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TMI Blog2025 (2) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... elf is bad in law consequently the re-assessment proceedings is liable to be invalid in law. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ors on the same day that the errors were made, and that since were committed at the broker's end, the assessee could not be penalized. 4.3 From a perusal of all the details on record and submissions, the following observations are made • Client Code Modifications have been made in as many as 63 transactions. It is difficult to understand how genuine punching errors can occur in such large numbers. One can understand if an error is made on one or two occasions. However, the error to punching on 63 separate occasions in respect of the same broker and client is highly unlikely and suspicious. • The broker, Mehta Finstock Pvt Ltd, Mumbal, has in response to a query from the AO, stated that it cannot provide any details of CCM made in the case of the appellant. • Provision of penalty by SEBI in case of CCM has led to a sharp decline in CCM instances. This goes to prove that CCM was being done in a calculated manner by the brokers with active participation of clients. • If the contention of the appellant that modifications had to be carried out due to human errors is to be considered, the fact cannot be ignored that chances of human error on all the occa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross-examine the concern parties. 4.1 The Ld.CIT(A) has failed to appreciate that the reopening of regular assessment by notice u/s. 147 itself was illegal, unlawful and without jurisdiction since the condition precedent for reopening were not fulfilled. 5.1 Without prejudice to above and in the alternative, the addition confirmed by CIT(A) is highly excessive and calls for reduction. It is, therefore, prayed that the addition of Rs. 12,56,760/- upheld by the CIT(A) may kindly be deleted." 5. The ld. counsel, Shri S.N. Divatia, for the assessee first dealt with the jurisdictional issue of reopening of assessment is done after four years wherein assessment u/s. 143(3) was already made on 27-12-2011 accepting the loss of Rs. 3,27,55,126/- claimed by the assessee which includes the sale of shares by the assessee. Thus, there is no failure on the part of the assessee in not disclosing any materials before the Assessing Officer or in the books of accounts. Further in the original assessment proceedings vide replies dated 10-11-2011 and 18-11-2011 the assessee filed various details relating to the loss from the derivative business in shares and also produced copy of bank stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act the assessee filed his original return of income and assessed to tax after calling for various details relating to the derivative business in shares and securities, after perusing books of accounts along with details and vouchers. As per audited profit and loss account still there is business loss of Rs. 1,80,46,366/- which is placed at page no. 8 of the paper book. 7.1. The reasons recorded by the Ld AO for reopening of assessment is as follows:- "An information has been received from the Investigation wing. Ahmedabad regarding the Survey Report prepared by the ADIT (Inv.) Unit-1(3), conducted by the DDIT, (Inv.) Unit-1(3), Ahmedabad on Survey is 23.3.2015. The outcome of the survey report is that the choice advantage has been taken by the client i.e. income or loss i.e. if Client needs income for his books of accounts, he can generate the income through stock exchange by Client Code Modification with the help of the broker. The same is applicable in loss cases also. The Report has been provided alongwith annexure in which above named assessee is also involved in the transaction that he has taken the benefit of reduction of income due to C.C.M. amounting to Rs. 5,89,787/- f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassessment as provided for in Section 147 would not be attracted. 25. It is because the Revenue cannot demonstrate a failure on the part of the Petitioner to make full and truthful disclosure of facts in his possession, that its stance has been moulded to state that such demonstration is not necessary, and it would suffice if the Revenue formulates a "reason to believe" that income has escaped assessment. We are afraid that we cannot agree to such a proposition, which would require ignoring the explicit provisions of Section 147 and supplanting it with a new formulation as is being canvassed by the Revenue. 26. Section 147 explicitly stipulates the grounds on which, and the framework within which, such reassessment may be initiated. The Revenue has invoked the first proviso to Section 147(1) in order to initiate the reassessment. An essential ingredient of the first proviso is that no action for reassessment can be taken after the expiry four years from the end of the relevant assessment year, unless the income escaping assessment has been caused by the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absent. The reasons must be self-evident, 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. xxxxxxxxxx 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Consequently, the writ petition is allowed the impugned reassessment notice dated 22.03.2018 Issued under Section 148 of the IT Act and further proceedings, if any, initiated pursuant to the said notice dated 22.03.2018 are set aside." 7.3. The Co-ordinate Bench of this Tribunal in the case of Kaizen Stock Trade Pvt. Ltd. [cited supra] held as follows:- "Business loss/deductions -Allowable as (Bogus loss) - Assessment year 2010-11 - Assessee company filed its return of income which was accepted and an order was passed An information was received from National Stock Exchange (NSE) that there was change in code of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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