TMI Blog2016 (11) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1990-91 i.e. prior to the signing of the deed of relinquishment of right/development rights in the year 1995, the assessee was very much shown as a tenant in the property in question. The AO, during the original scrutiny assessment proceedings under section 143(3) of the Act, had thoroughly examined the issue, put the queries to the assessee and thereafter had allowed the claim of the assessee. Without any new fact or information coming into his knowledge and without stating any specific reason merely saying that from the records it is observed that the assessee was not tenant, in our view, is nothing but the change of opinion on the part of the AO. The reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of belief regarding escapement of income. The powers of Assessing Officer to reopen an assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". There can be no manner of doubt that the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO for initiating reassessment proceedings were that on examination of records, it was observed that the assessee never possessed any tenancy rights. Hence, the notice under section 148 was issued stating that substantial revenue had escaped assessment. 4. In appeal before the Ld. CIT(A), the assessee contended that relevant queries had been raised by the AO regarding the tenancy rights during the assessment proceedings under section 143(3) of the Act and that no new information had come into the knowledge or possession of the AO and that the reopening was done merely on the basis of change of opinion. The Ld. CIT(A), however, rejected the above contention of the assessee observing that as per the scheme of the amended provisions of section 147, the AO need merely a reason to believe that income has escaped assessment provided the four year time limit has not expired. If the AO has formed a prima facie opinion that assessee did not possess tenancy rights at that stage that belief, even only on assumption, was sufficient to reopen the assessment and it would be subsequently open to the assessee to prove or disprove the correctness or otherwise of the assumption. He, therefore, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,625/-. On the right side the name of tenants who have occupied the said property has also been mentioned wherein the name of assessee Dr. Keki H. Gharda is duly mentioned, the area occupied by him has been mentioned as 2634 sq. ft. and against which a rent of ₹ 5664 has been shown to be received and a sum of ₹ 2126/- has been shown as paid toward municipal tax. The Ld. Counsel, therefore, has contended that the case of the Revenue is that the story about the tenancy rights of the assessee in the property in question is a device adopted by the assessee in the year 1995 when the landlord/tenant of the property M/s. Gharda Chemicals Ltd. had entered into redevelopment agreement of the property. That to lessen the tax liability, the assessee company had shown one of its directors Dr. Keki H. Gharda as a tenant in some portion of the property, for which a compensation on relinquishment of rights was agreed to be paid to the assessee Dr. Keki H. Gharda vide agreement dated 01.09.1995. The Ld. Counsel, thus, has stressed that from the records above, it is very much evident that the agreement of 1995 was not an afterthought. The assessee was shown as tenant in the wealth tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the original scrutiny assessment proceedings under section 143(3) of the Act, had thoroughly examined the issue, put the queries to the assessee and thereafter had allowed the claim of the assessee. Without any new fact or information coming into his knowledge and without stating any specific reason merely saying that from the records it is observed that the assessee was not tenant, in our view, is nothing but the change of opinion on the part of the AO. As per the provisions of section 147 of the Act, the AO is authorized to reopen the assessment proceedings, if he has reason to believe that any income chargeable to tax has escaped assessment. The courts of law time and again have held that such a reason to believe that the income of the assessee has escaped assessment should be based on some tangible material which comes to the knowledge of the AO. An assessment cannot be reopened under section 147 of the Act on the basis of mere suspicion. A perusal of the reasons recorded reveals that assessment has been reopened on the assumption that assessee was not the tenant in the property without referring to any specific document, evidence or information. There is no dispute to the we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 147 of the Act, which was not permissible in view of the law laid down by the Hon ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. (supra). Identical view has also been taken by the Hon ble Jurisdictional Bombay High Court in the case of Direct Information (P) Ltd. (supra) as relied upon by the Ld. Counsel. 9. The facts of the case in hand when seen in the light of the legal proposition as laid down by the Hon ble Supreme Court and by the Hon ble jurisdictional Bombay High Court as discussed above, the reopening in this case is to be held as illegal and bad in law. 10. Since we have held the very reopening of the assessment as bad in law, hence the consequential additions made by the AO have no legs to stand. Hence, without going into the merits of the additions made by the AO consequent to the reopening of the assessment, the appeal of the assessee is allowed on the ground of the validity of the reopening of the assessment. 11. Now coming to the appeal of the Revenue i.e. ITA No.6656/M/2013. ITA No.6656/M/2013 (Revenue s Appeal) 12. The Revenue has come in appeal agitating the action of the Ld. CIT(A) in deleting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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