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Sky View Counsultants Pvt. Ltd. Versus Income Tax Officer, Ward 23 (4) & Anr.

2017 (9) TMI 588 - DELHI HIGH COURT

Reopening of assessment - reasons to believe - Held that:- Revenue has no answer to the submission that the entire exercise undertaken by the ITO (Inv.) was without jurisdiction. Which is why in the counter affidavit filed in the present writ petition, the stand taken by the Revenue is that it is not the only reason for re-opening the assessment. The fact remains that it could not form tangible material for re-opening the assessment. The fact remains that the power under Section 131 (1A) can be .....

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erstwhile AO of the Petitioner. A perusal of the letter dated 2nd November 2011 written by the Director (Vigilance) to the DGIT (Vigilance) does not throw any light on any material relevant to AY 2009- 10. In fact, the concluding paragraph of the said letter a request is made for reopening of the assessment for the AY 2007-08 by invoking Section 263 of the Act. This explains why that route was resorted to for AY 2007-08. - This Court is therefore satisfied that the jurisdictional requirement .....

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alima, Advocates. Respondents Through: Mr. Rahul Kaushik, Senior Standing Counsel for the Income Tax Department. O R D E R Dr. S. Muralidhar, J.: 1. The challenge in this writ petition is to the notice dated 29th March 2016 issued by the Income Tax Officer Ward 23(4), New Delhi (hereafter Assessing Officer - AO ) under Section 148 of the Income Tax Act, 1961 ( Act ) seeking to reopen the Petitioner's assessment for the Assessment Year ( AY ) 2009-10. A challenge is also laid to the letter da .....

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48/-. The said return was processed under Section 143 (1) of the Act. 3. On 29th March 2016, the AO issued the impugned notice under Section 148 of the Act proposing to reopen the assessment for AY 2009-10. The reasons recorded by the AO on 10th March, 2016 for reopening of the assessment, as communicated to the Petitioner, were broadly as under: (i) A Tax Evasion Petition ( TEP ) had been received by the investigation wing of the Income Tax Department to the effect that the Petitioner had colle .....

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nder Section 147 of the Act were in progress. Even for the AY in question i.e. the AY 2009-10, a perusal of the Profit and Loss (P&L) Account for the year ending 31st March, 2009 showed that the Petitioner was claiming an expense of ₹ 2,41,79,349/- on account of contractor s charges . This was in fact the bribe amount distributed by it. (ii) The second reason was that the Income Tax Officer (Investigation) [ITO (Inv)] OSD-I, Unit-3, New Delhi issued the summons under Section 131 (1A) o .....

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e as was in AY 2007- 08 and 2008-09 . It was further inferred that the aforementioned sum of ₹ 2,41,79,349/- had been used by the Petitioner for non business purposes , thus concealing its true income. (iii) The third reason was that the Director General of Income Tax (DGIT) (Vigilance) by letter dated 2nd November, 2011 had also suggested that the claim of expenses made by the Petitioner would have to be examined. This was after a detailed inquiry into a complaint against the then AO of C .....

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e disposed of by the AO by the impugned letter dated 4th July 2016. One of the objections raised was that the entire exercise undertaken by the ITO (Inv) by invoking Section 131(1A) of the Act was without jurisdiction since that provision could not have been invoked without him being duly authorised. On this issue, in the impugned order dated 4th July 2016, the AO noted that the said information received from the ITO (Inv) was not the sole basis for reopening the assessment. It was stated that t .....

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ation and belief formed which has been arrived at after independent evaluation of the information by the AO. 6. This Court has heard the submissions of Dr. Rakesh Gupta, learned counsel appearing for the Petitioner, and Mr. Rahul Kaushik, learned Senior Standing Counsel for the Revenue. 7. In the counter affidavit filed on behalf of the Revenue, reference, inter alia, is made to the fact that the proceedings under Section 147 of the Act for AY 2008-09 resulted in an assessment order under which .....

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that this Court has to necessarily examine the reasons recorded by the AO on 10th March, 2016 which make no reference, and obviously so, to an order that was passed subsequent to the date of recording of the reasons on 30th March, 2016. Secondly, he points out that the said assessment order for AY 2008-09 was in fact challenged by the Petitioner by filing an appeal before the CIT (A) and, therefore it was incorrect to say that the said order was not challenged. 9. On this issue, it requires to .....

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stage in respect of notices of the assessment . After referring to a large number of decisions, this Court explained: The ratio laid down in all these cases is that, having regard to the entire scheme and purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred and/or gath .....

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t the above jurisdictional requirement should be shown to have been fulfilled from the reasons for re-opening of the assessment. In other words, the reasons must speak for themselves. The mandatory jurisdictional requirement in terms of the first proviso to Section 147 of the Act will not be fulfilled if the reasons do not themselves clearly indicate that there was in fact a failure by the Assessee to make a full and true disclosure of all material facts. The reasons have to explain what the mat .....

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ue tries to make up for the obvious defect in the reasons themselves which do not spell out the reasons by providing a justification at the stage of disposal of the objections or later in the counter affidavit when the re-opening is challenged by a writ petition. This, again, is impermissible in law. Since the reasons must speak for themselves, a subsequent attempt to supply the omission at the stage of an order disposing of the objections raised by the Assessee or providing them in the counter- .....

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opening of the assessment for AY 2009- 10. In any event, this will not answer one of the principal grounds urged by Dr. Gupta that the tangible material that is required to be shown for justifying the re-opening of assessment has to be relevant to the AY in question, i.e. AY 2009-10. 12. In Commissioner of Income Tax v. Gupta Abhushan (P)Ltd. [2009] 312 ITR 166 (Del), it is emphasised that information relating to one AY will not automatically become relevant for re-opening the assessment for ano .....

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sessment order for AY 2007-08 was passed by the AO on 11th December, 2009. It was re-opened by the CIT (A) by the order dated 28th March 2012 under Section 263 of the Act. This resulted in a further assessment order dated 28th March 2013 by the AO under Section 143 (3) read with Section 263 of the Act. Only 7% of the 'contractor s expenses' was disallowed and added back. Therefore, even for AY 2007-08, the TEP did not result in adding back the entire amount. The decision in AGR Investmen .....

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ot refer to them while recording his reasons on 10th March 2016. Clearly this was an instance of non-application of mind by the AO to the relevant material. Since the AO failed to justify his reasons to believe that income has escaped assessment for AY 2009-10 on the basis of the TEP pertaining to AY 2007-08, it was all the more important for the AO to refer to all the subsequent developments in relation to reopening of the assessment for AY 2007-08. 15. As already pointed out hereinabove, the R .....

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