TMI Blog2021 (2) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of assessment which is already concluded under Section 143(3) of the Act on 26.03.2010 cannot be reopened without any allegation by the Assessing Officer that there was non-disclosure of true and correct facts by the assessee while framing the original assessment. In order to assume jurisdiction under Section 147 where assessment has been made under sub-section (3) of section 143, two conditions are required to be satisfied. Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment; Such escapement occurred by reason of failure on the part of the assessee either to make a return of income under section 139 or in response to the notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all the material facts necessary for his assessment for that purpose. The power to assess or reassess income under section 147 of the I.T. Act cannot invoked routinely . During the course of original assessment proceedings, the issue for which the assessment is sought to be reopened was subject matter of examination by the A.O. Thus, it is clear that the assessee had disclosed all the material facts during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Joint Development Agreement by the Registering Authority, continuation of the litigation over the properties which are the subject matter of Joint Development Agreement which disabled the appellant as well as the transferee from not carrying out any activity on the property so as to remotely presumed any income assessable during the impugned period. 7. The learned A.O has erred in re-opening of assessment ford the A.Y 2008-09 u/s 148 of the Act, is barred by limitation as the notice u/s 148 is issued beyond four years from the end of the relevant assessment year, as the original assessment is completed u/s 143(3) of the Income Tax Act, 1961. 8. On the facts and circumstances of the case, the reassessment order passed by the learned A.O is illegal and opposed to law and liable to be quashed as the A.0 has recorded completely false wrong facts on reasons recorded for re-opening of the assessment in spite of repeated request by the Appellant. 9. On the facts and circumstances of the case, the reassessment is bad in law and liable to be quashed, as the assessment is re-opened merely by change of opinion, without any allegation of failure on the part of the Appellant to disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d his return of income for the A.Y. 2008-09 on 29.09.2008 declaring total income ₹ 1,85,85,160/- As per the records the returns has been processed u/s 143(1) and no scrutiny assessment has been made in this case for the assessment year 2008-09. A Survey u/s 133A was conducted in the business premises of the assessee on 02.03.2015. During the course of survey, it was found that the assessee had entered into JDA on 14.05.2007 with M/s Shriram Properties Limited, Chennai for the construction of residential flats on the lands owned by the assessee by transferring the lands measuring 12 acres and 31.5 guntas situated at Singapura, Jalahalli East, Bengaluru. The assessee claims that there were litigations in the civil courts by the family members of the original owners of the lands and that the matter was settled and the possession was handed over to the Developer only in the month of October 2013. In this connection, still the assessee has to prove with the documentary evidences with regard to the handing over the possession of the lands to the Developer. 3.1 It was submitted by the assessee during post survey proceedings that the land involved in the JDA dt.14.5.2007 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 148 for re -opening the assessment; and 4.2 The Ld. AR submitted that in terms of section 147 of the Act, the assessment can be re-opened if the AO has the reason to believe that income escaped assessment. It was submitted that the phrase employed u/s. 147 of the Act, reason to believe postulates a belief, which is in that income chargeable to tax has escaped assessment. This live link must also be apparent from the reading of the reasons recording. The Ld. AR submitted that the concept of live-link as explained by the Supreme Court in the case of CIT. Vs. Lakhmani Mewat Das reported in 103 ITR 437 wherein it was held that the reasons set out by the A.O. to the belief that income has escaped assessment is totally absent in this. The Ld. AR relied on the relevant observations of the Supreme Court in the aforesaid case of Lakhmani Mewal Das (supra) as below: The reasons for the formation of belief must have a rational connection or relevant bearing on the formation of the belief. Formation of belief postulates that there must be a direct nexus or live link between the material coming to the notice of the income tax offices and the formation of his belief that there has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in W.A. No. 928/ 1991 before the Division Bench of the Karnataka High Court which held as under : More than the AO s report which the learned judge characterized as evasive and speculative, it is the statement of reasons for the reopening which is evasive and speculative. We find no basis therein which could have led the appellant to entertain reasons to believe that income chargeable to tax had escaped assessment for the relevant assessment year. it is imperative that the reasons should have a rational and relevant nexus to the formation of such belief. We do not find such nexus . The Ld. AR submitted that the ratio of the above judgment squarely applies in the instant case. According to the Ld. AR, it is because, the learned AO had entered into a speculative assumption there is a transfer in terms of section 2(47)(v) of the Act which has not been established at all. Hence, it was submitted that it cannot be said that there was a bona fide belief entertained by the learned AO that income of the assessee has escaped assessment for the above assessment year. It was submitted that there was absolutely no live link between the reasons stated by AO and the belief entertained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bars re-opening of the assessment since the conditions permitting the reopening do not exist and the same is not the basis on which the assessment stands reopened. The Ld. AR placed reliance for this proposition on the ratio of the judgment of the Bombay High Court in the case of Nirmal Bang Securities Pvt. Ltd., reported in 382 ITR 93 wherein after noticing the reasons recorded and the legal position as well as the statutory provisions of the Act in para [24] of the judgment, it was held as under: - In view of the aforesaid well-settled legal position and there adm it tedly being not even an allegation in the reasons recorded that there was any failure on the port of the petitioner to disclose truly and fully all material facts necessary for assessment, let alone the details thereof, the impugned notice dated March 30,2007 and the impugned order dated December 8, 2007 are liable to be quashed and set aside on this ground of our . 4.9 The Ld. AR placed reliance on the judgment of the Jurisdictional High Court in the case of CHAITANYA PROPERTIES PRIVATE LIMITED reported in 240 659 [Kar] wherein, the Hon'bte jurisdictional High Court has considered the substantial quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be mode to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing 0fficer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. lt is for the Assessing Officer to reach the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous or it should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self explanatory and should not keep the assessee guessing for the reasons. Persons provide the link between conclusion and evidence. The reason recorded must be based on evidence. The Assessing Office , in the event of challenge to the reasons, must be able to justify the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopened on account of the survey findings that the assessee had entered into the two JDAs dt.14.5.2007 and 7.5.2009 and the income accruing to the assessee out of these JDAs had not been offered to tax and the assessee had not provided any documentary evidence that the transfer of the property to the developer had happened at a later date and furher the limitation for reopening the assessment for Assessment Year 2008-09 was 31.3.2015, the Assessing Officer was justified in his belief that income had escaped taxation. The incumbent Assessing Officer in her remand report, the material facts that came to light as a result of the survey constituted fresh material as compared with that had been considered at the time of the original scrutiny assessment for Assessment Year 2008-09 and hence there was not simply a change of opinion based on the same facts but adequate reasons for the Assessing Officer to believe that income had escaped tax. The ld. DR submitted that the function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. At this stage of survey and post survey proceedings, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (xii) 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 . (xiii) 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 on the basis of the information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and the assessments be reopened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atters 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. (xix) The reasons recorded or the material available on record must have nexus to the subjective opinion formed by the Assessing Officer regarding the escapement of the income but then, while recording the reasons for the belief formed, the Assessing Officer is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the Assessing Officer had cause or justification to know or suppose that the income had escaped assessment. It is also well settled that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. 6.1 Now, we go through the provisions of Section 147 of the Act. 147. Income escaping assessment.-- If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words reason to believe , Parliament re-introduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No.549 dated 31st October, 1989, which reads as follows: 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe' in Section 147. A number of representations were received against the omission of the words 'reason to believe' from Section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO is barred from taking any action under this section after the expiry of four years from the end of the relevant Assessment Year in the following cases: (a) Where an assessment under section 143(3) or 147 has already been concluded for the relevant assessment year; and (b) There is no failure from the part of the assessee to: Make a return under section 139 Response to notice under section 148 Disclose fully and truly all material facts necessary for the assessment. 7.1 During the course of original assessment proceedings, the issue for which the assessment is sought to be reopened was subject matter of examination by the A.O. Thus, it is clear that the assessee had disclosed all the material facts during the regular assessment proceedings. Therefore, it cannot be alleged that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. 7.2 The Hon ble Apex Court in the case of New Delhi Television v. DCIT [(2020) 116 taxmann.com 151 (SC)] had held that reopening of the assessment beyond four years is bad in law when the tax payer has disclosed the facts at the time of original assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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