TMI Blog2011 (7) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee - Hence, M/s Swetu Stone Pvt. Ltd. is a non-existing and a fictitious entity/person - Therefore, the present writ petition is allowed and writ of certiorari is issued quashing the proceedings u/s 148 of the Act. - 8067/2010 - - - Dated:- 21-7-2011 - Sanjiv Khanna, J. Udaibir Singh Kocher, Adv. for the Petitioner Suruchi Aggarwal, Adv. for the Respondent JUDGMENT Sanjiv Khanna, J 1. The petitioner is a company, which was incorporated on 30th September, 2002 and for the first year, i.e., the assessment year 2003-04, had filed its return of income on 31st March, 2005. The return was not selected for scrutiny. Subsequently, the Assessing Officer issued two notices dated 22nd March, 2010 and 29th March, 2010 under Section 148 of the Income-Tax Act, 1961 (Act, for short) for assessment. The petitioner has impugned these two notices on the ground that the pre-conditions for issue of notice under Section 148 are not satisfied and, therefore, the Assessing Officer is exceeding his jurisdiction. The petitioner has also impugned the order dated 15th November, 2010 passed by the Income-Tax Officer, Ward 8(4), New Delhi rejecting their objections to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) Where an assessment has been made, but- (i) Income chargeable to tax has been underassessed; or (ii) Such income has been assessed at too low a rate; or (iii) Such income has been made the subject of excessive relief under this Act; or (iv) Excessive loss or depreciation allowance or any other allowance under this Act has been computed." 4. The aforesaid Section is wide but it is not plenary. We have to consider and examine the crucial expression "reason to believe" used in the said Section. The Assessing Officer must have "reason to believe" that an income chargeable to tax has escaped assessment. This is mandatory and the "reasons to believe" a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son to the respondent and the live link or close nexus which should be there between the material before the ITO and the belief which he was to form was missing or was, in any event, too tenuous to provide a legally sound basis for reopening the assessment.... The position in the present case falls within the same category. At the time of the original assessment all the facts relating to the cash credits in question were fully disclosed. This has been found by the learned Judge at page 960 (of 118 ITR) and indeed this is the accepted position on the basis of which even the proposal of the ITO to the Commissioner (set out at page 964) proceeded. Thereafter, the only material received by the ITO appears to be that the revenue authorities had carried out certain investigations, that they had discovered the existence of bogus hundi brokers who were allegedly lending their names to assessee and that a list had been circulated to various ITOs of the hundi brokers who were allegedly indulging in malpractices. The internal audit party appears to have discovered that some of the creditors whose credits had been accepted in the assessee's case fell within this category and raised an audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under Section 147/148. The reasons recorded by the Assessing Officer for approval of the Commissioner of Income-Tax Range-VIII, in paragraph 11 of the said form/proforma read: "11. Reasons for the belief that income has escaped assessment.- Information is received from the DIT (Inv.-1), New Delhi that the assessee has introduced money amounting to Rs.5 lakh during the F.Y. 2002-03 relating to A.Y. 2003-04. Details are contained in Annexure. As per information amount received is nothing but accommodation entry and assessee is a beneficiary." 9. On the basis of the aforesaid reasons, the Commissioner gave approval recording as under: "Yes, I am satisfied on the reasons recorded by the A.O. for approval and issue of notice u/s 148 of the I.T Act, 1961." 10. It is accepted that the Section 151(2) of the Act is applicable in the present case as the proceeding under Section 148 were initiated after expiry of four years from the end of the relevant assessment year. Therefore, the Assessing Officer was required to take approval an officer not below the rank of the Joint Commissioner of Income-Tax after recording reasons. In the present case sanction has been taken from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrary exercise of power. For it is on the basis of the reasons recorded and on those reasons alone that the validity of the order reopening the assessment is to be decided. The reasons recorded while reopening the assessment cannot be allowed to grow with age and ingenuity, by devising new grounds in replies and affidavits not envisaged when the reasons for reopening an assessment were recorded. The principle of law, therefore, is well settled that the question as to whether there was reason to believe, within the meaning of section 147 that income has escaped assessment, must be determined with reference to the reasons recorded by the Assessing Officer. The reasons which are recorded cannot be supplemented by affidavits. The imposition of that requirement ensures against an arbitrary exercise of powers under section 148." 12. In these circumstances, we are examining the reasons given by the Assessing Officer in the proforma seeking permission/approval of the Commissioner and whether the same satisfy the pre-conditions mentioned in Section 147 of the Act. 13. Annexure attached to the said proforma placed on record of the petitioner reads as under: BENEFICIARY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is stated that M/s Swetu Stone Pvt. Ltd. had applied for allotment of shares worth Rs.5 lacs and the same were allotted by the petitioner. It is further stated that statements of Mahesh Garg and Shubhash Gupta were recorded by the Director of Income-Tax (Investigation) and on the basis of the statements they have come to the conclusion that the said persons were entry operators. Copy of the statements of Mahesh Garg and Shubhash Gupta have not been placed on record by the respondent. The petitioner, has, however, enclosed copy of statements of Mahesh Garg and Shubhash Gupta recorded on different dates. The said persons have not specifically named the petitioner though other parties have been named and details have been given and it is stated that they were provided accommodation entries. However, it is stated that the entries were made by giving cheque/DD/PO after receiving cash and sometimes expenses entries were provided. The reasons recorded by the Assessing Officer do not make reference to any statement of Mahesh Garg or Shubhash Gupta. This may not also be necessary, if the statements were on record and it is claimed and prima facie established that they were examined by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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