TMI Blog2019 (9) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... of escapement is founded. The so called reasons instead of being reasons to believe are reasons to suspect and sought to extend the scope of enquiry from the stage where it was left vide enquiry letter. The investment need not necessarily come from the income. It may be out of income exempted from tax, 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 is 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 Assessing officer should speak his mind and the basis for coming to conclusion that investment had been sourced from 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 recorded by the Assessing officer, are no reasons in the eye of law for assuming jurisdiction in this case for issuing notice under section 148 - Decided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued under section 148 of the Act . 2. BECAUSE , while confirming the reopening in the light of reasons recorded the Ld CIT(A) has not appreciated that the purported Reasons are No Reasons in the eyes of Law. The so called Reasons evidently do not show any application of mind on part of the AO much less evidence to show that satisfaction has been arrived by the AO to show that any Income liable for Tax has escaped Assessment warranting recourse to Notice under section 148 of the Act. 3. BEACUSE, alleged unsatisfactory compliance to Letter as was issued by the AO may be a ground only for reasons to suspect for alleged escapement of income but does not give any valid foundation for reaching to reasons to believe and thereafter arriving at the satisfaction for escapement of Income warranting recourse to Notice under section 148 of the Act. 4. BECAUSE, the sanction as was mandatorily required to be accorded under section 151 of the Act before issuing Notice under section 148 of the Act was without application of mind in a mechanical manner, leading the Notice issued under section 148 of the Act to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the side of Assessing officer and this was followed by notice under section 148 of the Act. He further submitted that Ld. CIT(A) while sustaining re-assessment proceedings omitted to consider that Letter dated 21.11.2014 was a mere non statutory letter and as such the learned Assessing officer has illegally and without authority of law has issued it and based on this unauthorized enquiry letter, proceedings under section 148 cannot be authorized under the law. He further submitted that even if the proceedings of enquiry are held to be legally initiated in that eventuality too the reasons recorded are totally barren and bald do not show any application of mind and proceedings were initiated for the purpose of verification of sources of investment in property, from the stage left in earlier proceedings. He placed reliance to various case laws, which wherever found applicable shall be appropriately discussed in this order. 7. Per contra, the learned D.R Shri Waseem Arshad, at the outset objected to the submissions made by the learned A.R and stated that since assessee had not challenged the validity of notice under section 148 of the Act before the authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (SC) (APB-9-12) it can be raised at this stage even for the first time. The Hon ble Supreme Court while dealing with ground raised before the ITAT for the first time relating to legal issue has held that Tribunal should not be prevented from considering questions of law arising in assessment proceedings although not raised earlier. It was also held that under section 254 of the Act the Tribunal has jurisdiction to examine a question of law which though not arose before lower authorities but arose before it from facts as found by lower authorities and having a bearing on tax liability of assessee. 10. In the case of Shri Abdul Majid Vs CIT , (2006) 153 Taxman 131 (All) the Hon ble Allahabad High Court framed following question of Law for its consideration at the instance of appeal preferred by the assessee: 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) 11. The Hon ble High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court CIT vs. Safetag International India Pvt. Ltd. , (supra). The perusal of the case reveals that it nowhere lays down any proposition of law for which the learned Sr. D.R has sought to rely upon it. In this case assessee did not ask for the reasons recorded, participated in the assessment proceedings and raised objection before the learned CIT(A) about the validity of notice under section 148 of the Act. However, the Hon ble High Court directed the Revenue to supply copy of reasons to the assessee within four weeks and upon receipt of reasons assessee was required to make submission before learned CIT(A) based upon such reasons challenging the validity of re-assessment proceedings and learned CIT(A) shall decide this issue on merits after hearing the parties. From the reading of the Judgment it 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. 14. Further reliance on the Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO , 125 Taxman 963 for the proposition that the Hon ble Supreme Court had required that immediately after receipt of not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. In this view of the matter and particularly following the Hon ble Supreme Court in the case of Parsuram Pottery Works Co. Ltd (supra) request of the learned Sr. D.R for setting aside the case is rejected. 17. We are alive of the settled position in law that the question of Jurisdiction is not a matter of acquiescence. The proprietary of notice under section 148, based upon reasons recorded is not dependent upon the objection or no objection by the assessee at the stage of assessment. If the reasons recorded, independently can withstand the test of judicial scrutiny, only such reasons will confer jurisdiction to issue notice and frame assessment in pursuance thereto. However, if the reasons recorded, upon being challenged at any stage of proceedings fails to withstand the test of judicial scrutiny, in that eventuality, upon such recorded reason no valid notice can be issued and any assessment framed consequent thereto even taking shelter of No objection from the assessee could save the assessment from being held to be declared void-ab-intio . In this ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision under which it has been issued. So the provisions have to be examined to ascertain as to under which provision it was issued; As per section 133(6), the concerned income tax authority may require any person, inter alia, to furnish information in relation to such points or matters, as in their opinion would be useful for, or relevant to, any enquiry or proceeding under the Act; Section 133(6) corresponds to section 38, of the Income-tax Act, 1922. It was amended in 1995 and the words 'enquiry or' were inserted before the word 'proceedings' and the second proviso was also inserted, by the Finance Act, 1995, with effect from 1-7-1995; The scope and effect of this amendment brought about in 1995 was explained by the CBDT in its Circular No. 717, dated 14- 8-1995. It was mentioned therein that the provisions of section 133(6) empower income-tax authorities to call for information which is useful for, or relevant to, any proceeding under the Act which means that these provisions can be invoked only in cases where the proceedings are pending and not otherwise. This acts as a limitation or restraint on the capability of the revenue to tackle evasion effectively. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponse by the assessee to the enquiry letter cannot be said to constitute material before the Assessing Officer which could lead him to form any belief of escapement of income. 21. This leaves us, with only with a part of the reasons recorded which pertains to fact of purchase of property, sources of which allegedly remained unexplained at the stage of enquiry proceedings. As submitted before learned CIT(A) and also before us that no re-assessment proceedings can be initiated for the purpose of verification of sources of investment. 22. Reliance in this regard has rightly been placed to Lucknow Bench decision In the case of Chunnilal Prajapati Vs ITO , 2011 (2) TMI 1522 where the ITAT was required to adjudicate the legality of action under section 148, initiated on the basis of Report from the Investigation wing that assessee had invested in purchase of immovable property, sources of which remained unexplained before the Investigation wing and moreover assessee has not even filed his Return of Income. The reasons recorded as reproduced here as under: This fact came to knowledge through letter No. Addl. DIT/Inv./TEP/x 120 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to believe that the income chargeable to tax has escaped assessment. Issue notice under section 148 of the Income Tax Act, 1961. 25. The ITAT quashed Notice under section 148 by observing that: From the reading of the reasons, it is quite evident that the ld. AO has not applied his mind while recording his reasons without assigning any valid reasons that no reasons have been given to make out a case that income of the assessee has escaped assessment for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y mental exercise having been done by him before arriving at the satisfaction for escapement of income and thus, the AO made his conclusions, leaving the reader to guess for the material on basis of which of belief of escapement is founded. The so called reasons instead of being reasons to believe are reasons to suspect and sought to extend the scope of enquiry from the stage where it was left vide enquiry letter. The investment need not necessarily come from the income. It may be out of income exempted from tax, 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 is 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 Assessing officer should speak his mind and the basis for coming to conclusion that investment had been sourced from 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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