TMI Blog2011 (3) TMI 1056X X X X Extracts X X X X X X X X Extracts X X X X ..... used by the Assessing Officer clearly postulates the height of arbitrariness in the process of reopening the assessment and the fact that the assessment was not made on the strength of the reasons mentioned in the note clearly supports the stand of the assessee that the assessment was sought to reopened merely to harass the assessee. In favour of assessee. - 6449 (MUM.) OF 2007 - - - Dated:- 23-3-2011 - D. MANMOHAN, RAJENDRA SINGH, JJ. R.S. Srivastav for the Appellant. Vijay Mehta for the Respondent. ORDER Rajendra Singh, Accountant Member. This is an appeal filed at the instance of the revenue and it pertains to the assessment year 2000-01. Return of income having been processed under section 143(1) of the Act, Assessing Officer sought to reopen the assessment by issuing a notice under section 148 of the Act on certain assumptions. Upon reopening the assessment, it was found that the assumptions on which reopening was made were not true but he proceeded to complete the assessment under section 143(3) read with section 147 of the Act, by treating the amount received by the assessee on transfer of development rights as business income, as against the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(1) of the Act on 21-2-2002. 4. However, the Assessing Officer sought to reopen the assessment on the ground that the correct income assessable to tax had escaped assessment and accordingly issued a notice under section 148 of the Act on 4-6-2004. Reasons recorded for reopening of the assessment are placed in paper book (Page 14 of the paper book). The case of the Assessing Officer is that during the course of assessment proceedings for the subsequent year i.e., 2001-02 certain facts which were not disclosed to the department earlier have come to the notice. In the balance sheet, under the head "property account", opening balance FSI was shown at Rs. 2,51,504.60ps. No details whatsoever of the FSI have been furnished. Details with regard to the property were also not furnished for the past many years. No doubt, for some years the property was mentioned as 'Jogeswari property' and in other years it was shown as 'Andheri property', but the assessee refused to furnish any details. It was also stated that the assessee had paid municipal taxes which "appears to be for the change of usage". Presumably, he has made certain local enquiries whereby he "understood" that the property in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by him on the basis of local enquiries made that it was the assessee who developed the property known as "Oshiwara Plaza". However, I do not find any such findings in the impugned assessment order. The impugned assessment order does not mention any of the enquiries, if any, made and outcome thereof. Even the show-cause notice issued during the reassessment proceedings vide letter dated 8-3-2006, the Learned Assessing Officer sought explanation from the appellant as to why the profit on sale of fixed assets should not be taxed under the head 'Profits and Gains of Business and Profession'. It appears that the learned Assessing Officer has proceeded on presumptions and assumptions that increase in value of the property by capitalizing various expenses automatically leads towards the fact that appellant was in the running of business in the development and sale of property. Nowhere in the impugned assessment order he has found any development expenses or substantial expenses that are required to change the face of the property as alleged by him in the reasons recorded for reopening the assessment. Thus, I find force in the arguments and submissions of the learned A.R. that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Counsel, appearing on behalf of the assessee, adverted our attention to page 12 of the paper book i.e., letter dated 27-1-2004 addressed by the assessee to the Commissioner of Income-tax, to submit that the Assessing Officer sought to harass the assessee during the course of assessment proceedings for the assessment year 2001-02 and hence, assessee had to report the matter to the Commissioner of Income-tax with a request to transfer the case to some other Officer. In this background it has to be seen as to whether the notice under section 148 for the assessment year 2000-01 issued on 4-6-2004 is based on proper reasons or it is merely issued on assumptions which cannot stand the test of law. Learned Counsel submitted that the assessee had not been carrying on business for the past several years and was merely maintaining the property without any further modifications. In the process it incurred certain expenditure in the form of legal fees, municipal tax etc., which was capitalised since there is no other income for the assessee. In the year under consideration, income on the sale of development rights was already declared under the head 'Long term capital gains'. After sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly, in the case of CIT v. Smt. Maniben Valji Shah [2006] 283 ITR 453 the Hon'ble Bombay High Court had taken into consideration the principle laid down by the Apex Court in the case of Ganga Saran Sons (P.) Ltd. v. ITO [1981] 130 ITR 1/6 Taxman 14 to hold that at the time of issuance of notice the Assessing Officer should have proper basis to entertain a belief that any part of the income of the assessee has escaped assessment and reopening cannot be made merely to collect further details. The Apex Court, return, observed that the belief entertained by an Assessing Officer must not be arbitrary or irrational and it must be reasonable; though the Court cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Assessing Officer in coming to the belief, Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain belief, before issuing a notice for reopening of assessment. The Apex Court further observed that if there is no rational and intelligible nexus between the reasons and the belief, the conclusion would be inescapable that the Assessing Officer could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee." [Emphasis supplied] 14. Learned Counsel, appearing on behalf of the assessee, reiterated the submissions by stating that the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts narrated by the Assessing Officer and the CIT(A), as well as the facts available on record, the Assessing Officer appears to have reopened the assessment on mere assumptions and surmises and he never cared to verify the factual position. Letter addressed to the Commissioner of Income-tax, regarding the harassment meted-out to the assessee by the concerned Assessing Officer, indicates that the Assessing Officer sought to reopen the assessment on the ground that municipal tax was paid by the assessee for change of use of the property and the assessee's property was converted into shops and marriage halls consisting of 110 units and in this regard he used the expression "it is understood", without mentioning as to what was the basis for his understanding. The expression used by the Assessing Officer clearly postulates the height of arbitrariness in the process of reopening the assessment and the fact that the assessment was not made on the strength of the reasons mentioned in the note clearly supports the stand of the assessee that the assessment was sought to reopened merely to harass the assessee. The Hon'ble Bombay High Court in the case of Jet Airways (I) Ltd. (supra) had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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