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12-04-2019, Omega Biotech, Section 147, 148, 152, Tribunal Delhi

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2 months 5 days ago #9150 by amit
Section - 147, 148, 152, 34, 31
Order Date - 12-04-2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - Omega Biotech Ltd.
Respondent - ITO
Justice - LALIET KUMAR JM & B.R.R.KUMAR AM
Citation - 419Taxpundit185
Appeal No. - ITA No.2570/Del./2015
Asstt. Year - 2002-03

Order

PER : LALIET KUMAR

This appeal is preferred by the assessee against order dated 27.02.2015 passed by the Ld. CIT (Appeals)-7, New Delhi for assessment year 2002-03 on the following grounds reads as under :-

I. The CIT(A) erred in law and on facts in upholding the reassessment order passed u/s 147 and notice issued u/s 148 as valid ignoring the fact that the notice u/s 148 has been issued merely on the basis of the information received from Investigation Wing. Thus, the assessment so made should be cancelled.

II. The CIT(A) erred in law and on facts in confirming the addition of Rs. 12,50,000/- for the amount received towards the share capital from five limited companies ignoring the facts, evidences and submissions placed on record. Thus, the addition so made should be deleted.

III. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.”

2. The Ld. CIT(A) decided the issue of the Jurisdiction u/s 148 of the ACT against the assessee by citing the following reasons paragraph 5.4 to 5.7.

“5.4 The issue was again examined by the apex court in the case of Assistant Commissioner of Income tax v Rajesh Jhaveri Stock Brokers (P.) Ltd (SC) wherein it was held as under:

"16. Section 147 authorises and permits the AO to assess or reassess income chargeable to tax if he has reason to believe that income far any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification, if the AO has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot he read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion.

The function of the Assessing Off leer is to administer the statute with .solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [199!] 191ITR 662, for initiation of action under ,sect ion 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is' essentiaI. At that stage, the, final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the .stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have firmed a requisite belief whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction.

17. The scope and effect of section 147 as substituted with effect from 1-4-1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution Under the old provisions of section 147 separate clauses (a) and (b) laid down the circumstances under which income escaping assessment ,for the past assessment years could be assessed or reassessed to confer jurisdiction under section 147(a) two conditions were required to be satisfied, firstly the AO must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose filly or truly di material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have
jurisdiction to issue notice under section 148 read with section 147(q). But under the substituted section 147 existence of only the first condition suffices. In other words if the AO for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment

18. So long as the ingredients of section 147 are fulfilled, the AO is free to initiate proceeding under section 147 and, failure to take steps under section 143(3) with the AO powerless to initiate reassessment proceedings even when intimationy 143(1) had been issued."

5.5 The Hon'ble Courts in the judgments mentioned above have clearly held that formation of belief by the AO is within the realm of subjective satisfaction and it is not necessary for the AO to conclusively prove the escapement of income before

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