TMI Blog2024 (2) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... vide basis of belief of escapement of income year specific. AO s belief must be based on some tangible material, having a live link or nexus with the income allegedly escaping assessment. Reassessment cannot be resorted to on the basis of vague, indefinite or remote information. Where reassessment proceedings are initiated on the basis of information received from other departments/sources without examining them, it cannot be said that the same was based on belief of the AO that income had escaped assessment. Applying the law on reopening of assessments u/s 147 of the Act as noted above by us to the facts of the case we find merit in the contention of assessee that the jurisdiction assumed by the AO to reopen the case of the assessee was invalid. The reasons for arriving at this finding are very obvious. No specific recording of escapement of income for the assessment year reopened by the AO. Consolidated reasons recorded for all impugned years. Reasons are vague - The reasons record the consolidated figure of disproportionate assets found by the CBI pertaining to all the impugned years before us. There is no recording of income escaping assessment for each particular as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SMT. MADHUMITA ROY, JUDICIAL MEMBER, JUDICIAL MEMBER For the Appellant : Shri Sakar Sharma, A.R. For the Respondent : Ms. Saumya Pandey Jain, Sr. DR ORDER PER BENCH: These appeals relate to the same assessee and are filed against separate orders passed by the ld. Commissioner of Income-Tax (Appeals), Ahmedabad (in short CIT(A)) u/s 250(6) of the Income Tax Act, 1961( hereinafter referred to as Act ).The orders passed pertain to Assessment Years(A.Y) 1996-97 to 2000-01. While the assessee and the Department have filed cross appeal for Asst. Year 1996-97, for the remaining years only the assessee has come up in appeal. The three appeals of the assessee in ITA No.1751-1753/Ahd/2008 are in relation to the orders passed by the ld.CIT(A) confirming levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 [hereinafter referred to as the Act for short]. Remaining appeals are in relation to orders passed by the ld.CIT(A) in quantum proceedings for the impugned years. 2. We shall first be dealing with the appeals filed in quantum proceedings for A.Y 1996-97 to A.Y 2000-01. ITA 435 332/Ahd/2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the assessee pointed out that the assessment in all the impugned years was framed under section 147 of the Act, and he wished to challenge the validity of the assessment so framed on the following grounds: i) The reasons recorded of escapement of income for reopening the case of the assessee was one consolidated reason for all the years involved. There was no specific finding of escapement of income for any of the specific years, and it was a just a general reason for all the years involved; ii) That there was no belief of the AO of income of the assessee having escaped assessment but it was a borrowed belief ; iii) That in Asst. Year 1999-2000, reopening had been sanctioned/ approved by the CIT which was against the provisions of law in this regard, as prescribed under section 151 of the Act. 6. The Ld.DR countered by stating that - Before the ld.CIT(A) in Asst. Year 1996-97, the assessee had withdrawn his objection to the approval to the reopening of the case not being in accordance with provision of section 151 of the Act; that the satisfaction of the AO was not a borrowed satisfaction, and it was based on the report of the CBI of the disproportionate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us, making addition on account of investment in the disproportionate assets found by the CBI as being from unexplained sources. The facts as aforestated are derived from para 2-5 of the assessment order for A.Y 1996-97which are reproduced hereunder: 11. Since the assessee has challenged the validity of the assessment framed u/s 147 of the Act in all the impugned years before us, pointing out insufficiency in the reasons recorded for reopening the case of the assessee, it is pertinent first to reproduce the reasons filed before as under: 12. A perusal of the reasons as above reveals: that one common reason was recorded for all the years reopened by the AO i.e. 1996-97 to 2000-01 which are impugned before us. that the AO has picked up consolidated figure of the disproportionate assets attributed by the CBI report to the assessee for all the impugned years i.e A.Y 1996-97 amounting to Rs. 47.20 lakhs, to reopen the case for all the years. the AO has also recorded the fact that the income relating to the disproportionate assets has not been disclosed by the assessee and which exceeds Rs. 1 lac in all the years. 13. On the basis of this informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income escaping assessment for the different years concerned. AO u/s 147 of the Act can reassess income only when he forms a belief of income of that year having escaped assessment. Reasons recorded therefore for reopening cases have to provide basis of belief of escapement of income year specific. 16. Further the AO s belief must be based on some tangible material, having a live link or nexus with the income allegedly escaping assessment. Reassessment cannot be resorted to on the basis of vague, indefinite or remote information. The Hon ble apex court has laid down the law in this regard in the case of Income Tax Officer Vs Lakhmani Mewal Das 103 ITR 437 wherein they have categorically held as under: ..The reasons for the formation of the belief contemplated by section 147(a) of the Income-tax Act, 1916 for reopening of an assessment must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of cases pertaining to the relevant ward. It was clear that the Assessing Officer referred to the information and the two directions as reasons on the basis of which he was proceeding to issue notice under section 148. These could not be the reasons for proceeding under section 147/148. From the so-called reasons, it was not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Therefore, the reassessment was not valid. Principal Commissioner of Income Tax-5 vs Shodiman Investments (P) Ltd (2020) 422 ITR 337 (Bom) wherein the Hon ble High Court reiterated the proposition holding as under: 14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that re- opening notice has to be issued by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation in the report that certain assets were in the name of his wife and father who had regular sources of income. The CBI report mentions the date of investment also. The AO has made no effort to even determine the quantum of income escaping assessment as per his belief for each year involved. The AO appears to have simply borrowed the belief of the CBI in its preliminary report attributing all assets found during search to the assessee and recording consolidated belief of escapement of income based on the figure mentioned by the CBI in its report. There is complete lack of application of mind by the AO, we hold, while forming belief of escapement of income. 24. Pertinent is the law laid down by the apex court that such preliminary report of CBI does not constitute information for forming any adverse belief against an assessee. The Hon ble Apex Court in the case of Union of India Vs Ajit Jain and Another 260 ITR 80 (SC) affirmed the order of the Hon ble Delhi High Court in Ajit Jain vs Union of India reported in 242 ITR 302 (Del) holding so. The relevant findings of the Hon ble High Court in this regard are as under: 14. It is in the light of the above principles of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt could not straightaway lead to the inference that it was his undisclosed income. 25. Though the Hon ble court in the said case dwelt on the existence of information for validating search action u/s 132 of the Act on the assessee, the principles of the interpretation of the term reason to believe , based on information that an assessee is in possession of assets undisclosed, to conduct a valid search operation u/s 132 of the Act, was adopted by the Hon ble court from its interpretation in terms of section 147 of the Act. The Hon ble court held that mere intimation by CBI of assessee being in possession of assets was not sufficient information to form belief of escapement of income. 26. In the present case the report of the CBI lists all assets clearly mentioning the fact of the names of different persons in which it was found invested, including his wife and father. The report notes the fact of both the relatives having sources of income and thereafter goes on to state that the assets are disproportionate to the disclosed source of income of the assessee and his wife. Clearly it is just a preliminary report of the CBI, who have in a general manner attributed all assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reason to believe that 60,000 US$ had been paid as bribe to the Iraqi officials and therefore was required to be added to the income of the Assessee. 28. In view of the above, the CBI report, we hold, could not have constituted information for the AO to form belief of escapement of income. For reasons detailed above, we have no hesitation in holding that reopening resorted to by the AO in all the impugned years before us being not in accordance with law. The orders passed by the AO u/s 147 of the Act in all the impugned years, we hold, are invalid and accordingly quashed. The appeal of the assessee in quantum proceedings are therefore allowed on the legal ground. 29. Since we have quashed the assessment orders, we are not dealing with the grounds raised by the assessee on merits, since it is only an academic exercise. 30. The appeal of the Revenue for A.Y 1996-97 also does not survive in view of our order above holding all assessments to have been invalidly framed and hence quashed. 31. Further, since we have held all the assessment orders to be invalid, the penalty levied under section 271(1)(c) of the Act, as a consequence, has no legs to stand upon, and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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