TMI Blog2021 (5) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the present case, we are of the view that, the facts mentioned in the affidavit by the revenue could not be termed as new ground or new reasons to supplement the reasons recorded by the AO. Therefore, the contention raised by the learned counsel for the writ applicant that, by way of affidavit in reply, the revenue has improved the reasons recorded, has no any merit and cannot be accepted to hold that, the exercise to reopen the assessment is without jurisdiction. Whether AO failed to record an independent finding as to how the income has escaped assessment? - AO himself was satisfied with regard to the information and other materials on record, he formed an opinion that, the income has escaped assessment. Therefore, when the information was specific with regard to transactions of penny stock entered into by the assessee with the Tuni Textiles Ltd., and the AO 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 incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 3. 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 his 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 26.04.2019. The writ applicant vide letter dated 25.03.2019, raised objections and same came to be disposed of by the revenue vide order dated 11.10.2019. 4. 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: Assessee has filed the Return of income for A.Y. 2012-13 declaring gross total income at ₹ 45,000/- on 25.03.2012 2. Brief details of information collected/received by the AO: The information in respect of the penny stock transaction made in FY 2012-13 was made by the assessee as per AIMS module ITS/ITBA data available with this office. The said scrips are found to be penny stocks and has been used by beneficiaries (seller of shares) to launder money in the garb of LTCG while claiming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 5211000/- has escaped assessment within the meaning of section 147 of the I.T. Act. Hence It is fit case for reopening the assessment under section 147 of the Income Tax Act 1961 for the A. Y. 201314. 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 transaction is of penny stock of ₹ 5211000/- 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 was processed only u/s. 143(1) of the IT. Act. Hence, I have reason to believe that income chargeable to tax of ₹ 5211000/- has escaped assessment within the meaning of section 147 of the I. T. Act. Hence It is fit case for reopening the assessment under section 147 of the Income tax Act, 1961 for the A. Y. 201314. In view of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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 by the Assessing Officer. Thus, the impugned notice on this ground required to be quashed and set aside. d. It was submitted that, there is no independent application of mind on the part of the AO while recording the reasons for reopening and that merely placing reliance on the materials provided by the Investigation Wing for recording the reasons is impermissible. In this case, the AO failed to record an independent finding as to how income has escaped assessment on a proper application of mind. e. It was submitted that there was no link between the information received and formation of opinion that the income has escaped assessment. f. It was further submitted that, the affidavitinreply filed by the revenue, the revenue seeks to supplement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Asst. Commissioner of Income Tax, (2019) 101 Taxman.com.393, to submit that, in a similar set of facts, this Court had dismissed the petition challenging the notice issued under Section 148 of the Act. 12. Mr. Manish Bhatt, learned Senior Counsel for the revenue submits that there being no merits in the writ application, the same deserves to be dismissed. 13. Having heard the learned counsel for the respective parties and having gone through the materials on record, the only question falls for our consideration is that, whether the revenue is justified in reopening the assessment for the year under consideration? 14. It is settled position of law that Section 147 of the Act empowers the AO, if he has reasons to believe that, any income chargeable to tax has escaped assessment, to assess or reassess such income or recompute any allowance. This power is subject to the provisions of Section 148 to 153 of the Act. 15. It is pertinent to note that in the present case, the return of income was processed under Section 143(1) of the Act, and no scrutiny assessment was made under Section 143(3) of the Act and therefore, the proviso to Section 147 of the Act would not apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reached upto ₹ 268.75 ps in 13 months and was again fall down at ₹ 23/- in mid March, 2013. 18. The learned counsel appearing for the writ applicant raised the contention that, the facts mentioned in the affidavit in reply clearly proves that, the respondent seeks to supplement the reasons recorded by the AO, which is not permissible in law. On the other hand, the learned counsel for the revenue would submit that, the attempt on the part of the revenue is to make further clarification of the information received by the AO and it is 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,92,277. It further appears that, on the basis of information received from the concerned wing, the AO made independent enquiries and applied his mind to the information and upon due satisfaction and the materials gathered during the enquiries, finally formed a belief that, the income has escaped assessment. At the stage of issuing the notice, the court cannot investigate into adequacy or sufficiency of the reasons. When no scrutiny assessment made under section 143(1) of the Act, the requirement for reopening is only reason to believe. Considering the facts of the present case, the AO has caused of justification that, the alleged transaction of penny stock, claiming 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent reason, cannot be overridden. What is, therefore, to be ascertained is, whether the alleged reason really existed, and if it did, whether it was so irrational as to be outside the limits of his administrative discretion with which the AO is invested so as to be really in disregard of the statutory condition....... Evidently, the AO purporting to exercise powers under Section 147 of the Act, is not a party who has to not only state but establish before anyone the socalled jurisdictional facts . 23. In view of the settled principle of law as propounded by the Apex Court as well as by this court and considering the contention of the reasons recorded for reopening and further clarification of the information made by the revenue, we are of the view that, the Assessing Officer himself was satisfied with regard to the information and other materials on record, he formed an opinion that, the income has escaped assessment. Therefore, when the information was specific with regard to transactions of penny stock entered into by the assessee with the Tuni Textiles Ltd., and the AO had applied his independent mind to the information and upon due satisfaction, led to form an opinion that, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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