TMI Blog2021 (2) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... he obligation to arrive at such conclusion that the assessee failed to disclose all material facts necessary for the assessment after applying his mind and verification of the facts. But the Assessing Officer has not done so. The entire basis for reopening the assessment is on the premise that there was a cash transaction of a huge amount, and having regard to the same, there was no true and full disclosure. We have already explained that this issue of cash transaction is nothing but a mere guess, and at the cost of repetition, the transaction of sale was not with K.Star Corporation. M/s. K.Star Corporation, in the present case, is the second buyer. There is no escapement of income chargeable to tax. The conditions precedent for resorting to reopening of the assessment under Section 147 of the Act 1961 are not satisfied in the present case. We are not convinced with the satisfaction arrived at by the respondent for the purpose of reopening of the assessment for the relevant Assessment Year 2011-12. - Decided in favour of assessee. - R/Special Civil Application No. 19549 of 2018 With R/Special Civil Application No. 19550 of 2018 With R/Special Civil Application No. 19551 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... habhai Khokariya 1/3 rd Ambalal Laljibhai Patel 1/3 rd 8. The writ-applicant filed his return of income for the Assessment Year 2011-12 on 29th December 2011 declaring the total income at ₹ 6,67,350=00, which included the long-term capital gain of ₹ 22,48,496=00 arising on account of sale of the land in question. 9. The case of the writ-applicant for the year under consideration was selected for scrutiny and various details were called for by the then Assessing Officer and the same were duly furnished by the writ-applicant from time to time. 10. It is the case of the writ-applicant that he had furnished a declaration in writing at the stage of the original assessment, whereby it was pointed out that he himself along with three other co-owners had sold the land in question. The writ-applicant also furnished the purchase-deed as well as the sale-deed with respect to the land in question. 11. Upon due examination of all the relevant aspects of the matter, the then Assessing Officer chose not to make any addition in respect of the capital gains arising on account of the sale of the land in ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has been analysis and consciously considered. On the perusal of the details received from the DCIT, Central Circle-4, Surat, during the course of survey and search proceedings, it was found that the M/s. K.Star Corporation has made unaccounted investment of ₹ 11,62,47,100/- for purchase of the said piece of the land. In this case, the assessee i.e. Shri Kantilal Dharmashibhai Narola has received unaccounted cash of ₹ 2,90,61,775/- (25% of ₹ 11,62,47,100/-) during the F.Y. 2010-11 relevant to A.Y. 2011-12. On the verification of the return of income filed by the assessee, it is appeared that he has not disclosed the amount of ₹ 2,90,61,775/- cash receipts during the year under consideration and same is requires to be taxed as an unaccounted income of the assessee for A.Y. 2011-12. In view of the above facts and circumstances of the case, I have therefore reason to believe that income of ₹ 2,90,61,775/- has escaped assessment in this case, for which the case of the assessee for A.Y. 2011-12 needs to be reopened within the meaning of section u/s 147 of the I.T. Act. 14. The writ-applicant filed his objections to the reasons referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 161174 3762 606390689 LAND COST 7000 * 20000 130880100 AVERAGE CONSTR. COST PER SQ.FT. 161174 1500 241761000 TOTAL COST 372641100 BALANCE 233749589 SHARE - KB 100 233749589 3. From the reasons it is evident that : (a) During the course of search and survey proceedings in the case of K.Star Group it is found that M/s K.Star Corporation has purchase land amounting to ₹ 1,46,33,000/- having total area of 5853 Sq. mts equivalent to 7000 Sq. yards. (b) As per working the rate of purchase of land is ₹ 20,000/- per sq. yard and total purchase value as per said workings comes to ₹ 13,08,80,100/- as against sale deed of ₹ 1,46,33,000/-. (c) On the basis of alleged working your Good Self have concluded that Shri Kishorbhai Bhurabhai Koshiya, the sole key person of K.Star Corporation has made unaccounte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid letter the said incriminating document on which Your Good Self is relying upon was seized from the back office of M/s. K.Star Corporation. The assessee had sold the land under reference to Shri Swintubhai Mavani and Shri Ankitbhai Koshiya. In this regard copy of sale deed is enclosed herewith. M/s. K.Star Corporation is an unknown entity for the assessee and the assessee had not executed any agreement or made any transactions with the said firm. It also came to the knowledge of the assessee that M/s. K.Star Corporation was not into existence at the time of execution of sale deed. Therefore reopening made on the basis of the document seized from an unknown entity is not justified and therefore the reopening proceedings should be quashed. 7. Further nowhere in the above sheet it is mentioned that the assessee along with other co-owners have received ₹ 13,08,80,100/- for sale of land. The assessee has not received any amount over and above the document value i.e. ₹ 36,58,250/- (25% of ₹ 1,46,33,000/-). The land cost mentioned in the sheet may be the estimated market value of the land as on the date of preparing the sheet. Thus the assessee vehemently objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Provinces Manganese Ore Co. Ltd. vs. ITO (1991) 191 ITR 662, for initiation of action u/s.147(a) (as the provision stood at the relevant time) fulfillment of the two condition is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, what is required is Reason to believe but not to establish fact of escapement of income. At the stage of issue of notice the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the material would conclusively prove the escapement is not the concern at this stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction. 16. Being dissatisfied with the above, the writ-applicant is here before this Court with the present writ-application. SUBMISSIONS : 17. Mr.Tushar Hemani, the learned senior counsel, assisted by Ms.Vaibhavi Parikh, the learned counsel appearing for the writ-applicant, vehemently submitted that the assessment for the year under consideration was framed under Section 143(3) of the Act 1961 and the same is sought to be reopened beyond the period of fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er joined the newly formed partnership firm, namely, M/s. K.Star Corporation, as partners and their respective share in the agriculture land were contributed as share capital. 24. Mr.Hemani would submit that there is absolutely no basis whatsoever or any evidence for the unfounded assumption that the agriculture land was sold for ₹ 13,08,80,100=00. He submits that there is no tangible material so as to reopen the case of the writ-applicant. 25. In such circumstances referred to above, Mr.Hemani, the learned senior counsel, prays that there being merit in his writ-application, the same may be allowed and the impugned notice be quashed and set-aside. 26. On the other hand, this writ-application and the connected two writ-applications have been vehemently opposed by Ms.Kalpana Raval, the learned senior standing counsel appearing for the Revenue. Ms.Raval would submit that the office of the respondent received information from the DCIT, Central Circle-4, Surat, that a search and survey operation was carried out at the residential and business premises of M/s. K.Star Group on 17th August 2016. During the course of the search and survey, it was found that M/s. K.Star Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,775/- escaped assessment, the case was reopened u/s. 147 of the Act. Further, notice u/s. 148 of the Act was issued after following the procedure prescribed as per the Act and obtaining approval from the Competent Authority which was duly served upon the assessee. 6. With reference to para no. 3.3 to 7, this office is in possession of specific information received from the DCIT, Central Circle which is further based on Investigation Wing and these are the internal limbs of the Department and the decision of the Hon ble High Court in the case of Aradhana Estate P. Ltd. Vs. DCIT is applicable in this case. It is once again reiterated that there is no change of opinion. Further, impounded material was also received wherein the above facts could clearly be examined. So, after forming the belief and obtaining necessary approvals and as per the procedure laid down in the Act, the case was reopened u/s. 147 of the Act. There is no estimation of the figures but the working was made after deducing the figures on the documentary evidences collected during the course of search. In view of the above discussion and on the ratio laid down by the Hon ble High Court there is no borrowed sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le consideration over and above the amount mentioned in the conveyance deed. It has been baselessly stated that the sole developer of the project was Kishore Bhurabhai Koshiya and it has been further baselessly assumed that the said person has made unaccounted cash payment of ₹ 11,62,47,100/-. In any case, this reopening beyond a period of four years and there is no failure on the part of the Petitioner as to full and true disclosure. Also the issue on hand was threadbare examined at the original assessment stage. Validity of reopening is to be tested strictly on the basis of reasons recorded prior to reopening. Also reopening is based on borrowed satisfaction. Also the share of the Petitioner has been erroneously presumed to be 25%. All these fallacies clearly show that no case is made out for reopening. Hence, the impugned notice deserves to be quashed. ANALYSIS : 30. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the impugned notice should be quashed. 31. On 14th December 2018, a Coordinate Bench of this Court, while issuing the notice, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material is not a thing to be considered at that stage. (iii) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. (iv) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieve, the process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some link between the tangible material and the formation of the belief or the reason to believe that the income has escaped assessment. (xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression tangible material does not mean the material alien to the original record. (xiii) The order, disposing of objections or any counter affidavit filed during the writ proceedings before the Court cannot be substituted for the reasons to believe . (xiv) The decision to reopen the assessment on the basis of the report of the Investigation Wing cannot always be condemned or dubbed as a fishing or roving inquiry. The expression reason to believe appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonable and prudent man o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tection of large scale tax evasion. The non-disclosure of the source of the information, by itself, may not reduce the credibility of the information. There may be good and substantial reasons for such anonymous disclosure, but the real thing to be looked into is the nature of the information disclosed, whether it is a mere gossip, suspicion or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts indicating incorrect allowance of the expense, such disclosure would constitute information as contemplated in clause (b) of Section 147. (xx) The reasons recorded or the material available on record must have nexus to the subjective opinion formed by the A.O. regarding the escapement of the income but then, while recording the reasons for the belief formed, the A.O. is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the A.O had cause or justification to know or suppose that the income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information has bearing on the income of the assessee and such income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be 'independent' and not 'borrowed' or 'dictated' satisfaction. Law in this regard is now well-settled. 36. The Supreme Court in the case of Anirudh Sinhji Karan Sinhji Jadeja vs. State of Gujarat reported in [1995] 5 SCC 302 as well has held that if a statutory authority has been vested with the jurisdiction, it has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether. The cases reopened on the basis of information received from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eizure 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 receipt of ₹ 23,98,014.00 and therefore, Respondent No. 2 concluded that he had reasons to believe that this amount had escaped assessment within the meaning of Section 147 of the Act. 36. First of all it would be evident from the materials on record that Petitioner had disclosed the above information to the Assessing Officer in the course of the assessment proceedings. All related details and information sought for by the Assessing Officer were furnished 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. 37. In such circumstances, it cannot be said that Petitioner did not disc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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