×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
12-04-2019, Kamal Kishoree Aggarwal, Section 274, 148, Tribunal Delhi
Thi s i s an appeal filed by the assessee against the order of CIT(A)-12, New Delhi dated 13.07.2018.
2. The assessee has rai sed following grounds of appeal:
“1. On the facts and circumstances o f the case, the order passed u/s 250(6) by the Ld . CIT(A) confirming the assessment order passed u/s 143(3) r .w .s. 147 by the Ld . Assessing Of ficer is bad in law .
2. The Ld . CIT(A) has erred both in law and on the facts o f the case by upholding the action o f the Ld . ASSESSING OFFICER to initiate reopening and reassessment o f the case u/s 147 o f the Income Tax Act 1961.
3. Ld . CIT(A) has erred in confirming the addition o f Rs. 5,96,177/- made by Ld . AO u/s 143(3) r .w .s. 147 by treating certain share transaction s as bogus.
4. Ld . CIT(A) has erred in not recognizing the fact that the Client Code Modi fication (CCM) was done to recti fy the genuine errors held at the end o f broker for which the assessee was not responsible.
5. Ld . CIT(A) has erred in confirming the order o f Ld . AO even when the Ld . AO failed to provide the details o f the transactions where Client Code was modi fied .
6. Ld . Assessing Of ficer has erred bo th in law and on facts o f the case in initiating penalty proceedings u/s 271(1)(c) read with section 274 o f the IT Ac t, 1961.
7. The appellant craves leave to amend , delete or add any grounds o f appeal before or during the course o f hearing o f the appeal .”
3. In ground nos. 1 & 2 of the appeal , the assessee has challenged the reopening of assessment made u/s 147 of the Act i s bad in law.
4. The Commissioner of Income Tax (Appeals) has decided the issue as under:
“(1) The above ground challenges the action of the LI Assessing Officer in resorting to provisions of section 148 of the Act as being bad in law as would be apparent from the detailed submissions being made hereinafter.
(2) S. 147 of the Act authorizes and permits an Assessing Officer to reassess the income chargeable to tax for any assessment year if he has "reason to believe that the said income for any assessment year has escaped assessment". The expression "escaped assessment" clearly connotes a very basic postulate that income for a particular assessment year went unnoticed by the Ld. Assessing Officer and because of it not being noticed by him for any reason, it escaped assessment. Accordingly, there should be a complete linkage and direct co-relation between the formation of reason to belief and the conclusion as to income escaping assessment so as to resort to the reassessment provisions.
(3) The provisions of the Act make it clear that the issue of a Notice under Section 148 of the Act seeking action under section 147 of the Act is dependent on "recording of a satisfaction” as to escapement of income as a threshold requirement i.e. "the Assessing Officer should have reason to believe that income chargeable for the relevant assessment year has escaped assessment". The language of the section makes it clear that while the powers of an Assessing Officer to initiate reassessment proceedings are very wide, at the same lime they are not plenary in nature. These powers are vitally controlled by the words 'reason to believe' employed by the section. The reasons for formation of belief for reopening an assessment must have a rational, intimate and direct connection or relevant bearing on the formation of the belief. The existence or otherwise of such a belief on the pan of the Assessing Officer, is not a mere question of limitation but the very foundation of his jurisdiction. Accordingly, the law clearly postulates the presence of the following four essential ingredients for the issue of a notice u/s 148 of the Act:
(a) existence of some material(s) and not mere fancy imagination, speculation or suspicion:
(b) an "application of mind" by the Assessing Officer to such material:
(c) a nexus between such materialist and the belief of escapement of income from assessment, and
(d) an inference based on reason drawn by the Assessing Officer that income has escaped assessment.
(4) In the instant ease a review of the reasons furnished for the issue of notice u/s 148 and consequent framing of the reassessment in the Appellant’s case make it clear that the same are based on information received from the Pr DIT (Investigation), based on the results of surveys carried out on certain brokers, wherein it has been determined that the facility of Client Code Modification has been allegedly used as a means of tax evasion and not for "rectifying genuine errors" as permitted by SEB1
(5) White the name of the Appellant does not appear in any of the investigations carried out by different wings of the Income-tax Department, the mere fact that certain entities individuals could have misused the facility1 has prompted the id Assessing Officer, without any independent appraisal or judicious application of mind, to tar ad such transactions with the same brush and to taint the same to be irregular, bogus and even fraudulent
(6) A review of the reasons for issuing the impugned notice ids 147/148 of the Act for "alleged escapement of income" would reveal (hat they merely, in fact blindly, rely upon the information conveyed to the id Assessing Officer from independent sources Wings of the Department which has not been independently verified by any degree of application of mind or conducting any such enquiries.
(8) As already discussed herein be ore the basis for the validity of any action u/s 147/148 of the Act has to be some 'tangible, substantive and specific belief that the "income of a particular assessee" in question has escaped assessment. The information on the basis of which such an action has been taken should he specific in relation to the particular assessee. Merely on the basis of some general information and without any specific application of mind the issue of escapement of income cannot be determined and any action taken on the basis of the same is beyond the letter, spirit and intent of law.
(8) The relevant lega provisions in this regard specially call for a definite conclusion as to the "reason to believe" as opposed to "reason to suspect”, hi the
given case there was only a suspicion as to some income having escaped assessment which suspicion cannot by itself sus ain any action u/s 147/148 of the Act. The reliance on Enquiries/Investigations carried out in the ease of independent third parties may have led to some adverse findings which by itself cannot be ipso- facto applied to the Appellant whereby it is clear that the notice in question is merely based on a "reason to suspect" as opposed to a "reason to believe". The manner in which affairs are conducted by independent third parties, acting in their its own self-interest and the results of any proceedings carried out in their cases cannot, without any concrete evidence, lead to a formation of belief as to escapement of income in the ease of the Appellant.