TMI Blog2018 (1) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... on of remand to the Assessing Officer to pass a fresh order after hearing the petitioner or its authorised representative, without being influenced by the earlier order dated 11th September,2015 or by this order. We have not formed any firm opinion on merits. - W.P.(C) 9800/2015 - - - Dated:- 8-1-2018 - MR. SANJIV KHANNA MR. CHANDER SHEKHAR JJ. Petitioner Through: Mr. S. Krishnan, Advocate Respondents Through: Mr. Ruchir Bhatia and Mr. Puneet Rai, Standing Counsel for the Income Tax Mr. Zoheb Hossain, Sr. Standing Counsel for Revenue SANJIV KHANNA, J. (ORAL) 1. We have heard counsel for the parties, and with their consent taken the writ petition for final hearing. We have also perused the departmental records which has been produced by the counsel for the respondents. 2. The petitioner, Scan Holding (P) Ltd., has challenged initiation of proceedings under Section 147 read with 148 of the Income Tax Act, 1961 (Act, for short) vide notice dated 31.03.2015 for the Assessment Year (AY) 2008-09. 3. It is accepted and admitted that the original return filed by the petitioner for the AY 2008-09 was not subjected to scrutiny assessment and was processed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed that the assessee had shown exempt dividend income amounting to ₹ 2,27,600/- whereas the assessee had not disclosed the expenditure to earn this exempt income as per section 14A read with Rule 8D resulting in escapement of income. 4. Bogus and Personal expenses: Information has also been received that the assessee has claimed bogus and personal expenses as business expenses to suppress the income and therefore lowering or avoiding the payment of tax. The same issue was also raised in the AY2007-08. However, the amount cannot be quantified at this point of time but I have reason to believe that this issue needs to be scrutinized and this type of expenses is liable to be disallowed, 5. Expenditure on account of Foreign Travelling It is noticed from perusal of P L Account that the company has debited ₹ 3465948/- as Foreign Travelling in its P L A/C. The same issue was also raised in the AY2007-08. However, the amount cannot be quantified at this point of time but I have reason to believe that this issue needs to be scrutinized and this type of expenses is liable to be disallowed. 6.Rent to Director It is stated by the complainant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal and also deny each and every factual assertion as mere assumption and imagination. The reasons to believe, it is asserted merely refer to the complaint made by the former statutory auditor, a Chartered Accountant. The complaint was reproduced in the reason to believe without ascertaining and examining whether there was any basis and substance in the allegations, or they are vague and biased insinuations, which were nothing more than gossip and canards. We are not reproducing the entire letter, but would like to reproduce some portion of the objection letter:- 5. PRELIMINARY OBJECTION 2 - WHETHER THE CONTENTS OF THE COMPLAINTS AS BROUGHT INTO THE REASONS RECORDED LEAD TO ANY BELIEF AS TO ESCAPEMENT OF INCOME - Since we are not privy to the complaints themselves, these submissions are being made on a perusal of the Reasons recorded, requesting for leave to make further submissions if required after receipt of copies thereof: Two points are noteworthy from the contents of the Reasons: a. If the Complainant is the Assessee's erstwhile auditor as referred to at Para 2 above, it is interesting that he has helped write the Assessee's books of account, then conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny conclusions to escapement of income; as has been pointed out at Para5(c) above. c. NO OBSERVATION AS TO ESCAPEMENT OF INCOME No observation or finding-in this regard appears in the Reasons Recorded either, as pointed out at Para 8 above. The belief as to escapement of income is to be formed by your kind self alone, and such belief must resonate from the Reasons Recorded. As the Assessing Officer, your kind self has to demonstrate that as per provisions of the Income-tax Act 1961, there is escapement of income. In the subject case though, the Reasons only indicate allegations and probabilities. The phrase '1 have reason to believe' is not a magic wand. It needs to be tested by its vicinity. The vicinity only comprises of unsubstantiated allegations and non-allegations. That being the case, the existence of the belief must be held to be a fiction, So it is prayed. 6. We have not reproduced paragraph 3 of the objections to avoid prolixity, albeit the petitioner had asserted that the allegation were conjunctures and imaginations and not worthy of being treated as cogent reasons. The petitioner had stated :- [1] Commission received from Ball Corporation ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of which the case was reopened cannot lead to any belief as to escapement of income. The reopening appears to be mechanical and is non reasoned. commission income earned from M/s. Ball Packaging has been duly offered to tax No disallowance can be made on account of Section I4A, Bogus expenses and Foreign Travel expenditure, rent paid to directors or depreciation on office premises. IV. The submission made by the assessee have been considered. but found not acceptable. In the present case as the case for the relevant assessment year-was not assessed u/s 143(3) of the Act and six years have not elapsed for the relevant assessment year, prior approval as per Act was taken from the Competent Authority before .issuing the notice u/s,JA8. Hence the notice u/s 148 of the Act for assessment of the assessee Company's case is valid and as per law. Thereafter, the order quotes case laws on the question of initiation of proceedings under Sections 147 and 148 of the Act. It is recorded in paragraph IV.2 that the contention of the petitioner that there was no tangible material or new information, was not correct and rather it was supported by facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th: it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction of the Income Tax Officer: the forum of decision as to the existence of reasons and the belief is not in the mind of the Income Tax Officer. If it be asserted that the Income Tax Officer had reason to believe that income had been under-assessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justiciable. The expression therefore predicates that the Income Tax Officer holds the belief induced by the existence of reasons for holding such belief. It contemplates existence of reasons on which the belief is founded, and not merely a belief in the existence of reasons inducing the belief; in other words, the Income Tax Officer must on information at his disposal believe that income has been underassessed by reason of failure fully and truly to disclose all material facts necessary for assessment. Such a belief, be it said, may not be based on mere suspicion: it must be founded upon information. 10. More direct and appropriate is the reasoning gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also made against the individual directors, namely, Vijay Aggarwal, Rajiv Aggarwal and Juhi Dixit. The individual directors had filed writ petitions in this Court, which have been allowed. Similarly, for the Assessment Year 2007-08, the petitioner had participated in the assessment proceedings under Section 147/148 of the Act and some additions in the scrutiny assessment were made, but these additions have been deleted in the first appeal. We are not giving any firm or affirmative opinion, but would require the Assessing Officer to consider the aforesaid aspects and pass a reasoned and a speaking order dealing with the contentions of the assessee. 13. This is a case wherein there was no assessment and in case Assessing Officer felt that there was nexus between the grounds and the facts stated and available which have basis and foundation to form the reasons to believe that income has escaped assessment, it is open to him to say so and thereafter continue with the proceedings under sections 147/148 of the Act. However, the findings of the Assessing Officer must be honest and cogent, based upon some material available on record, to support the prima facie finding and not predi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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