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2015 (11) TMI 934

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..... t income chargeable to tax has escaped assessment, inasmuch as, the formation of belief of the Assessing Officer is not based upon the details available on record, but on the material made available by the DGIT (Inv.), Mumbai which is an external source. Under the circumstances, it cannot be said that the requirements of section 147 of the Act are satisfied, inasmuch as, the belief of the Assessing Officer is not based upon the material on record, but on some other material from an external source which does not find reference in the reasons. As is clear on a plain reading of the reasons recorded, except for the assertion that there were bogus purchases, the Assessing Officer has not referred to any material on the basis of which he proceeded to invoke the provisions of section 147 of the Act. The assertion made by the Assessing Officer is a bare one, without any reference to the material on the basis of which he made such assertion. - Decided in favour of assessee. - Special Civil Application No. 12873 of 2014, Special Civil Application No. 12875 of 2014 - - - Dated:- 13-10-2015 - Harsha Devani And A. G. Uraizee, JJ. For the Appellant : Mr R K Patel, Adv. with Mr Darshan P .....

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..... erein. It was submitted that however, the Assessing Officer has nowhere disclosed as to from which record of the assessee, he has reached to such conclusion in the reasons for reopening of the assessment. Referring to the order rejecting the objections filed by the petitioner, it was pointed out that the Assessing Officer stated that he has acted pursuant to the information received from the Director General of Income Tax (Inv.), Mumbai; however, there is no reference to such fact in the reasons recorded for reopening the assessment. It was submitted that the information received from the DGIT (Inv.) appears to have been made the basis for reopening the assessment; however, there is no independent application of mind by the Assessing Officer if one looks into the reasons recorded. According to the learned counsel, in the above circumstances, the very reopening of assessment is without any basis and that on the reasons recorded, the Assessing Officer could not have formed the belief that any income chargeable to tax has escaped assessment within the meaning of such expression as envisaged under section 147 of the Act. 4. Opposing the petitions, Mr. K. M. Parikh, learned senior st .....

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..... f could be formed by the Income Tax Officer and further whether that material had any rational connection with or a live link for the formation of the requisite belief. Reliance was also placed upon the decision of the Supreme Court in the case of Raymond Woollen Mills Ltd. v. Income Tax Officer and others, (1999) 236 ITR 34, for the proposition that the court has only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. Reliance was also placed upon the decision of the Supreme Court in the case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd., (2007) 291 ITR 500 (SC), for the proposition that so long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. Reliance was also placed upon the decision of this court in the case of Dishman Pharmaceuticals a .....

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..... 12873 of 2014 [1] On verification of details available on records, it is noticed that assessee has made Bogus Purchase of ₹ 30,65,639/-, during the financial year 2008-09 i.e. A.Y. 2009-10. By claiming bogus purchases in the trading and P L A/c as an expenses, the assessee has shown less profit to the extent of the amount of Bogus Purchases. [2] In view of the above facts of the case, I have reason to believe that the income chargeable to tax has escaped assessment within the meaning of section 147 of the I. T. Act, 1961, to the extent of ₹ 30,65,639/- for the A.Y. 2009-10. Special Civil Application No.12874 of 2014 [1] On verification of details available on records, it is noticed that assessee has made Bogus Purchase of ₹ 37,11,752/-, during the financial year 2009-10 i.e. A.Y. 2010-11. By claiming bogus purchases in the trading and P L A/c as an expenses, the assessee has shown less profit to the extent of the amount of Bogus Purchases. [2] In view of the above facts of the case, I have reason to believe that the income chargeable to tax has escaped assessment within the meaning of section 147 of the I. T. Act, 1961, to the extent o .....

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..... 8. At this juncture, reference may be made to certain averments made in the affidavit-in-reply filed by the respondent, wherein a stand has been taken that the Director General of Income Tax (Inv.), Mumbai has carried out independent inquiries on hawala transactions and has supplied the information of bogus purchases by the assessee for the years under consideration and that this information, as received from the DGIT (Inv.), Mumbai, is made part and parcel of the assessment record of the assessee. It is further stated therein that the case of the assessee has been reopened to verify the purchases made by the assessee. The notice under section 148 of the Act was issued after recording of reasons and satisfaction of the Assessing Officer on the basis of the details, that is, of DGIT (Inv.), Mumbai, available on record. It is further the case of the respondent that there was no assessment in this case and no opinion was formed, and therefore, there was no question of change of opinion and that the case has been reopened on the basis of subsequent information provided by the authority defined under the Act. Reference has been made to the decision of the Supreme Court in the case of A .....

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..... ons for issuing notice. The reasons should set out the reasons for formation of the belief of the Assessing Officer that the income has escaped assessment and in case where the reopening of assessment is after the expiry of a period of four years from the end of the relevant assessment year, the belief should be that, by reason of omission or failure on the part of the assessee to disclose fully and truly the material facts, the income has escaped assessment in a particular year. Unless the substratum is laid in the reasons, clearly demonstrating the twin belief, that is, the belief that income has escaped assessment and the belief that such escapement is by reason of failure on the part of the assessee, filing an affidavit and stating the same before the court for the first time would amount to bringing on record material which did not form the basis of formation of such belief. The belief that income has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts has to be recorded in the reasons, though the same may be elaborated by filing an affidavit. But, in the absence of formation of any such belief being recorded in th .....

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..... er has not referred to any material on the basis of which he proceeded to invoke the provisions of section 147 of the Act. The assertion made by the Assessing Officer is a bare one, without any reference to the material on the basis of which he made such assertion. 14. At this juncture, reference may be made to the decision of the Supreme Court in the case of Ram Bai v. Commissioner of Income Tax, (1999) 3 SCC 30, wherein, the Income Tax Officer has made an order of assessment under section 147(a) of the Act holding that a sum of ₹ 2,43,934/- was payable as tax and initiated penalty proceedings. On appeal by the assessee, the Commissioner of Income Tax (Appeals) held that the ITO could not have had any reason to believe that there was escapement of income as there was no material whatever at that time to indicate that the lands were non-agricultural. The Commissioner (Appeals) allowed the appeal and cancelled the order of assessment under section 147(a). The Department approached the Income Tax Appellate Tribunal with an appeal, but in vain, as the Tribunal agreed with the Commissioner and confirmed his order. The revenue applied for reference to the High Court which answe .....

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..... n assertion in the said communication that the land in question was not subjected to agricultural operation and that he had reason to believe, the income chargeable to tax had escaped for Assessment Year 1965-66 by reason of omission or failure on the part of the assessee to make a valid return. But for such assertion, no reference has been made to any material on the basis of which he proceeded to invoke the provisions of Section 147(a) of the Act. Even the assertion as such was a bare one without any reference to the materials on the basis of which he made the said assertion. 9. Learned counsel for the Revenue has placed reliance on the judgment of this Court in Central Provinces Manganese Ore Co. Ltd. v. ITO. It was held on the facts in that case that the reasons recorded in the notice issued under Section 147(a) and the material on record justified the issue of such notice. That ruling will not help the Revenue in this case as there is no material whatever on record to justify the issue of notice by the ITO under Section 147 of the Act. 15. Adverting to the facts of the present case, the returns filed by the assessee have been processed under section 147(1) of the A .....

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