counsel Ms. A. Razaq and Ms. S. Linhares appearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by Petitioner challenging the order of re-opening assessment which was passed in the year 2016 itself. Besides, it is well settled proposition of law that the re-opening of assessment must be based on the reasons given by the Assessing Officer so as to form his opinion that the income has escaped assessment. Admittedly, the reasons provided to the Petitioner in all these matters, no where reflects the material which the revenue is now trying to bring on record by way of additional affidavit. 32. It is now well settled proposition of law that even the Assessing Officer cannot add or explain reasons for re-opening apart from the reasons disclosed along with notices and by way of filing affidavit in the Court of law. Thus we are unable to look into any material which the revenue is now trying to place on record by way of additional affidavit. The Revenue is entitled to deal with such aspect independently and in accordance of the provisions of Income tax act. However, we at this stage and in the present proceedings cannot look into such material. Such additional affidavits are filed in Writ Petition Nos. 262/2016,264/2016, 265/2016,271/2016,272/2016,881/2016 and 882/2016. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suppressed or that failed to fully and truly disclose the facts while filing the returns, though he had knowledge about it. 37. In Writ Petition No. 882/2016, the notice was issued on 10.08.2015 for the Assessment year 2009-10. The reasons for re-opening was provided along with letter dated 08.01.2016 which show that the assessee filed its return for the assessment year 2009-10 on 29.09.2009 declaring the total income. Such returns were processed under Section 143(1) of Income Tax Act. Later on, the case was selected for scrutiny and the assessment was completed under Section 143(3) on 30.12.2011. However, some new facts came to light regarding under-invoicing of export of Iron Ore. These new facts/information was received from Directorate of Revenue Intelligence (DRI), Mumbai through the Office of Principle Commissioner of Income Tax, Panaji about the under-invoicing of export by the assessee during the year under consideration. Further, details were obtained from the local office of Directorate of Revenue Intelligence. As per this information, DRI investigated the issue of under-invoicing related to number of exporters of Iron Ore from the State of Goa and the assessee is one o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich admittedly refers to the customs duty and the commission paid to overseas agents. The Assessing Officer nowhere disclosed as how, such information is material for the purpose of considering that there is failure to disclose truly and fully about the payment made to the commission agent. Besides, there is absolutely no record on the part of the Assessing Officer that he independently applied his mind to the material received from Directorate of Revenue Intelligence (DRI), Mumbai, so as to come to his independent conclusion that there was suppression of material and that there is need for re-opening of the assessment. The entire material and the chart prepared in the reasons is found copied from the report of the Directorate of Revenue Intelligence (DRI), Mumbai. 43. In case of Principle Commissioner of Income Tax-5 Vs. Shodiman Investment (P) Ltd., 2018 93 Taxman.com 153 (Bombay), the Co-ordinate Bench of this Court in para 12 observed thus: The re-opening of an assessment is an exercise of extra ordinary power on the part of Assessing Officer, as it leads to unsettling the settled issue/Assessment. Therefore, the reasons to believe have to be necessarily recorded in terms of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred before the ITAT by Shodiman was allowed. Revenue challenged the order of ITAT by filing appeal before the High Court. While rejecting the said appeal, the Court has observed that the reasonable belief on the basis of tangible material could be prima facie formed to conclude that income chargeable to tax has escaped assessment. Words whatever reasons is qualified by the words having reasons to believe that income has escaped assessment the words whatever reasons only means any tangible material which would on application to the facts on record lead to reasonable belief that income chargeable to tax has escaped assessment. This material which forms basis, is not restricted but material must lead to formation of reasons to believe that income chargeable to tax has escaped assessment. Mere obtaining of material by itself does not result in reason to believe that income has escaped assessment. It can only be the basis of forming the belief. However, belief must be independently formed in the context of material obtained that there is an escapement of income. Otherwise no meaning is being given to words to believe as found in Section 147 of the Act. The words whatever reasons i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bom 221 and CIT Vs Kelvinator India Limited 320 ITR 561 observed that twin conditions must be satisfied when the reopening is beyond the period of four years. Justification offered while rejecting objections of the petitioner cannot be regarded as valid defence of the impugned notice. Such justification/reason given for the first time at the time of disposal of the objections filed by the assessee objecting to reopen the assessment. Such reasons must exist and recorded at the time of issue of notice under Section 147/148 of the Income Tax Act. Only on the basis of such reasons disclosed while issuing notice, the jurisdiction of the Assessing Officer could be considered when the same is challenged by way of petitions. It has been repeatedly observed that reasons cannot be supplemented or substituted belatedly either at the time of rejecting the objection or by filing an affidavits. 49. In the remaining matters and more particularly in the lead petition, in all, five reasons are disclosed for the purpose of re-opening but within four years. Such re-opening reasons are already discussed at the beginning of this judgment and therefore, not required to be stated again. 50. The basic c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct re-opening of assessment. We do not see any reason independently forming opinion by the Assessing Officer, apart from what was borrowed from the Justice M.B. Shah Commission report. Thus, such reasons which are not having any application of mind as well as any independent material and reason to believe, cannot be construed as legal reasons for re-opening of the assessment. 56. Finally, in some matters it is claimed that the assessee failed to disclose fully and truly the material findings that beyond 22.11.2007, the mining activities were illegally continued. In all these matters, the returns were filed somewhere in the year 2009-10, even though, there was no such decision passed by the Apex Court holding that mining leases beyond 2007 were illegal. 57. It is a fact that for making disclosure truly and fully the assessee must have the knowledge of it. It is necessary to note here that the case of Goa Foundation Vs. Union of India in Writ Petition No. 435 of 2012 was decided by the Apex Court on 21.04.2014 . While deciding the said petition, the Supreme Court observed that the mining leases in Goa expired in the year 1997 and thereafter, renewal could have been granted only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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