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TMI Blog2020 (2) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the assessee in ITA No.1728/Kol/2018 for Assessment Year 2007-08 are as follows: "1. For that Ld. CIT(A) erred in law and on facts in confirming the notice u/s. 148 and proceedings u/s. 147 of the I.T. as valid. 2. (a) For that the notice and entire proceedings u/s. 147 of the I.T. Act is void ab initio wrong, illegal, bad in law as well as on facts and time barred. (b) For that entire proceedings u/s. 147 are bad in law and facts for interpolation in the dates put on records. (c) For that proceedings u/s. 147 are bad in law and on facts for not following set and decided principals of law and decision available, particularly when there is no satisfaction of Assessing Officer regarding any escapement of income and quantification thereof in the reasons recorded and when it is apparent that AO only wanted 'Verification'. (d) For that proceedings u/s. 147 are bad in law and on facts in not disposing of "Preliminary Objections" as per provision of law. (e) For that proceedings u/s 147 are also bad in law and on facts in making additions/disallowances on the issues other than the 'Issue' (existence of which is denied) for which the notice u/s. 148 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO for reopening of the assessment. There was no assessment framed earlier u/s. 143(3). In these grounds of appeal the appellant has in sum & substance challenged the validity of the reopening of assessment by the AO u/s 148 of the Act. The first contention raised by the AR of the appellant is that the notice u/s. 148 was issued first and the reasons were recorded later. In this context it has been stated that the reasons were recorded on 17th of May 2014. The AR is contending that first the date of recording reasons was typed as 7th May 2014. and thereafter it was later changed by hand to 31st of March 2014. The A/R, therefore, has argued that the notice was issued on 31.03.2014 without recording of reasons. On perusal of the copy of reasons recorded it is observed that item at Sl. No. 7 pertains to Date of filing of the Return. The date 17.05.2014, which the A/R is referring to was probably inadvertently typed against the column referring to date of filing of the return. Therefore, the same has been struck off by the AO. As regards the date of recording of reasons is concerned it is observed that the same has been signed by the ITO, 7(2)-Kol, on 31.03.2014. Further in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly Rahee Infratech Limited). The joint venture company Pandrol Rahee Technologies Pvt. Ltd. is to promote and marketing the products of Pandrol Limited, UK as per agreement dated 02.03.2004 between M/s. Rahee Industries Ltd. and M/s Pendrol Limited. It appears from the bank statement of M/s Pendrol Rahee Technologies Pvt. , that there are huge high value transactions reflected in both in the debit and credit entries of the account no.005010200026910 maintained with Axis Bank Ltd., Shakespeare Sarani, Kolkata, except the transitions of FDI Investments. These are certain transactions of high amounts appear to be very suspicious. The investigation under FEMA, 1999 is going on by their Directorate. In the meantime, the matter was referred to our department for examining the case from the income tax point of view. A copy of the bank statement obtained from the bank statement is enclosed. On examination of the documents it appears that foreign investment to the extent of Rs. 1,72,53,731/- received in the account of M/s. Pandrol Rahee Technologies Pvt. Ltd. as against 60% shares under FDI scheme in the said account of M/s Pandrol Rahee Technoligies Pvt. Ltd. from 11.02.2005 to 20.06.2012. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shakespeare Sarani, Kolkata, the transitions of FDI Investments. These are certain transactions of high amounts appear to be very suspicious............. The company is yet to start its manufacturing in India. As the details furnished by the other adagencies are not enough and the information available in the records are not satisfactory, to explain income,which has not been properly disclosed, necessary verifications are required in the case. Having gone through the above reasons recorded by assessing officer, we noticed that reasons were recorded by AO only for 'necessary verifications' of certain facts. The assessing officer could do the necessary verification by issuing notice under section 143(2)/143(3) of the Act. The provisions of section 147 of the Act, that is, reassessment can be used by assessing officer if there is 'tangible material' which shows that income has escaped assessment. The verification of the income tax return filed by the assessee u/s 139(1) of the Act may be done by assessing officer by issuing notice 143(2)/143(3) of the Act. Therefore, reasons recorded by the assessing officer is bad in law. An assessment can be reopened only if there is 'reason to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t escaped from assessment is not known at the time of issue of notice u/s 147/148 of the Act, therefore reasons recorded by assessing officer is not valid. It is important to mention here that notice u/s 147/148 has been issued on the basis of reason to believe and there is no tangible material to come to conclusion that there is a escapement of income and the said reason have no live link with the formation of the belief. The same fact was also confirmed by the Hon`ble supreme court in the case of CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC). (v) The assessing officer in the reasons recorded relied on the FEMA transactions but in the reassessment order framed by him u/s 147/148 of the Act he did not make any addition related to FEMA transactions. Therefore, ld Counsel stated that AO can not tax further transaction which might have come to his knowledge during the reassessment proceedings, as the primary reasons recorded by him did not survive. In that view of the matter, the other additions made in the said reassessment order which were not part of the reasons recorded for reopening the assessment are not sustainable in the eyes of law even after insertion of Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee." This view has also been ventilated by the Hon`ble Delhi High Court in the case of Ranbaxy Laboratories Ltd,336 ITR 136 (Del), wherein it was held as follows: "18. We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of Jaganmohan Rao (supra) [sic-Jet Airways (I) Ltd. (supra)]. We may also note that the heading of s. 147 is "Income escaping assessment" and that of s. 148 "Issue of notice where income escaped assessment". Sec. 148 is supplementary and complimentary to s. 147. Sub-s. (2) of s. 148 mandates reasons for issuance of notice by the AO and sub-s. (1) thereof mandates service of notice to the assessee before the AO proceeds to assess, reassess or recompute escaped income. Sec. 147 mandates recording of reasons to believe by the AO that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Expln. 3 if during the course of these proceedings the AO comes to conclusion that some items have esc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and that the return of the assessee was processed under s. 143(1) of the Act only on 11th June, 1996. 4. In Trustees of H.E.H. the Nizam's Supplemental Family Trust vs. CIT (2000) 159 CTR (SC) 114 : (2000) 242 ITR 381 (SC), the Supreme Court observed : "It is settled law that unless the return of income already filed is disposed of, notice for reassessment under s. 148 of the IT Act, 1961, cannot be issued, i.e. no reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of return already filed are not terminated." 5. From the dates that we have mentioned above and the law as laid down, it is clear that assessment proceedings terminated under s. 143(1) of the Act only on 11th June, 1996. In other words, on 5th June, 1996, when the AO made up his mind to issue a notice to the assessee under s. 147/148 of the Act, a valid return of income filed by the assessee was still pending before him and which could have been processed. 6. It is submitted by learned counsel for the Revenue that since the period for issuing a notice to the assessee under s. 143(2) of the Act had already elapsed, and the AO was of the view that income had escap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has not disposed of the objections of the assessee by passing a speaking order, therefore reassessment proceedings initiated by AO is null and void in the eye of law. 11. Now, we analyze the conditions of reopening of assessment in the assessee`s case under considerstion: Conditions laid down in section 147 : "If the A.O. has reason to believe that any income chargeable to tax has escaped assessment for any assessment year." (i).There must be material for the belief: In the assessee`s case there is no 'material to believe'. The reassessment proceedings were initiated by the assessing officer for verification of certain information which is not a tangible material. (ii).Circumstances must exist and cannot be deemed to exist for arriving at an opinion. In the assessee`s case the reasons recorded by the AO is a general statement. There is no opinion framed by AO. (iii).Reasons to believe must be honest and not based on suspicion, gossip, rumour or conjecture. In the assessee`s case the reasons were recorded based of FEMA information. In the reassessment proceedings u/s 147/148 there was no any addition on account of FEMA information, hence reasons recorded by the AO were ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect nexus or link between the material and the formation of such belief. Since in the instant case, the reopening was initiated to verify certain information or to conduct enquiry. The reopening of assessment in the assessee`s case was initiated on the basis of 'FEMA' information but the 'FEMA' dropped the proceedings before date of reassessment on 17/03/2015 and AO did not make any addition based on FEMA transaction. Amount escaped from assessment is not known at the time of issue of notice u/s 147/148 of the Act. On receipt of reasons, the assessee is entitled to file objections to issuance of notice and the A.O. is bound to dispose of the same by passing a speaking order. We note that AO has not disposed of the objections of the assessee by passing a speaking order. The Assessing Officer having not carried out the scrutiny assessment within the prescribed statutory limit, cannot be given another innings for no fault of the assessee and therefore in the facts and circumstances of the case, we are of the considered opinion that 'reason to believe' which is the jurisdictional precondition to reopen the assessment as required by the law has not met in the reasons recorded in the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X
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