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TMI Blog2014 (5) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... That was processed and accepted under Section 143(1). After about 7 years from the end of the assessment year, he received the notice impugned in this case, issued by the revenue, proposing to reassess his income under Section 147/148 on the ground that income had escaped assessment due to his failure to disclose material facts. The impugned notice was based upon a tax evasion Petition given to the Revenue by a serving Commissioner of Income Tax, then posted at Ranchi. 3. The petitioner alleges that this Tax Evasion Petition was issued out of personal vendetta of the complainant who was known to use scandalous language and level false and baseless allegations and that he had also launched frivolous litigation solely with a view to cause harassment. The Revenue, at the request of the petitioner, furnished a copy of the reasons to believe recorded under Section 147 of the Act to support the re-opening of assessment. The material portions of the reasons so recorded are extracted below: "The details of investment in immovable property which has not been declared in return of income and not included in the taxable income disclosed by the assessee, pertains to several assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce reveal that property is owned by one Sh. K.K. Khanna in the records of MCD it has further been alleged by the complainant that the aforesaid flat has been acquired through power of attorney during F.Y. 2004 - 2005 relevant to A.Y. 2005-2006 out of concealed income of the assessee which has not been offered to tax and on which no tax has been either paid or collected by the department although the same is payable. It has further been alleged that one MTNL landline telephone was installed at Flat NO. 877, IInd Floor, New Friends Colony, New Delhi - 110 065 which was surrendered by Sh. P.K. Misra after the complainant found out that Sh. P.K. Misra had invested his unaccounted income concealed from tax in the said flat. Since there is no disclosure about any link between Sh. P.K. Misra and the property and the said property is admitted on affidavit sworn by the assessee and filed before Hon'ble Delhi High Court as his address & residence and the cost of property or the rent of the property as may be the case, exceeds the limit prescribed U/s 147 for assumption of jurisdiction to re-open the assessment, this is considered to be a fit enough case for initiation of proceedings U/s 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principal allegations, i.e. acquisition of the Second floor of D-877, New Friends Colony and consequent non-disclosure to the extent of about Rs. 10 crore is devoid of any material. In this regard, reliance is placed upon the statement of Mr. Khanna, the owner. It is also submitted that the material on record suggested that the petitioner's statement, i.e. that immediately upon his ceasing to be a Central Government employee, since he was not in possession of any residential property in Delhi, he leased-out the New Friends Colony property which belonged to Mr. Khanna, is not only substantiated but completely established. It is argued in this regard that the relevant records, i.e. the municipal tax records, the title deeds etc. clearly established that the owner of the property, i.e. Mr. Khanna and that the petitioner had leased the property for period till 2009. The rent paid was Rs. 33,000/- per month. All these are matters of record. The Revenue's contention in this regard, which led to the reopening of the assessment, was based upon the allegations received in the tax evasion Petition that the real owner of the property was none other than the writ petitioner and that the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivastava v. ACIT 319 ITR 221; ITO v. Selected Dalur Band Coal Company 217 ITR 597; Ayojan Developers v. ITO 335 ITR 234 and CIT v. Atul v. Vinita Jain 299 ITR 383, for the proposition that the material should be one on the basis of which the reasonable plea and not a completely absurd or unreasonable one can be entertained with respect to evasion of income. It was argued that these decisions also establish that mere suspicion is not sufficient unless it is based upon reasonable facts. Underlining that the entire materials on record did not justify reopening of the assessment as no tax evasion was in fact shown but that the allegations made by the complainant were driven by vendetta, learned counsel submitted that they required to be quashed on account of malafides. 9. The respondent Revenue, in its counter affidavit and also through the submissions of the learned counsel urges that the sufficiency and adequacy of the material and the reasons based upon it cannot be the subject matter of proper enquiry under Article 226. Being invested with statutory power, the Assessing Officer (AO) has to form the opinion where the allegations prima facie make out a case for reopening of a compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee's omission to disclose a material fact. The judgments relied on, particularly Shipra Srivastava are authorities for the proposition that the power to re-open an assessment ought to be exercised on the basis of an appreciation of materials through application of mind, reasonably. This Court had, in that decision, quashed the reassessment notice, inter alia, observing that: " reasons which have been recorded seeking reopening of the assessment, and as reproduced above show that there is no application of mind by the Assessing Officer which can be said to be the mind of a reasonable person to arrive at a conclusion, which has been arrived at in view of the reasons recorded." Likewise, there must be a reasonable nexus between the fresh material and its nature, for a sustainable opinion on the part of the ITO to reopen an assessment. 11. In the present case, so far as the New Friends Colony property is concerned, the statement of Shri. Khanna reveals that he is its owner; the petitioner was his lessee for about two years, paying monthly rent of Rs. 33,000/-. Moreover, the assessee was a public servant, who lived in official residences and had no premises of his own when he left ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y mandated to the assessee to put forth his or her point of view was aimed at a meaningful process whereby the AO could evaluate whether the opinion formed to reassess income, continued to be relevant, in the light of the explanation furnished. Whilst a court under Article 226 would judge the opinion and the reasons to believe, nevertheless a reasonable explanation which might clear doubts of the AO, would have to be dealt with in a reasonable manner. G.K.N. Drive Shafts affords a chance to the AO to take a second look at the feasibility or justification for proceeding with Section 148 notice. Otherwise, the opportunity mandated in G.K.N. Drive Shafts is a mere ritual. In the present circumstances, this Court is of opinion that having been given the explanations, the AO acted unreasonably in persisting with the reassessment notice, which also could not be said to have been based on tangible material, given the statement of Shri Khanna and lack of any tangible material supporting the allegations. Sustaining the notice and reassessment proceedings would amount to condoning what is clearly oppression and harassment. 14. In view of the above conclusions, the impugned reassessment noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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