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TMI Blog2024 (9) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue cannot be the sole basis for forming a belief that income of the assessee has escaped assessment. Having received information from the Investigating Wing, it was incumbent upon the Assessing Officer to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment. Clearly, in this case, the AO has not acquired any material to form such belief. There is not even a line of reason which may justify the formation of the belief. Consequently, we are satisfied that reopening of assessment for the assessment year in question by the AO does not satisfy the requirement of law in terms of Section 147 148 - Thus reassessment proceddings set aside - Decided in favour of assessee. - HON'BLE MR. JUSTICE YASHWANT VARMA AND HON'BLE MR. JUSTICE RAVINDER DUDEJA For the Petitioner Through: Dr. Rakesh Gupta, Mr. Somil Agarwal Mr. Dushyant Agarwal, Advs. For the Respondents Through: Mr. Shlok Chandra, Sr.SC with Ms. Madhavi Shukla, Jr.SC, Ms. Priya Sarkar, Jr.SC and Mr. Sudarshan Roy, Adv. JUDGMENT RAVINDER DU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the belief of escapement of income was in fact the belief of DDIT and not of the respondent Assessing Officer. It was also submitted by the petitioner in its objections that the cash deposits in the bank account, being part of books of accounts and being out of service charges income, which has already been accounted for as income in the profit and loss account, could not have led for forming reason to believe of escapement of income. It was also submitted in the objections that there is no date on the reason recorded and hence it cannot be ascertained as to whether the reason was recorded prior to the issue of notice under Section 148 of the Act. 7. The objections were disposed of vide letter dated 13.11.2018 without dealing with any of the objections raised by the petitioner company as to the reopening of the assessment. Instead, the respondent Assessing Officer mentioned that the Assessee had not filed the details asked for in the assessment proceedings. 8. Feeling aggrieved, petitioner filed the present writ petition for quashing for impugned notice dated 22.03.2018 issued under Section 148 of the Act. 9. Respondents filed counter affidavit stating that petition is misconcei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of escapement of income should be an independent belief of the Assessing Officer and should not be borrowed belief of some other Authority and therefore, reasons recorded must reflect the due and independent application of mind. It is further submitted that recording of reasons to believe is just not an empty or idle formality but forms a sole foundation of the assumption of jurisdiction under Section 147 and validity of assumption of jurisdiction under Section 147 has to be seen with reference to the reasons recorded only. 17. Referring to the reasons recorded by the Assessing Officer in the present case, it is submitted that the Assessing Officer has merely relied upon the information received from DDIT and has not given any independent reason for forming the belief and therefore there is no independent application of mind. 18. Countering the above submissions, learned counsel representing the Revenue has argued that it was only through information received from the Investigating Wing that the Revenue came to know about the nature and source of credits and after going through the records, the Assessing Officer formed the belief regarding the assessment of income. It is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are 'reason to believe' and not reason to suspect' The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the Income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. 22. Dealing with an identical question, this Court in the case of Principal Commissioner of Income Tax vs. Meenakshi Overseas Pvt. Ltd. (2017) 395 ITR 677 , on the facts of the said case observed as under:- 19. A perusal of the reasons as recorded by the Assessing Officer reveals that there are three parts to it. In the first part, the Assessing Officer has reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing. xxxxx xxxxxx xxxxxx 26. The first part of section 147 (1) of the Act requires the Assessing Officer to have reasons to believe that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The Assessing Officer being a quasi-judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre-condition to the assumption of jurisdiction under section 147 of the Act. The reasons to believe must demonstrate link between the tan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly, the statement of Shri Sumit Bhayana, Director holding 67% shares of the assessee company was recorded on oath on 04.10.2013. The assessee while recording statement on oath was confronted with the issue of cash deposits in their bank account and was asked to explain the source of cash. The assessee accordingly admitted that the cash deposited into the bank accounts are business receipts which has been received from brokers acting on behalf of exporters/ importers und this consists of 10 to 15% of their business. The assessee was subsequently asked to give details viz. name and address of such brokers from which cash was received. The assessee admitted that no details in respect of such brokers are admitted that no commission is paid to such brokers, as they themselves negotiate the deal with exporters/ importers and after setting aside their margin of profit, the business is assigned to the assessee company. On perusal of the profit Loss' account for F.Y. 2010-11. it was further observed that an amount of Rs. 93,71,791/- has been debited as expense under the head commission paid. The assessee was accordingly asked to explain such expense. In response to this the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain whether income had escaped assessment, nonetheless, the Assessing Officer must have sufficient cause to believe that it has. 25. In the present case, as may be seen, there is no close nexus or live link between tangible material and the reason to believe that income has escaped assessment. The information received from the Investigating Unit of the Revenue cannot be the sole basis for forming a belief that income of the assessee has escaped assessment. Having received information from the Investigating Wing, it was incumbent upon the Assessing Officer to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment. 26. Clearly, in this case, the Assessing Officer has not acquired any material to form such belief. There is not even a line of reason which may justify the formation of the belief. Consequently, we are satisfied that reopening of assessment for the assessment year in question by the Assessing Officer does not satisfy the requirement of law in terms of Section 147 148 of the Act. 27. Consequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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