TMI Blog2021 (5) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... that, the income has escaped assessment - when the information was specific with regard to transactions of penny stock entered into by the assessee with the Karma Ispat Ltd. and the Assessing Officer had applied his independent mind to the information and upon due satisfaction, led to form an opinion that, the amount of claim of LTCG claimed by the assessee is chargeable to tax has escaped assessment, which facts suggests that, there is live link between the material which suggested escapement of income and information of belief. Under the circumstances, we are satisfied that, there was enough material before the Assessing Officer to initiate proceedings under Section 147 of the Act. We do not agree with the contention that, merely on the information, the Assessing Officer has recorded the reasons and on the basis of borrowed satisfaction, he formed an opinion with respect to the income chargeable to tax has escaped assessment. As examined the issue of valid sanction as raised by the learned counsel for the writ applicant - the copy of the approval has been provided to the assessee at the stage of passing the order of disposing the objections raised by the assessee. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and same was supplied vide communication dated 25.04.2019. The writ applicant vide letter dated 25.06.2019 raised objections and the same came to be disposed of by the revenue vide order dated 29.11.2019. (c) The Assessing Officer before issuing the notice has recorded the following reasons for reopening of the assessment:- Reasons for Reopening :- 1. Brief details of the assessee: The assessee is an individual and has filed her return of income for the year under consideration on 27.07.2012 declaring total income at ₹ 6,05,830/-. 2.Brief details of information collected/received by the AO: The information in respect of the penny stock transaction made in FY 2011-12 was made by the asessee as per information received from the ITO/CIB)1, Mumbai on 02.04.2013 at DIT (I CI) Mumbai uploaded in the ITS data. 3. Analysis of information collected /received :As per the penny stock transaction data available, assessee has made sell transactions on 03.05.2011 of shares of Karma Ispat Limited trade qty.3000shares for ₹ 848550/-. 4. Enquiries made by the AO as sequel to information collected /received: As per information received from the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 530/-. The assessee sold 3300 shares of Karma Ispat Limited and earned long term capital gain of ₹ 8,15,579/- and claimed it as exempt income under Section 10(38) of the Act. The return was processed under Section 143(1) of the Act and no scrutiny assessment was made under Section 143 (3) of the Act. (b) The Assessing Officer, reopened the assessment under Section 147 of the Act by issuing impugned notice dated 28.03.2019 under Section 148 of the Act. The writ applicant filed his return of income in response to the notice and requested the respondent to supply the copy of the reasons for reopening and same was supplied vide communication dated 25.04.2019. The writ applicant vide letter dated 25.06.2019 raised objections and the same came to be disposed of by the revenue vide order dated 29.11.2019. (c) The Assessing Officer before issuing the notice has recorded the following reasons for reopening of the assessment:- Reasons for Reopening :- 1. Brief details of the assessee: The assessee is an individual and has filed her return of income for the year under consideration on 31.07.2012 declaring total income at ₹ 424530/-. 2.Brief details o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable to facts of this case and the assessment year under consideration is deemed to be a fit case where income chargeable to tax has escaped assessment. 9. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 will be obtained separately from Principal Commissioner of Income Tax, Jamnagar as per the provisions of section 151 of the Act. 5. The writ applicant raised the objections against the issuance of impugned notice and initiation of the reassessment proceedings, mainly on the following grounds : i. Lack/absence of valid sanction under Section 151 of the Act. ii. The reasons for reopening factually incorrect; iii. No reason to believe that the income chargeable to tax has escaped assessment; iv. No live nexus/link between the information received and material gathered from the different sources. v. Reopening is not permissible for proving and/or fishing inquiry or investigation without their being a specific findings as to escape of income; vi. Reopening is based on borrowed satisfaction. 6. Being aggrieved by the order of disposal of the objections a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions entered into by the writ applicant in the scrip in question is a penny stock transaction, which cannot be a legal ground to reopen the assessment for the year under consideration. 9. In view of the aforesaid contentions, the learned counsel submitted that reopening of the assessment is, therefore, without jurisdiction and hence, the impugned notice deserves to be quashed and set aside. 10. In support of the aforesaid submissions, the learned Senior Counsel Mr. Tushar Hemani has relied upon the following decisions: i. Principal Commissioner of Income Tax Vs. Smt. Krishna Devi (Delhi High Court, ITA 125 of 2020 decided on 15.01.2021) ii. Prashant S. Joshi Vs. Income Tax Officer (2010) 189, taxmann 1(Bom) iii. Gujarat Lease Finance Ltd. Vs. Deputy Commissioner of Income Tax (2013) 36 taxmann.com.359 (Guj) iv. Krishna Metal Industries Vs. HM Algotar (1997) 225 ITR 853, Gujarat v. N.B. Bhatt Inspecting Asst. Commissioner of Income Tax Vs. I.B.M. World Trade Corporation (1995) 216 ITR 811, Bom. vi. Hindustan Lever Limited Vs. R.B. Wadkar (2004) 137 taxman.479 (Bom) Krupesh Ghanshyambhai Thakkar Vs. Dy. Commissioner of Income Tax, (2017) 77 taxmann.com. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o show that, there was any failure to disclose fully or truly all material facts necessary for the assessment. When return is processed under Section 143 of the Act and in intimation sent to assessee, it is not an assessment . Therefore, when reopening is sought of an assessment, the initial return was processed under Section 143(1) of the Act, the AO can form reason to believe that income has escaped assessment by examining the return and/or the documents accompanying the return. It is not necessary in such case for the AO to come across some fresh tangible material to form reason to believe that the income has escaped assessment. 15.A plain reading of reasons recorded in both the cases reveals that, the case of the assessee is reopened under Section 147 of the Act, since the information dated 02.04..2013 received from ITO (CIB-1), Mumbai at DIT (I CI, Mumbai) that as per the penny stock transaction data, the assessee had sold 3000 shares of Karma Ispat Ltd., on 30.05.2010 for the consideration of ₹ 7,74,541/- and in second round of transaction, sold 3300 shares worth of ₹ 8,91,661/- on 30.06.2011. After receiving the information, the AO made enquiries an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the part of the revenue is to make further clarification of the information received by the AO and it can be permissible in law. We have examined the reasons recorded as indicated above for reopening of the assessment. It appears that, the AO has made reference of the information received from the concerned investigation wing with regard to bogus accommodation entries of long term capital gain provided by the certain entities. Though, full details of the information and enquiry conducted by Kolkata wing having not been reflected in the reasons recoded, but there was a specific reference made in the reasons recorded by the AO that, the transactions made by the assessee is penny stock. In this context, we may place reliance on the decision of this Court in the case of Aayojan Developers Vs. ITO, [335 ITR 234] , wherein, this Court after referring the decision of the Calcutta High Court in the case of East Cost Commercial Com. Ltd., [128 ITR 324] , it was held that, the income tax officer in his affidavit filed in the Court could explain or elaborate or clarify the reasons recorded by him, but he could not thereby introduce new grounds or new reasons or new materials which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of long term capital gain has escaped assessment. We may place reliance on the case of Central Prominces Mangnese Ore Company ltd. (191 ITR 662 SC), wherein the Apex Court interpreted the word reason to believe . It was held that, the word reason in the phrase reason to believe in Section 147, would means cause or justification. If the assessing officer has cause or jurisdiction to know or suppose that income has escaped assessment he can be said to have reason to believe that income has escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. 21. In Praful Chunilal Patel Vs. M.J.Makwana Vs. CIT, [236 ITR 832], this Court while interpreting the term 'reason to believe' held that, the word reason to believe cannot mean that the AO should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination he makes and, if he likes, from any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he had reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe cannot mean that the AO should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination he makes and, if he likes, from any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he had reason to believe that such income had escaped assessment. The justification for his belief is not to be judged from the standards of proof required for coming to a final decision. A belief though justified for the purpose of initiation of the proceedings under Section 147 may ultimately stand altered after the hearing and while reaching the final conclusion on the basis of the intervening enquiry. At the stage where he finds a cause or justification to believe that such income has escaped assessment, the AO is not required to base his belief on any final adjudication of the matter . And, .....His formation of belief is not a judicial decision but an administrative decision. It does not determine anything at the initial stage, but the AO has a duty to proceed so as to obtain, what the taxpayer was always bound to pay if the increase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiate proceedings under Section 147 of the Act. 24. In the discussions made hereinabove, we do not agree with the contention that, merely on the information, the AO has recorded the reasons and on the basis of borrowed satisfaction, he formed an opinion with respect to the income chargeable to tax has escaped assessment. 25.We have examined the issue of valid sanction as raised by the learned counsel for the writ applicant. We take the notice of the fact that, the copy of the approval has been provided to the assessee at the stage of passing the order of disposing the objections raised by the assessee. Therefore, it is evident that, in the instant case, the authorities concerned have given approval after due application of mind and expressed their satisfaction with regard to the reasons recoded for reopening of the assessment. 26. In view of the foregoing reasons and considering the facts and circumstances of the present case, we have no hesitation to hold that it could not be said to have that there was no material or grounds before the AO and the assumption of jurisdiction on the part of the AO under Section 147 of the Act to reopen the assessment by issuing impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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