TMI Blog2021 (11) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... like this comes to the notice of the AO then it only triggers 'reason to suspect'. Then what the AO should have done was that he should have made reasonable enquiry and should have collected material which could make him believe that there is in fact escapement of income. So in the present case the AO when he got this information from the DDIT (Inv.) should have found out the intermediaries through whose hands the assessee had received ₹ 25 lakhs and then should have properly recorded in the reasons recorded the fact from whom the assessee has received ₹ 25 lakhs which has been layered from M/s. Kalyan. Here in this case this important fact/jurisdictional fact is found missing and, therefore, the factual basis on which the AO reopened itself is fragile and, therefore, the reasons recorded to reopen itself is bad in law and, therefore, the reassessment order dated 27.12.2019 passed by the AO itself stands vitiated on the factual findings recorded by the Ld. Pr. CIT that the assessee has received money not from M/s. Kalyan directly but through several layers from M/s. Kalyan, M/s. BSR Finance Construction Co. and finally reached to the assessee. This part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny ground or grounds on or before the date of hearing of the appeal. 3. The assessee while raising aforesaid issues has raised a legal issue in respect invocation of revisionary jurisdiction by the Ld. Pr. CIT u/s. 263 of the Act against the AO's reassessment order dated 29.03.2019 pursuant to reopening of the assessment u/s. 147 of the Act. 4. The facts in brief are that the assessee's return of income was scrutinized u/s. 143(3) of the Act by framing an assessment on 30.03.2015 (hereinafter referred to as the 'original assessment'). Thereafter, the AO issued notice u/s. 148 of the Act proposing his desire to reopen the assessment on the reasons as given below: 5. Pursuant to the aforesaid action of the AO to reopen the original assessment, the assessee objected to the same by contesting the allegation of the AO that the assessee was a beneficiary of ₹ 25 lakhs from entry operator M/s. Kalyan Merchants Pvt. Ltd. (hereinafter referred to as 'M/s. Kalyan'). According to the assessee, it did not have any transaction with M/s. Kalyan in this assessment year and, therefore, according to assessee, the question of it becoming beneficiary does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee on the legal issue that Ld. Pr. CIT did not had the jurisdiction to invoke revisional jurisdiction u/s. 263 of the Act and his finding that the AO's reassessment is erroneous as well as prejudicial to the interest of the revenue is, therefore, bad in the eyes of law. 7. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee's return of income was scrutinized u/s. 143(3) of the Act by framing an assessment on 30.03.2015. Thereafter, the AO issued notice u/s. 148 of the Act proposing his desire to reopen the assessment on the reasons as reproduced supra in which he informed the assessee, that since the assessee had transaction of ₹ 25 lakh with M/s. Kalyan which is not doing any actual business, the assessee is beneficiary of unaccounted fund of ₹ 25 lakh which he proposes to tax after reopening. Pursuant to the aforesaid reasons recorded the assessee objected to the reopening by contesting the allegation of the AO that the assessee was a beneficiary of ₹ 25 lakhs from entry operator M/s. Kalyan. According to the assessee, it did not had any transaction with M/s. Kalyan in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallenged by the assessee on the legal issue that Ld. Pr. CIT did not had the jurisdiction to invoke revisional jurisdiction u/s. 263 of the Act and his finding that the AO's reassessment is erroneous as well as prejudicial to the interest of the revenue is bad in the eyes of law. 8. Before we advert to the legal issue raised by the assessee let us examine the settled legal precedents on the reopening of assessment as well as refresh our mind as to the concept of assessment of an income of an assessee. First of all, we have to keep in mind that the concept of assessment is governed by the time barring rule and assessee acquires a right as to the finality of proceedings. Quietus of the completed assessment can be disturbed only when there is information or evidence regarding undisclosed income or AO has information in his possession showing escapement of income. Even if the AO has information in his possession that there is escapement of income of an assessee, then also the AO cannot legally/validly reopen the assessment u/s. 147 of the Act unless the jurisdictional fact and law which is required to reopen an assessment exist i.e. the AO should have reasons to believe escape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to speak through the reasons. Their Lordship added that The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion the evidence......... . Therefore it has to be kept in mind that reasons are to be examined only on the basis of the reasons as recorded by the AO. Another important point is that even though reasons, as recorded, may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry which may result in detection of an income escaping assessment. Undoubtedly at the stage of recording the reasons for reopening the assessment; all that is necessary is the formation of prima facie belief that an income has escaped the assessment; and it is not necessary that the fact of income having escaped is proved to the hilt. What is however, necessary is that there must be something which indicates even if not establishes the escapement of income from assessment. It is only on this basis that the AO can form the belief that an income has escaped assessment. And merely because some furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment, when we examine the legal issue raised by the assessee, we note that in this case the original assessment u/s. 143(3) of the Act was framed on 30.03.2015 (refer page 14 to 17 of paper book); and thereafter, the AO has reopened the assessment by issuing notice u/s. 148 of the Act on 29.03.2019 conveying his desire to reopen the original assessment and thereafter conveyed to the assessee the reasons to believe escapement of income by mentioning about ₹ 25 lakhs transaction of the assessee with M/s. Kalyan. Pursuant to the same, the assessee objected to the reopening and had brought to the notice of the AO that in the relevant year under consideration (AY 2012-13) the assessee did not had any transaction with M/s. Kalyan. The AO after considering the reply of the assessee did not draw any adverse inference against the assessee in the reassessment order framed on 27.12.2019. However, it is pertinent here to state that in the reassessment proceedings another new query regarding an issue which was not mentioned in the reasons recorded (supra) the AO asked by raising new question (refer pages 48 to 54 of PB) regarding the claim made by the assessee regarding loss f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial Co. (supra). Therefore, according to Ld. A.R., since in this case the AO has inquired into both the issues and has taken a plausible view, the Ld. Pr. CIT could not have interfered with the AO's action, unless he has recorded a finding after enquiry by himself that AO's view are unsustainable in law. 10. One more legal angle the Ld. AR pointed out is that in the reasons recorded by the AO it can be noted that there is only one issue i.e. with regard to ₹ 25 lakhs transaction with M/s. Kalyan and from a perusal of the reassessment order dated 27.12.2019 it can be noted that AO has not made any addition on this issue. Therefore, according to him the AO could not have taken any adverse view in respect of the loss of ₹ 43,02,450/- as held by the Hon'ble Bombay High Court in the case of CIT vs. Jet Airways India Ltd. in [2017] 88 taxmann.com 493 (Bombay) because the jurisdictional facts on which the AO formed his belief about escapement of income to reopen the assessment does not exist. So once the AO find that issue for which he reopened in the first place i.e. regarding ₹ 25 lakhs transaction of assessee with M/s. Kalyan does not exist, then he c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R that even though the assessee might not have received the money directly from M/s. Kalyan, however the assessee was the ultimate beneficiary through M/s. BSR Finance. However, we do not countenance this contention of the Ld. CIT, DR for the simple reason that in the reasons recorded the AO has alleged about ₹ 25 lakhs assessee receiving from M/s. Kalyan. And the assessee was confronted with these reasons recorded and the assessee rebutted this alleged fact and brought to the notice of the AO that the assessee had not received ₹ 25 lakhs from M/s. Kalyan by filing bank statement etc. Therefore, the AO did not draw any adverse inference. However, the Ld. Pr. CIT has brought out that there were layering in this transaction and the money was transacted through the hands of M/s. Kalyan then M/s. BSR Finance and then ultimately it reached to the assessee. Here it is pertinent to note that the AO has in the reasons recorded for reopening has mentioned about receiving information from the DDIT (Inv.) from which he was informed that huge suspicious transaction of money in the bank statement of M/s. Kalyan took place and that M/s. Kalyan is not doing any actual business and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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