TMI Blog2018 (5) TMI 1547X X X X Extracts X X X X X X X X Extracts X X X X ..... ment filed an Misc. Civil Application for review or recall or even when Assessing Officer issued a fresh notice dated 29.03.2017 which is impugned in this petition. Fact of the matter is there is no formal withdrawal of notice till date. A notice of reopening which is once issued would remain in operation unless it is specifically withdrawn, quashed or gets time barred. First instance would be at the volition of the Assessing Officer as the person who had issued the notice. He can recall the notice for valid reasons and may even issue a fresh notice which is not impermissible in law. Nevertheless, there has to be an action of withdrawal. Mere intention, a stated intention or even an intention which is otherwise put in practice cannot be equated with withdrawal of the notice. The conclusion that we have reached would invariably result in frustrating the Revenue's attempt to reopen the assessment and may have been seen to be based on somewhat technical reasons. Having succeeded on all other grounds, the Revenue may legitimately feel somewhat disappointed. Nevertheless, our duty is to give effect to the legal principles. The law does not recognize two parallel assessments. - pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 5,73,65,135/- as stated above ha escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. Issue Notice u/s. 148 of the Income Tax Act, 1961. 4. The petitioner challenged such notice of reopening by filing Special Civil Application No. 2120 of 2016. Such petition was disposed of by an order dated 21.06.2016 in the following manner: After hearing learned counsel for the parties for some time previously and today, learned counsel Shri Pranav G.Desai for the Department stated on instructions that the respondent Assessing Officer would withdraw the impugned notice for reopening of the assessment based on the reasons supplied to the petitioner, with a view to issuing a fresh notice after recording fresh reasons. In that view of the matter, it is not necessary to decide the validity of the notice which is under challenge in this petition. Learned counsel for the petitioner however submitted that if fresh notice is issued, the petitioner may consider challenging it in accordance with law. Petition disposed of accordingly. 5. The Revenue thereafter filed Misc. Civil Application No. 2789 of 2016. In the said petition seeking review of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y would go ahead with the proposal to withdraw the notice for issuing the fresh one. Once again on the same day, after taking instructions, he conveyed to us that the Assessing Officer would go by the initial offer of withdrawal of the notice. It was, thereupon, that we disposed of the writ petition by an order dated 21.06.2016, in which, we permitted the Assessing Officer to withdraw the impugned notice with a view to issuing a fresh notice after recording fresh reasons. 2. What transpired during the course of the hearing and which is recorded hereinabove does not form part of our order dated 21.06.2016 but learned counsel for both sides agreed that this is as far as possible an accurate recording of what actually had transpired. 3. In that view of the matter, when the Assessing Officer had consciously withdrawn the notice of reopening even without the permission to treat the fresh notice as continuation of the original and therefore having been issued within a period of four years from the end of the relevant assessment year, he now cannot resile from such a decision as is sought to be done through this application. 4. Under the circumstances, this application i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 1(1) Rajkot, vide his letter No. DCIT/Cir-1(1)/Review Petition/Marwadi S FL/2016-17 dated 28.07.2016 had requested the Sr.Standing Counsel, Shri Pranav Desai to file Review Petition before the Hon. Gujarat High Court. 4. In the meantime, the case was centralized with the circle. The Review Petition filed by the department has been dismissed by the Hon'ble Guajrat High Court (on 28/09/2016) on the ground that the A.O. has consciously withdrawn the notice of the re-opening there is no need for reviewing earlier order. 5. However, as directed by the Hon' Gujarat High Court, fresh reason is recorded herewith as under. Reasons for reopening of assessment a. The assessee M/s. Marwadi Shares Finance Ltd (PAN:AABCM5192K) is a broker who facilitates share trading activities for its clients. Besides, it is also engaged in trading of shares and providing other financial services. The Directorate of Income Tax (Intelligence and Criminal Investigation) carried out a thorough investigation in respect of certain brokers who were indulging in the practice of transferring fictitious profit or loss by misusing the client code modification facility in F O segm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers including the assessee by the I CI Wing of the Income Tax Department. The assessee had claimed losses to the tune of ₹ 5,69,52,995/- by resorting to such non-genuine CCM practices. These facts were not disclosed by it in its return of income. Also these facts were not disclosed while finalizing its assessment u/s. 143(3) on 29.09.2010. This claim of fictitious loss had resulted into under assessment to the tune of ₹ 5,69,52,995/-. e. In view of the above, I have reason to believe that the income of the assessee has escaped tax to the extent of ₹ 5,69,52,995/- as stated above and this escapement is within the meaning of section 147 of the Income Tax Act, 1961. f. As the present case fall in the time limit of 4 years to 6 years from the end of the relevant assessment year, the approval of the Pr. CIT is sought. As the reason are being rerecorded again as per the direction of the Hon Gujarat High Court, the approval for reopening is sought again as per law. 7. The petitioner raised objections to the notice of reopening under letter dated 20.07.2017. Such objections were, however, rejected by an order dated 17.08.2017. The petitioner has therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een issued beyond a period of four years was therefore bad in law. Counsel also contended that the Assessing Officer has proceeded on the borrowed satisfaction without independent application of his own mind. (vi) Counsel argued that the transfer of jurisdiction was also invalid. There was no concurrence between the two Commissionorates before the jurisdiction assessment of the petitioner was transferred from one authority to the another. (vii) Counsel lastly contended that there is no valid sanction for reopening the assessment. There is nothing on record that the competent authority applied its mind before granting any such sanction. 10. On the other hand, learned counsel Mr. Bhatt for the department opposed the petition. He contended that incorrect narration of facts in the reasons recorded by the Assessing Officer pertaining to the directions issued by the Court are severable and would not destroy the very core of the reasons recorded by him demonstrating that income chargeable to tax had escaped assessment and that the same occasioned due to failure on part of the assessee to disclose truly and fully all necessary facts. (i) Counsel further contended that even thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons recorded merely stated that the information was received by the office in response to fictitious losses created by some broker by misusing client code modifications facility. The petitioner M/s. Marwadi Shares and Finance Ltd was reported to be one of the beneficiaries of misuse of such facility. Such fictitious losses had been adjusted by the assessee against the profits of other years. Thus, it could be argued that the Assessing Officer had merely proceeded on the information received by him. His approach was therefore possible of being faulted as having acted on bare information without his own application of mind and thus relying on borrowed satisfaction. In the fresh reasons, he gave some background facts which, to be honest, were highly jumbled up. He referred to the past litigation and recorded that the High Court had directed recording of fresh reasons. This obviously was a clear error. Ordinarily, we would not give any such direction. In any case, the order of the High Court which is reproduced in this judgement nowhere records any such direction. However, this by itself would not be fatal to the cost of the Revenue. The background facts are clearly severable from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the transfer of the assessment, the respondents cannot be faulted for not making any further factual averments in this regard. Nevertheless, to satisfy ourselves, we have perused the original files which show that the question of transfer of assessment emanated from the Office of the Director General of Income Tax (Investigation) as can be seen from a letter dated 16.09.2016 written to the Principal Director of Income-tax (Inv), Ahmedabad. He had requested to write to the Principal Chief Commissioner of Income Tax having jurisdiction of the group of cases requesting the authorities to pass necessary orders under section 127(2) of the Act transferring the cases to the concerned Assessing Officers in the jurisdiction. In turn, on 18.10.2016, Deputy Director of Income Tax (Investigation), Ahmedabad, wrote to the Principal Commissioner of Income Tax, Rajkot, to whom the Assessing Officer of the petitioner was subordinate requesting for transfer of the case under section 127(2) of the Act. On 07.11.2016, the Principal Commissioner of Income Tax, Rajkot, granted approval for transfer of the case of the petitioner. Since the transfer of the jurisdiction was within the same city, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fresh notice after recording fresh reasons. Counsel for the petitioner had however, stated that if such fresh notice is issued, the petitioner may consider challenging the same in accordance with law. In view of this, the petition was disposed of. Thus, clearly, till the disposal of the petition, the notice was not yet withdrawn. It was only conveyed to the Court that the same would be withdrawn. Even when the Revenue filed a review petition being Misc. Civil Application No. 2789 of 2016 clearly there was no formal order passed withdrawing the notice. In fact, the prayer of the Revenue was that the fresh notice which may be issued should be treated to have been issued within a period of four years. This is significant since previous notice of reopening was issued within a period of four years. By the time the High Court disposed of the writ petition in the manner noted above, four years had lapsed from the end of the relevant assessment year. Any fresh notice therefore would be beyond a period of four years. The Revenue desired that in view of the special events, the fresh notice may be treated as an extension of the original notice and deemed to have been issued within four yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessment would not arise. Once a notice is issued under section 148 of the Act, it triggers initiation of proceedings for assessment or reassessment of income which may have escaped assessment earlier. During such assessment, any income which may come to the notice of Assessing Officer may also be brought to tax. Till this assessment is not completed, it would not be possible for him to form a belief that income chargeable to tax had escaped assessment. Until the assessment, be it original or reopened, is pending before the Assessing Officer, the question of issuing notice for reopening would not arise. As noted, in case of Ranchhoddas Karsondas (supra), the Supreme Court had taken a view that till the assessment proceedings are pending, it cannot be stated that there was escapement of income. To our mind, there is no distinction whether the pending assessment is pursuant to the return filed by the assessee originally or in response to the notice of reassessment issued by the Assessing Officer. In either case within the contours of the provisions for assessment, the assessment of the income of the assessee at the hands of the Revenue is at large. 8. We are conscious tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of law. Such a notice would not reopen an assessment, would not commence assessment proceedings and whenever so declared, such a declaration would relate back to the original issuance thereof. In such a situation, if the Revenue has issued a second notice for reopening, the same would not be rendered invalid. In this context we may recall, the Supreme Court in case of Ranchhoddas Karsondas (supra), in the context of notice of reopening issued pending a return of nil income filed by the assessee linked the validity of the notice to the validity of the return observing that if the return filed by the assessee was no return, the conditions of section 34 (of the Act of 1922) would apply and the Assessing Officer could carry out the assessment. 17. When therefore in the present case the first notice of reopening of assessment was not withdrawn, there was no scope, nor permissible in law to issue fresh notice of reopening. Counsel for the Revenue, however, vehemently contended that such withdrawal of notice of reopening must be deduced from facts and attendant circumstances. His contention was that the Revenue had, all along, intended to withdraw the notice and the fact, that s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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