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TMI Blog2018 (5) TMI 1489X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 9,02,730/=. Such return was processed under Section 143 of the Income-tax Act, 1961 ["the Act" for brevity] and accepted without any scrutiny. To reopen such assessment, the Assessing Officer issued the impugned notice. In order to do so, he had recorded the following reasons : "In this case the return of income for A.Y 2010-11 was filed on 31/07/2010 declaring total income of Rs. 9,02,730/=. The return was processed under Section 143 [1] of the Act. The assessee company is a registered member [Code No. 3032] of BSE. This office subsequently received information from the BSE through the DDIT [Investigation] Unit 1 [2], Ahmedabad that the above named assessee / broker has made Client Code Modification in 11028 trades/contacts of various clients during the period 01.04.2009 to 31.03.2012. From the data obtained, it is seen that the assessee has made client code modification in number of trades contracts involving different clients during FY 2009-10 to 2011-12 and the total amount involved in client code modification is Rs. 70,00,62,400/=. Further analysis shows that during the year under consideration ie., in FY 2009-10, the assessee made client code modification in 2557 trades ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice of reopening under a communication dated 29th May 2017. These objections, however, were rejected by the Assessing Officer by an Order dated 8th August 2017. Hence, these petitions. Taking us through the reasons recorded, counsel for the petitioner submitted that the Assessing Officer had no tangible material to enable him to form a belief that income chargeable to tax has escaped assessment. The Assessing Officer has proceeded on presumption and surmises before coming to the conclusion that the assessee had earned undisclosed income. Counsel submitted that reopening of the assessment cannot be permitted for roving or fishing inquiries or on the basis of mere suspicion. In this respect, counsel relied on a judgment of Division Bench of this Court in the case of Chintan Jadavbhai Patel v. Income-tax Officer, reported in [2017] 246 Taxman 361 [Gujarat] in which the Court was of the opinion that there was no tangible material available with the Assessing Officer to even prima facie show that the assessee had received any money in cash by way of sale consideration of the land. The Court eventually quashed the notice of reopening. Learned counsel Shri Manish Bhatt for the Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny, the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment." With this background in mind, we may analyze the reasons recorded by the Assessing Officer. As per these reasons, according to him, the assessee had during the period between 1st April 2009 to 31st March 2012 carried out as many as 11028 client code modifications ["CCM" for short]. The total amount involved in such CCMs was close to Rs. 70 Crores. During the financial year 2009-2010 ie., relevant to AY 2010-2011, the assessee had made as many as 2557 CCMs involving total amount of Rs. 23.43 Crores. The Assessing Officer noted that it is observed that, "it is observed that in number of cases, for making such CCMs and thereby providing contrived losses or profit, normally, the broker charges 0.5% to 1% of such losses/profits." The reasons further record that Investigating Wing of the Department had sought expert opinion from National Stock Exchange to broadly distinguish between a genuine and non genuine CCM. As per the Stock Exchange, the following categories would fall within genuine CCMs viz., [i] Where error occurs due to communication or punching or typing so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Limited v. ITO [1991] ITR 662, for initiation of action under section 147(a) [as the provision stood at the relevant time] fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction [see ITO v. Selected Dalurband Coal Company P Limited [1996 217 ITR 597 (SC); Raymond Woolen Mills Limited v. ITO [1999] 236 ITR 34 (SC)]." In case of Raymond Woollen Mills Limited v. Income Tax Officer & Ors., reported in [1999] 236 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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