9911796707
TMI Blog2024 (7) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... n the legal grounds raised by the assessee, it is stated that assessment order deserves to be quashed on account of three legal grounds- (a) ld. Assessing Officer did not dispose of the objections raised by the assessee against the reasons recorded; (b) no valid notice under section 143(2) of the Act was served upon the assessee; (c) reopening has been carried out without any verification and without independent application of mind. 4. Facts in brief are that the assessee is a Private Limited Company and return of A.Y. 2011-12 furnished on 21.09.2011 declaring total income of Rs. 18,530/-. In the computation of income, only income from business has been declared. Return processed under section 143(1)(a) of the Act. Subsequently, on 28.03.2016, notice under section 148 of the Act issued and the reasons recorded for reopening mentioned in the said notice read as under:- The Directorate of Income Tax (Inv), Koi had conducted extensive investigation in the matter of tax evasion by some individuals/entities by showing income from LTCG, which is actually bogus, perpetrated through accommodation entry operators. In the entire scenario, it is found that the promoters of the penny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct. He thus prayed that reassessment proceeding deserves to be quashed. 6. Before me, ld. Counsel for the assessee has referred to following decisions in support of his contention that reopening is bad in law:- (i) Sheo Nath Singh -Vs-Appellate Assistant Commissioner of IT (Central), Calcutta and Others reported in [1971 ]82 ITR 147 (SC) (ii) S.Narayanappa And Others -Vs- Commissioner of Income Tax, Bangalore reported in [1967]63 ITR219(SC) (iii) Ganga Saran & Sons P. Ltd -Vs- Income-Tax Officer And Others reported in [1981] 130 ITR 1 (SC) (iv) Commissioner of Income-tax -Vs- Spirit Global Construction (P) Ltd reported in [2023] 153 taxmann.com 641 (Delhi). (v) Commissioner of Income-tax -Vs- Batra Bhatta Company reported in [2010] 321 ITR 526 (Del)- (vi) Chhugamri Rajpal -Vs- S.P.Chaliha And Others reported in (1971) 79 ITR 603 (SC). (vii) Bharat Jayantilal Patel Vs. Union of India And Others reported in [2015] 378 ITR 596 (Bom). (viii) Aroni Commercials Ltd -Vs- Deputy Commissioner of Income Tax And Another reported in [2014] 362 ITR 403 (Bom). (ix) Asian Paints Ltd -Vs- Deputy Commissioner of Income-tax And Another reported in [2008] 296 ITR 90 (Bom). ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act observe that the assessee has not earned any long-term capital gain during the year. There is no exemption claimed under section 10(38) of the Act at Rs. 5,47,749/- in the income tax return. A copy of the said return is placed at page 43 of the paper book and computation is placed at page 28. Even in the Profit & Loss Account, net income from sale of investment is only Rs. 12,500/-. As far as short-term capital loss figure of Rs. 35,31,930/- is concerned, it is brought to our notice that during the year, the assessee purchased 30,000 shares of 'JMD Telefilm' for a consideration of Rs. 35,36,867/- and the same was sold at Rs. 5,46,663/- and hence incurred a loss of Rs. 29,90,203/-. I also note that the assessee has not shown any long-term/short-term capital gain/loss and the purchases and sales of such shares are treated as stock-in-trade. Hence the loss in such scrips are claimed as business loss and not capital loss. 11. I further note that in the reasons recorded whatever is alleged is not correct. There is no separate information or material evidence available with the ld. Assessing Officer which could prove that he had reason to believe that the income had escaped assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n [2014] 362 ITR 403 (Bom). (iii) Asian Paints Ltd -Vs- Deputy Commissioner of Income-tax And Another reported in [2008] 296 ITR 90 (Bom). (iv) Hewlett Packard Financial Services (India) (P) Ltd -Vs- Deputy Commissioner of Income-tax reported in [2023] 152 taxmann.com 559 (Karnataka). 13. Further as regards the decision about holding that the reopening proceedings are bad in law if no proper reasons are recorded. I would like to take note of the decision of the Hon'ble Apex Court in the case of Sheo Nath Singh reported in (1971) 82 ITR 147, wherein Hon'ble Court observed as under:- "In our judgment, the law laid down by this court in the above case is fully applicable to the facts of the present case. There can be no manner of doubt that the words " reason to believe " suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstances evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the filing of the return and till the issuance of the notice under Section 147. The proceedings under Section 147 are not to be invoked at the mere whim and fancy of an Assessing Officer and it has to be seen in every case as to whether the invocation is arbitrary or reasonable. The decision of the Supreme Court in Chhugamal Rajpal (supra) is clearly applicable to the facts of the present case. In the case before the Supreme Court, the purported reasons recorded for reopening the assessment were inter alia:- "It appears that these persons are name-lenders and the transactions are bogus. Hence, proper investigation regarding these loans is necessary." 8. The Supreme Court did not find that these were sufficient reasons for reopening the assessment. With regard to the sentence "hence, proper investigation regarding these loans is necessary", the Supreme Court observed that this conclusion that there is a case for investigation as to the truth of the alleged transactions is not the same thing as saying that there are reasons to issue a notice under Section 148. The Supreme Court further observed as under:- "... he must give reasons for issuing a notice under Section 148. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer has reason to believe" and not - "If the Assessing Officer believes". There must be some basis upon which the belief can be built. It does not matter whether the belief is ultimately proved right or wrong, but, there must be some material upon which such a belief can be founded. In the present case, the Commissioner Income-tax (Appeals) as well as the Tribunal have found as a fact that there was no material upon which the Assessing Officer could have based his belief that income had escaped assessment. The decisions cited by Mr Jolly, who appeared on behalf of the revenue, namely, Income-tax Officer v. Selected Dalurband Coal Co. Pvt. Ltd: 217 ITR 597, Raymond Woolen Mills Limited v. Income-tax Officer and Others: 236 ITR 34 and Assistant Commissioner of Income-tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd: 291 ITR 500 do not say anything different. In Dalurband Coal Co. (supra), the Supreme Court observed that at the stage of issuance of notice under Section 148 of the said Act, "the only question is whether there was relevant material, as stated above, on which a reasonable person could have formed the requisite belief". Again, in Raymond Woolen Mills Ltd (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less a belief based on reason and materials. 11. Consequently, we find that there is no error in the decision of the Tribunal which is impugned before us. No substantial question of law arises for our consideration. The appeal is dismissed". 15. Respectfully following the ratio laid down in above decision, I find that firstly, the reopening proceedings deserve to be quashed solely on the ground that ld. Assessing Officer has not disposed of the objections raised by the assessee to the reasons recorded. Secondly, the re-opening proceedings deserve to be quashed on the ground that no proper reasons have been recorded for reopening of assessment and the reasons recorded are merely based on the information received from Investigation Wing and cannot be treated as "reasons to believe" but are merely "reasons to suspect" and mere suspicion of the ld. Assessing Officer towards escapement of income, is not permitted under section 147 of the Act to reopen an assessment. Therefore, the reassessment notice under section 148 giving rise to jurisdiction under section 147 of the Act is quashed and consequently the reassessment order in question against appeal are also similarly quashed and se ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
