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TMI Blog2024 (7) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 set aside. The grounds of appeal are allowed. - Dr. Manish Borad, Accountant Member For the Assessee : Shri N.S. Saini, A.R. For the Revenue : Shri Arup Chatterjee, Addl. CIT ORDER The present appeal is directed at the instance of assessee against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 29th January, 2024 passed for assessment year 2011-12. 2. Though the assessee has raised as many as eleven grounds of appeal, but the effective issues raised are of two types, firstly challenging the validity of reopening of the assessment under section 147 of the Act and secondly on merits changing the disallowance of loss of Rs. 29,90,203/- incurred on account of purchase and sale of equity shares. Since the assessee has raised the legal question of assumption of jurisdiction by the ld. Assessing Officer to reopen the assessment, it would pertinent to first deal with the aforesaid legal question as it goes to the root of the matter. 3. In the legal grounds raised by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch share broker. In absence of such examination, the entire report of DIT(Inv.) is based on assumption and presumption. It was also stated that since the reopening under section 147 has been carried out by ld. Assessing Officer merely on the basis of information without carrying out independent investigation and without satisfying as to whether there was at all escapement of income, therefore, reopening under section 147/148 is bad in law and deserves to be dropped. It is also submitted that ld. Assessing Officer has not disposed of the objections raised by the assessee. Ld. Counsel for the assessee also submitted that the reopening proceedings were challenged before the ld. CIT(Appeals) but no relief was granted. He stated that the reasons recorded are merely on the basis of information. Ld. Assessing Officer has failed to make any independent application of mind and the same is discernible from the fact that the assessee has neither earned any long-term capital gain during the year nor claimed any loss as short-term capital loss and the assessee has claimed business loss and even the amount alleged in the reasons recorded are incorrect. He thus prayed that reassessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;JMD Telefilm'. In just reverse procedure, the assessee is learnt to have booked STCL of Rs 3531930/- from the same scrip in the same year. In view of this, I have reason to believe that an income of Rs. 4079679/- chargeable to tax has escaped assessment within the meaning of sec 147. 9. Perusal of the reasons reveals that ld. Assessing Officer has referred to the information received from the Investigation Wing giving a general statement that there are certain matters of tax evasion by some individuals and entities by showing income from long-term capital gain, which is actually bogus and perpetrated through accommodation entry provider. The assessee is also alleged to have enjoyed bogus long-term capital gain of Rs. 54,77,449/- by transacting in the alleged penny stock JMD Telefilm . In the reasons, it is alleged that the assessee is learned to book short term capital loss of Rs. 35,31,930/- from the same scrip in the same year. 10. I, however, going through the computation of income as well as the objections raised by the assessee against initiation of proceedings under section 147 of the Act observe that the assessee has not earned any long-term capital gain during the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation rendering the whole exercise to be arbitrary and unsustainable in law. 12. As far as the decision referred by the ld. Counsel for the assessee are concerned, we find that firstly there is absence of any order of ld. Assessing Officer disposing of the objections raised by the assessee. Neither any reference to disposing of objection is dealt in the assessment order nor ld. D.R. could file any copy of such order. Thus is an admitted fact that ld. Assessing Officer has not disposed the objection raised by the assessee against the issue of notice u/s 148 of the Act. It has been consistently held by the Hon ble Courts that if ld. Assessing Officer does not accept the objection filed against the reasons for reopening of assessment, he shall not proceed in the matter without disposing of the objections, failing which subsequent proceedings would be bad in law. We find support from the following decisions:- (i) Bharat Jayantilal Patel Vs. Union of India And Others reported in [2015] 378 ITR 596 (Bom). (ii) Aroni Commercials Ltd -Vs- Deputy Commissioner of Income Tax And Another reported in [2014] 362 ITR 403 (Bom). (iii) Asian Paints Ltd -Vs- Deputy Commissioner of Income-tax And Ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that the tribunal as well as the Commissioner of Income-tax (Appeals) came to the correct conclusion. A reading of the reasons recorded does not disclose that the Assessing Officer, in fact, had reasons to believe that any income had escaped assessment. It is not just the belief of the Assessing Officer that is material, but such a belief must be based on certain reasons. The first sentence of the reasons recorded is merely a statement of fact that the assessee firm sold agricultural land for Rs 57,37,500/- in March 1996 and claimed exemption under the provisions of Section 2 (14). The second sentence is merely exploratory in nature in the sense that it says that the claim of the assessee that the land is agricultural and hence not a capital asset requires much deeper scrutiny . There is no indication as to on what information or on what material the Assessing Officer harboured the belief that the claim of the assessee required deeper scrutiny. In fact, as recorded in the order of the Commissioner of Income-tax (Appeals), no new material is on record after the filing of the return and till the issuance of the notice under Section 147. The proceedings under Section 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that he could not have had reasons to believe that by reason of the assessee s omission to disclose fully and truly all material facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year; nor could it be said that he, as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year. We are not satisfied that the ITO had any material before him which could satisfy the requirements of either cl.(a) or cl. (b) of s. 147. Therefore, he could not have issued a notice under s. 148. 9. We feel that the observations of the Supreme Court in the aforesaid decision clearly apply to the case at hand. Merely because the Assessing Officer felt that the issue required much deeper scrutiny , is not ground enough for invoking Section 147. It is not belief per se that is a pre-condition for invoking Section 147 of the said Act but a belief founded on reasons. The expression used in Section 147 is - If the Assessing Officer has reason to believe and not - If the Assessing Officer believes . There must be some basis upon which the belief c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason to believe that an income had escaped assessment. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. 10. We have already noticed that in the present case, the Commissioner Income-tax (Appeals) as well as the Tribunal have returned the concurrent finding of fact that there was no material before the Assessing Officer on the basis of which the Assessing Officer could have maintained a belief that the agricultural land sold by the assessee was a capital asset within the meaning of Section 2 (14) of the said Act. In fact, the Assessing Officer did not even have such a belief. And, as the expression requires much deeper scrutiny indicates, the Assessing Officer was embarking on mere exploration without any belief, much 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 subs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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