TMI Blog2021 (5) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... isfaction, 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. 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. No hesitation to hold that it could not be said to have that there was no material or grounds before the Assessing Officer and the assumption of jurisdiction on the part of the Assessing Officer under Section 147 of the Act to reopen the assessment by issuing impugned notice under Section 147 of the Act is without authority of law, which render into the notice unsustainable. Therefore, the assessee failed to make out a case. - R/SPECIAL CIVIL APPLICATION NO. 21929 of 2019 - - - Dated:- 13-5-2021 - HONOURABLE MR. JUSTICE J.B. PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, filed return of income on 25.03.2013, declaring total income of ₹ 12,26,170/ . The assessee sold 40,000/ shares of Tuni Textiles Limited and earned long term capital gain of ₹ 35,72,261/ and claimed it as exempt income under Section 10(38) of the Act. The case of the assessee was selected for scrutiny assessment and after considering the various details furnished by the assessee, the Assessing Officer had passed assessment order under Section 143 of the Act, vide order dated 30.10.2014. 6. The Assessing Officer, reopened the assessment under Section 147 of the Act by issuing impugned notice dated 26.03.2019 under Section 148 of the Act. The writ applicant filed return of income in response to the notice and requested the respondent to supply copy of the reasons for reopening and same was supplied vide communication dated 22.04.2019. The writ applicant vide letter dated 13.05.2019, raised objections and same came to be disposed of by the revenue vide order dated 11.10.2019. 7. The Assessing Officer before issuing the notice has recorded the following reasons for reopening of the assessment. Reasons recorded : 1. Brief details of the Assessee: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income for A.Y. 2012 -13 declaring gross total income at ₹ 1226170/ and as per AIMS module the assessee has made transaction of penny stock. Accordingly, the only requirement to Initiate proceeding u/s.147 is reason to believe which has been recorded above paras. 6. Basis of forming reason to believe and details of escapement of income : As the transaction is of penny stock of ₹ 3540000/ and the assessee has filed return of income for year under consideration but no assessment as stipulated u/s.2(4) of the Act was made and the return of Income processed only u/s. 143(1) of the I.T. Act. Hence, I have reason to believe that income chargeable to tax of ₹ 3540000/ has escaped assessment within the meaning of section 147 of the I.T. Act. Hence It is fit case for re opening the assessment under section 147 of the Income Tax Act 1961 for the A. Y. 2013 14. In view of the above, the provisions of clause (b) of Explanation 2 to Section 147 are applicable to facts of this case and the assessment year under consideration, it deemed to be a case where Income chargeable to tax has escaped assessment. 7. Escapement of Income chargeable to tax : The trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Senior Counsel assisted Mr. Karan Sangani, the learned advocate appearing for the revenue. 11. Mr Tushar Hemani, the learned Senior Counsel appearing for the writ applicant, raised the following contentions: a. It was submitted that the impugned notice is bad in law and without jurisdiction because the conditions precedent for reopening under Section 147 of the Act are not satisfied; b. It was submitted that, reasonable belief as contemplated under Section 147 /148 of the Act must be that of an honest and reasonable person based upon reasonable ground and it should not be based on some suspicious and vague reason. Whereas, in this case, the reasons are vague and do not reveal any income having escaped assessment and furthermore, reasons recorded made it clear that, this is a case of borrowed satisfaction without any independent application of mind. c. It was further submitted that, in case of reopening beyond period of 4 years, it is mandatory to obtain sanction from the competent Authority as provided under Section 151 of the Act. Whereas, in this case, the sanction as required under Section 151 of the Act before issuance of the notice was not obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 293 (Guj.) 14. On the other hand, learned Senior Counsel Mr. Manish Bhatt, vehemently opposed the writ application, contending that the Assessing Officer was in receipt of information from the Investigation wing I CI wing through AIMS Module of the ITBA, that the writ applicant had sold 40,000 penny stock shares of Tuni Textiles Ltd., worth of ₹ 35,72,261/ during A.Y 2012 -13 and after in depth investigation into the transaction of the scrip of Tuni Textiles Ltd., it was found that the transaction was penny stock and the assessee had availed accommodation entry to the tune of sale consideration received on sale of such shares by way of entering into dubious transactions in penny stock scrip. In this background of the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has noticed that the price rise in the share of Tuni Textiles Ltd., for the relevant year had not been supported by financial fundamental of scrip and there was a manipulation by group of syndicate like promoters, brothers and controllers who played major role in rising the price for fictitious long term capital gain and the assessee has availed accommodation of entry to the tune of sale consideration received on sale of such shares by way of entering into dubious transaction in penny stock scrip. 19. It appears that, in the affidavit in reply filed by the revenue, it has been stated that, Principal Director of Income Tax (Inv) Kolkata, had undertaken the accommodation entry of long term capital gain, and identified large number of beneficiaries who had availed huge amount of bogus entries of LTCG and identified 64811 beneficiaries involving bogus LTCG amounting ₹ 38000 crores. In reply affidavit, the revenue has highlighted the modus operandi of the business of penny stocks and further pointed out that the company involved in this case i.e. Tuni Textile Ltd., was having market price of share around ₹ 32/ on 26.09.2011 and thereafter, by rigging the price was reac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Senior Counsel for the writ applicant is that the reopening of the assessment cannot be permissible on the basis of the change of opinion by the Assessing Officer. A bare perusal of the reasons recorded, it appears that the Assessing Officer was in receipt of information that the scrip TUNI Textiles was penny stock, used by the beneficiaries (seller of shares) to launder money in the garb of LTCG. We are of the view that the aforesaid information and subsequent outcome of the enquiry made by the Assessing Officer, were not previously disclosed during the assessment proceeding. Thus, when the information came into knowledge of the Assessing officer, which was not on record and available at the time of assessment order, the principle of change of opinion would not apply. Therefore, the contention raised by the learned Senior counsel with regard to principle of applicability of change of opinion in the present case is not acceptable. 23. The next contention is that, the Assessing Officer failed to record an independent finding as to how the income has escaped assessment. Under such facts and circumstances, it is vehemently contended that, the Assessing Officer while re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 Assessing Officer 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 Assessing Officer has a duty to proceed so as to obtain, what the taxpayer was always bound to pay if the increase is justified at all. The decision to initiate the proceedings is not to be preceded by any judicial or quasi judicial enquiry. His reasoning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made hereinabove, 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. 28. 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. 29. 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 Assessing Officer and the assumption of jurisdiction on the part of the Assessing Officer under Section 147 of the Act to reopen the assessment by issuing impugned notice under Section 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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