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Reassessment in case of original assessment u.s. 143.1.a. Not allowed in absence of reasons recorded by AO and to make roving enquiry etc.

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Reassessment in case of original assessment u.s. 143.1.a. Not allowed in absence of reasons recorded by AO and to make roving enquiry etc.
By: CA DEV KUMAR KOTHARI
March 5, 2019
All Articles by: CA DEV KUMAR KOTHARI       View Profile
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Honorable Supreme Court has dismissed appeal of the revenue against judgment of Gujarat High Court of honorable Gujarat  High Court on issue of reassessment when  (a) original assessment was made u.s. 143.1.

To summarize:

Reassessment was not allowed:

      (a)  for making roving enquiry/ deep enquiry/ deep verification etc.

      (b) when notice was issued  based on information  by other authority (VAT department in this case) and

      (c ) in absence of  reasons recorded  by the AO on his own. To elaborate, as opined by High court: “ It is equally well settled that the notice of reopening can be supported on the basis of reasons recorded by the Assessing Officer. He cannot supplement such reasons

In earlier articles on re-assessment in case of summary assessment author had also expressed view that when a return is accepted u.s. 143.1.a and no notice is issued u.s. 143.2. then AO cannot issue a notice u.s. 148 in respect of any item of income or expenditure or claim and also capital receipts  etc. for which information are furnished in the Return of Income in the manner prescribed, and that has been accepted u.s. 143.1 without issuing notice u.s. 143.2. In view of author, when no notice is issued, AO has formed an opinion that based on information, no scrutiny is required for any of reasons stated in S.143.2. Therefore, even in case of summary assessment, in such cases, AO must have some new intangible material to form a  believe that income has escaped assessment.

The view of author is based on mandatory language used  “the Assessing officer shall issue notice….” ,   in given circumstances.

Judgments under direct study are:

PR. COMMISSIONER OF INCOME TAX VERSUS MANZIL DINESHKUMAR SHAH 2019 (1) TMI 1396 - SUPREME COURT

PRINCIPAL COMMISSIONER OF INCOME TAX 5 VERSUS MANZIL DINESHKUMAR SHAH 2018 (5) TMI 1176 - GUJARAT HIGH COURT

INDUCTOTHERM (INDIA) PVT. LTD. VERSUS M. GOPALAN, DY. COMMISSIONER OF INCOME-TAX 2012 (9) TMI 16 - GUJARAT HIGH COURT

Some earlier judgments on S.148 vis a vis S.143.1.a are briefly discussed below:

ITO v. Master Keshav Suri  228 ITR (ST.) 156.

SLP of department was dismissed, No notice u/s 143.2 was issued and limitation lapsed. Reassessment was not allowed. (Appended after list at page no.3 )

ANKITA A. CHOKSEY VERSUS INCOME TAX OFFICER-19 (1) (1) & OTHERS 2019 (1) TMI 862 - BOMBAY HIGH COURT : relevant head note

Even in cases where the return of income has been accepted by processing under Section 143(1) reopening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed u/s 143(1) does not give the AO a carte blanc to issue a reopening notice.

PRINCIPAL COMMISSIONER OF INCOME TAX-6 VERSUS MEENAKSHI OVERSEAS PVT. LTD. 2017 (5) TMI 1428 - DELHI HIGH COURT – head notes:

Reopening of assessment - reasons to believe - Held that:- In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'.

The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment.

The Court is satisfied no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 to reopen the assessments for the AYs in question does not satisfy the requirement of law. The question framed is answered in the negative, i.e., in favour of the Assessee and against the Revenue.

THE PR. COMMISSIONER OF INCOME TAX-5 VERSUS M/S. SHODIMAN INVESTMENTS PVT. LTD., 2018 (4) TMI 1287 - BOMBAY HIGH COURT  - relevant head note:

The reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a reopening notice on the basis of intimation regarding reopening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that reopening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction.  ( full judgment is appended below page 18-22)

Bapalal & Co. Exports v. Joint Commissioner of Income-tax [ 2006 (9) TMI 86 - MADRAS HIGH COURT ]

– Case of 143(1) and 148 .

Recent judgment of the Supreme Court and related High Court judgments:

PR. COMMISSIONER OF INCOME TAX VERSUS MANZIL DINESHKUMAR SHAH 2019 (1) TMI 1396 - SUPREME COURT  Special Leave Petition (Civil) Diary No(s). 708/2019   Dated: - 25 January 2019

PRINCIPAL COMMISSIONER OF INCOME TAX 5 VERSUS MANZIL DINESHKUMAR SHAH   2018 (5) TMI 1176 - GUJARAT HIGH COURT

INDUCTOTHERM (INDIA) PVT. LTD. VERSUS M. GOPALAN, DY. COMMISSIONER OF INCOME-TAX [2012 (9) TMI 16 - GUJARAT HIGH COURT]

 

By: CA DEV KUMAR KOTHARI - March 5, 2019

 

 

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