TMI Blog2022 (12) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITA No. 1300/Mum/2018 - - - Dated:- 27-6-2022 - Pramod Kumar (Vice President), and Sandeep S Karhail (Judicial Member)] For the appellant Percy Pardiwalla along with Sukhsagar Syal For the respondent Dr. Mahesh Akhade ORDER Per Bench 1. These cross appeals are directed against the order 15th December 2017, passed by the learned CIT(A), in the matter of assessment under section 143(3) r.w.s. 147 of the Income Tax Act 1961, for the assessment year 2010-11 2. When this appeal came up for hearing, learned senior counsel for the assessee urged us to first take up the assessee s grievance against reopening of the assessment, as, in the event of the assessee s succeeding on this point, all other grievances raised in these cross-appeals will be rendered academic and infructuous. The learned Departmental Representative does not oppose this prayer, though, on merits of the matter, he has his vehement submissions. With the consent of the parties, as such, we take up the reopening aspect first. 3. Grievance of the assessee, as set out in the first ground of appeal of the assessee, is as follows:- 1. On the facts and under the circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvested or deposited for any part of the year in consonance with the provisions of section 13(1)(d) read with section 11(5) shall be charged to tax at the maximum marginal rate of tax. During the year, from the records it is seen that the book value quoted shares which was Rs.10,89,469/- in A.Y.2009-10 has reduced to Rs.89,469/- in A.Y.2010-11. Consequently, the quoted shares has increased from Rs.1234 Crores in A.Y.2009-10 to Rs.1501.5 Crores in A.Y.2010-11. This implies that the assessee had earned capital gains on sale of quoted shares and invested in prohibited mode of investment as per section 13(1)(d) of the Act. Therefore, the investment in prohibited mode to the extent of Rs.267.5 Crores (Rs.1501.5 Crores - Rs.1234 Crores) has escaped from being taxed. In view of the non-compliance of the provisions of section 13(1)(d), exemption u/s.11 should have been denied on the net sale proceeds of Rs.267.5 Crores. Therefore, I have reason to believe that the income to the extent of Rs.267.5 Crores has escaped assessment for A.Y.2010-11. B) The assessee has claimed exemption u/s.10(33) of Rs.96,16,26,397/- which was not in order. As the assessee has received dividend on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e carried the matter in appeal but without any success. Learned CIT(A) confirmed the action of the Assessing Officer and observed as follows:- 6.4 In the first ground of appeal, the appellant has contended that the reassessment is bad in law since -initiated without giving reasons for reopening the assessment. In respect of this, it is stated that in this case notice u/s. 148 of the Act was issued on 10th January, 2014 to the assessee which was duly served. The Assessee Trust filed its response dated 14th February, 2014. In the said letter, the only mention was that they were enclosing photocopy of the revised income-tax return filed on October 8, 2010. After submitting so, the appellant requested for providing the reasons for reopening of the assessment u/s.148 of the Act. It is only subsequently vide their letter dated 18th June, 2014 that the appellant stated that their return submitted on 8th October, 2008 be considered to have been filed in response to the notice u/s.148 of the Act. In the said letter dated 18.06.2014, the assessee again requested for providing reasons for reopening of the assessment. Subsequently, the reasons were supplied to the assessee during the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Senior Counsel appearing for the assessee submitted that the reassessment proceedings initiated in the present case are bad in law as no tangible material was available with the Assessing Officer for initiating the reassessment proceedings. Learned Senior Counsel further submitted that proceedings under section 147 of the Act can be initiated only when the Assessing Officer has reason to believe and this precondition is equally applicable to both the cases i.e. where return has been processed under section 143(1) as well as where scrutiny assessment is completed under section 143(3) of the Act. 9. On the other hand, Dr. Mahesh Akhade, learned Departmental Representative submitted that the arguments raised by the assessee are not arising from the grounds raised before the Tribunal. Learned DR further submitted that even before the learned CIT(A) proceedings under section 147 were not challenged on these basis. 10. In a short rebuttal, learned Senior Counsel submitted that ground no. 1 raised in present appeal is wide enough to cover all the aspects of assessee s challenge to reassessment proceedings under section 147 of the Act. Learned Senior Counsel by referring to assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, therefore, the impugned reassessment proceedings cannot be questioned on the ground of change of opinion by the Assessing Officer. However, non-selection of the case for scrutiny does not in any manner belittle / reduce the significance and meaning of the term reason to believe , which is of paramount importance for initiating proceedings under section 147 of the Act and, as been held in various decisions, reason to believe that income has escaped assessment should be based on some new or tangible material. Such a requirement also rules out the possibility of initiation of reassessment proceedings only on the basis of suspicion without any material being available with the Assessing Officer. 12. In this regard, following observations of Hon ble Delhi High Court in CIT vs Orient Craft Ltd., [(2013) 354 ITR 536 (Del)], becomes relevant, as the Hon ble High Court has also analysed the decision of Hon ble Supreme Court in Rajesh Jhaveri Stock Brokers (supra), which has been relied by the Assessing Officer while disposing assessee s objections: 13. Having regard to the judicial interpretation placed upon the expression reason to believe , and the continued use of that ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment and an intimation . The context in which those observations were made has to be kept in mind. They were made to point out that where an intimation is issued under section 143(1) there is no opportunity to the assessing authority to form an opinion and therefore when its finality is sought to be disturbed by issuing a notice under section 148, the proceedings cannot be challenged on the ground of change of opinion . It was not opined by the Supreme Court that the strict requirements of section 147 can be compromised. On the contrary, from the observations (quoted by us earlier) it would appear clear that the court reiterated that so long as the ingredients of section 147 are fulfilled an intimation issued under section 143(1) can be subjected to proceedings for reopening. The court also emphasised that the only requirement for disturbing the finality of an intimation is that the assessing officer should have reason to believe that income chargeable to tax has escaped assessment. In our opinion, the said expression should apply to an intimation in the same manner and subject to the same interpretation as it would have applied to an assessment made under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147. 16. For the above reasons, we answer the substantial question of law framed by us in the affirmative, in favour of the assessee and against the Revenue. The appeal of the Revenue is accordingly dismissed. There shall be no order as to costs. 13. Further, Hon ble jurisdictional High Court in Balakrishna Hiralal Wani vs ITO, [2010] 321 ITR 519 (Bombay), emphasised the importance of fulfilment of jurisdictional condition, i.e. existence of reason to believe on the basis of tangible material, before initiating reassessment proceedings under section 147 of the Act, by observing as under: 9. Section 147 empowers the Assessing Officer to assess or reassess income, which he has reason to believe has escaped assessment for the assessment year. The existence of a reason to believe is the condition precedent to the exercise of power and the reasons must be recorded in writing. The proviso to section 147 imposes an additional condition in a situation where action is sought to be taken after the expiry of four years from the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to the conclusion that there is escapement of income from assessment. Reasons must have a link with the formation of the belief.... 12. Thus, there was, in our opinion, no tangible material before the Assessing Officer, as explained in the judgment of the Supreme Court in Kelvinator (supra) to form a conclusion that income has escaped assessment. Hence though no assessment order was passed under section 143(3), we are of the view that the jurisdictional condition precedent prior to the exercise of the power to reopening the assessment under Section 147 of the Act has not been fulfilled. The petition will, therefore, have to be allowed. 14. In view of the above, we are of the considered view that reassessment proceedings initiated by the Assessing Officer under section 147 of the Act are bad in law, as there was no new or tangible material which came to the possession of the Assessing Officer subsequent to the issue of the intimation under section 143 (1) of the Act and therefore, the jurisdictional condition i.e. existence of reason to believe is not satisfied in the present case. As regards learned DR s submission that arguments now raised in present app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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