TMI Blog2021 (6) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... ome chargeable to tax has escaped assessment. Valid sanction u/s 151 - We take the notice of the fact that, the copy of the approval has been provided to the assessee at the stage of passing the order of disposing the objections raised by the assessee. Therefore, it is evident that, in the instant case, the authorities concerned have given approval after due application of mind and expressed their satisfaction with regard to the reasons recoded for reopening of the assessment. No hesitation to hold that it could not be said to have that there was no material or grounds before the AO and the assumption of jurisdiction on the part of the AO under Section 147 of the Act to reopen the assessment by issuing impugned notice under Section 147 of the Act is without authority of law, which render the notice unsustainable. Therefore, the assessee failed to make out a case. - Decided against assessee. - R/SPECIAL CIVIL APPLICATION NO. 22199 of 2019 - - - Dated:- 15-3-2021 - HONOURABLE MR. JUSTICE J.B.PARDIWALA AND HONOURABLE MR. JUSTICE ILESH J. VORA MS VAIBHAVI K PARIKH FOR THE PETITIONER MRS MAUNA M BHATT FOR THE RESPONDENT ORDER PER: HONOURABLE MR. JUSTI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO(CIB)I, Mumbai on 02.04.2013 at DIT (I CI), Mumbai uploaded in the ITS data that the shares sell are of penny stock. On perusal ROI it is noticed and found that assessee shown LTCG the same has been claimed as exempt in ROI ₹ 8,80,926/-. Further, as per ITS data the assesse transaction of sell of penny stock to the extent of ₹ 9,69,620/-. As the assessee has not fully disclosed the said transaction in her return of income. 6. Basis of forming reason to believe and details of escapement of income:- As the transaction is of penny stock of sell of 3600 shares of Karma Ispat Limited of ₹ 9,69,620/- treated as penny stock transaction. Therefore, I have reason to believe that the income chargeable to tax, which has escaped assessment amounts to ₹ 9,69,620/- for the year under consideration. 7. Sixth paragraph will include basis of reason to believe. That income to the tune of ₹ 9,69,620/- has escaped assessment as mentioned in para 6. 8. Applicability of the provision of section 147/151 to the fats of the case: In this case, return of income was filed for the year under consideration but all the material facts have not been disclosed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under Section 147/148 of the Act must be that of an honest and reasonable person based upon reasonable ground and it should not be based on some suspicious and vague reason. Whereas, in this case, the reasons are vague and do not reveal any income having escaped assessment and furthermore, reasons recorded made it clear that, this is a case of borrowed satisfaction without any independent application of mind. c. It was further submitted that, in case of reopening beyond period of 4 years, it is mandatory to obtain sanction from the competent Authority as provided under Section 151 of the Act. Whereas, in this case, the sanction as required under Section 151 of the Act before issuance of the notice was not obtained by the Assessing Officer. Thus, the impugned notice on this ground required to be quashed and set aside. d. It was submitted that, there is no independent application of mind on the part of the AO while recording the reasons for reopening and that merely placing reliance on the materials provided by the Investigation Wing for recording the reasons is impermissible. In this case, the AO failed to record an independent finding as to how income has escaped assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iciary of the accommodation entries of long term capital gain on penny stock transactions and therefore, the AO has reasons to believe that the income chargeable to tax has escaped assessment. Mr. Bhatt placed reliance upon the decision of this Court in the case of Purvi Snehalbhai Pachhigar Vs. Asst. Commissioner of Income Tax, (2019) 101 Taxman.com.393, to submit that, in a similar set of facts, this Court had dismissed the petition challenging the notice issued under Section 148 of the Act. 12.Mr. Manish Bhatt, learned Senior Counsel for the revenue submits that there being no merits in the writ application, the same deserves to be dismissed. 13.Having heard the learned counsel for the respective parties and having gone through the materials on record, the only question falls for our consideration is that, whether the revenue is justified in reopening the assessment for the year under consideration ? 14. It is settled position of law that Section 147 of the Act empowers the AO, if he has reasons to believe that, any income chargeable to tax has escaped assessment, to assess or reassess such income or recompute any allowance. This power is subject to the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action in penny stock scrip. 17. It appears that, in the affidavit in reply filed by the revenue, it has been stated that, as per the information, the Director of investigation, Kolkata, conducted enquiries and found that, some big syndicates involved in providing accommodation entries of long term capital gain and identified 84 listed penny stocks. It has been further stated by the revenue in their affidavit that, the search was conducted in the premises of 32 share broking entities, who have accepted and admitted that, they were involved in providing bogus long term capital gain. It has been further clarified by the revenue in their affidavit in reply that, the company viz. Karma Ispat Ltd., was used to provide accommodation entries to the beneficiaries in the form bogus long term capital gain. In the background facts, the revenue has further clarified that, after receipt of the information, the AO independently applied his mind and verified the data of the assessee and upon his due satisfaction, the AO formed an opinion that, the assessee was one of the beneficiaries in availing the long term capital gain amounting to ₹ 9,69,620/-, which income chargeable to tax has esc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO while recording the reasons for reopening the assessment did not have any valid reasons to believe that, the income earned by the assessee by way of long term capital gain has escaped assessment. 21.A bare perusal of the reasons recorded and further clarification of the information made by the revenue by way of affidavit in reply would make it clear that, the company Karma Ispat Ltd., was used in providing bogus accommodation entries of long term capital gain by certain entities like broker etc. Undisputedly, the assessee had purchased 3600 shares on 29.04.2010 at a total cost of ₹ 82,998/- and sold it in the month of July, 2011 for total consideration of ₹ 9,63,923/-. It further appears that, on the basis of information received from the concerned wing, the AO made independent enquiries and applied his mind and upon due satisfaction to the information and the materials gathered during the enquiries, finally formed a belief that, the income has escaped assessment. At the stage of issuing the notice, the court cannot investigate into adequacy or sufficiency of the reasons. When no scrutiny assessment made under section 143(1) of the Act, the requirement for reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation or may come from any source that he considers reliable. His reason is not to be judged by a Court by the standard of what the ideal man would think. He is the actual man trusted by the legislature and charged with the duty of forming of a belief for the mere purposes of determining whether he should proceed to collect what is strictly due by law, and no other authority can substitute, its standard of sufficient reason in the circumstances, or his opinion or belief for his. Unless the ground or material on which his belief is based, is found to be so irrational as not to be worthy of being called a reason by any honest man, his conclusion that it constitutes a sufficient reason, cannot be overridden. What is, therefore, to be ascertained is, whether the alleged reason really existed, and if it did, whether it was so irrational as to be outside the limits of his administrative discretion with which the AO is invested so as to be really in disregard of the statutory condition....... Evidently, the AO purporting to exercise powers under Section 147 of the Act, is not a party who has to not only state but establish before anyone the socalled jurisdictional facts. 23. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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