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TMI Blog2023 (10) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2017-18. The petitioner of Special Civil Application No. 922 of 2022 is husband of petitioner of Special Civil Application No. 19280 of 2021. 3. Rule, returnable forthwith. Learned Senior Standing Counsel Mr. Varun K. Patel waives service of notice of rule for and on behalf of the respondents. 4. With regard to the controversy in these petition is in narrow compass, with the consent of learned advocates of both the sides, these petitions are heard analogously and are being disposed of by this common judgment and order. 5. For sake of convenience, Special Civil Application No. 922 of 2022 is treated as a lead matter. 6. Brief facts of the case are as under: 6.1. The petitioner who is an individual filed his return of income for the Assessment Year 2017-18 on 21.06.2017 declaring total income of Rs. 7,67,190/- including the income under the head "Profit and Gains from business or profession" in accordance with the provisions of Section 44AD of the Act. 6.2. The respondent-Assessing Officer issued impugned notice dated 31.03.2021 under Section 148 of the Act for reopening the assessment. The petitioner filed return of income in response to the impugned notice issued on 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Hemani would submit that even though the petitioners have categorically pointed out in the objections against the reopening that the nature of transaction is not mentioned in the reasons recorded and hence, such reasons are vague and not definite or relevant, however, while passing the order disposing of such objections, respondent has not put in any effort to provide clarity on the nature of the transaction referred to in the reasons recorded for reopening. It was therefore submitted that the respondent assessing officer is not having any detail in relation to the so-called unaccounted transactions and therefore, the respondent would not have any reason to believe that income chargeable to tax has escaped the assessment. Learned Senior Advocate Mr. Hemani would therefore submit that on this short ground only, the impugned notices deserve to be quashed. 7.4. In support of such submissions, reliance is placed on the decision of this Court in case of Bharatkumar Nihalchand Shah versus Income Tax Officer dated 07.03.2023 in Special Civil Application No. 5353 of 2022 wherein, it is held that non-specific and general reasons without establishing rational nexus between transaction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lieve that any income has escaped the assessment and in absence of any such exercise to have the satisfaction to form the reason to believe by the respondent, it is apparent that the respondent has issued the impugned notice merely based on "borrowed satisfaction" as against statutory requirement of "independent satisfaction" and therefore the impugned notice deserves to be set aside as such action is not tenable in the eye of law. 7.10. Learned Senior Advocate Mr. Hemani would submit that it is a settled law that an Assessing Officer would not assume jurisdiction to reopen an assessment unless he records his own independent satisfaction to the effect that he has reason to believe that any income chargeable to tax has escaped the assessment after application of mind. It was therefore submitted that such satisfaction cannot be based on application of mind by third person which is emerging from the facts of the case on perusal of the reasons recorded. In support of his submissions, learned Senior Advocate Mr. Hemani relied upon the decision in case of Harikishan Sunderlal Virmani Versus DCIT reported in 394 ITR 146 (Gujarat). 7.11. It was further submitted that on bare perusal of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents placed on record along with the affidavit-in-reply at Annexure R1. It was submitted that the respondent is not enlarging the scope of the reasons recorded by placing such information but it is only to demonstrate of what has already been considered for the reasons recorded. It was submitted that the basis for formation of the reasons was specifically noted in the reasons record which in turn based on the case specific information and therefore, it cannot be said that the reasons are vague as sought to be contended by the petitioner. 8.2. It was submitted that the petitioner has not made out any case in view of the fact that the petitioner failed to disclose all the material facts and in absence of the scrutiny assessment conducted by the Assessing Officer, the impugned notice may not be quashed because what is to be seen at the stage of recording the reasons is existence of the belief based on faithful appreciation of the material which has live link to income escaping assessment. It was submitted that the respondent-Assessing Officer is not required to establish the truth of escapement of income by detail investigation or legal analysis and as per the settled legal positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment. 9. Having heard the learned advocates for the respective parties and having considered the rival submissions, it would be germane to refer to the relevant extract of the reasons recorded for reopening of the assessment which reads as under : "ANNEXURE 1. Brief details of the Assessee: The assessee is an HUF and the address of the assessee as per ITBA/ITD is Plot No. 510, Adarsh Society, Vijaynagar, Bhavnagar. The PAN of assessee is ALSPB7684E and assessee has filed return of income for A.Y. 2017-18 on 21.06.2017 showing total income at Rs. 7,67,190. (a) Nature of business activity: Not known. (b) Details of previous filing of ROI processing and scrutiny: Sr.No A.Y. Date if filling ROI Whether selected for scrutiny/re-open 1. 2015-16 14/07/2015 No 2. 2016-17 07/06/2016 No 3. 2017-18 21/06/2017 No 2. Brief details of information collected/ received by the AO: Information made available with this office through Insight Portal along with Report of Dy. Commissioner of income-tax, Central Circle, Surat reveals that assessee has done unaccounted transaction of Rs. 44,34,265/during the year. 3. Analysis of information collected/ received: In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the petitioner could defend his case, merited acceptance. Looking at the reasons again, what is only stated by the Assessing Officer is that, "From the data made available under Project Falcon, it is seen that the assessee has created a profit/loss of Rs. 74,62,860/-". Both buying and selling of trades have been are executed at the Bombay Stock Exchange". This statement is a non-detailed and completely escapist. It does not give any fact regarding the transactions or other attendant facts except saying that assessee had engaged in the trading at the Bombay Stock Exchange to create profit or loss. Though styled as reasons, the ground of reopening is unreasoned. 6. The necessity to incorporate reasons in the administrative, quasi judicial or judicial orders are repeatedly emphasised by the supreme court. In Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota vs. Shukla and Brothers [(2010) 4 SCC 785], it was stated that the requirement of providing reasons can never be disposed with, "The increasing institution of cases in all Courts in India and its resultant burden upon the Courts has invited attention of all concerned in the justice administra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that order passed by the quasi judicial authority or even administrative authority affecting the rights of the parties must speak and that is must not be like the "inscrutable face of a sphinx". 6.4 The principles for recording reasons came to be summarised by supreme court in Kranti Associates Private Limited (supra), "a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Group Housing Society Limited and Others [(2010) 13 SCC 336], the supreme court stated importance of reasons referring to other decisions on the point thus, "The reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same, the order becomes lifeless. Reasons substitute subjectivity with objectivity. The absence of reasons renders an order indefensible/unsustainable particularly when the order is subject to further challenge before a higher forum. Recording of reasons is principle of natural justice and every judicial order must be supported by reasons recorded in writing. It ensures transparency and fairness in decision making. The person who is adversely affected must know why his application has been rejected." (par a 27) 6.6 On the basis of the propositions laid down in different decisions by the supreme court above referred and others, the following legal principles on the point in issue may be enlisted, (i) "Reasons" are of paramount importance. "Reasons" are heartbeat of every conclusion. It introduces clarity in any order. Without the reasons, the order is lifeless. (ii) The concept of reasoned judgment has become an indispen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and whether formation of opinion by the Assessing Officer is based on some relevant facts or not, could be judged provided the reasons are properly recorded and the details are given with regard to reopening of assessment that the reasons to believe with the Assessing Officer must be reflected in recording of such reasons to be communicated to the assessee. 7.4 The cryptic way of recording of reasons like found in the instant case, would render the exercise of powers vitiated. With such vague reasons the respondent could be said to have failed to demonstrate that there was any escapement of income chargeable to tax. He could demonstrate such element, if he gives reasons for the same." 12. In case of Harikishan Sunderlal Virmani (Supra) this Court held that from the reasons recorded, if the same are on borrowed satisfaction without forming an independent opinion, the assumption of the jurisdiction to re-open the assessment under Section 147 was bad in law. 13. In view of the above conspectus of law, the entire exercise of re-opening would depend upon the reasons recorded by the Assessing Officer and therefore the reasons recorded to re-open the assessment by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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