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TMI Blog2023 (5) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... t was stated that the petitioner is a family trust, which filed the petition through one of the trustees-the authorised signatory. It is the case that the petitioner Trust filed return of income for the Assessment Year 2017-2018 on 28.2.2018 disclosing income of Rs. 72,750/-. While according to the petitioner, it disclosed all material facts fully, the notice under section 148 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') was received by the petitioner. Thereby, the assessment was sought to be reopened. 3.1 On 12.7.2021, the respondent provided reasons recorded by the Assessing Officer for seeking to reopen the assessment. The petitioner filed objections to the reasons recorded on 26.7.2021, which were rejected by the respondent by order dated 14.12.2021. The petitioner has also prayed to set aside the said order disposing of the objections by rejecting them. Under section 142(1) of the Act, notice came to be issued to the petitioner to furnish the details. 3.2 The following were the reasons recorded by the Assessing Officer communicated to the petitioner, "Information was made available to this office arising out of assessment in the case of Smt. Paru M. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted exempt income and shown accordingly in the computation of income, comprising of dividend income from equity shares and the units of mutual funds. 3.5 It was stated by the petitioner that therefore the say of the department that income of Rs. 86,53,31,770/- had escaped assessment was wrong and baseless. It was contended that neither the said figure was mentioned nor was communicated. With regard to the nature of income alleged to have been escaped assessment, the assessee stated to the Assessing Officer that it had made elaborate reference for claiming exemption under section 10(38) of the Act in case of Smt. Paru M. Jaikrishna. The petitioner assessee claimed that there was no link or connection of the relevant information in her case with the escapment of income in the present case. 3.6 While rejecting the objections of the petitioner assessee, amongst other aspects, the Assessing Officer stated in his order in paragra No.8 thus, which is relevant to be reproduced, "From the above, it is clear that jurisdiction to reopen an assessment u/s.147 r.w.s 148 of the Income-tax Act, can be acquired if on the basis of relevant information coming to the possession of the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Bankim Bhagwanji Chaauhan vs. Income Tax Officer, Ward 1 being Special Civil Application No. 14021 of 2019, Vijay Harishchandra Patel vs. Income Tax Officer, Ward (3) being Special Civil Application No. 16171 of 2017, Mumtaz Haji Mohmad Memon vs. Income Tax officer, Ward 6(1) being Special Civil Application No. 21030 of 2017, Narendrakukar Mansukhbhai Patel vs. Income Tax Officer Ward 1(2)(3) being Special Civil Application No. 16790 of 2017 were relied on to buttress the same submission. 4.1.2 Learned advocate for the petitioner was relentless in pressing the point that reassessment was sought to be opened on the basis of wrong facts by further relying on Division Bench decision of this court in Sagar Enterprises vs. Assistant Commissioner of Income Tax being Special Civil Application No. 8202 of 1997 by referring to its paragraph Nos. 2 and 4. Also pressed into service were the decisions of the Division Bench of this Court in Manishkumar Pravinbhai Kiri vs. Assistant Commissioner of Income Taxc being Special Civil Application No. 15475 of 2015, in Giraben Atulbhai Shah vs. Office of the Assistant Commissioner of Income Tax, Central Circle 1(2), Ahmedabad being Special Civil Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for regular scrutiny. It was stated that, however, information was made available from and out of the assessment in case of another family member Smt. Paru M. Jaykrishna for the Assessment Year 2017-2018. It was stated that the said Smt. Paru M. Jaykrishna had claimed exemption under section 10(38) of the Act on sale of shares of certain companies and that the promoters of the company are the family members of Jaykrishna Group, who are Munjal Mrugesh Jaykrishna, Pary Mrugesh Jaykrishna and Gokul Mrugesh Jaykrishna. 4.3.1 The following portion from affidavit-in-reply is reproduced so as to notice and highlight the precise case of the department from para-4 of the affidavit, "Information was made available to this office arising out of assessment in the case of Smt. Paru M Jaykrishna (PAN: ADIRPJ9354P) for the AY 2017-18. During the course of assessment proceedings, it was found that the assessee [i.e. Smt. Paru M Jaykrishna (PAN: ADIRPJ9354P)], has claimed exemption u/s 10(38) of the Act of Rs. 59,54,83,421/- on sale of shares of M/s. Aksharchem (India) Ltd. and M/s. Asahi Songwon Colours Ltd.. The promoters of both the companies are family members of Jaykrishna Group i.e. Munj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with and disposing of at the outset the aspect of Special Civil Application No. 3922 of 2022 which was filed by Mrugesh Jaykrishna Family Trust-I where Mrugesh Jaykrishna was also a family member of the promoters and in his name also a trust was created as was done in the case of other family members. In the said petition also, the challenge was against the notice dated 30.3.2022 issued to the said family member-assessee under section 148 of the Act. The reasons recorded and weighed with the Assessing Officer to seek reopening of the assessment against the said petitioner were similar and almost identical. 5.1 The said petition was withdrawn by the said petitioner through his learned advocate on the ground that order was passed favouring the said petitioner. The following order was passed while disposing of the petitioner on 20.03.2023, "Learned advocate Mr.Darshan Patel fairly stated that in light of the Assessment Order dated 23.03.2022 passed under Section 147 read with section 144B of the Income Tax Act, 1961, the present petition has become infructuous, in which the assessment is nil. In that view, the present petition would not survive and accordingly, this petition is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanation 1.For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : (a) Where income chargeable to tax has been underassessed ; or (b) where such income has been assessed at too low rate ; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922 (11 of 1922); or (d) where excessive loss or depreciation allowance has been computed. Explanation 2. Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso." (para 21) 5.3 Similarly, in Raymond Woollen Mills Limited vs. Income Tax Officer, Centre Circle XI, Range Bombay and Others [(2008) 14 SCC 218], the supreme court observed about the scope of judicial review. It was observed that sufficiency or correctness of the reasons are not subject to judicial review. Prima facie existence of material forming the basis of reopening, if available, would justify the exercise of powers by the Assessing Officer. In that case, the assessment was proposed to be reopened on the ground that charging of fiscal duties, labour charges, fuel, wages, chemicals etc. by the assessee company to its profit and loss account while excluding the same in valuing its stock had resulted in undervaluation of inventories and understatement of profits, it was held that the High Court com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cogent probable facts and not on the basis of established facts. Establishment of escapment of income is a stage to arrive at a conclusion of the reassessment proceedings. At the stage of issuance of notice, the only question is to be addressed is whether relevant material is available with the Assessing Officer on the basis of which reasonable likelihood could be gathered that there was an escapment of income. If the facts so suggest, the Assessing Officer would be entitled to form such belief to proceed further. Even the sufficiency of material could not be said to be germane at this stage. Whether the material could conclusively prove the escapment is not a concern at this initial stage. 6. Appreciating the controversy in light of the above principles and facts situation obtaining, it is to be clearly noticed that the transactions were noticed by the Assessing Officer in respect of sale of shares of the companies named M/s. Aksharchem (India) Ltd. and M/s. Asahi Songwon Colours Ltd.. The present petitioner claimed exemption under section 10(38) of the Act to the tune of Rs. 59,54,83,421/-. In the return of income filed for the year under consideration, the gross total income sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and after obtained the requisite approval from higher authority, reopened the case u/s. 148 of the Act." 6.3 In ITO vs. Selected Dalurband Coal Co. (P) Ltd. [(1997) 10 SCC 68], the principle was stated that formation of belief by the Assessing Officer is within the realm of his subjective satisfaction. 6.4 The Assessing Officer found that there was likelihood of the acts and instance of insider trading by the said assessee. The beneficiaries, it was noticed, were the promoters group consisting of family member. The assessee Smt. Paru M. Jaykrishna calculated the long term capital gain of Rs. 59,54,83,421/- and on such transfer, claimed exemption under section 10(38) of the Act. The petitioner assessee, it was prima facie found to have earned income to the tune indicated which was chargeable to tax but the same was not shown in the return of income. 6.5 When on the basis of the above operating facts, the Assessing Officer harboured reasons to believe that the assessment of the petitioner was required to be reopened, it could be said to be well justified. The Assessing Officer could be said to have formed his opinion on the basis of cogent facts suggesting possibility of escapeme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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