TMI Blog2019 (8) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... income, which should have been disclosed and had not been shown therefore, there was escapement of income. There must be direct nexus between the material and belief of escapement. This mental exercise must be self-evident from the reasons recorded. Reasons must be self-speaking and self-defending. The purported reasons do not show any such exercise by the learned Assessing officer and hence he wrongly acquired the jurisdiction in the matter. We are of the considered view that the reasons recorded by the Assessing officer, are no reasons in the eye of law for assuming jurisdiction in this case. - Decided in favour of assessee - ITA No.137 And 138/Ag/2018 - - - Dated:- 22-3-2019 - SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER, AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER For The Appellant : Shri Anurag Sinha, AR For The Respondent : Shri Waseem Arshad, Sr. DR. ORDER Per Dr.M. L. Meena, A. M.: Both these appeals by the assessee are directed against separate orders passed by the Ld. CIT(A)-II, Agra, dated 30.11.2017. Assessee has raised following grounds: 1. BECAUSE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons recorded, which are identical in both the cases with the only variation in amount and assessment year therefore, both the appeals are heard together and being adjudicated by this common order. 3. The Ld. A.R of the assessee Shri Anurag Sinha, Advocate submitted that the purported reasons are no reasons in the eye of Law. The so called reasons are based on incorrect assumption of facts as assessee was never questioned to explain source of investment whereas in the reasons recorded escapement is assumed for alleged failure of the assessee to explain sources of investment. According to the submission of Ld. Counsel to even if there was any failure to explain sources of investment such failure alone will not necessarily leads to the satisfaction of escapement of income. Proceedings under section 147 cannot be initiated for the purpose of verification of sources of investment. Thus, according to the Ld. A.R the reasons recorded do not show any application of mind on part of the LEARNED ASSESSING OFFICER to show that any Income liable for Tax has escaped Assessment warranting recourse to Notice under section 148 of the Act. He invited attention to the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee since had not challenged the validity of notice under section 148 of the Act at any stage before the authorities below therefore, he cannot be allowed to raise this objection at this belated stage and thereby taking the revenue by surprise. For this he placed reliance to Hon ble Supreme Court Judgment in the case of GKN Driveshafts (India) Ltd. v. ITO , (2002) 125 Taxman 963(S.C) and CIT vs. Safetag International India Pvt. Ltd. , ITA No. 355, 412 of 2010 ( Delhi High Court). He thereafter, submitted that the proceedings are validly initiated on the basis of credible report indicating suspicious transaction and therefore, the LEARNED ASSESSING OFFICER was well within his jurisdiction to issue Notice u/s 148 of the Act. He further submitted that no return of income was filed in compliance to notice u/s 148 of the Act.Reliance was placed to the following Judgments: 1. ACIT Vs Shri Jatinder Machanda, ITA.No. 4060/Del./2011- ITAT Delhi 2. CIT Vs Oasis Hospitalities (Pvt.) Ltd. Delhi High Court 3. CIT Vs Kamdhenu Steel Alloys Ltd. Delhi High Court 4. M/s Kays jewels Private Ltd. Vs Union of India And Anr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT, was in law justified in rejecting the additional grounds challenging the validity of assessment order on the basis of illegal initiation of proceedings u/s 148 without complying the provision of Section 148 (2) The Hon ble High Court held that Further, it has been held that the plea with regard to the jurisdiction of the Officer goes into the root of the matter, therefore, even if not raised at the first instance before the Assessing Authority, it can be raised before the Appellate Authority at a later stage. In this view of the matter, we are of the opinion that the Tribunal has erred in not allowing the additional ground challenging the validity of the assessment order on the basis of illegal initiations of the proceedings under Section 148 of the Act. 8. In the case Km.Teena Gupta Vs. CIT ,(2017) 4 TMI 114 (All.)(APB- 27-31)the Hon ble Allahabad High Court set-aside the order passed by the Hon ble ITAT wherein the Hon ble ITAT refused to entertain the ground regarding the validity of re-assessment proceedings on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not understood as to how reference to this case help the cause of the revenue in the case on hands. Therefore, the case is distinguishable on facts. 10. Further reliance on the Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO (2002) 125 Taxman 963 for the proposition that the Hon ble Supreme Court has required that immediately after receipt of notice u/s 148 of the Act assessee has to furnish return of income and seek reasons recorded and thereafter file objection . Thus as per his submission since assessee did not file return of income in compliance to notice u/s 148 of the Act and also has not filed objection he is precluded from challenging the validity of reasons at this belated stage. We are afraid to approve this submission too. In the case of GKN Driveshafts (India) Ltd. (supra) the Hon ble Supreme Court has only provided step wise procedure and nowhere it has been held that if objections are not filed before learned Assessing officer such objection cannot be taken up at any further stage or the legal right of assessee would stands waived. It would be reading or making us to read something which is not there in the Judgment of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid against policy of Birla Sun life Insurance. Vide this notice the learned Assessing officer has only called upon the assessee to furnish year wise and policy wise break up of premiums paid against policy of Birla Sun life Insurance. In fact this notice refers to a notice dated 05.06.2015 which was issued by the learned Assessing officer in past and remained non-complied with. Copy of notice dated 05.06.2015 is also placed in paper book (APB-16) even in this notice assessee was only required to furnish year wise and policy wise break up of premiums paid against policy of Birla Sun life Insurance. Therefore, it is clear that assumption of jurisdiction based on the reasons that assessee was asked to explain the source of investment vide letter dated 14.08.2015 and he has not furnished the sources of investment leading to formation of satisfaction regarding escapement of income is found to be wrong, which seriously prejudices the validity reasons recorded. 14. The next part of the reasons recorded states that As per reply of the assessee as well as from ITD System it is seen that assessee had submitted here return of income showing income of ₹ 1,54,680/- for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is disclosure of the income during a particular period. The reason is vague and relies on the presumptions on the part of the Assessing Officer. He seems to be presuming that when the assessee had made purchase worth such huge amounts, he must disclose sizable income 17. Hon ble Bombay High Court in the case of CIT VsSmt. Maniben Valji Shah reported as (2006) 283 ITR 453 (Bom.)found reopening to invalid in law where proceedings under section 147 was initiated to verify the source of Investment made in purchase of house was quashed. It was held by the Hon ble High Court: Reassessment Reasons to believe fishing enquiry impugned notice clearly indicates that the ld. AO merely wanted to know the details of sources of funds invested by the assessee in purchasing a flat ld. AO had no basis to reasonably entertain a belief that any part of income of the assessee had escaped assessment and that such escapement was by reasons of any omission or failure on the part of the assessee to disclose fully and truly all material facts action of the ld. AO in reopening the assessment was not valid. 18. In the case of Chunnilal Prajapati Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer cannot believe that there was income which has escaped assessment 20. The ITAT, Delhi Bench in the case of Anil Singhal Vs ITO in ITA No. 2044/Del/2017 vide order dated 04.10.2017 was called upon to examine the legality of action initiated under section 147 where reasons recorded were, as reproduced in the ITAT order in para-2 were as under: In this case as per information available with this office the assessee has purchased an immovable property for ₹ 1,15,00,000/- during f.y 2007-08 relevant to A.Y 2008-09. To verify the source of investment in the property, letters dated 27.01.2015 06.02.2015 were issued to the assessee requesting therein to submit the copy of ITR of the relevant year filed by him. Further, Inspector of this ward has served the letter on the above assessee personally for fixing the date 10.03.2015 for compliance but on the date fixed assessee neither submitted the reply nor attended the office, which shows that the assessee is deliberately not furnishing the source of investment in respect of purchase of property. In view of the above facts, I have reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. The answer, in our humble understanding, is in negative. The Assessing Officer has opined that an income of ₹ 10,24,100 has escaped assessment of income because the assessee has ₹ 10,24,100 in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income, and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escaped assessment. 9. Learned Departmental Representative has referred to a number of judicial precedents in support of her stand that even deposits in the bank account, as having come to the notice of the Assessing Officer through AIR, can be reason enough for holding the belief that income has escaped assessment. She has relied upon the decisions in the cases of CIT v. Nova Promoters Finlease (P.) Ltd [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment. On the basis of reasons as recorded in this case, such an inference about income escaping assessment, in our humble understanding, cannot be drawn. 23. The text of the reasons recorded do proves that virtually there has been no application of mind by the learned Assessing officer so as to form satisfaction that any income has escaped assessment. The text of the reasons recorded do virtually proves that the reasons recorded in the case in hands are no reasons in the eye of law. The so called reasons instead of being reasons to believe are solely reasons to suspect . The investment in premium paid need not necessarily come from the income. It may be out of past savings, loans, gifts, liquidation of investment or sale of another property etc. Notice under section 148 cannot be issued for verification of information, but here the jurisdictional satisfaction of the essential requirement has to be shown that there has been reason to believe that there was income chargeable to tax . The reasons recorded by the learned Assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed any information. Reassessment noticewas thus held to be rightly quashed by the ITAT. It is not understood as to what purpose it serves for the revenue to rely upon this Judgement rendered in favour of the assessee. 27. The case of M/s Kays Jewels Private Ltd. vs Union of India , inWrit Tax No. 721 of 2015by the Hon ble Allahabad High Court is also misplaced as in this case as evident from the limited text reproduced in the Synopsis referring to Para-14, it is apparent that the case was decided by the Hon ble High Court on change of opinion that too in favour of the assessee, which is not the case in appeal on hands. Therefore, the case is distinguishable on facts. 28. Reliance to CIT vsShriShyam Sunder Infrastructure , ITA 236/2014 Delhi High Court is misplaced as in this case assessee therein challenged the legality of Notice under section 148 on the ground of lack of territorial jurisdiction of the learned Assessing officer framing the assessment. The Hon ble High Court while reversing the order passed by the Hon ble ITAT held that in view of the specific provision contained in section 124(3) as the assessee responded to the learned Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had issued a Notice under Section 142 requiring the assessee inter alia to furnish a disclosure in respect of the share applicants, the amounts received and the source, the mode in which payments were received together with confirmatory letters and PAN card details of the investors. It has been stated that in response thereto the assessee had by its letter (Annexure 3) made a disclosure including that in regard to the four companies which are now alleged to be bogus. Hence, it has been submitted that there was no failure on the part of the assessee to disclose fully and truly all the necessary facts relevant to the assessment and in view of the proviso to Section 147(1), the reopening of the assessment beyond the period of four years is contrary to law.The Hon ble High Court while sustaining Notice under section 148 held though the reopening of the assessment in the present case is beyond the period of four years but the Assessing Officer was satisfied that the condition stipulated in the first proviso to Section 147 was duly fulfilled. Therefore, the case is distinguishable on facts. 32. Reliance to M/s Ginni Filaments vs. CIT , in Writ Tax No. 1402 of 2014- Allah ..... X X X X Extracts X X X X X X X X Extracts X X X X
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