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Debottor Trust Estate of Rammohan Mullick Kolkata Versus Income Tax Officer, Ward-43 (4) , Kolkata

2017 (1) TMI 779 - ITAT KOLKATA

Validity of reopening of assessment - reasons to believe - non passing of speaking order - Held that:- In the reasons recorded, there is no live link between the reasons to believe and income escapement assessment. We are aware that the reason recorded to re-open has to be seen on a standalone basis which triggered to reopen the case under section 147 of the Act. In the light of the above we are of the opinion that it cannot be concluded that AO was not having sufficient information at the time .....

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nt of income. Therefore, the entire reopening is vitiated on this count. In the absence of the said jurisdictional fact renders the reopening 'coram non judice' and the assessment 'null' in the eyes of law. - We also find that the AO is under obligation to dispose of the objection raised by the assessee for the reopening of the case under section 147 of the Act by way of speaking order in terms of the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd v. Income Tax Officer (200 .....

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Kol /2016 - Dated:- 11-1-2017 - Shri A.T.Varkey, Judicial Member And Shri Waseem Ahmed, Accountant Member By Assessee : Shri B. Chakraborty, AR By Revenue : Shri Pinaki Mukherjee, JCIT-SR-DR ORDER Per Waseem Ahmed, Accountant Member These four appeals by same assessee are against the different orders of Commissioner of Income Tax (Appeals)-13, Kolkata by even dated i.e. 30.11.2015. Assessments were framed by ITO Ward-43(4), Kolkata u/s 143(3)/147) of the Income Tax Act, 1961 (hereinafter referre .....

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assessee in this appeal is that ld. CIT(A) erred in confirming the order of AO by holding the assessment under section 147 of the Act as valid. 4. At the outset the ld. AR appearing for assessee has challenged the assessment proceedings u/s 147 of the Act on the ground that the conditions for initiating proceedings under the Act have not been complied with. The ld. AR before us submitted that proceedings under section were initiated on account of two reasons as discussed below : 1. The AO obser .....

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ion of the AO for reopening the case u/s 147 of the Act that the assessee has claimed exemption u/s 11 of the Act is based on his surmise, conjecture. Accordingly, the assessment is liable to be quashed. Similarly, the AO initiated the proceedings u/s 147 of the Act on the ground that the assessee has claimed personal expenses against the income of other sources which are not allowable u/s57 of the Act. However the fact is that no expenditure of whatsoever was claimed by the assessee in its inco .....

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hand the ld. DR vehemently supported the order of authorities below. 5. We have heard the rival contentions and perused the materials available on record. It is well settled in law that reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis. Nothing can neither be added to the reasons so recorded nor anything can be deleted from the reasons so recorded. The Hon'ble Bombay High Court, in the case of Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR 3 .....

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should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence....". Therefore, the reasons are to be examined only on the basis of the reasons as recorded. 6 The next important point is that even though reasons, as recorded, may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry which may re .....

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that the Assessing Officer can form the belief that an income has escaped assessment. Merely because some further investigations have not been carried out, which, if made, could have led to detection to an income escaping assessment, cannot be reason enough to hold the view that income has escaped assessment. It is also important to bear in mind the subtle but important distinction between factors which indicate an income escaping the assessments and the factors which indicate a legitimate susp .....

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me escaping assessment. 6.1 While dealing with this aspect of the matter, it is useful to bear in mind the observations made by Hon'ble Supreme Court in the case of ITO Vs Lakhmani Mewal Das [(1976) 103 ITR 437] that, "......the reasons for the formation of the belief must have 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 ITO and .....

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howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment." 6.2 Similarly in CIT vs. Kelvinator of India Ltd reported in 320 ITR 561, the Full Bench of Hon'ble Supreme Court held as under :- "It is a well settled principle of interpretation of statute that the entire statute should be read as a whole and the same has to be considered thereafter chapter by ch .....

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fied where it may be a mere possible view or where the issues are debatable. Even the Income-tax Appellate Tribunal has limited jurisdiction under section 254(2) of the Act. Thus when the Assessing Officer or Tribunal has considered the matter in detail and the view taken is a possible view the order cannot be changed by way of exercising the jurisdiction of rectification of mistake. It is a well settled principle of law that what cannot be done directly cannot be done indirectly. If the Income- .....

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crucial expression is "reason to believe". The expression predicates that the Assessing Officer must hold a belief by the existence of reasons for holding such a belief. In other words, it contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief. Such a belief may not be based merely on reasons but it must be founded on information. As was observed in Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC .....

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ng Officer, the belief must be held in good faith ; it cannot be merely a pretence. It is open to the court to examine whether the reasons for the belief have a rational nexus or a relevant bearing to the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To that limited extent, the action of the Assessing Officer in initiating proceedings under section 147can be challenged in a court of law." 6.3 We are therefore of the opinion that section 147 of .....

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existence if he had reason to believe that income has escaped assessment. Formation of reason to believe that income escaped assessment has to be that of a prudent person. The reasons for such belief have to be recorded in writing on the basis of material in the possession of AO. While the words "reason to believe" are wide in their import, it cannot include a mere suspicion or ipse dixit of the AO. The belief of the AO should lead him to form an honest and reasonable opinion based on .....

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on of the Hon'ble Delhi High Court in CIT vs. Kelvinator of India Ltd. -held in its order reported in 320 ITR 561, ".....that Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have link with the formation of belief." Therefore, if the fresh tangible material which the AO has in his possession is relevant to have nexus to the formation of belief then, of co .....

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ng to the assessee company for AY 2001- 02 to examine the legal grounds raised by the assessee in the light of reasons to believe recorded by the AO in his assessment order which reads as under : It is see that the assessee has claimed exemption u/s. 11 of the IT Act 1961 but the trust is not registered u/s. 12A of the IT Act, 1961, the income derived from the trust is used for private religious purpose which does not ensure for the benefit of the public. It is also seen that the assessee derive .....

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l expenses against the income of other sources which are not allowable under section 57 of the Act. However, on perusal of income tax return we find the fact is that the assessee is not registered u/s 12A of the Act and no exemption u/s 11 of the Act was claimed. Similarly, we find that no expense against the income of other sources was claimed by the assessee and consequently no question of claiming personal expense arises. The fact as emerged from the records is that assessee has just shown th .....

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o believe and income escapement assessment. We are aware that the reason recorded to re-open has to be seen on a standalone basis which triggered to reopen the case under section 147 of the Act. In the light of the above we are of the opinion that it cannot be concluded that AO was not having sufficient information at the time of initiating action u/s 147 for forming reason for escapement of income. In the light of the above, we hold that there was no fresh tangible material available for the fo .....

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