TMI Blog2020 (6) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the petitioner. Several hearings took place in this regard where-after the Assessing Officer had concluded the assessment proceedings by passing assessment order under section 143 (3) of the Act. Thus it would appear that Petitioner had disclosed the primary facts at its disposal to the Assessing Officer for the purpose of assessment. He had also explained whatever queries were put by the Assessing Officer with regard to the primary facts during the hearings. It cannot be said that Petitioner did not disclose fully and truly all material facts necessary for the assessment. Consequently, Respondent No. 2 could not have arrived at the satisfaction that he had reasons to believe that income chargeable to tax had escaped assessment. In the absence of the same, Respondent No. 2 could not have assumed jurisdiction and issued the impugned notice under section 148 of the Act. Respondents have tried to traverse beyond the disclosed reasons in their affidavit which is not permissible. The same cannot be taken into consideration, while examining validity of notice under section 148. As has been held in Prashant S. Joshi [2010 (2) TMI 271 - BOMBAY HIGH COURT] the reasons which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2015 passed under section 143(3) of the Act. 5. On 31.03.2019 Respondent No. 1, who was in the meanwhile conferred jurisdiction to assess the Petitioner s income, issued notice to the Petitioner under section 148 of the Act stating that he had reasons to believe that Petitioner s income chargeable to tax for the assessment year 2012-13 had escaped assessment within the meaning of section 147 of the Act. Proceeding to assess/re-assess the income for the said assessment year, Respondent No. 1 called upon the Petitioner to submit return in the prescribed form for the said assessment year. It was further mentioned that said notice was issued after obtaining necessary satisfaction of the Principal Commissioner of Income Tax-1, Mumbai. 6. Petitioner sought for the reasons for issuing notice under section 148 of the Act vide letter dated 09.04.2019, referring to the decision of the Supreme Court in the case GKN Driveshafts (India) Ltd., vs. I.T.O., 259 ITR 19. Petitioner also filed return of income under section 148 of the Act, returning the income at ₹ 90,630.00 as originally assessed by the Assessing Officer under section 143(3) of the Act. 7. By letter dated 31.05. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that though the notice was dated 31.03.2019 but the same was posted after closure of financial year and thus was barred by limitation being beyond six years. Other grounds were also raised by the Petitioner. 10. Respondent No. 2 by his letter dated 26.08.2019 informed the Petitioner that its objections to issuance of notice under section 148 of the Act was duly considered but on the grounds and reasons mentioned therein, the same was rejected. 11. Aggrieved, present writ petition has been filed, seeking the reliefs as indicated above. 12. This Court by order dated 01.10.2019, prima facie, took the view that the impugned notice was dispatched after 31.03.2019 which made the impugned notice beyond the statutory period of six years and thus without jurisdiction. While granting time to Respondents to file reply affidavit, interim stay was granted to the impugned notice dated 31.03.2019. 13. Respondents have filed affidavit-in-reply controverting the averments made in the writ petition. It is stated that the impugned notice was issued after recording reasons under section 148 (2) of the Act and after obtaining sanction of the Principal Commissioner of Income Tax-I, Mumbai, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed pursuant to the impugned notice dated 31.03.2019, petitioner could not reduce the amount of refund already received as the online ITBA system did not provide for any separate column for reduction of the said amount already refunded. In any event, the said amount of ₹ 26,13,268.00 and interest were not the reasons for reopening assessment. All details about the purchase and sale of shares of Mittal Securities Ltd., were furnished; Assessing Officer was not required to give findings on each issue raised during the course of the assessment proceedings. Assessing Officer had applied his mind and granted relief to the petitioner in the assessment order. Normally when submission of assessee is accepted, no finding is given in the assessment order. 15. In the course of hearing, Mr. Agarwal, learned counsel for the Petitioner referred to the postal receipts which indicate that the impugned notice was delivered by Income Tax Department to the Petitioner through the post office on 31.03.2019 at 3.34 p.m.. Therefore, he submits that Petitioner would not press upon this ground as raised in the writ petition. 15.1 Primary contention of Mr. Agarwal is that the reasons given fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 90,630.00 was filed by the assessee on 20.09.2012. The assessment was completed on 28.03.2015 by accepting the returned income. An information has been received from the Investigation Wing that a search and seizure action was carried out on Shri Naresh Jain and his associates by the DIT (Inv.)-2, Mumbai on 19.03.2019 which was concluded on 21.03.2019. The search action covered the syndicate of persons who were acting in collusion and executing managed transactions in the stock exchange thus generating bogus long-term capital gains/ bogus short-term capital loss/ bogus business loss entries for various beneficiaries. This search action unraveled the workings of the syndicate and brought on record the make-believe nature of paper work that is manufactured in order to show the arranged transactions as legitimate market transactions. Statement of Shri Shirish Shah, recorded during the course of search action u/s 132 (4) of the Act in which he had admitted under oath that with the help of various people, manipulated the share prices of various scrips in order to provide bogus entries of long term capital gain, short term capital loss and business loss. Evidence has also been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me chargeable to tax amounting to ₹ 23,98,014/- has escaped assessment within the meaning of section 147 of the Act read with the provisos thereto. Notice u/s. 148 of the Income Tax Act, 1961, is therefore, issued to assess such income and also any other income chargeable to tax which has escaped assessment and which may come to notice subsequently in the course of the proceedings under this section. 19. From the above, it is seen that according to Respondent No. 2 information was received from the Investigation Wing about search and seizure action carried out in the premises of Shri Naresh Jain on 19.03.2019 which concluded on 21.03.2019. The search action revealed that a syndicate of persons were acting in collusion and had managed transactions in the stock exchange, thereby generating bogus long-term capital gains, bogus short term capital gains and bogus business loss entries for various beneficiaries. The search action unraveled the workings of the syndicate and brought on record the make believe nature of paper work that is manufactured in order to show the arranged transactions as legitimate market transactions. Statements of various persons were recorded in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to purchase and sale of shares of Mittal Securities Ltd., (now Scan Steels Ltd.,), but that did not amount to full and true disclosure of all material facts unless true and real facts are disclosed before the Assessing Officer. Assessing Officer had not discussed in the assessment order about the genuineness or camouflage nature of the transactions of purchase and sale of shares of Mittal Securities Ltd. by the Petitioner. 23. From the above, it is seen that what Respondent No. 2 contends is that though Petitioner had disclosed details of the transactions pertaining to purchase and sale of shares of Mittal Securities Ltd., (now Scan Steels Ltd.), Petitioner did not disclose the real colour / true character of such transactions and therefore, he did not make a full and true disclosure of all material facts which was also overlooked by the Assessing Officer. 24. Reverting back to the original assessment proceeding, we find from the materials on record that after the Petitioner had filed the initial return of income on 20.09.2012, Assessing Officer had issued notice to the Petitioner under section 142(1) of the Act dated 07.08.2013, calling upon the Petitioner to produce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any investment nor was there any inventory of shares; no dividend was earned during the year. Alongwith the said letter relevant documentary evidence in respect of the concerned transactions were enclosed. 26. Thereafter, assessment order was passed on 28.03.2015, wherein Assessing Officer had noted that during the course of scrutiny details of income, expenditure, assets and liabilities were called for, examined and placed on record. After perusing all details and after examination of those and upon discussion, total income was computed in terms of the return filed by the Petitioner. As already noted above, the assessment order was passed under section 143(3) of the Act. It was mentioned therein that representative of the Petitioner had attended the assessment proceedings from time to time and had filed details with explanations. 27. At this stage, we may briefly refer to the relevant legal provisions. 28. Section 147 of the Act deals with income escaping assessment . Section 147 says that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at income chargeable to tax has escaped assessment for the relevant assessment year. The second condition is that the Assessing Officer must arrive at the satisfaction that income chargeable to tax has escaped assessment for the said assessment year by reason of the failure on the part of the assessee to make a return under section 139 or to respond to a notice under section 142(1) or section 148 or due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. 31. The key or crucial expressions appearing in section 147 are reason to believe and failure to disclose fully and truly all material facts necessary for assessment . 31.1 Before dilating on these two expressions, it would be apposite to refer to section 148 of the Act, which deals with issue of notice where income has escaped assessment. As per sub-section (1), before making the assessment, re-assessment or recomputation under section 147, a notice in the prescribed form is required to be served upon the assessee by the Assessing Officer, calling upon him to file return of income in terms of such notice within the period specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll disclosure of the primary facts at the time of the original assessment. Production before the Income Tax Officer the books of accounts or other evidence from which material evidence with due diligence could have been discovered by the Income Tax Officer will not necessarily amount to disclosure contemplated by law but the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that, his duty ends. It is for the Income Tax Officer to draw the correct inference from the primary facts. If the Income Tax Officer draws an inference, which appears subsequently to be erroneous, it would amount to change of opinion and mere change of opinion with regard to that inference would not justify initiation of action for re-opening assessment. 32.2 The grounds or reasons which led to formation of the belief that income chargeable to tax has escaped assessment must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exists reasonable grounds for the Income Tax Officer to form the above bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasons which are recorded by the Assessing Officer for re-opening an assessment are the only reasons which can be considered when the formation of the belief is impugned. Recording of reasons distinguishes an objective from a subjective exercise of power and is a check against arbitrary exercise of power. The reasons which are recorded cannot be supplemented subsequently by affidavits. The question as to whether there was reason to believe within the meaning of section 147 that income has escaped assessment must be determined with reference to the reasons recorded by the Assessing Officer. Even in a case where only an intimation is issued under section 143(1), the touchstone to be applied is as to whether there was reason to believe that income had escaped assessment. 35. Having discussed the above, we may once again revert back to the reasons furnished by Respondent No. 2 for re-opening of assessment under section 147 of the Act. After referring to the information received following search and seizure action carried out in the premises of Shri Naresh Jain, it was stated that information showed that Petitioner had traded in the shares of M/s. Scan Steels Ltd., and was in rece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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