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TMI Blog2025 (1) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. >Also appears from the reasons recorded that the no verification of the material on record is made by the respondent and there is no independent opinion that any income has escaped assessment due to any failure on the part of the assessee in not disclosing fully and truly all material facts necessary for assessment. >From the reasons recorded it appears that the initiation of reopening proceedings are on the borrowed satisfaction as no independent opinion is formed and on bare perusal of the reasons recorded, it emerges that the AO considering the information received from the insight portal, has issued impugned notice forming reason to believe that the income has escaped the assessment on the presumption that the petitioner has been involved in creating the non-genuine profit which is already offered to tax in the return of income which is accepted in the regular course of assessment by passing the order under section 143 (3) of the Act. >There is no basis to form reasonable belief for escapement of income except the information made available on the insight portal. The respondent-Assessing Officer has not considered the material on record to come to the conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 having face value of Rs. 10/- each which were split in face value of Rs. 2/- each in September, 2015. Thus, 60,000 equity shares of face value of Rs. 10/- held by the petitioner were split into 3,00,000 equity shares of face value of Rs. 2/-. Further it is the case of the petitioner that 1,05,465 equity shares were sold in Assessment Year 2016-2017 against a consideration of Rs. 1,09,98,307/- and thereby Long Term Capital Gain of Rs. 1,02,74,815/- was earned and was claimed as exempt under section 10 (38) of the Act. The equity shares of M/s. Kaushal Limited were held by the petitioner for more than 25 months and were sold in tranches. >8. Respondent issued the impugned notice under section 148 of the Act for Assessment Year 2016-2017 on 31.03.2021 proposing to reassess the total income treating the Long Term Capital Gain shown by the petitioner in the return of income as bogus. >9. The petitioner thereafter filed return of income on 20.04.2021 declaring total income at Rs. 17,75,216/- pursuant to the impugned notice for reassessment and claimed exemption in respect of Long Term Capital Gain income on sale of equity shares. >10. Respondent supplied the reasons for reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to establish any nexus between the petitioner and M/s. Kaushal Limited including its agents and representatives. It was also submitted that the respondent in its letter dated 10.05.2021 apprising the reasons for reopening has not reproduced any specific evidence involving petitioner's name or its role in M/s. Kushal Limited and the related anomalies. >19. It was therefore submitted that the respondent has failed to satisfy the prerequisite of "reason to believe" as prescribed in section 147 of the Act. It was submitted that reassessment is resorted to on the basis of information from Investigation wing which had nowhere stated that petitioner had claimed bogus long term capital gain. Further, there was no independent application of mind by Respondent. In support of his submission, reliance was placed upon decision of Hon'ble Delhi High Court in case of Pr. CIT v. Meenakshi Overseas (P.) Ltd. Reported in [2017] 395 ITR 677 (Delhi), wherein it is held as under: >"20. Coming to the second part, this tells us what the AO did with the information so received. He says: "The information so received has been gone through." One would have expected him to point out what he foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no satisfaction recorded by Assessing officer himself, which is a precondition as per section 147 of the Act. >21. Reliance was placed on the decision of this Court in case of Harikishan Sunderlal Virmani vs Deputy Commissioner of Income Tax, reported in Circle-2(1) 394 ITR 146 wherein it is held as under: >"Thus from the reasons recorded, the reopening of the assessment is on the information/data supplied by the office of the Principal Director of Income Tax (Investigation), Ahmedabad. From the information received, it appears that though the client code of the assessee with the broker Guinness Securities Limited was WW/2647, modified client code was found to be WW/2108 and therefore, to verify the genuineness of the modification of the client code, by applying Lavenshtein Distance Analysis or digit edit analysis utility, distance was found to be 3 and therefore, it is believed that the code is not wrongly typed and it is termed as deliberate change and establishing non-genuineness and contrived nature of the code change. From the reasons recorded, it does not appear that verification of the material on record there is independent formation of opinion by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent has not formed any independent opinion about escapement of income nor does it appear that there stands any belief upon which the respondent has issued the Impugned Notice for escapement of Income and the respondent has wholly on the basis of information received, initiated the reassessment proceedings and therefore, the impugned reassessment proceedings have been initiated only and solely upon borrowed satisfaction of the investigation wing, which is not permissible. >26. Reliance was also placed on the decision of this Court in the case of Varshaben Sanatbhai Patel Versus Income Tax Officer, reported in (2015) 64 Taxmann.com 179 (Gujarat). >27. It was further submitted that the crucial link or nexus between the information available to the respondent and the formation of belief is absent in the reasons recorded. The formation of belief by the respondent that income of the petitioner chargeable to tax had escaped assessment, was unreasonable and irrational, as it could not be related to the underlining information, something which is discernible from a bare reading of the letter recording reasons. It was submitted that the expression "reason to believe" which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as of little importance. They have substituted the form for the substance." >30. It was further submitted that in the impugned order it is categorically stated that "It would be relevant to mention that a detailed enquiry was made by the investigation wing through which it has been revealed that a large scale of tax evasion had been made in the form of bogus long term capital gain by providing accommodation entries and as per the information, you are one of the beneficiaries out of them.". However, the said enquiry report has neither been reflected in the reasons for reopening nor has been furnished to the petitioner. >31. It was submitted that without prejudice to the case of the petitioner, even if it is assumed though not admitted, that the petitioner herein is involved into any accommodation entries and such information has been recovered from the search and seizure carried at M/s Kushal Ltd., even then the petitioner's assessment can be reopened for assessment under Section 153C of the Act. Thereby, any action pursuant to search and seizure, as is the case of the Petitioner, proceedings under Section 153C of the Act are required to be followed. It was further submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether or not the material would conclusively prove escapement is not the aspect or concern at the stage of initiation of reassessment proceedings but this aspect has to be examined subsequently during the course of reassessment proceedings. >35. It was further submitted that a detailed inquiry was made by the investigation wing through which it has been revealed that a large scale of tax evasion had been made in the form of bogus long term capital gain by providing accommodation entries and therefore, the proposed action of holding the LTCG of the assessee as non-genuine and liable for tax under section 68 of the Act was legal and valid. In support of such contention reliance was placed on decision in case of CIT v. Durga Prasad More reported in (1971) 82 ITR 540 (SC) and in case of Sumati Dayal v. Commissioner of Income Tax reported in 214 ITR 801 (SC), wherein it is held that even if a transaction or entry prima facie appears to be legal and is duly supported by documentary evidence, the tax authorities not only have the right but also an obligation to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emat statement. It, therefore, cannot be said that the petitioner has not disclosed fully and truly all material facts relevant for assessment. >40. It also appears from the reasons recorded that the no verification of the material on record is made by the respondent and there is no independent opinion that any income has escaped assessment due to any failure on the part of the assessee in not disclosing fully and truly all material facts necessary for assessment. >41. Moreover, from the reasons recorded it appears that the initiation of reopening proceedings are on the borrowed satisfaction as no independent opinion is formed and on bare perusal of the reasons recorded, it emerges that the Assessing Officer, considering the information received from the insight portal, has issued impugned notice forming reason to believe that the income has escaped the assessment on the presumption that the petitioner has been involved in creating the non-genuine profit which is already offered to tax in the return of income which is accepted in the regular course of assessment by passing the order under section 143 (3) of the Act. >42. It is also pertinent to note that there is no basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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