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2016 (5) TMI 115 - DELHI HIGH COURT

2016 (5) TMI 115 - DELHI HIGH COURT - [2016] 382 ITR 547 - Reopening of assessment - Held that:- It is well settled that the reasons recorded for reopening the assessment have to speak for themselves. They have to spell out that (i) there was a failure of the Assessee to disclose fully and truly all the material facts necessary for the assessment and (ii) the reasons must provide a live link to the formation of the belief that income had escaped assessment. These reasons cannot be supplied subse .....

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d assessment.Consequently, for the aforementioned reasons, the Court is satisfied that in the present case the essential requirements of Section 147 of the Act have not been satisfied by the Revenue. - Decided in favour of assessee - W. P. (C) 8994/2014 & CM 20547/2014 - Dated:- 18-2-2016 - Justice S. Muralidhar And Justice Vibhu Bakhru, JJ. W. P. (C) 9014/2014 & CM 20601/2014, W.P.(C) 9015/2014 & CM 20603/2014, W.P.(C) 9386/2014 & CM 21216/2014, W.P.(C) 9387/2014 & CM 21218/2014 .....

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e are two sets of writ petitions filed by Sabharwal Apartments Private Limited ( SAPL ) and Sabharwal Properties Industries Private Limited ( SPIPL ) challenging the notices issued to each of them under Section 148 of the Income Tax Act, 1961 ( the Act ) on 28th March, 2014 in respect of Assessment Years (AYs) 2007-2008 to 2012-2013. 2. While directing issuance of notice in the writ petitions on 7th January, 2015, this court directed that no further steps shall be taken pursuant to the aforement .....

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order passed under Section 143(3) of the Act. 4. The broad grounds of challenge to the reopening of the assessments is that in respect of AY 2007-2008 and 2008-2009 pertaining to SAPL, the notices were beyond the period of four years after the end of the AY in which the return was filed; in respect of SPIPL barring the notices for AYs 2010-2011 and 2011-2012, none of the other notices were served on SPIPL; for AY 2007-2008, the notice issued to SPIPL was beyond four years. However, the main grou .....

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lication of mind. 5. The reasons for reopening the case as recorded for the AY 2007-2008 in respect of SAPL, on the basis of which notice was issued, are the reasons for reopening of the cases in respect of SPIPL as well and it is the same set of reasons for all the six AYs, i.e., 2007-2008 to 2012-2013. 6. Since the main ground of challenge is regarding the lack of clarity of the reasons recorded, it is necessary to set out the reasons as under: The Proposal in the prescribed format in the abov .....

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2) M/s Mahima Distributors Pvt. Ltd. (MDPL) Kolkata which was acquired by purchase of shares by four company was more than ₹ 9 crores but purchased for ₹ 37 lacs while other companies who acquired shares in the same company had paid huge premium over and above the par value of ₹ 10/- per share of (MDPL) in F.Y. 2006-07(A.Y. 2007-08). The issue is being investigated by Investigation Wing, Kolkata for verifying the receipt of share premium by MDPL and report awaited. Further comp .....

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icable money received in A.Y. 2008-09 by SPIPL is ₹ 50 lac & in A. Y. 2009-10 75 lac. SAPL ₹ 50 lac in A.Y. 2009-10 for verification of transaction and existence of companies or merely providing book entries and commission issued to DDIT Kolkata & report awaited. The loans received by M/s. SAPL and M/s. SPIPL in AY 11-12 before the takeover of company M/s. MDPL remains unexplained as under. - M/s Sabharwal Properties Industries Pvt. Ltd. (SPIPL) ₹ 5244306/- M/s Sabharwa .....

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2014 passed by the Income Tax Officer Ward-7(1), New Delhi. These orders have also been challenged in the present writ petitions. 8. With the help of the learned counsel for the Revenue, the Court has tried to decipher the reasons recorded for reopening since a plain reading of it reveals that the reasons are totally incoherent. In fact, a plain reading of it gives rise to doubts whether some lines have gone missing or some punctuation marks have been left out. Grammatically also the reasons re .....

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f that income has escaped assessment. To recapitulate the law on this aspect as explained in Madhukar Khosla v. Assistant Commissioner of Income Tax (2014) 367 ITR 165 (Del): the foundation of the AO s jurisdiction and the raison d etre of a reassessment notice are the reasons to believe . Now this should have a relation or a link with an objective fact, in the form of information or facts external to the materials on the record. Such external facts or material constitute the driver, or the key .....

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on 147 of the Act, the AO does not have the power to reopen an assessment on the basis of mere change of opinion . It observed: ....the Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfilment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as .....

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be as under: i. A survey operation under Section 133A was conducted by the Investigation Wing, New Delhi on 12th December, 2013 in the premises of SAPL and SPIPL. ii. Both SAPL and SPIPL showed unsecured loans of ₹ 9.65 crore having been borrowed from Mahima Distributors Private Limited ( MDPL ), Kolkata for AY 2011-2012. iii. The shares of MDPL worth more than ₹ 9 crore were acquired by four companies for ₹ 37lakhs, whereas other companies which acquired shares of MDPL paid a .....

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y SAPL and SPIPL in 2011-2012 before takeover of MDPL remained unexplained. 12. The facts relating to all the six AYs appear to be jumbled up. That apart, the unnumbered paras 3 and 4 of the reasons extracted hereinbefore do not make any grammatical sense whatsoever. 13. In an attempt to salvage the situation, learned counsel for the Revenue drew attention to paras 2 to 4 and 8 of the order dated 24th October 2014 rejecting the Petitioners' objections which read thus: 2. The transactions per .....

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s Mahima Distributors Pvt. Ltd., Kolkata for ₹ 37 lac though the investment of this company was 9 crore. Not so much, the other companies purchased the shares of this company during F.Y. 2006-07 relevant to A.Y. 2007-08 after payment of huge premium. This company was found bogus and was only operation on paper and no actual transactions were going on as per the statement of the Director of M/s. MDPL recorded by the Investigation Wing, Kolkata. 4. There is a clear mentioned in the reasons t .....

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gus. Their statements are available on record." 14. The following reasons which find place in the above orders dated 24th October 2014, do not find any mention in the original reasons recorded for reopening the assessment: i. The Assessees purchased a company, MDPL, for ₹ 37 lakh though the investment of the company was ₹ 9 crore. ii. MDPL was found to be bogus and there was no actual transaction involving it. iii. There was a statement of the Director of MDPL to the above effec .....

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hat (i) there was a failure of the Assessee to disclose fully and truly all the material facts necessary for the assessment and (ii) the reasons must provide a live link to the formation of the belief that income had escaped assessment. These reasons cannot be supplied subsequent to the recording of such reasons either in the form of an order rejecting the objections or an affidavit filed by the Revenue. In this context, the decision of this Court in Northern Exim (P) Ltd. v. DCIT [2013] 357 ITR .....

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ated as its income for the assessment year 1997-98 as no return of income had been filed. The entry made in the proceeding sheet is perhaps more elaborate and informative than the reasons recorded under Section 148(2) in the sense that it also states one more reason for initiating re- assessment proceedings, namely, that there is a difference between the profit before tax (Rs.42,79,340/-) and the amount declared in the VDIS (Rs.7,23,490/). The reasons recorded however are not so explicit and do .....

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