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TMI Blog2025 (3) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the petitioner meaning thereby that the AO without application of mind and contrary to any information in his possession has issued the impugned notices in a mechanical manner. This Court in case of Paresh Babubhai Bahalani [2023 (10) TMI 1203 - GUJARAT HIGH COURT] has referred to and relied upon the decision in the case of Bharatkumar Nihalchand Shah [2023 (3) TMI 1415 - GUJARAT HIGH COURT] wherein, it is held that non-specific and general reasons without establishing the rational nexus between transaction and the escapement of income are not valid for assumption of jurisdiction to reopen the assessment. r proceeded to record that the petitioner has failed to offer the income as deemed income amounting to Rs. 14, 03, 19, 900/- which is nothing but total of debit and credit side of the account from the books of account maintained by the petitioner of the said company. It is therefore, evident that the reasons recorded by the respondent are on the borrowed satisfaction without forming an independent opinion and therefore, the assumption of the jurisdiction to reopen the reassessment under Section 147 of the Act is bad in law. Reassessment proceddings set aside in absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act accepting the return of income filed by the petitioner. 4.6 It is case of the petitioner that by notice dated 25.02.2019 issued under Section 133 (6) of the Act, the petitioner was called upon to furnish the various details in relation to transactions with Affluence Commodities Pvt. Ltd. which was replied by the letter dated 1st March, 2019 whereby, the petitioner provided the Annual Accounts, Bank Statement, ledger & confirmation of the said Company including the Assessment Order passed under Section 143 (3) of the Act by the Respondent. 4.7 The petitioner thereafter received the impugned notice dated 31.03.2021 under Section 148 of the Act seeking to reopen the case of the petitioner for the year under consideration. 4.8 The petitioner filed return of income in response to the impugned notice with a request to supply the copy of the reasons recorded for reopening which was supplied to the petitioner along with the notice dated 11.11.2021 issued under Section 143 (2) read with Section 147 of the Act and reads as under:- "In this case, Information was received from the ACIT, Central Circle-2(3), Ahmedabad vide letter No. ACIT/CC-2(3) Information/ 2016-17 dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any as the petitioner had entered into the loan transactions of receipt and payment during the year and total of the debit and credit side is Rs. 14, 03, 19, 900/-. 5.1 It was therefore submitted that the respondent has issued the impugned notice in a mechanical manner, without application of mind having no prima facie belief as to escapement of income chargeable to tax as the total of debit side of the account of the said Company in the books of accounts of the petitioner which was already confirmed by the said Company cannot be the escapement of the income. 5.2 It was further submitted that there is no failure on the part of the petitioner to disclose fully and truly all material facts during the course of the regular assessment as the petitioner has furnished all the details including the amount of interest received during the year under consideration and therefore the impugned notice is issued merely on the change of opinion and the same is not sustainable. 5.3 It was further submitted that the reference made in the reasons recorded to the report of the Investigation Wing is also vague inasmuch as there is no live nexus between the information received and the facts of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o believe' that such income has escaped assessment. The justification of AO's belief is not to be judged from the standards of proof required for coming to a final decision. A belief though justified for the purpose of initiation of the proceedings u/s 147 may ultimately stand altered after the hearing and while reaching the final conclusion on the basis of the intervening enquiry. At the stage where AO finds a cause or justification to believe that such income has escaped assessment, the AO is not required to base his belief on any final adjudication of the matter. The AO's formation of belief is not a judicial decision but an administrative decision. It does not determine anything at the initial stage, but the AO has a duty to proceed so as to obtain what the tax payer was always bound to pay if the result of official information or AO's own investigation or may come from any source that AO considers reliable. The AO had applied his mind and examined the information received and then recorded his reasons to believe that the income of assessee had escaped assessment for the year under consideration. Considering the above facts, the AO has reasonable belief that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general reasons without establishing the rational nexus between transaction and the escapement of income are not valid for assumption of jurisdiction to reopen the assessment. 7.2 This Court in case of Bharatkumar Nihalchand Shah (Supra) has held as under :- "5. Without going into any aspect on the merits of reopening, the ground of assailment by the petitioner-assessee that the reasons are cryptic and that they did not furnish details, on the basis of which the petitioner could defend his case, merited acceptance. Looking at the reasons again, what is only stated by the Assessing Officer is that, "From the data made available under Project Falcon, it is seen that the assessee has created a profit/loss of Rs. 74, 62, 860/-". Both buying and selling of trades have been are executed at the Bombay Stock Exchange". This statement is a non-detailed and completely escapist. It does not give any fact regarding the transactions or other attendant facts except saying that assessee had engaged in the trading at the Bombay Stock Exchange to create profit or loss. Though styled as reasons, the ground of reopening is unreasoned. 6. The necessity to incorporate reasons in the administrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Court whose order is impugned, is sustainable in law and whether it has adopted the correct legal approach. To sub-serve the purpose of justice delivery system, therefore, it is essential that the Courts should record reasons for its conclusions..." (para 12) 6.3 Recording of reasons in order is essential feature of dispensation of justice. In Kranti Associates Private Limited and Another vs. Masood Ahmed Khan and Others [(2010) 9 SCC 496], the supreme court stated that order passed by the quasi judicial authority or even administrative authority affecting the rights of the parties must speak and that is must not be like the "inscrutable face of a sphinx". 6.4 The principles for recording reasons came to be summarised by supreme court in Kranti Associates Private Limited (supra), "a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions. o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process." (para 47) 6.5 In Sant Lal Gupta and Others vs. Modern Cooperative Group Housing Society Limited and Others [(2010) 13 SCC 336], the supreme court stated importance of reasons referring to other decisions on the point thus, "The reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same, the order becomes lifeless. Reasons substitute subjectivity with objectivity. The absence of reasons renders an order indefensible/unsustainable particularly when the order is subject to further challenge before a higher forum. Recording of reasons is principle of natural justice and every judicial order must be supported by reasons recorded in writing. It ensures transparency and fairness in decision making. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year under consideration. 7.2 All the reasons which hold good in the eye of and with the Assessing Officer must be made known to the assessee. Assessee has right to refute undefined the reasons for reassessment by filling objections. Unless the Assessing Officer appropriately delineates and communicates the reasons for reassement, right of the assessee to file objections would remain an eye-wash. 7.3 Whether the reassessment powers are adverted to on objective basis, whether the element of assessment of income is noticed from the facts and whether formation of opinion by the Assessing Officer is based on some relevant facts or not, could be judged provided the reasons are properly recorded and the details are given with regard to reopening of assessment that the reasons to believe with the Assessing Officer must be reflected in recording of such reasons to be communicated to the assessee. 7.4 The cryptic way of recording of reasons like found in the instant case, would render the exercise of powers vitiated. With such vague reasons the respondent could be said to have failed to demonstrate that there was any escapement of income chargeable to tax. He could demonstrate su ..... 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