TMI Blog2023 (12) TMI 1164X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1961 specifically mandates who would be the authority inasmuch Sub-Section (1) of Section 151 of the Act of 1961 relates to issuance of notice under Section 148 after the expiry of the period of 4 (four) years from the end of the relevant assessment year and the authority would be the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner who had to arrive at the satisfaction on the reasons recorded by the Assessing Officer for issuance of such notice. On the other hand, in respect to all other cases, i.e. up to four years, the authority would be the Joint Commissioner which is the authority defined in Section 2(28C). It is also pertinent that the Act of 1961 does not stipulate that the power which had been entrusted by the Act to an Officer can be exercised by any superior officer. Whether the non-communication of the entire satisfaction note would vitiate the reassessment proceedings? - For conferment of jurisdiction, the recording of reasons is no more essential but recording of reasons would only be essential in terms with Sub-Section (2) of Section 148 for the Assessing Officer to issue any notice under Section 148. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons for forming the belief is not. Therefore, if an assessee has to challenge the existence of the belief, the same can be done so in a proceedings under Article 226 of the Constitution which is also well settled. Further, it is also the opinion of this Court that the existence of the belief cannot be challenged before the Assessing Officer as it touches upon his own jurisdiction. However, as the sufficiency of reasons for forming the belief cannot be challenged in a proceeding under Article 226 of the Constitution, the assessee would have a right to file objections against the sufficiency of the reasons for forming the belief by the Assessing Officer. It is in that context, the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) made the said observations. Bogus LTCG - exemption u/s10(38) denied - assessee sold shares (penny stocks) as identified by SEBI and Investigation Wing, Kolkata during FY 2010-11 - HELD THAT:- From the reasons so recorded as above noted and reading conjointly with the computation of income with the detail so given in the reasons for issuance of notice under Section 148 of the Act of 1961, it cannot be said that there was no existence of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oral submissions. - HONOURABLE MR. JUSTICE DEVASHIS BARUAH For the Petitioner(s) : Mr. R. Goenka, Advocate For the Respondent(s) : Mr. S. C. Keyal, Standing counsel JUDGMENT AND ORDER (CAV) 1. All the four writ petitions challenging the initiation of respective reassessment proceedings are taken up for disposal by this common judgment and order. 2. For the purpose of deciding the writ petitions, this Court finds it relevant to take note of the brief facts in respect to the four writ petitions. WP(C)/5437/2016 3. The Petitioner herein is an assessee under the Income Tax Act, 1961 (for short the Act of 1961 ) having Permanent Account Number. The Petitioner filed his return of income for the Assessment Year 2011-12 relevant to the Financial Year 2010-11 in Form No. ITR-4 on 21.09.2011 vide acknowledgement No. 287799831210911 disclosing total income chargeable to tax at Rs. 14,30,000/-. In the return of the income so filed by the Petitioner, it is the case of the Petitioner that the Long Term Capital Gains which were exempted under Section 10(38) of the Act of 1961 were duly reflected. The Petitioner had stated in the writ petition that in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as under: Amount transaction date Script Amount Brokers name with code-502 20.09.2010 Odyssey corporation Ltd. 963900 National/multi commodity 29.03.2011 Splash media works Ltd. 229838 National/multi commodity 23.03.2011 Splash media works Ltd. 308284 National/multi commodity 22.03.2011 Splash media works Ltd. 214465 National/multi commodity 23.03.2011 Splash media works Ltd. 706000 National/multi commodity 23.03.2011 Splash media works Ltd. 529500 National/multi commodity 28.03.2011 Splash media works Ltd. 791200 National/multi commodity But as per return fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or documents specified therein and furnish in writing and verified in the prescribed manner information called for as per the enclosure and on the points or matters specified. 8. The Petitioner on 18.08.2016 approached the Respondent No. 1 through his representative with a Petition dated 17.08.2016 praying for adjournment of hearing which was fixed on 23.08.2016. However, as the Respondent No. 1 was not available, the case was adjourned for hearing on 08.09.2016. Thereupon, it appears from the records that on 08.09.2016, the Petitioner filed the instant writ petition challenging the reasons which were recorded on 30.03.2016 for issuance of the notice under Section 148; the notice under Section 148 dated 30.03.2016; the notice under Sub-Section (2) of Section 143 dated 11.07.2016; the notice under Sub-Section (1) of Section 142 dated 11.08.2016. 9. This Court vide an order dated 14.09.2016 had issued notice and in the interim, the proposed reassessment for the Assessment Year 2011-12 was directed to be kept in abeyance until the returnable date. The records of the writ petition further shows that on 03.04.2017, the interim order which was passed earlier was directed to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner. This Court finds it relevant to note that pursuant to the said affidavit-in-opposition, no reply was filed. WP(C)/5530/2016 11. The Petitioner herein is an assessee under the Act of 1961 having a Permanent Account Number. The Petitioner physically submitted the return of Income for the Assessment Year 2010-11 relevant to the financial year 2009-10 in the prescribed Form No. ITR-2 as duly signed and verified by her on 06.09.2010. It was alleged that in the said return, the income from the Short Term Capital Gains and Long Term Capital Gains and material facts were duly reflected in the Computation of Total Income for the Assessment Year 2010-11. Subsequent thereto, the Petitioner filed the return of income for the Assessment Year 2011-12 relevant to the financial year 2010-11 electronically in form No. ITR-2 on 29.07.2011 vide acknowledgement No. 256722290290711 disclosing total chargeable income to tax at Rs. 12,65,520/-. It was stated by the Petitioner in the writ petition that in the return of the income, she duly reflected the details of the Long Term Capital Gains which were exempted under Section 10(38) of the Act of 1961 in the appropriate place as provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (penny stock as identified by SEBI and investigation wing, Kolkata) during the FY 2010-11 details given as under: transaction date script amount Brokers name with code-502 20.09.2010 Odyssey corporation Ltd. 994500 National/multi commodity 22.03.2011 Splash media works Ltd. 690650 National/multi commodity 23.03.2011 Splash media works Ltd. 525723 National/multi commodity 28.03.2011 Splash media works Ltd. 516000 National/multi commodity 22.03.2011 Splash media works Ltd. 465600 National/multi commodity 22.03.2011 Splash media works Ltd. 529500 National/multi commodity But as per return filed for A.Y. 2011-12 relating to F.Y. 2010-11, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice under Sub-Section (2) of Section 143 dated 11.07.2016 and the notice under Sub-Section (1) of Section 142 dated 11.08.2016. 15. This Court vide an order dated 19.09.2016, issued notice and in the interim stayed the proposed reassessment for the Assessment Year 2011-12 until the returnable date. Thereupon, it further appears that vide an order dated 03.04.2017, the interim order passed earlier was directed to continue until further orders. The record also reveals that on 11.07.2018, the instant writ petition was tagged along with WP(C) No. 5437/2016, WP(C) No. 5535/2016 and WP(C) No. 5536/2016. 16. It is pertinent to mention that on 01.12.2016, an affidavit-in-opposition was filed by the Respondent No. 3. The contents of the said affidavit-in- opposition is similar to the contents of the affidavit-in-opposition filed by the Respondent No. 3 in WP(C) No. 5437/2016. However, it is relevant to observe that in the affidavit-in-opposition filed in the instant case, there was no denial to the fact that the Petitioner s assessment was made under Section 143(3) of the Act of 1961 which was otherwise denied in WP(C) No. 5437/2016. The Petitioner however had not chosen to file any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn for the assessment year 2013-14 on 28.06.2016, a copy of which she had enclosed with the letter dated 04.07.2016. The Petitioner also requested the Respondent Authority to provide her the reasons for issuance of notice under Section 148 of the Act of 1961. On 11.07.2016, the Respondent No. 1 issued a letter with the subject Request to communicate reasons recorded for reassessment under Section 148 with reference to the letter dated 04.07.2016. The said communication has been enclosed as Annexure-11 to the writ petition and taking into account the relevance, the same is reproduced hereinunder: To Dt. 11-07-2016 Smti Laxmi Chandak Mangaldeep Rupahi Ali, Jorhat Sub: Request to communicate reasons recorded for re-assessment u/s 147 Ref: Your letter dated 04.07.2016 With reference to the above, I would please to intimate the reasons enumerated below for re-assessment u/s 147 of the I.T. Act, 1961 of your case for the A.Y. 2013-14 As per information extracted from the ITD application the assessee had made bogus long term capital gain/short term capital loss by way of transaction made through penny stocks amounting to Rs. 17,55,360/- during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No. 3. In the said affidavit-in-opposition, it was stated that if information is received from any competent authority stating that the income had escaped from the assessment, it was open for the department to reassess the said case for the sake of revenue to examine whether the disclosure of all information was fully and truly done or not. It was stated that information were available from the Kolkata Investigation Wing that the stocks which were sold by the Petitioner were penny stocks. Further to that, on the basis of the information by the Kolkata Investigation Wing, thousands of crores of disclosures were made by the tax payers in the IDS 2016 and therefore the information on the basis of which the reassessment proceedings were initiated cannot be termed as not based on reasons to believe but were based on tangible information. No affidavit-in-reply was filed to the said affidavit-in-opposition. WP(C)/5536/2016 22. The Petitioner herein is an assessee under the Income Tax Act, 1961 having Permanent Account Number. The Petitioner submitted her return of income for the Assessment Year 2013-14 relevant to the Financial Year 2011-12 belatedly but voluntarily through e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e letter dated 04.07.2016 issued by the Petitioner. The said communication is a part of Annexure-11 and as the same has relevance for the purpose of deciding the instant writ petition, this Court finds it pertinent to reproduce the same hereinbelow: 11-07-2016 To Dt. Smti Laxmi Chandak Mangaldeep Rupahi Ali, Jorhat Sub: Request to communicate reasons recorded for re-assessment u/s 147 Ref: Your letter dated 04.07.2016 With reference to the above, I would please to intimate the reasons enumerated below for re-assessment u/s 147 of the I.T. Act, 1961 of your case for the A.Y. 2013-14 As per information extracted from the ITD application the assessee had made bogus long term capital gain/short term capital loss by way of transaction made through penny stocks amounting to Rs. 17,55,360/- during the F.Y. 2012-13. The investigation conducted by the Investigation Directorate of Income-tax Deptt. Also reveals that trading in said penny stock was manipulated affair to generate entries of bogus LTCG/STCL facilitating tax evasion. (Moushumee Lahkar) Income-tax Officer Ward-3, Jorhat 25. Subsequent thereto, on 12.07.2016, the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. 27. In the backdrop of the above pleadings, let this Court take into consideration the submissions made by the learned counsels for the parties. 28. Mr. R. Goenka, the learned counsel appearing on behalf of the Petitioners had drawn the attention of this Court to the returns so filed by the Petitioners wherein the statements of long Term Capital Gain which were exempted under Section 10(38) of the Act of 1961. In the case of the writ petitioner in WP(C) No. 5437/2016, it was the submission of the learned counsel for the said Petitioner that in respect to the Long Term Capital Gain, the purchase cost was shown at Rs. 2,82,535/- and the net sale price was Rs. 60,41,458/- and thereby the capital gain which was shown at Rs. 57,58,923/-. Referring to the reasons for initiation of the proceedings under Section 148 of the Act of 1961, the learned counsel submitted that the reasons assigned were that as per the return filed by the said Petitioner for the Assessment Year 2011-12, relating to the Financial Year 2010-11, there was no income/loss in respect to the sale of shares which have been disclosed. He therefore submitted that when the very aspect of the matter was duly shown in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. In respect to WP(C) No. 5536/2016, the learned counsel had drawn the attention of this Court to the return so filed and the computation of income for the Assessment Year 2013-14 and submitted that the purchase cost was duly shown at Rs. 50,000/- and the net sale price was shown at Rs. 18,47,975/- and on the basis thereof, the capital gain was shown at Rs. 17,97,975/-. He submitted that on the basis of those information duly submitted, the assessment was duly carried out. The learned counsel further referring to the reasons which were furnished on 11.07.2016 submitted that the reasons assigned therein were that from the information extracted from the ITD Application, the assessee had made Bogus Long Term Capital Gain/Short Term Capital Loss by way of transaction made through penny stocks amounting to Rs. 17,55,360/- during the Financial Year 2012-13 and upon investigation conducted by the Directorate of the Income Tax Department, it revealed that the trading in the said penny stocks were manipulated affairs to generate entries of bogus long term capital gain/short term capital loss facilitating tax evasion. He submitted that there can be no basis for formation of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut authority and accordingly, the entire reassessment proceedings should be nullified on the said basis. In that regard, the learned counsel referred to a judgment in the case of Ghanshyam K. Khabrani Vs. Assistant Commissioner of Income Tax, Circle-1 reported in (2012) 346 ITR 443, the judgment of the Co-ordinate Bench of this Court in the case of Dhansri Roller Flour Mills Vs. Union of India reported in (2023) 151 Taxmann 494 (Gauhati) and the judgment of the Delhi High Court in the case of Commissioner of Income Tax Vs. SPL S Siddhartha Ltd. reported in (2012) 345 ITR 223 (Delhi). 31. At this stage, this Court finds it relevant to mention that this Court vide an order dated 12.09.2023, taking into account the submissions so made by the learned counsel for the Petitioner as well as the learned Standing counsel appearing on behalf of the Income Tax Department in respect to the issue pertaining to non-compliance of Section 151 of the Act of 1961, directed the Standing counsel appearing on behalf of the Income Tax Department to produce the records pertaining to the reassessment proceedings so initiated against the Petitioners in the instant batch of writ petitions. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit and gains from speculative business 1,29,928 and Income from House Property Rs. 28,000/-, Income from Short term capital gain Rs. 545/- and Income from other sources Rs. 2,47,133/. The assessee declaring exempt income in schedule El an income of Rs. 16,97,115/- from Long Term Capital Gain, Interest Income Rs. 5633/- and Dividend income Rs. 250/- among other income. As per information extracted from the ITD application the assessee had made bogus long term capital gain/short term capital loss by way of transaction made through penny Stocks amounting to Rs. 17,55,360/-during the F.Y. 2012-13. The investigation conducted by the Investigation Directorate of Income-Tax Deptt. also reveals that trading in said penny stock was manipulated affair to generate entries of bogus LTCG/STCL facilitating tax evasion. The source of the fund for the purchase of shares as mentioned above for which capital gain is raised was from her sources not declared in the return of income. I find that the assessee has undeclared income in the return furnished which has escaped assessment. I have therefore reasons to believe that the income of the assessee from Long Term Capital Gain, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of Rs. 17,97,975/- from Long Term Capital Gain, Interest Income Rs. 18,956/- and Dividend income Rs. 1677/-. As per information extracted from the ITD application the assessee had made bogus long term capital gain/short term capital loss by way of transaction made through penny Stocks amounting to Rs. 17,56,820/-during the F.Y. 2012- 13. The investigation conducted by the Investigation Directorate of Income-Tax Deptt. also reveals that trading in said penny stock was manipulated affair to generate entries of bogus LTCG/STCL facilitating tax evasion. The source of the fund for the purchase of shares as mentioned above for which capital gain is raised was from her sources not declared in the return of income. I find that the assessee has undeclared income in the return furnished which has escaped assessment. I have therefore reasons to believe that the income of the assessee from Long Term Capital Gain, not shown as income and the source for the purchase of the above mentioned scripts for the assessment year 2013-14 not shown in the return of income has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961. Approval is therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the judgment of the Supreme Court in the case of S. Narayanappa Vs. CIT reported in (1967) 63 ITR 2019. The learned Standing counsel further submitted that the Central Board of Direct Taxes had placed certain information to the jurisdictional Assessing Officers pertaining to the Investigation Wing of Kolkata and SEBI regarding bogus capital gains through transactions of unlisted shares being penny stocks. Consequently, the verification of the ITD software were done which revealed that the Petitioners herein had made bogus long Term Capital Gain/Short Term Capital Loss by way of transactions made through penny stocks during the assessment year in question. He further submitted that the investigation conducted by the Investigation Directorate of the Income Tax Department also revealed that the trading in the said penny stocks were also manipulated affairs to generate entries of bogus Long Term Capital Gain/Short Term Capital Loss facilitating tax evasion. The learned Standing counsel submitted that the source of funds for the purchase of shares for which the capital gains were claimed from the respective Petitioners own sources were not declared in the return of the income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the satisfaction note. He submitted that the Constitution Bench of the Supreme Court in the case of K. S. Rashid and Son and Another Vs. Income Tax Officer and Another reported in AIR 1964 SC 1190 had observed in the context of Section 34 of the Income Tax Act 1922 that the condition precedent for initiation of proceedings for reassessment is for recording of reasons and not for furnishing the same. Be that as it may, the learned Standing counsel submitted that the specific reasons as contained in the satisfaction note were duly furnished. Even otherwise, it was submitted by the learned Standing counsel that the question of the initiation of proceedings for reassessment under Section 147 of the Act of 1961 cannot be put to challenge on the ground that the entire satisfaction note was not furnished. 41. From the pleadings and the respective contentions, various issues have arisen in the writ petitions relating to the non-fulfilment of the condition precedent for initiation of the reassessment proceedings as well as the violation of the provisions of Section 151 of the Act of 1961. Further to that, in two writ petitions, the initiation of the reassessment proceedings have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined that the expression reason to believe appearing in Section 34 of the Income Tax Act, 1922 did not mean a purely subjective satisfaction on the part of the Income Tax Officer. The belief must be in good faith and cannot be merely pretence. Paragraph 2 of the said judgment is quoted hereinbelow: 2. On behalf of the appellant Mr Gopalakrishnan contended in the first place that the reasons which induced the Income Tax Officer to initiate the proceedings under Section 34 were justiciable. It was submitted that those reasons should have been communicated by the Income Tax Officer to the assessee before the assessment was made. In this connection, the further argument of the appellant was that those reasons must be sufficient for a prudent man to come to the conclusion that the income had escaped assessment . In our opinion, there is no substance in any one of these arguments. It is true that two conditions must be satisfied in order to confer jurisdiction on the Income Tax Officer to issue the notice under Section 34 in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year. The first condition is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote of another judgment of the Supreme Court in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in (2008) 14 SCC 208 wherein the Supreme Court considered the import of the phrase reasons to believe as provided in Section 247(a) of the Act of 1961. While interpreting the said phrase, the Supreme Court considered both Section 147 and Section 247(a) of the Act of 1961 and observed that Section 147 authorizes and permits the Assessing Officer to assess or reassess income chargeable to tax if he had reasons to believe that income for any assessment year had escaped assessment. The word reasons in the phrase reason to believe was opined by the Supreme Court to mean cause or justification. It was further opined that if the Assessing Officer had cause or justification to know or suppose that the income had escaped assessment, it can be said to have reasons to believe that income has escaped assessment. It was also observed that the expression reason to believe cannot be read to mean that the Assessing Officer should have finally asserted the fact by legal evidence or conclusion inasmuch as the function of the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition has remained viz. that where the assessing officer has reason to believe that income has escaped assessment, confers Jurisdiction to reopen the assessment. Therefore, post 1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. 7. One must treat the concept of change of opinion as an in-built test to check abuse of power by the assessing officer. Hence, after 1-4-1989, the assessing officer has power to reopen, provided there is tangible material to come to the conclusion that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of a different inferences from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income Tax Officer, it was opined that the sufficiency of the reasons for forming his belief is not for the Court to judge but it is open to an assessee to establish that there, in fact, existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, it was opined that the Court may look into the conclusions arrived at by the Income Tax Officer and examine whether there was any material available on record from which the requisite belief could be formed by the Income Tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. 47. This Court further finds it relevant to take note of the judgment of the Supreme Court in the case of State of Uttar Pradesh and Others Vs. Aryaverth Chawal Udyog and Others reported in (2015) 17 SCC 324 wherein the Supreme Court also opined that the materials on the basis of which the Assessing Authority bases its opinion must not be arbitrary, irra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that the assessing officer certainly has the power to reassess any income which escaped assessment for any assessment year subject to the provisions of Sections 148 to 153. However, the use of this power is conditional upon the fact that the assessing officer has some reason to believe that the income has escaped assessment. The use of the words reason to believe in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such reassessment proceedings merely on his change of opinion on the basis of same facts and circumstances which has already been considered by him during the original assessment proceedings. Such could not be the intention of the legislature. The said provision was incorporated in the scheme of the IT Act so as to empower the assessing authorities to reassess any income on the ground which was not brought on record during the original proceedings and escaped his knowledge; and the said fact would have material bearing on the outcome of the relevant assessment order. 15. Section 147 of the IT Act does not allow the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To reopen an assessment under Section 147 read with Section 148 of the Act of 1961, the same can be done only on the basis of specific, reliable and relevant information coming to the possession of the Income Tax Officer subsequently, for which he has reasons to believe on the basis of tangible materials that the income had escaped assessment. For the purpose of starting reassessment proceedings, the Assessing Officer either should have some fresh facts which were not previously disclosed or some information with regard to the facts previously disclosed, comes into his possession which tends to expose the untruthfulness of those facts. (e) The sufficiency of reasons for forming the belief of the Income Tax Officer is not for the Court to judge or for that matter, the sufficiency of the grounds which induced the Income Tax Officer to act is not a justiciable issue. (f) The power of judicial review can be exercised if and only if the assessee is able to establish that there exists no belief or that the belief was not at all bonafide one or was based on vague, irrelevant and non-specific information. It is only to that limited extent, the Court may look into the conclusions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ress itself to a given aspect sought to be examined in the reassessment proceedings. (l) Section 147 of the Act of 1961 confers jurisdiction upon the Assessing Officer to reopen assessment upon having reasons to believe that the income for the relevant assessment year had escaped assessment. This conferment of jurisdiction cannot be confused with the manner in which the jurisdiction is to be exercised. The exercise of the jurisdiction is to done in terms of and satisfying the provisions of Section 148 to 153 of the Act of 1961. 50. It is on the above parameters that this Court has to take note of as to whether on the facts of the instant cases, the Income Tax Officer had fulfilled the conditions for initiating reassessment proceedings. 51. Moving forward, let this Court now take up the Issue No. (B) i.e. as to whether the compliance to Section 151 of the Act of 1961 is mandatory and would the failure to comply with the same render the reassessment proceedings fatal. In the foregoing analysis, this Court had opined on the basis of the well settled principles that in order to exercise the powers for reassessment, the provisions of Section 148 to 153 of the Act of 1961 hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause-(b) of Section 149(1) provides that if four years, but not more than six years have elapsed from the end of the relevant assessment year, unless the income chargeable to for which had escaped assessment, amounts to or is likely to amount to Rs. 1,00,000/- or more for that year. Sub-Section (2) of Section 149 stipulates that the provisions of Sub-Section (1) of Section 149 as to issue of notice shall be subject to the provisions of Section 151. 54. Therefore, a conjoint reading of Section 147, 148 and 149 of the Act of 1961 would show that Section 147 empowers the Assessing Authority to reopen assessment if he has reasons to believe that the income of an assessee had escaped assessment. The reasons to believe has to be on the basis of tangible materials. This power conferred under Section 147 can be exercised subject to Sections 148 to 153. Section 148(1) stipulates that notice has to be issued to the assessee. Section 148(2) stipulates that no notice can be issued unless the Assessing Authority records reasons for doing so. Section 149(1) stipulates the time limit for issuance of a notice under Section 148. Section 149(2) categorically mandates that the provisions of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if this Court takes note of various judicial pronouncements as regards Section 151 of the Act of 1961 and who would be the authority to give the prior approval for issuance of a notice under Section 148 of the Act of 1961, this Court finds it relevant to take note of the judgment of the Bombay High Court in the case of Ghanshyam K. Khabrani (supra) wherein the Division Bench of the Bombay High Court held that the Commissioner of Income Tax is not a Joint Commissioner as per the definition contained in Section 2(28C) of the Act of 1961. It was also observed that though the Commissioner of Income Tax may be a higher superior officer, but there was no statutory provision in the Act of 1961 under which a power to be exercised by an officer can be exercised by superior officer. It was also observed that when the statute mandates the satisfaction of a particular functionary for the exercise of the power, the satisfaction must be that of the authority inasmuch as where a statute requires something to be done in a particular manner, it has to be done in that manner. This view has been consistently endorsed in the case of DSJ Communication Ltd. Vs. Dy. CIT reported in (2014) 222 Taxma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) which more particularly arises in WP(C) No. 5535/2016 and WP(C) No. 5536/2016 as to whether the non-communication of the entire satisfaction note would vitiate the reassessment proceedings. The amendments to Section 147 and 148 brought into effect by the Act 3 of 1989 w.e.f. 01.04.1989 assumes importance inasmuch as the words for reasons to be recorded by him in writing, is of the opinion was substituted by the words has reasons to believe . Further to that Sub-Section (2) of Section 148 was inserted which reads as under: 2. The Assessing Officer shall, before issuing any notice under this Section, record his reasons for doing so . 60. By these amendments, as already stated supra, conferring of the jurisdiction upon the Assessing Officer to reopen assessment was only upon the Assessing Officer having reasons to believe that an income chargeable to tax had escaped assessment for any assessment year. This Court while dealing with the Issue No.(A) had referred to the judgment of the Supreme Court in the case of Kelvinator of India Ltd. (supra) wherein the Supreme Court noted the said amendment and in order to check abuse of the power by the Assessing Officer, it was opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument of the appellant on this point is misconceived. The proceedings for assessment or re-assessment under Section 34(1)(a) of the Income Tax Act start with the issue of a notice and it is only after the service of the notice that the assessee, whose income in sought to be assessed or re-assessed, becomes a party to those proceedings. The earlier stage of the proceeding for recording the reasons of the Income Tax Officer and for obtaining the sanction of the Commissioner are administrative in character and are not quasi-judicial. The scheme of Section 34 of the Act is that, if the conditions of the main section are satisfied a notice has to be issued to the assessee containing all or any of the requirements which may be included in a notice under sub-section (2) of Section 22. But before issuing the notice, the proviso requires that the officer should record his reasons for initiating action under Section 34 and obtain the sanction of the Commissioner who must be satisfied that the action under Section 34 was justified. There is no requirement in any of the provisions of the Act or any section laying down as a condition for the initiation of the proceedings that the reasons which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a conclusion that there is escapement of income from assessment, the Assessing Officer would have the jurisdiction to reopen assessment not only on the reasons recorded but he would also have the jurisdiction to touch upon other issues for which no reasons were recorded. 64. The above analysis therefore would show that the furnishing of the reasons is not required as per the provisions of the Act of 1961 and the said aspect had been judicially also accepted. Now therefore the question arises as to why the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) had observed that the reasons upon being requested has to be furnished which would provide an opportunity to the assessee to file objection against such reasons and further the Assessing Officer has to pass an order on the said objection and thereupon proceed. For ascertaining the said aspect, this Court finds it relevant to take note of the facts involved in the said case. In GKN Driveshafts (India) Ltd. (supra) a writ petition was filed challenging the validity of notices under Sections 148 and 143(2) of the Act of 1961. The said writ petition was rejected as premature by the High Court holding that the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts already delineated supra. ISSUE (A) :- WP(C)/5437/2016 67. In the instant writ petition, a perusal of the return so submitted on 21.09.2011 by the Petitioner revealed that the Petitioner earned capital gains to the tune of Rs. 57,58,923/- which as per the Petitioner was exempted under Section 10(38) of the Income Tax Act, 1961. From the said computation of income, it is seen that Odycorp (6500) shares were purchased at Rs. 1,03,208/- on 24.11.2008 and were sold at Rs.9,89,824/- on 20.09.2010. In respect to the company Splash M (35000), shares were purchased on 16.06.2009 at Rs. 1,79,327/- and was sold at Rs.13,57,777/- on 21.03.2011. It is also seen that in respect to Company Splash M (35000) shares, Splash M (35000) shares, Splash M (28250) shares and Splash M (6750) shares, all such shares were purchased on 24.12.2009 at zero purchase cost and were sold at Rs. 12,67,638/- on 22.03.2011, at Rs. 12,29,542/- on 23.03.2011, at Rs. 9,67,902/- on 28.03.2011 and at Rs. 2,28,775/- on 29.03.2011 respectively thereby earning a Long Term Capital Gain of Rs. 57,58,923/-. Now coming to the reasons so assigned, it has been stated that the assessee sold shares (penny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2011 respectively thereby earning a long term capital gain of Rs. 57,51,915/-. Now coming to the reasons so assigned, it has been stated that the assessee sold shares (penny stocks) as identified by SEBI and Investigation Wing, Kolkata during FY 2010-11 totaling to Rs. 37,21,973/- but as per the return filed for assessment year 2011-12 relating to Financial Year 2010-11, no income/loss in respect to sale of shares were disclosed. It is on the basis of such information received from the ITD - Penny Stock which formed the reasons for the Assessing Officer to believe that the income had escaped from assessment. 70. From the reasons so recorded as above noted and reading conjointly with the computation of income with the detail so given in the reasons for issuance of notice under Section 148 of the Act of 1961, it cannot be said that there was no existence of reasons to believe that the income had escaped assessment. Further to that, the reasons so assigned were neither vague nor indefinite. The reasons had a live link for the formation of the requisite belief. This Court during the course of hearing was also given the same reply on the inquiry made with the learned counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioner as well as the satisfaction note which have been quoted hereinabove, the computation of income so filed by the Petitioner for the assessment year 2013-14 in the opinion of this Court cannot be said that there was no existence of reasons for formation of the belief for initiating of proceedings under Section 147 of the Act of 1961. Further to that, the reasons so assigned were neither vague nor indefinite. The reasons had a live link for the formation of the requisite belief. WP(C)/5536/2016 72. A perusal of the return so submitted by the Petitioner on 07.02.2014 for the assessment year 2013-14 revealed that in the computation of income, an amount of Rs. 17,97,975/- was shown as exempted under Section 10(38) of the Act of 1961. In the said computation, it was shown that there was purchase of shares of a company namely CCL Inter (6000) on 28.02.2011 at a purchase cost of Rs. 24,000/- and the same was sold on 27.09.2012 at Rs. 8,70,000/-. Again shares were purchased of the said company i.e. CCL Inter (4500) and CCL Inter (2000) both on 28.02.2011 at Rs. 18,000/- and Rs.8,000/- respectively. The said shares i.e. CCL Inter (4500) were sold on 09.10.2012 at Rs. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cords to see as regards the compliance to Section 151 of the Act of 1961. From the record so produced pertaining to the Petitioners in WP(C) No. 5535/2016 and WP(C) No. 5536/2016, it is apparent that there is effective compliance. In respect to the writ petitioner in WP(C) No. 5437/2016, no records have been produced on the grounds that the same could not be traced. However, Mr. S. C. Keyal, the learned Standing counsel for the Income Tax Department submitted on instructions that due permission was taken from the Joint Commissioner, Income Tax, Range by making an online request for approval. He further submitted that on 30.03.2016, the said approval was granted and the notice under Section 148 was generated in system and issued. In respect to WP(C) No. 5530/2016, the records are available wherein also it is seen that the Assessing Officer had made an online request for approval of the JCIT Range on 30.03.2016 and on the very date, the approval was granted and the notice under Section 148 of the Act of 1961 was generated in system and issued. 74. A perusal of the writ petition i.e. WP(C) No. 5437/2016 shows that the reasons for issuance of notice for the reopening of assessment w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistently with the Rules. At the outset an objection was taken by the respondents to our entertaining the contention because, they point out, it is not a contention raised in the writ petitions and should not be allowed to be raised for the first time by way of oral submission in the course of arguments during the final hearing of the writ petitions. It is not denied by learned counsel for the petitioners that the point has not been specifically and clearly raised in the writ petitions, but he asks us to consider it by reason of what he describes as its fundamental importance , We have carefully perused the writ petitions, and it is plain that the entire scope of the petitions is limited to challenging the validity and application of the Central Secretariat Service (Amendment) Rules, 1979 and the consequent Regulations for holding a limited departmental competitive examination. No relief has been sought for quashing the Office Memorandum dated July 20, 1974. No ground has been taken in the writ petitions assailing the validity of the office memorandum on the basis now pressed before us. We are of opinion that the courts should ordinarily insist on the parties being confined to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests that the online request was made to the Joint Commissioner of Income Tax and the said was duly approved. This Court is not inclined to disbelieve the said materials on record on the basis of just oral submissions that too when such plea have not been taken. As regards WP(C) No. 5535/2016 and WP(C) No. 5536/2016, the said issue of non-compliance does not arise. ISSUE C :- 77. The contention in respect to Issue No.(C) have been permitted to be raised by this Court even without pleadings on the ground that the Petitioners in WP(C) No. 5535/2016 and WP(C) No. 5536/2016 were furnished reasons on 11.07.2016 and the said Petitioners bonafidely believed that those were the reasons for which the Assessing Officer reopened the assessment. It was only when the records were produced on 18.11.2023 and the satisfaction note being perused, it revealed that only the relevant portion of the satisfaction note was furnished to the said Petitioners. 78. The analysis so made in respect to Issue No.(C) in the foregoing paragraphs of the instant judgment makes it therefore clear that the non- furnishing of the entire satisfaction note to the writ petitioners in WP(C) No. 5535/2016 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Department as well as the Central Board of Direct Taxes to make necessary inquiry as to how the records of the Petitioner in WP(C) No. 5437/2016 was not traceable or lost and thereupon initiate appropriate action against the erring officials. (v) Taking into account that the Petitioners herein have a right to object to the sufficiency of the reasons which led to the formation of the belief for reopening of the assessment as held by the Supreme Court in the case GKN Driveshafts (India) Ltd., this Court grants liberty to the Petitioners herein to submit their respective objections within 30 days from the date of the instant judgment objecting to the sufficiency of the reasons for formation of the belief that the income had escaped assessment for the assessment year in question and if such objections are filed, the Assessing Officer shall dispose of the same by passing a speaking order. Depending upon the said decision of the Assessing Officer, the reassessment proceedings shall be carried out. (vi) It is further made clear that the speaking order as directed to be passed hereinabove provided objections are filed, would be in relation to the sufficiency of the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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