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TMI Blog2025 (3) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, 2021 issued under Section 148 of the Income Tax Act, 1961 (for short "the Act") for the Assessment Years 2013-14 and 2014-15 on the ground that the reasons recorded for reopening for both the Assessment Years are vague and incorrect. 4. For sake of convenience, Special Civil Application No.2488 of 2022 is treated as a lead matter for recording of the facts. 4.1 The petitioner - Company entered into various loan transactions with one M/s. Affluence Commodities Pvt. Ltd. during the previous year relevant to Assessment Year 2013-14 and earned interest income of Rs.1, 99, 000/-. The aggregate amount of transactions between the petitioner and the said Company at the end of the year was Rs. 14, 03, 19, 900/-. 4.2 The petitioner filed return of income for the year under consideration on 26.09.2013 declaring total income of Rs. 23, 88, 130/-. 4.3 The case of the petitioner was selected for scrutiny and notice dated 08.07.2015 was issued under Section 142 (1) of the Act including the details of interest paid/ received with rate of interest as per Point No. 'xxiii' of the said notice. 4.4 The petitioner by letter dated 16.07.2015, furnished the details as called for and categoricall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uity/derivates trading of Rs 14, 03, 19, 900/- with the help of share brokers etc wherein a search action was carried out by the Investigation Wing of Income Tax Department. 3. On the basis of above mentioned facts and after proper investigation from the materials on record, it is substantiated that during the year under consideration, the assessee has failed in offered income as deemed income amounting to Rs. 14, 03, 19, 900/-. Hence, it is found that income of Rs. 14, 03, 19, 900/- for the year under consideration has escaped assessment within the meaning of Section 147 of the I.T. Act. 5. Learned Senior Advocate Mr. Tushar Hemani for the petitioner submitted that the respondents could not have assumed the jurisdiction as the petitioner never entered into any transactions in equity/ derivatives of Affluence Commodities Pvt. Ltd. and therefore the reasons recorded are absolutely vague, scanty and non-specific more particularly, the basis of reopening is stated to be trading the petitioner in the penny stock Affluence Commodities Pvt. Ltd. of Rs. 14, 03, 19, 900/- which is nothing but, the total of debit and credit side of the account maintained by the petitioner in its books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances, no interference is called for while exercising extra ordinary jurisdiction under Article 226 of the Constitution of India more particularly when the information received by the respondent from the Investigating Wing is specific and it is clearly pointed out that the Assessee has unexplained income of Rs. 14, 03, 19, 900/-. 6.3 In support of his submission, the reliance was placed on the following averments made in the affidavit-in-reply filed on behalf of the respondent. "6. I humbly state that the main ingredient required to issue notice u/s 148 of the I.T. Act, 1961 is to form 'reason to believe. At the stage of issue of notice u/s 148, the only question is whether there was relevant material on which reasonable person could have form the requisite belief as to whether an income chargeable to tax has escaped assessment. The expression 'reason to believe' cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion. Whether material would conclusively prove escapement of income is not the concern at the stage of issue of notice. It only means that the AO forms a belief from the examination of facts, from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore has recorded the satisfaction for reopening of the assessment. 7. Having heard the learned advocates appearing for the respective parties and considering the material placed on record, it appears that the respondent-Assessing Officer while recording the reasons has failed to take into consideration the report of the Investigation Wing in true perspective. It also appears that the respondent-Assessing Officer while recording the reasons for reopening has not even considered that the amount mentioned in the reasons of Rs. 14, 03, 19, 900/- regarding the Assessment Year 2013-14 is nothing but total of debit and credit side of the account of M/s. Affluence Commodities Pvt. Ltd. from the books of accounts of the petitioner. Similarly for Assessment Year 2014-15 also the reasons recorded reflects the total of the debit and credit side of the account of the said Company from the books of accounts of the petitioner meaning thereby that the respondent-Assessing Officer without application of mind and contrary to any information in his possession has issued the impugned notices in a mechanical manner. 7.1 This Court in case of Paresh Babubhai Bahalani (Supra) has referred to and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of being heard. Secondly, the concerned authority should provide a fair and transparent procedure and lastly, the authority concerned must apply undefined its mind and dispose of the matter by a reasoned or speaking order. This has been uniformly applied by courts in India and abroad." (para10) 6.1 In S.N. Mukherjee vs. Union of India [(1990) 4 SCC 594], the insistence of and importance of recording reasons for decision by the administrative authorities and Tribunals was justified by observing that, "administrative process will best be vindicated by clarity in its exercise". It was stated in Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota (supra) that in exercise of powers of judicial review, the concept of reasoned order has been equally enforced by the courts in India. Absence of reasons by the administrative authorities and the Tribunals, would render the order liable to judicial chastisement. The reasons are necessary to enable the appellate or higher courts to exercise their jurisdiction appropriately. 6.2 It was then observed in Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota (supra), "....It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. j. Insistence on reason is a requirement for both judicial accountability and transparency. k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubber- stamp reasons' is not to be equated with a valid decision making process. m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737). n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maker. The decision making process becomes transparent by virtue of reasons. In absence,, it is impossible to know whether the person deciding the issue is faithful to the doctrine of precedent or to the principles of incrementalism. (vi) Reasons in support of decisions must be cogent, clear and succinct. A pretense of reasons or "rubber-stamp reasons" cannot be equated with a valid decision-making process. (vii) Reasons also facilitate the process of judicial review by superior courts. 7. In light of the above discussion highlighting the indispensability of reasons in the order passed by any authority administrative, quasi judicial or judicial, when it comes to exercise of powers under sections 147 and 148 of the Income Tax Act, 1961, there has to be a greater thrust for necessity of recording reasons. The entire exercise of reopening hinges on the reasons recorded by the Assessing Officer. It is the 'reasons' which weigh with him. 7.1 When the concluded assessment is to be revisited with by the Assessing Officer, recording of reasons for exercise of such powers has to be viewed as vested rights for the assessee. While exercising powers under the Act to reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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