TaxTMI 
TaxTMI 
2015 (4) TMI 411
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....) and the order dated 21st January, 2015 (Annexure 'B') and, further relief is that upon scrutiny thereof, this Court should quash and set aside the same. 4) The other relief is that the Respondents be restrained and prohibited from proceeding in furtherance of this notice and the impugned order and reassessing the alleged income escaping assessment. 5) We are required to refer to very few facts to appreciate the arguments of both sides. The Petitioner is a private limited company having its registered office at the address mentioned in the cause title. For the assessment year 201011, return of income was filed on 15th September, 2010 declaring a business loss of Rs. 1,61,793/under section 28 of the IT Act and booking loss amounting to Rs. 1,22,95,221/under section 115JB of the IT Act. 6) The relevant and material aspect of this return is that in it Rs. 1,21,33,429/was shown as book value of the shares transferred by way of gift. The case of the Petitioner was that in terms of memorandum of association of the Petitioner, it gifted 9,39,980 equity shares of United Phosphorus Limited and 93,400 shares of Uniphos Enterprises Limited. Both being companies, in which public ar....
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....ceedings be dropped. The Petitioner submitted that without these objections being dealt with, a notice under section 142(1) of the IT Act dated 20th November, 2014 was issued, calling upon the Petitioner to submit books of account and other documents. That is in support of the return of income. Some information was also called for. 9) Subsequently on 21st January, 2015, the impugned order came to be passed rejecting the objections. 10) Mr. Pardiwallalearned Senior Counsel appearing for the Petitioner submits that the Respondents could not have invoked this power of reopening the assessment on a mere change of opinion. Apart from that, he invited our attention to the contents of the notice and submits that the notice does not indicate any reasons and for the belief that income chargeable to tax for assessment year 201011 has escaped assessment within the meaning of section 147 of the IT Act. Mr.Pardiwalla would submit that the purported reasons, copy of which is at page 89 of the paper book, are nothing but a reiteration of the position emerging from the return. It is clear from the reasons supplied that the return of income filed by the Assessee for the assessment year 200910 was....
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....e Writ Petition be allowed, as the issuance of notice is not in accordance with law. The notice is exfacie bad in law and the proceedings are wholly without jurisdiction. The Petitioner there should not be forced to go through the process and await the outcome of reassessment. Mr. Pardiwalla would submit that once the principal condition is not satisfied, then, at the threshold the notice be quashed. 12) On the other hand, Mr. Vimal Guptalearned Senior Counsel appearing for the Department/Respondents would submit that there is no merit in this Writ Petition. In the affidavit in reply as also prior thereto in the communications referred in the Writ Petition, it has been pointed out that no regular assessment order was made under section 143(3) of the IT Act. Intimation issued under section 143(1) cannot be treated as an order of assessment. Once the intimation was received from the Assistant Commissioner of Income Tax, Central Circle 38, Mumbai by letter dated 19th December, 2003 that the Petitioner had transferred 10,33,380 shares, whose market value on the date of transfer was 14,86,85,700/, without consideration to M/s. Nerka Chemicals Ltd. by way of a transfer deed dated 26th F....
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....herefore justified the issuance of notice and by relying upon the law laid down by the Hon'ble Supreme Court in the case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in (2007) 291 ITR 500. He would therefore submit that the Writ Petition be dismissed, as the Petitioner can appear before the Assessing Officer; produce the requisite material and in the event adverse order is passed, challenge it in accordance with law. At this stage, this Court should not interfere. 15) With the assistance of the learned Senior Counsel appearing for both sides, we have perused the Writ Petition, the relevant Annexures and the decisions brought to our notice. 16) In the Judgment of the Hon'ble Supreme Court, which has been relied upon by Mr. Gupta [Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra)], the Hon'ble Supreme Court was concerned with a case where a private limited company filed its return of income for assessment year 200102. That was filed on 30th October, 2001 declaring loss at a certain figure. The return was processed under section 143(1) of the IT Act and the loss returned was accepted. A notice under section 148 of the IT Act wa....
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....ion 143(2). That right is preserved and is not taken away. Between the period from April 1, 1989, and March 31, 1998, the second proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1) (a), an intimation had to be sent to the assessee notwithstanding that no tax or refund was due from him after making such adjustments. With effect from April 1, 1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till June 1, 1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between April 1, 1998, and May 31, 1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word "intimation" as substituted for "assessment" that two different concepts emerged. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso t....
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.... India [1996] 220 ITR 248 (Delhi). It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from June 1, 1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any "assessment" is done by them? The reply is an emphatic "no". The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise." 18) The Hon'ble Supreme Court thus held that section 147 authorises and permits the Assessing Officer to assess or reassess the income chargeable ....
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.... To, The Principal Officer, M/s. Nivi Trading Ltd. 4th Floor, Ready Money Terrace, 167, Dr. A. B. Road, Mumbai - 400018. PAN: AAACN2703L Whereas I have reason to believe that your income in respect of which you are assessable chargeable to tax for the A. Y. 20102011 has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. I, therefore, propose to assess for the said assessment year and I hereby require you to deliver to me within 30 days from the date of service of this notice, a return in the prescribed form of your Income in respect of which you are assessable for the said assessment year. (TANVI S SAVANT) Income Tax Officer 7(1)(1), Mumbai." 20) When this was objected to by the Petitioner/Assessee and sought the reasons, what the Petitioner was provided with are the reasons and which read as under:" Reasons for reopening u/s. 147 in the case of M/S. NIVI TRADING LTD. A. Y. 201011 It is verified from the Return of Income filed by the assessee for A. Y. 200910 that it had shown LTCG from investments in shares amounting to Rs. 1,54,81,620/and had shown dividend of Rs. 9,74,420/. During the A. Y. 201011, assessee had shown LTCG of Rs. 33,4....
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.... pointed out that there is no understatement of income or claim of loss, deduction allowance in the return of income. Thus, there is no question of any income chargeable to tax escaping assessment. More so, when the amount of Rs. 1,21,33,429/had been added back while computing the total income. It is this stand of the Petitioner and which to our mind would fall within the parameters of the principles and emerging from a reading of the Judgment of this Court. In the case of Smt. Maniben Valji Shah (supra) this Court emphasised that the important words in section 147 of the IT Act are "has reason to believe" and they are stronger than the words "is satisfied". The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. While the Court cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matter in regard to which he is required to entertain the belief before he can issue notice unde....
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....for issuance of notice is to be found in section 147 of the IT Act and that is on the reason to belief that any income chargeable to tax has escaped assessment for any assessment year, then, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be. In the present case, the Respondents do not state that any income chargeable to tax has escaped assessment. All that the Revenue desires is verification of certain details and pertaining to the gift. That is not founded on the belief that any income which is chargeable to tax has escaped assessment and hence, such verification is necessary. That belief is not recorded and which alone would enable the Assessing Officer to proceed. Thus, the reasons must be founded on the satisfaction of the Assessing Officer that income chargeable to tax has escaped assessment. Once that is not to be found, then, we are not in a position to susta....