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2017 (1) TMI 728 - BOMBAY HIGH COURT

2017 (1) TMI 728 - BOMBAY HIGH COURT - TMI - Validity of reopening of assessment - valid reasons to believe - review v/s reassessment - Held that:- It is a settled position in law that a re­opening of assessment has to be done only by the Assessing Officer based on his reasonable belief that income chargeable to tax has escaped assessment. This satisfaction of the Assessing officer has to be disclosed /made explicit in the reasons recorded and the same cannot be a subject of speculation and /or .....

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whole, it does not indicate that there has been a failure on the part of the petitioner to disclose fully and truly all facts necessary for assessment. Nor does it state that there has been any misrepresentation on the part of the petitioner. It is on re­examination of the seized diaries(A­1 to A­6) alone, without any fresh material which points to the falsity of the diaries(A­1 to A­6). Therefore when we examine the reasons recorded, without the aid of the affidavit in reply dated 12 March 1988 .....

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ch material relied upon by the Petitioner during the assessment proceedings, had led the Assessing Officer to conclude that the Petitioner is only a finance broker and not a financier. In fact the reasons recorded in this case does not even remotely indicate that any part of the evidence being relied upon to issue the impugned notices were not brought attention to by the petitioner during earlier assessment proceedings for the very assessment years which are sought to be reopened. - Decided in f .....

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re-open the Assessment for the Assessment Years 1989-90, 1990-91 and 1991-92 each respectively. 2. The petition was admitted on 25 August 1999 by this Court. At the time of admission, interim stay was granted in respect of all the three impugned notices dated 23 September 1997 till the disposal of this petition. 3. The bare facts relevant for the disposal of this petition are that the Petitioner at the relevant time was carrying on business as Finance and Estate Broker in the name and style of M .....

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90-91, the assessment proceedings were completed by intimation under Section 143(1)(a) of the Act on 9th February, 1990 and 6th March, 1991 respectively. While for the Assessment Year 1991-92, the Assessing Officer completed regular assessment by order dated 31st March, 1992 under Section 143(3) of the Act. 5. In the meantime, on 21/22nd September, 1990, search proceedings were initiated against the Petitioner. Consequent to the search proceedings, two re-opening notices under Section 148 of the .....

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ar 1991-92 is concerned, the Assessing Officer completed the Assessment on 31st March, 1994 by an order passed under Section 143(3) of the Act again amongst other things by placing reliance upon the six diaries (A1 to A6) seized during the search proceedings in the year 1990-91. 6. Thereafter, the Assessing Officer issued the impugned notices on 23rd September, 1997 to the Petitioner, seeking to re-open the assessment for the Assessment Years 1989-90, 1990-91 and 1991-92. The reasons recorded in .....

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t he received estate brokerage, finance charges (interest and brokerage) as given below. He also invested in properties mentioned below. The figures in diaries A/6 and A/1 are written by omitting three zeros and wherever he has made = mark, those figures are written by omitting two zeros. A. Estate Brokerage : In diary A/6 it is written that the assessee received following brokerage/profit in estate dealings: Date Amount Rs. Description of properties 16.4.90 1,00,000 Navani profit W.G. (Also wri .....

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ge account In diary A/1 following profit/brokerage is written which is not incorporated in A/6 diary :- 18.4.90 2,21,000 Murari shop Khar (Total 4,51,000 - 2,30,000=2,21,000 profit) Total 11,60,500 The above income was not shown by the assessee to his return nor assessed. This income of ₹ 11,60,500/- has escaped assessment. B. The assessee is also buying and selling properties. The details of such dealings are also noted in reasons recorded for A.Y. 1989-90. During the year the receipts fr .....

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,750 Chand Asha Nagar (Also A/1 diary) ,, 2,50,000 Rahul Murd account 7.5.90 4,00,250 Chandru & Mahink for Asha Nagar (Also in A/1 diary on 8.5.90) ,, 3,00,000 Manghira Bhayander 9.5.90 3,49,000 Chandru Crystal (Also in A/1 diary) 11.5.90 55,000 Navani flat account 22.5.90 50,000 Chandru flat deposi for Asha Nagar (Also in A/1 diary on 23.5.1990) 24.5.90 1,08,800 - do - (Also A/1 diary) 24.5.90 2,00,000 Dr. Sri Project A/c ,, 1,64,000 Mahink Asha Nagar (A-1 diary entry on 28.5.90 for flat 30 .....

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6.90 Rutu Enclave) 29.6.90 4,00,000 Received Purs Tulsa flat a/c (A-1) ,, 50,000 Chandu Sri Project flat (A-1 diary 28.6.90 Crystal Kandvli) 5.7.90 2,00,000 Received Divya Shah flat a/c Dep a/c (A-1 on 6.7.90) 7.7.90 2,00,000 Received C/o. P. Tulsa flat a/c 1031/5 (A-1 diary also) 9.7.90 10,000 Received Khysh Asha Nagar Dep(A1) 16.7.90 1,74,000 Received Mahink Asha Nagar flat payment (A-1 flat 501) - Do- 27,250 Received Sarju Thane a/c B/2 - 102 (A-1) 17.7.90 1,50,000 Received Mahin Divya a/c De .....

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13.8.90 1,71,500 Chandru Asha nagar Kandivli (A - 1) 16.8.90 6,25,000 Navani Karjat (A - 1) ,, 1,69,750 Mahink flat payment (A - 1 flat no.504 x 330 + 10 deposit Ashanagar) ,, 2,50,000 Khys Silver (A - 1 diary on 17.8.90 Silver Mist) ,, 28,000 Anand flat 18.8.90 1,50,000 Khysh Silver a/c (A-1 Silver Mist) 22.8.90 1,71,500 Mahink Asha Nagar (A-1 No.504) 22.8.90 4,500 Chandru Asha Nagar 22.8.90 70,000 Received R Vasu Karjat a/c 27.8.90 2,50,000 Atlanta ,, 17,500 ,, 29.8.90 20,000 Navani Divya A/c .....

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ubhai Crystal Deposit 14.4.90 2,93,000 Mahink Asha Nagar flat no.302 Area 550 401 575 18.4.90 1,58,000 Murari Shop Khar Total 451 - 230 = 221 profit 23.4.90 5,00,000 Tik Kukja Sonda Atlanta ,, 10.00,000 -do - LFC 26.4.90 50,000 Murari Divya a/c 26.4.90 1,00,000 Manghiram Bhayander Deposit 7.5.90 3,00,000 Manghi Bhayander Deposit 5.6.90 50,000 Chandrubhai Crystal A/c 6.6.90 36,000 C/o.Madam Flat a/c no. 1502x 950 rate 11.7.90 3,00,000 P. Tulsi Zali Con 1,16,78,515 Total receipts for properties &# .....

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.R. Puri Farm Karjat 18.4.90 2,34,000 R.Vasu 24.4.90 20,000 Murari, Blossom Enpys cheque 25.4.90 25,000 Murari Murud A/c ,, 2,000 Murari Blossom A/c 26.4.90 7,00,000 Jaikap against Kandivli Crystal 7.5.90 10,000 Divya Shah Nana Chowk ,, 40,00,000 Nitiraj Property against flat 2450 sq.ft Raj Prashar 10.5.90 13,00,000 Navani Tirupati Plaza Shop 3600 (A - 6 diary Page 65) (11.5.90) 18.5.90 2,50,000 Atlanta Construction Co - Dolly Nagpal 3.6.90 2,00,000 Kishor Jaising Flat A/c 11.6.90 1,50,000 Kisho .....

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37,50,000 Eagle Farm against material 14.8.90 20,000 Given Divya Shah Navani Stamp A/c 14.8.90 40,000 K.K. Murari Karjat 21.8.90 5,00,000 Atlanta Sonda Against 304 610 ft x 1000 23.8.90 2,50,000 Ramse Jivan Sharda Kutir Deposit 12000 feest 3000 Tenants 25.8.90 5,50,000 Atlanta Construction (Also in A/6 diary on 27.8.90 ) (P. 82) 24.8.90 5,00,000 Kirtikar Deposit office (A/6 diary on 27.8.90 ) (P.82) 24.8.90 5,92,000 Sri Project Mulund Tower 5.9.90 30,000 Kum Jais Mad A/c (Also in A - 6 diary) 8 .....

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assessment. D. The assessee is a financer. He has not explained the source of finance made. The new amounts given during the year to various parties upto 21.9.90 as per diary A/3 are ₹ 3,29,85,000/- The assessee has not explained, the source of the money advanced to various persons mentioned in A/3 diary. I am therefore of the opinion that this amount of ₹ 3,29,85,000/-is the income of the assessee u/s. 69/69B which has escaped assessment. E. As per A/I diary the assessee paid ₹ .....

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nt. F. The assessee vide letter dt . 5.2.94 has admitted that cash amount of ₹ 31 lacs deposited in the bank are unaccounted and covered by declaration u/s.132(4). This amount has escaped assessment. Thus consideration A,B,C,D,E & F above, the following income has escaped assessment within sub-clause (i) of clause (c) of explanation 2 of Sec. 147. Para A for estate brokerage received ₹ 11,60,500 Para B for profit in property dealings ₹ 17,51,777 Para C for unexplained inves .....

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reply dated 12th March, 1988 of one Mr. K. K. Deb Burman, the Commissioner of Income Tax, Central-I, - wherein it is contended that during the assessment proceedings under Section 148 read with Section 143(3) of the Act for Assessment Years 1989-90 and 1990-91 and during assessment proceedings under Section 143 (3) of the Act for the Assessment Year 1991-92 the Petitioner had misled the Assessing officer in respect of the entries found in the six seized diaries(A-1 to A-6) to conclude that he i .....

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department to reach the conclusion that he is a finance broker and not a financer. Similarly, it is submitted that the reasons as recorded do not even allege remotely that the petitioner had not decoded the entries in the diaries during the earlier/regular Assessment proceedings. These allegations are found only in the above Affidavit in reply filed by the Revenue to the Petition. It is submitted that such improvement of reasons by affidavit is not permissible as held by this Court in Hindustan .....

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in respect of the entries found in the six seized diaries(A- 1 to A-6) to conclude that he is not a financer. Besides, as stated in the affidavit the Petitioner's decoding of the seized diaries(A-1 to A-6) was incorrect. The learned Counsel further states that merely because the necessary evidence in the form of seized dairies were before the Assessing officer during the earlier Assessment proceedings, it would not follow that that there has been a full and true disclosure of all material f .....

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ces Ltd., 74 Taxmann.com 114 to contend that where an assessee has misrepresented facts which led the Assessing Officer to take a view divorced from the actual facts, then it is open to the Assessing Officer to issue a re-opening notice as done in the present facts. Thus it was submitted that the petition should be dismissed and the petitioner would have more than sufficient opportunity to explain the facts before the authorities under the Act in the reassessment proceedings. 11. It is a settled .....

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rded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to drawn based on reasons not recorded. It is for the Assessing officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons.... The reasons recorded should be clear and unambiguous and suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of the ind of the As .....

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fidavit or making oral submission, otherwise, reasons which are lacking in material particulars would get supplemented, by the time the matter reaches to the court, on the strength of affidavit or oral submissions advanced. 12. In the above view, any improvement in the reasons recorded as sought to be done by oral submissions on the basis of the affidavit in reply of the Commissioner of Income Tax Mr. K.K. Deb Burman dated 12 May 1988 has to be ignored. The reasons as recorded can alone be subje .....

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diaries(A-1 to A-6) alone, without any fresh material which points to the falsity of the diaries(A-1 to A-6). Therefore when we examine the reasons recorded, without the aid of the affidavit in reply dated 12 March 1988 of the Commissioner of Income Tax, it clearly indicates a change of opinion on the same set of facts. Thus it is a clear case of the Assessing officer seeking to review his decision taken during the earlier assessment/ re-opening assessment and not a case of reassessment. 13. Th .....

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ought to re-open and complete its assessment by placing reliance upon the trust deed and in, particular, the cost of acquisition of the property which was subjected to capital gains being recorded therein for the purpose of re-opening assessment. In that case, the Assessing Officer as well as this Court while negating a challenge by the Petitioner before it, placed reliance upon Explanation-I to Section 147 of the Act which provides that mere production of account books or other evidence from wh .....

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had led the Assessing Officer to conclude that the Petitioner is only a finance broker and not a financier. In fact the reasons recorded in this case does not even remotely indicate that any part of the evidence being relied upon to issue the impugned notices were not brought attention to by the petitioner during earlier assessment proceedings for the very assessment years which are sought to be reopened. In the case of Zohar Siraj Lokhandwala (supra), the reliance was placed upon the Explanatio .....

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