ITO 8(1)(4), MUMBAI vs. SENTIA DEVELOPERS LTD, MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against the order dated

14/12/2016 passed by the Ld.Commissioner of Income-tax

(Appeals)-8, Mumbai [in short, ‘the Ld. CIT(A)] for Assessment Year

2010-11, raising the following grounds:-

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“I. The Learned CIT(A) has erred The Learned CIT(A) has erred in law in not appreciating the facts that in law in not appreciating the facts that the AO would have power to reopen the the AO would have power to reopen the assessment assessment, provided he had some tangible material on the basis of which he could form a reason some tangible material on the basis of which he could form a reason some tangible material on the basis of which he could form a reason to believe that income chargeable to tax has escaped assessment. to believe that income chargeable to tax has escaped assessment. to believe that income chargeable to tax has escaped assessment. II. The Learned CIT(A) has erred on facts and in law in deleting the The Learned CIT(A) has erred on facts and in law in deleting the The Learned CIT(A) has erred on facts and in law in deleting the addition without going into the merits addition without going into the merits of the case. 2. The Ld.CIT(A)’s order is contrary in law on facts and deserves to be The Ld.CIT(A)’s order is contrary in law on facts and deserves to be The Ld.CIT(A)’s order is contrary in law on facts and deserves to be set aside. 3. The appellant craves leave to amend or alter any ground or to submit The appellant craves leave to amend or alter any ground or to submit The appellant craves leave to amend or alter any ground or to submit additional new ground which may be necessary. additional new ground which may be necessary. 4. The appellant prays that the order of The appellant prays that the order of the CIT(Appeals) the CIT(Appeals) on the above grounds be set aside and that of the AO be restored. grounds be set aside and that of the AO be restored. grounds be set aside and that of the AO be restored.” 2. Briefly stated, facts of the case are that the assessee filed its Briefly stated, facts of the case are that the assessee filed its Briefly stated, facts of the case are that the assessee filed its

return of income electronically on 21/09/2010 accompanied with return of income electronically on 21/09/2010 accompanied with return of income electronically on 21/09/2010 accompanied with

balance-sheet, P&L Account sheet, P&L Account, declaring total income at Nil. The otal income at Nil. The

return of income filed by the assessee was selected for scrutiny return of income filed by the assessee was selected for scrutiny return of income filed by the assessee was selected for scrutiny

assessment, which was completed on 16/11/.2012 under section assessment, which was completed on 16/11/.2012 under section assessment, which was completed on 16/11/.2012 under section

143(3) of Income-tax Act, 1961 (in short, ‘the Act’) accepting the tax Act, 1961 (in short, ‘the Act’) accepting the tax Act, 1961 (in short, ‘the Act’) accepting the

returned income filed by the assessee. returned income filed by the assessee.

Officer at New Delhi and Deputy Commissioner of Income Officer at New Delhi and Deputy Commissioner of Income Officer at New Delhi and Deputy Commissioner of Income-tax,

Hyderabad, the Assessing Officer recorded reasons to believe that Hyderabad, the Assessing Officer recorded reasons to believe that Hyderabad, the Assessing Officer recorded reasons to believe that

M/s Sentia Developers Ltd. 3 ITA 2661/Mum/2017

income escaped assessment and issued notice under section 148 of income escaped assessment and issued notice under section 148 of income escaped assessment and issued notice under section 148 of

the Act. The re-assessment was completed on 30/03/2015 wherein assessment was completed on 30/03/2015 wherein assessment was completed on 30/03/2015 wherein

the Assessing Officer considered the loans received by the assessee the Assessing Officer considered the loans received by the assessee the Assessing Officer considered the loans received by the assessee

company from its holding company as benefit under section 28(iv) company from its holding company as benefit under section 28(iv) company from its holding company as benefit under section 28(iv) of the Act amounting to ₹71,99,99,550/-. The Assessing Offi of the Act amounting to . The Assessing Officer

without prejudice, also treated the sum received as an unexplained without prejudice, also treated the sum received as an unexplained without prejudice, also treated the sum received as an unexplained

cash credit under section 68 of the Act. cash credit under section 68 of the Act.

challenged the validity of the re challenged the validity of the re-assessment proceedings as well as assessment proceedings as well as

addition on merit. The Ld.CIT(A), in his detailed finding has merit. The Ld.CIT(A), in his detailed finding has merit. The Ld.CIT(A), in his detailed finding has

quashed the re-assessment proceedings without any finding on the assessment proceedings without any finding on the assessment proceedings without any finding on the

merit of the addition. merit of the addition.

and perused the relevant materials on record. We find that and perused the relevant materials on record. We find that and perused the relevant materials on record. We find that

Ld.CIT(A) has quashed the re Ld.CIT(A) has quashed the re-assessment proceedings on the assessment proceedings on the

ground that reasons recorded by the Ld.Assessing Officer are based ground that reasons recorded by the Ld.Assessing Officer are based ground that reasons recorded by the Ld.Assessing Officer are based

on mere suspicion without any tangible material, change of opinion without any tangible material, change of opinion without any tangible material, change of opinion

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on the same set of facts without application of mind by the on the same set of facts without application of mind by the on the same set of facts without application of mind by the

Assessing Officer, etc. Therefore, for deciding the issue in dispute Assessing Officer, etc. Therefore, for deciding the issue in dispute Assessing Officer, etc. Therefore, for deciding the issue in dispute

of validity of re-assessment proceedings, it is relevant to reproduce assessment proceedings, it is relevant to reproduce assessment proceedings, it is relevant to reproduce

the reasons recorded by the Assessing Officer as under: the reasons recorded by the Assessing Officer as under: the reasons recorded by the Assessing Officer as under:-

"Reasons for reopening U/s 147 of the l.T.Act "Reasons for reopening U/s 147 of the l.T.Act The DC IT Cir.-2(3), Hyderabad, has intimated that during the 2(3), Hyderabad, has intimated that during the F'.Ys. 2008- -09 & 2009-10 the company M/s. Sentia Developers Ltd. invested Rs.51 Crore company M/s. Sentia Developers Ltd. invested Rs.51 Crore in M/s. Jagati Publication Ltd. in M/s. Jagati Publication Ltd. towards share application money at towards share application money at a very high premium and was allotted shares very high premium and was allotted shares during F.Y. 2009-10. The /TO (Inv.) Unit IV(1), New Delhi, has reported (Inv.) Unit IV(1), New Delhi, has reported that the Director of M/s. Sentia that the Director of M/s. Sentia Developers Ltd, did not appear to Developers Ltd, did not appear to explain the basis for investing at high premium. Further the basis for investing at high premium. Further 5,55,555 shares of M/s. Jagati Publication Ltd were 5,55,555 shares of M/s. Jagati Publication Ltd were purchased by M/s. Sentia Developers Ltd. by M/s. Sentia Developers Ltd. from M/s. Ramu Real Estates Pvt. Ltd. (presently known as ABIL Infrastructure Ltd.) at Rs.368 from M/s. Ramu Real Estates Pvt. Ltd. (presently known as ABIL Infrastructure Ltd.) at Rs.368 from M/s. Ramu Real Estates Pvt. Ltd. (presently known as ABIL Infrastructure Ltd.) at Rs.368 per share. All these investments were made out of the interest free unsecured loans procured, these investments were made out of the interest free unsecured loans procured, these investments were made out of the interest free unsecured loans procured, from M/s. India Bulls Real Estates Ltd. The DC from M/s. India Bulls Real Estates Ltd. The DCIT Cir.2(3), Hyderabad observed that the T Cir.2(3), Hyderabad observed that the investment made by M/s. Sentia Developers Ltd. has not yielded any benefits in the form of investment made by M/s. Sentia Developers Ltd. has not yielded any benefits in the form of investment made by M/s. Sentia Developers Ltd. has not yielded any benefits in the form of Dividend. Moreover, at the time of investment Moreover, at the time of investment half of net worth of M/s, Jagati Publications Ltd. half of net worth of M/s, Jagati Publications Ltd. had already eroded and the company was in losses. The share had already eroded and the company was in losses. The share prices of media companies do not prices of media companies do not command such a high price in the open market. command such a high price in the open market. It also needs to be examined whether the amounts received as unsecured interest free loans It also needs to be examined whether the amounts received as unsecured interest free loans It also needs to be examined whether the amounts received as unsecured interest free loans from M/s. India Bulls Real Estates Ltd. have been repaid by M/s. Sentia Developers Ltd. If the from M/s. India Bulls Real Estates Ltd. have been repaid by M/s. Sentia Developers Ltd. If the from M/s. India Bulls Real Estates Ltd. have been repaid by M/s. Sentia Developers Ltd. If the amounts have not been repaid, the payments may be irretrievable in nat amounts have not been repaid, the payments may be irretrievable in nature and hence may be ure and hence may be taxed in the hands of M/s. Sentia Developers Ltd. taxed in the hands of M/s. Sentia Developers Ltd.

The details of investment in M/s. Jagati Publication Ltd. made by The details of investment in M/s. Jagati Publication Ltd. made by M/s Sentia Developers Ltd.. as Sentia Developers Ltd.. as reported by the ITO (Inv.) Unit IV(1), New Delhi are as under: reported by the ITO (Inv.) Unit IV(1), New Delhi are as under:

Srl. Date No. of Face Premium Premium Amount No. equity Value (Rs.) shares 1 21.05.2009 277777 10 350 99999720 2 24.09.2009 555555 10 368 209999790 3 13.11.2009 1138889 10 350 410000040 4 Total 1972221 719999550 Since M/s. Jagati Publication Ltd. is neither listed nor was doing any business activity at the time Publication Ltd. is neither listed nor was doing any business activity at the time Publication Ltd. is neither listed nor was doing any business activity at the time of investment and since the assessee, M/s. Sentia Developers Ltd. is in a totally different line of of investment and since the assessee, M/s. Sentia Developers Ltd. is in a totally different line of of investment and since the assessee, M/s. Sentia Developers Ltd. is in a totally different line of business and there is no business activity reported by the assessee eith business and there is no business activity reported by the assessee either, the transactions er, the transactions relating to such investment is not a normal business transaction and is a. colourable device relating to such investment is not a normal business transaction and is a. colourable device relating to such investment is not a normal business transaction and is a. colourable device through a corporate medium which is highly suspicious in nature.. through a corporate medium which is highly suspicious in nature..

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The balance sheet of the assessee shows interest free unsecured loans of Rs The balance sheet of the assessee shows interest free unsecured loans of Rs The balance sheet of the assessee shows interest free unsecured loans of Rs.71,96,33,000/- in A.Y. 2010-11 as against Rs.9,96,23,000/ 11 as against Rs.9,96,23,000/-m A.Y. 2009-10 which is entirely received from the 10 which is entirely received from the holding company, M/s. India Bulls Real Estate Ltd. The balance sheet also reflect Long Term holding company, M/s. India Bulls Real Estate Ltd. The balance sheet also reflect Long Term holding company, M/s. India Bulls Real Estate Ltd. The balance sheet also reflect Long Term investment (at cost) of Rs. 72,00,00,000 ) of Rs. 72,00,00,000/- in A.Y. 2010-11 being 1972221 fully paid up equity 11 being 1972221 fully paid up equity shares of M/s. Jagati Publications Ltd. (face value of shares of M/s. Jagati Publications Ltd. (face value of Rs. 10 each) as against 'NIL' each) as against 'NIL' in A. Y. 2009- 10. In A. Y. 2009-10 the assessee had obtained. Inter Corporate deposits of Rs.10,01,00,000/ 10 the assessee had obtained. Inter Corporate deposits of Rs.10,01,00,000/ 10 the assessee had obtained. Inter Corporate deposits of Rs.10,01,00,000/- out of which it repaid Rs.4,77,000/ ich it repaid Rs.4,77,000/- during the same year. The balance deposits of Rs. 71,96,33, during the same year. The balance deposits of Rs. 71,96,33,000/- have not been repaid. Moreover, the share capital of the assessee company is only Rs. repaid. Moreover, the share capital of the assessee company is only Rs. repaid. Moreover, the share capital of the assessee company is only Rs.5lakhs. So the question arises as to how the interest free unsecured loans es as to how the interest free unsecured loans can be paid back by the assessee be paid back by the assessee company. Since these payments are irretrievable in nature on the basis of the report received from the ITO Since these payments are irretrievable in nature on the basis of the report received from the ITO Since these payments are irretrievable in nature on the basis of the report received from the ITO s. Sentia Developers Ltd. (Inv Unit-IV(l), New Delhi, the same nee V(l), New Delhi, the same need to be taxed in (he hands of M s. Sentia Developers Ltd. In the light of facts mentioned above, it is clear that the light of facts mentioned above, it is clear that the -amount of 71,96,33,000/ 33,000/- should have been brought to tax as income in the been brought to tax as income in the hands of the assessee. This has resulted in under hands of the assessee. This has resulted in under assessment of Rs.71,96,33, assessment of Rs.71,96,33,000/- and consequent short levy of tax amounting to and consequent short levy of tax amounting to Rs.21,58,89,900/-.” 6. We find that the Ld.CIT(A) has quashed the re We find that the Ld.CIT(A) has quashed the re We find that the Ld.CIT(A) has quashed the re-assessment proceedings observing as under: proceedings observing as under:- ! have carefully considered the facts of the case, assessment order, submissions and ! have carefully considered the facts of the case, assessment order, submissions and ! have carefully considered the facts of the case, assessment order, submissions and contention of the appellant as summarised above and the re contention of the appellant as summarised above and the relevant case laws pertaining to levant case laws pertaining to the issues to be decided.

Ground No. 1 “5.1 Ground No. 1 5.1.1 This ground relates to reopening of assessment u/s 147 of Income Tax 5.1.1 This ground relates to reopening of assessment u/s 147 of Income Tax 5.1.1 This ground relates to reopening of assessment u/s 147 of Income Tax Act, 1961. The assessing officer has extracted reasons for reopening under para Act, 1961. The assessing officer has extracted reasons for reopening under para Act, 1961. The assessing officer has extracted reasons for reopening under para 2 of his order and is not reproduced here for the sake of brevity. Inter alia, the 2 of his order and is not reproduced here for the sake of brevity. Inter alia, the 2 of his order and is not reproduced here for the sake of brevity. Inter alia, the assessing officer referred to intimation from DCIT Cir. 2(3), Hyderabad that assessing officer referred to intimation from DCIT Cir. 2(3), Hyderabad that assessing officer referred to intimation from DCIT Cir. 2(3), Hyderabad that during FY 2008-09 and 2009 09 and 2009-10, the appellant had invested Rs. 51 crore in M/s. 10, the appellant had invested Rs. 51 crore in M/s. Jagati Publication Ltd (JPL) towards share application money at "a very high on Ltd (JPL) towards share application money at "a very high on Ltd (JPL) towards share application money at "a very high premium" and the shares were allotted during FY 2009 premium" and the shares were allotted during FY 2009-10. Further, ITO(lnv) Unit 10. Further, ITO(lnv) Unit IV, New Delhi had informed that the appellant did not explain the basis for the had informed that the appellant did not explain the basis for the had informed that the appellant did not explain the basis for the high premium paid for the shares. T premium paid for the shares. The assessing officer further observed he assessing officer further observed "It also needs to be examined to be examined whether the amounts received as unsecured interest unsecured interest- free loans from M/s India Bulls Real Estate's Ltd., have been repaid by M/s free loans from M/s India Bulls Real Estate's Ltd., have been repaid by M/s free loans from M/s India Bulls Real Estate's Ltd., have been repaid by M/s Sentia Developers Ltd. If the amounts have not been repaid, the payments Developers Ltd. If the amounts have not been repaid, the payments Developers Ltd. If the amounts have not been repaid, the payments may be irretrievable in nature and hence in nature and hence may be taxed in the hands of M/s Sentia the hands of M/s Sentia developers Ltd."

5.1.2 The assessing officer has further expressed doubts about the above 5.1.2 The assessing officer has further expressed doubts about the above 5.1.2 The assessing officer has further expressed doubts about the above- mentioned investment of the appellant with remarks mentioned investment of the appellant with remarks "the transactions relating to "the transactions relating to

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such investment is not a normal business transaction and is a colourable device such investment is not a normal business transaction and is a colourable device such investment is not a normal business transaction and is a colourable device through a corporate me through a corporate medium which is highly suspicious in nature." highly suspicious in nature." The assessing officer further refers to the financial statements of the appellant and assessing officer further refers to the financial statements of the appellant and assessing officer further refers to the financial statements of the appellant and expresses his suspicions with the remarks, expresses his suspicions with the remarks, "Moreover, the share capital of the "Moreover, the share capital of the assessee company is only Rs. 5 lakhs. assessee company is only Rs. 5 lakhs. So the question arises as to how estion arises as to how the interest free unsecured loans can be paid back by the assessee company." interest free unsecured loans can be paid back by the assessee company." interest free unsecured loans can be paid back by the assessee company." 5.1.3 It is noted that at the time of original assessment, all details relating to the t is noted that at the time of original assessment, all details relating to the t is noted that at the time of original assessment, all details relating to the impugned investment and loan borrowings were disclosed in the audit impugned investment and loan borrowings were disclosed in the audit impugned investment and loan borrowings were disclosed in the audited accounts provided to the assessing officer. The assessing officer had passed accounts provided to the assessing officer. The assessing officer had passed accounts provided to the assessing officer. The assessing officer had passed order under section 143(3) of the Income Tax Act, 1961 vide order dated order under section 143(3) of the Income Tax Act, 1961 vide order dated order under section 143(3) of the Income Tax Act, 1961 vide order dated 26/11/2012, "After discussion and verification of the details filed". "After discussion and verification of the details filed". "After discussion and verification of the details filed". 5.1.4 From the abov ove discussion, in my opinion, in the instant case, the in my opinion, in the instant case, the assessing officer has relied upon and looked at the same details of audited assessing officer has relied upon and looked at the same details of audited assessing officer has relied upon and looked at the same details of audited accounts which were already subjected to scrutiny by his predecessor who has accounts which were already subjected to scrutiny by his predecessor who has accounts which were already subjected to scrutiny by his predecessor who has admittedly discussed and verified the details before passing as admittedly discussed and verified the details before passing assessment order. sessment order. There is nothing to indicate that the most basic details of investments or loans There is nothing to indicate that the most basic details of investments or loans There is nothing to indicate that the most basic details of investments or loans- taken escaped the notice of the assessing officer at the time of original taken escaped the notice of the assessing officer at the time of original taken escaped the notice of the assessing officer at the time of original assessment. 5.1.5, Secondly, the assessing officer has clearly indicated that the re 5.1.5, Secondly, the assessing officer has clearly indicated that the re 5.1.5, Secondly, the assessing officer has clearly indicated that the reopening is on the basis of certain intimation/report of departmental officers in Hyderabad on the basis of certain intimation/report of departmental officers in Hyderabad on the basis of certain intimation/report of departmental officers in Hyderabad and New Delhi. In the instant case, the reopening has been done on and New Delhi. In the instant case, the reopening has been done on and New Delhi. In the instant case, the reopening has been done on basis of suspicion aroused as a result of those intimations/reports. There is nothing to suspicion aroused as a result of those intimations/reports. There is nothing to suspicion aroused as a result of those intimations/reports. There is nothing to indicate that the assessing officer has applied his own mind and excavated any that the assessing officer has applied his own mind and excavated any that the assessing officer has applied his own mind and excavated any new information or even analysed facts in a new manner. new information or even analysed facts in a new manner. 5.1.6 Thirdly, remarks of the assessing officer like 5.1.6 Thirdly, remarks of the assessing officer like "needs to be be examined..,., may be taxed..... highly suspicious in nature ... may be taxed..... highly suspicious in nature ..... So the question arises as .. So the question arises as to how..... as highlighted above in extracts of his reasons for reopening indicate as highlighted above in extracts of his reasons for reopening indicate as highlighted above in extracts of his reasons for reopening indicate that the assessing officer was operating on mere suspicion that the assessing officer was operating on mere suspicion and was hoping to and was hoping to find some income that had escaped assessment my making fishing find some income that had escaped assessment my making fishing find some income that had escaped assessment my making fishing inquiries. His predecessor had asked for and obtained details of investments, source of predecessor had asked for and obtained details of investments, source of predecessor had asked for and obtained details of investments, source of investments and unsecured loans, all submitted by the appellant during original investments and unsecured loans, all submitted by the appellant during original investments and unsecured loans, all submitted by the appellant during original assessment vide letter dated 21/11/2012. Looking at the same details on record, assessment vide letter dated 21/11/2012. Looking at the same details on record, assessment vide letter dated 21/11/2012. Looking at the same details on record, the assessing officer has had a change of opinion and reopened the instant ssing officer has had a change of opinion and reopened the instant ssing officer has had a change of opinion and reopened the instant assessment. Moreover, the suspicion of the assessing officer is based on his assessment. Moreover, the suspicion of the assessing officer is based on his assessment. Moreover, the suspicion of the assessing officer is based on his own understanding of what should or should not be done by a businessman own understanding of what should or should not be done by a businessman own understanding of what should or should not be done by a businessman. He is stepping into the shoes of a businessman. is stepping into the shoes of a busi 5.1.7 The basic requirement of section 147 is that the assessing officer must 5.1.7 The basic requirement of section 147 is that the assessing officer must 5.1.7 The basic requirement of section 147 is that the assessing officer must have a reason to believe that any income chargeable to tax has escaped have a reason to believe that any income chargeable to tax has escaped have a reason to believe that any income chargeable to tax has escaped assessment and such belief must be belief of jurisdictional assessing officer and assessment and such belief must be belief of jurisdictional assessing officer and assessment and such belief must be belief of jurisdictional assessing officer and not any other assessing officer or authority or department. The assessing officer ssessing officer or authority or department. The assessing officer ssessing officer or authority or department. The assessing officer

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merely acting mechanically on the information supplied by other assessing merely acting mechanically on the information supplied by other assessing merely acting mechanically on the information supplied by other assessing officers or Investigation wing about the investments made or loans taken by the officers or Investigation wing about the investments made or loans taken by the officers or Investigation wing about the investments made or loans taken by the appellant without applying his own appellant without applying his own mind was not justified, in ICICI Home Finance ICICI Home Finance Co Limited Vs. AC IT, Circle 10(1), Mumbai and Union of India Writ Petition Co Limited Vs. AC IT, Circle 10(1), Mumbai and Union of India Writ Petition Co Limited Vs. AC IT, Circle 10(1), Mumbai and Union of India Writ Petition No.430/2012 the Hon'ble Jurisdictional High Court No.430/2012 the Hon'ble Jurisdictional High Court held that the reason to held that the reason to believe has to be of Assessing officer's own and not of beli has to be of Assessing officer's own and not of belief of any other ef of any other authority. The Hon'ble Bombay High Court held as under authority. The Hon'ble Bombay High Court held as under-

"6. The power to reopen a completed assessment under section 147 of the "6. The power to reopen a completed assessment under section 147 of the "6. The power to reopen a completed assessment under section 147 of the Act has been bestowed on the Assessing officer, if he has reason to believe Act has been bestowed on the Assessing officer, if he has reason to believe Act has been bestowed on the Assessing officer, if he has reason to believe that any income chargeable to tax h that any income chargeable to tax has escaped assessment for as escaped assessment for any assessment year. However, this belief that income has escaped assessment year. However, this belief that income has escaped assessment year. However, this belief that income has escaped assessment has to be reasonable belief of the Assessing officer himseif and assessment has to be reasonable belief of the Assessing officer himseif and assessment has to be reasonable belief of the Assessing officer himseif and cannot be an opinion and/or belief of some other authority" cannot be an opinion and/or belief of some other authority"

5.1.8 As discussed above, in the instant case, the assessing officer has 5.1.8 As discussed above, in the instant case, the assessing officer has 5.1.8 As discussed above, in the instant case, the assessing officer has borrowed his satisfaction from DCIT Hyderabad and ITO(lnv) New Delhi. He has borrowed his satisfaction from DCIT Hyderabad and ITO(lnv) New Delhi. He has borrowed his satisfaction from DCIT Hyderabad and ITO(lnv) New Delhi. He has not formed a belief on his own and hence, his action do not comply with the not formed a belief on his own and hence, his action do not comply with the not formed a belief on his own and hence, his action do not comply with the interpretation of section 147 interpretation of section 147 by various courts. This view is supported by a by various courts. This view is supported by a plethora of decisions across jurisdictions including in CIT v. Kamdhenu Steel & plethora of decisions across jurisdictions including in CIT v. Kamdhenu Steel & plethora of decisions across jurisdictions including in CIT v. Kamdhenu Steel & Alloys Ltd. (2012) 248 CTR 33 (De!hi)(High Court). Alloys Ltd. (2012) 248 CTR 33 (De!hi)(High Court).

5.1.9 Further, as observed above, in the instant case, the assessing officer 5.1.9 Further, as observed above, in the instant case, the assessing officer 5.1.9 Further, as observed above, in the instant case, the assessing officer was acting on mere suspicion and trying to make fishing inquiries. Various courts acting on mere suspicion and trying to make fishing inquiries. Various courts acting on mere suspicion and trying to make fishing inquiries. Various courts have held that no reopening can be done to make fishing inquiries: have held that no reopening can be done to make fishing inquiries: have held that no reopening can be done to make fishing inquiries:

5.1.10 In the instant case, all relevant facts were disclosed in audited financial 5.1.10 In the instant case, all relevant facts were disclosed in audited financial 5.1.10 In the instant case, all relevant facts were disclosed in audited financial statements submitted at the time of original assessment. Disclosure in balance statements submitted at the time of original assessment. Disclosure in balance statements submitted at the time of original assessment. Disclosure in balance sheet also amounts to disclosure of material facts. This has been held in sheet also amounts to disclosure of material facts. This has been held in sheet also amounts to disclosure of material facts. This has been held in numerous decisions such as: uch as: CIT vs. Corporation Ltd (2002) 254 ITR 791 (SC) • CIT vs. Corporation Ltd (2002) 254 ITR 791 (SC) Arthur Anderson & Co, vs. ACIT (2010) 324 ITR 240 (Bom) erson & Co, vs. ACIT (2010) 324 ITR 240 (Bom)

5.1.11 As stated, the appellant had already made a disclosure of all material stated, the appellant had already made a disclosure of all material stated, the appellant had already made a disclosure of all material facts and related documents at the time of original assessment. Reopening after facts and related documents at the time of original assessment. Reopening after facts and related documents at the time of original assessment. Reopening after full and true disclosures of a full and true disclosures of all material facts had been done at the time of original l material facts had been done at the time of original assessment has been h assessment has been held bad in law in the following decisions:

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Karkhana (2004) 269 ITR 186 (Bom) • Bhagwati Shankari Karkhana (2004) 269 ITR 186 (Bom) Western Outdoor Interactive (2006) 286 ITR 620 (Bom) • Western Outdoor Interactive (2006) 286 ITR 620 (Bom) Hindustan Lever Ltd. (2004) 267 ITR 161 (Bom) • Hindustan Lever Ltd. (2004) 267 ITR 161 (Bom) • Prashant Project Ltd. vs. Asst. CIT (2011) 333 ITR 368 (Bom) Project Ltd. vs. Asst. CIT (2011) 333 ITR 368 (Bom) Hindustan Petroleum Corporation Ltd. vs. Dy. CIT • Hindustan Petroleum Corporation Ltd. vs. Dy. CIT (2010) 328 ITR 534 (Bom) • (2010) 328 ITR 534 (Bom) • Nihilent Technologies (P) Ltd v Dy CIT (2011) 59 DTR 281 (Bom) Nihilent Technologies (P) Ltd v Dy CIT (2011) 59 DTR 281 (Bom) Shriram Foundry Ltd v. Dy.CIT (2012) 250 CTR 116 (Bom.) • Shriram Foundry Ltd v. Dy.CIT (2012) 250 CTR 116 (Bom.) Monitor India(P) Ltd v. UOI ( 2012) 68 DTR 313 (Bom) • Monitor India(P) Ltd v. UOI ( 2012) 68 DTR 313 (Bom) • HCL Corporation Ltd. v. ACIT (2012) 66 DTR 473 (Delhi)(High Court) HCL Corporation Ltd. v. ACIT (2012) 66 DTR 473 (Delhi)(High Court) HCL Corporation Ltd. v. ACIT (2012) 66 DTR 473 (Delhi)(High Court) Kimplas Trenton Fittings Ltd. v.ACIT (2012) 340 ITR 299 (Bom.) Kimplas Trenton Fittings Ltd. v.ACIT (2012) 340 ITR 299 (Bom.) 5.1.12 As observed above, at the time of original assessment, the assessing observed above, at the time of original assessment, the assessing observed above, at the time of original assessment, the assessing officer had made categorical remark of having examined details. The appellant officer had made categorical remark of having examined details. The appellant officer had made categorical remark of having examined details. The appellant had also filed all relevant details relating to investments, loans etc. Once an had also filed all relevant details relating to investments, loans etc. Once an had also filed all relevant details relating to investments, loans etc. Once an assessment has been completed u assessment has been completed under section 143(3) after raising a query on a nder section 143(3) after raising a query on a particular issue and accepting assessee's reply to the query, the Assessing particular issue and accepting assessee's reply to the query, the Assessing particular issue and accepting assessee's reply to the query, the Assessing Officer has no jurisdiction to reopen the assessment merely because the issue in Officer has no jurisdiction to reopen the assessment merely because the issue in Officer has no jurisdiction to reopen the assessment merely because the issue in question is not specifically adverted in the assessm question is not specifically adverted in the assessment order, unless there ent order, unless there is tangible material before the Assessing Officer to come to the conclusion that tangible material before the Assessing Officer to come to the conclusion that tangible material before the Assessing Officer to come to the conclusion that there is escapement of income. In this case, the assessing officer has not re is escapement of income. In this case, the assessing officer has not re is escapement of income. In this case, the assessing officer has not brought forth any such tangible material. Various courts have held this view forth any such tangible material. Various courts have held this view forth any such tangible material. Various courts have held this view, including in the decisions cited below: including in the decisions cited below:

' Asst CIT v Rolta India Ltd. (2011)132 ITD 98 (Mumbai) (TM ) (Trib) • ' Asst CIT v Rolta India Ltd. (2011)132 ITD 98 (Mumbai) (TM ) (Trib) ' Asst CIT v Rolta India Ltd. (2011)132 ITD 98 (Mumbai) (TM ) (Trib) CIT vs. Kelvinator of India Ltd (2002) 256 ITR 1 (Del) (FB) • CIT vs. Kelvinator of India Ltd (2002) 256 ITR 1 (Del) (FB) 1998)Approved by Supreme Court in (2010) 320 ITR 561 (SC) • (Asst yr 1997-1998)Approved by Supreme Court in (2010) 320 ITR 561 (SC) 1998)Approved by Supreme Court in (2010) 320 ITR 561 (SC) • D. T. & T. D. C. Ltd. vs. CIT (2010) 324 ITR 234 (Del.). D. T. & T. D. C. Ltd. vs. CIT (2010) 324 ITR 234 (Del.). M.J. Pharmaceuticals Ltd vs. CIT • M.J. Pharmaceuticals Ltd vs. CIT (2008) 297 ITR 119 (Bom) (Assessment Year 2003-2004) • (2008) 297 ITR 119 (Bom) (Assessment Year 2003 • Raymond Woollen Mills Ltd. Vs. Income Tax Officer And Raymond Woollen Mills Ltd. Vs. Income Tax Officer And Others • (1999) 236 ITR 34 (S.C.) (1999) 236 ITR 34 (S.C.) 5.1.13 Some important jurisdictional case laws on this issue are: Some important jurisdictional case laws on this issue are:

Asteroids Trading & Investment P. Ltd. vs DCIT, (2009) 308 ITR 190 (Bom) (193) a. Asteroids Trading & Investment P. Ltd. vs DCIT, (2009) 308 ITR 190 (Bom) (193) Asteroids Trading & Investment P. Ltd. vs DCIT, (2009) 308 ITR 190 (Bom) (193) b. Asian Paints Ltd. vs. DCIT (2008) 308 ITR 195 (Bom) (198) b. Asian Paints Ltd. vs. DCIT (2008) 308 ITR 195 (Bom) (198) 325 ITR 471 (Bom) c. ICICI Prudential Life Insurance Co. Ltd. (2010) c. ICICI Prudential Life Insurance Co. Ltd. (2010) 325 ITR 471 d. Aventis Pharma Ltd. vs. Astt. CIT (2010) 323 ITR 570 (Bom) (577) d. Aventis Pharma Ltd. vs. Astt. CIT (2010) 323 ITR 570 (Bom) (577) d. Aventis Pharma Ltd. vs. Astt. CIT (2010) 323 ITR 570 (Bom) (577) e. Bhavesh Developers vs. A.O. (2010) 224 CTR 160 (Bom) e. Bhavesh Developers vs. A.O. (2010) 224 CTR 160 (Bom) (IT) (2012) 50 SOT 433 (Mum) (Trib.), f. International Global Networks BV v. DDIT f. International Global Networks BV v. DDIT (IT) (2012) 50 SOT 433 (Mum) (Trib.), g. General Insurance Corporation of India v. Dy .CIT (2012) Vol.114 g. General Insurance Corporation of India v. Dy .CIT (2012) Vol.114 g. General Insurance Corporation of India v. Dy .CIT (2012) Vol.114(1) Bom . LR. 0246 (High Court)

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5.1.14 In view of the ratios of the numerous case Jaws cited above, which lay down 5.1.14 In view of the ratios of the numerous case Jaws cited above, which lay down 5.1.14 In view of the ratios of the numerous case Jaws cited above, which lay down strict parameters within which the strict parameters within which the powers of reopening assessment are vested in powers of reopening assessment are vested in the assessing officer, I find that the action of the assessing officer in reopening the the assessing officer, I find that the action of the assessing officer in reopening the the assessing officer, I find that the action of the assessing officer in reopening the assessment went against every principle laid down by Hon'b assessment went against every principle laid down by Hon'ble Courts, including e Courts, including jurisdictional courts and the Apex Courts. Therefore, the action of the assessing jurisdictional courts and the Apex Courts. Therefore, the action of the assessing jurisdictional courts and the Apex Courts. Therefore, the action of the assessing officer in reopening assessment u/s 147 of the Act officer in reopening assessment u/s 147 of the Act is held bad in law. This ground of held bad in law. This ground of appeal is allowed.”

stated to have been received from two sources. Firstly, from stated to have been received from two sources. Firstly, from stated to have been received from two sources. Firstly, from the3

Deputy Commissioner of Income Deputy Commissioner of Income-tax, Hyderabad that assessee tax, Hyderabad that assessee made investment of ₹51 crores in Jagati Publication Ltd towards made investment of 51 crores in Jagati Publication Ltd towards

share application money at a very high premium. Thi share application money at a very high premium. Thi share application money at a very high premium. This information,

in our opinion, was already available in the financial statement filed in our opinion, was already available in the financial statement filed in our opinion, was already available in the financial statement filed

by the assessee during the course of original assessment by the assessee during the course of original assessment by the assessee during the course of original assessment

proceedings under section 143(3) of the Act and so, no new proceedings under section 143(3) of the Act and so, no new proceedings under section 143(3) of the Act and so, no new

additional fact was brought on record indicating any i additional fact was brought on record indicating any i additional fact was brought on record indicating any income

escaped in the case of the assessee. Second escaped in the case of the assessee. Secondly, information information was

received from Income received from Income-tax Officer, New Delhi wherein in it was reported

that director of the assessee company had not appeared before that director of the assessee company had not appeared before that director of the assessee company had not appeared before

them for explaining the basis of investing at a high pre them for explaining the basis of investing at a high pre them for explaining the basis of investing at a high premium in the

shares of Jagati Publication Ltd. It is evident that Income shares of Jagati Publication Ltd. It is evident that Income shares of Jagati Publication Ltd. It is evident that Income-tax

M/s Sentia Developers Ltd. 10 ITA 2661/Mum/2017

Officer, New Delhi has also not brought on record any Officer, New Delhi has also not brought on record any Officer, New Delhi has also not brought on record any fresh or

additional facts leading to escapement of income by the assessee. facts leading to escapement of income by the assessee. facts leading to escapement of income by the assessee.

The assessment has been reopened based on the fac The assessment has been reopened based on the fac The assessment has been reopened based on the facts which were

already available on record of the Assessing Officer already available on record of the Assessing Officer already available on record of the Assessing Officer and, therefore,

reasons have been recorded on appreciation of the same set of the reasons have been recorded on appreciation of the same set of the reasons have been recorded on appreciation of the same set of the

facts, thus re-assessment is based assessment is based on change of opinion by the change of opinion by the

Assessing Officer, falls in the category of Assessing Officer, falls in the category of the review, rather than re the review, rather than re-

assessment. Further, we find that Assessing Officer assessment. Further, we find that Assessing Officer assessment. Further, we find that Assessing Officer has mentioned

he needs to examine whether any amount of loan was repaid by the he needs to examine whether any amount of loan was repaid by the he needs to examine whether any amount of loan was repaid by the

assessee to its holding company and if amount has not been repaid, assessee to its holding company and if amount has not been repaid, assessee to its holding company and if amount has not been repaid,

then same shall be irretrievab then same shall be irretrievable in nature and hence, taxable in the le in nature and hence, taxable in the

hands of the assessee. hands of the assessee. Thus, it is evident that the Assessing Officer he Assessing Officer

has not carried out any verification of the financial statement of has not carried out any verification of the financial statement of has not carried out any verification of the financial statement of

either of the assessee or of India Bulls Real Estate Ltd and merely either of the assessee or of India Bulls Real Estate Ltd and merely either of the assessee or of India Bulls Real Estate Ltd and merely

on the basis of suspicion recorded the reasons for reopening the basis of suspicion recorded the reasons for reopening the basis of suspicion recorded the reasons for reopening the

assessment.

decision of the Hon’ble Supreme Court in the case of decision of the Hon’ble Supreme Court in the case of decision of the Hon’ble Supreme Court in the case of CIT vs

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Kelvinator of India Ltd (2010) 320 ITR 561 (SC) Kelvinator of India Ltd (2010) 320 ITR 561 (SC) Kelvinator of India Ltd (2010) 320 ITR 561 (SC) wherein it is

held that the Assessing Officer cannot reopen an assessment on held that the Assessing Officer cannot reopen an assessment on held that the Assessing Officer cannot reopen an assessment on

mere change of opinion and there has to be tangible material to mere change of opinion and there has to be tangible material to mere change of opinion and there has to be tangible material to

come to the conclusion that there was escapement of income from come to the conclusion that there was escapement of income from come to the conclusion that there was escapement of income from

the assessment. The relevant finding of the Hon’ble Supreme Cou the assessment. The relevant finding of the Hon’ble Supreme Cou the assessment. The relevant finding of the Hon’ble Supreme Court

is reproduced as under: is reproduced as under:-

“ On going through the changes, quoted above, made to section 147 of the Act, we On going through the changes, quoted above, made to section 147 of the Act, we On going through the changes, quoted above, made to section 147 of the Act, we find that prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done find that prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done find that prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said under the above two conditions and fulfillment of the said conditions alone conferred conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has by and only one condition has remained, viz. that where the Assessing Officer remained, viz. that where the Assessing Officer has reason to believe that income has has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post – 1st escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post April 1989, power to reopen is much wider. However, one needs to give a schematic April 1989, power to reopen is much wider. However, one needs to give a schematic April 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words “reason to believ interpretation to the words “reason to believe” failing which, we are afraid, section 147 e” failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 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. We must also keep in “mere change of opinion”, which cannot be per se reason to reopen. We must also keep in “mere change of opinion”, which cannot be per se reason to reopen. We must also keep in mind the conceptual difference mind the conceptual difference between power to review and power to reassess. The between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment Assessing Officer has no power to review; he has the power to reassess. But reassessment Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain preconditions and if the concept of “change of has to be based on fulfillment of certain preconditions and if the concept of “change of has to be based on fulfillment of certain preconditions and if the concept of “change of opinion” is removed, as c opinion” is removed, as contended on behalf of the Department, then, in the garb of ontended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of “change reopening the assessment, review would take place. One must treat the concept of “change reopening the assessment, review would take place. 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 built test to check abuse of power by the Assessing Officer. Hence, after built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer 1989, the Assessing Officer has power to reopen, provided there is “tangible has power to reopen, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. material” to come to the conclusion that there is escapement of income from assessment. material” to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support fro Reasons must have a live link with the formation of the belief. Our view gets support fro Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, 1987. Parliament not only deleted the words the changes made to section 147 of the Act, 1987. Parliament not only deleted the words the changes made to section 147 of the Act, 1987. Parliament not only deleted the words “reason to believe” but also inserted the word “opinion” in section 147 of the Act. However, “reason to believe” but also inserted the word “opinion” in section 147 of the Act. However, “reason to believe” but also inserted the word “opinion” in section 147 of the Act. However, on receipt of representations from the companies against omission of th on receipt of representations from the companies against omission of the words “reason to e words “reason to believe”, Parliament reintroduced the said expression and deleted the word “opinion” on the believe”, Parliament reintroduced the said expression and deleted the word “opinion” on the believe”, Parliament reintroduced the said expression and deleted the word “opinion” on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow

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the relevant portion of Circular o.549 dated October 3 the relevant portion of Circular o.549 dated October 31, 1989 [1990] 182 ITR (SC).1, 29), 1, 1989 [1990] 182 ITR (SC).1, 29), which reads as follows :

“7.2 Amendment made by the Amending Act, 1989, to reintroduce the Amendment made by the Amending Act, 1989, to reintroduce the Amendment made by the Amending Act, 1989, to reintroduce the expression ‘reason to believe’ in section 147. expression ‘reason to believe’ in section 147.- A number of representations A number of representations were received against the omission of the words ‘re were received against the omission of the words ‘reason to believe’ from ason to believe’ from section 147 and their substitution by the ‘opinion’ of the Assessing Officer. It section 147 and their substitution by the ‘opinion’ of the Assessing Officer. It section 147 and their substitution by the ‘opinion’ of the Assessing Officer. It was pointed out that the meaning of the expression, ‘reason to believe’ had was pointed out that the meaning of the expression, ‘reason to believe’ had was pointed out that the meaning of the expression, ‘reason to believe’ had been explained in a number of court rulings in the past and was well settled been explained in a number of court rulings in the past and was well settled been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing and its omission from section 147 would give arbitrary powers to the Assessing and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these past assessments on mere change of opinion. To allay these past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce fears, the Amending Act, 1989, has again amended section 147 to reintroduce fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression ‘has re the expression ‘has reason to believe’ in place of the words ‘for reasons to be ason to believe’ in place of the words ‘for reasons to be recorded by him in writing, is of the opinion’. Other provisions of the new recorded by him in writing, is of the opinion’. Other provisions of the new recorded by him in writing, is of the opinion’. Other provisions of the new section 147, however, remain the same.” section 147, however, remain the same.”

opinion that there is no infirmity in the order of the Ld.CIT(A) on the e is no infirmity in the order of the Ld.CIT(A) on the e is no infirmity in the order of the Ld.CIT(A) on the

issue in dispute and accordingly, we uphold the same. The ground issue in dispute and accordingly, we uphold the same. The ground issue in dispute and accordingly, we uphold the same. The ground

No.I of appeal of the Revenue of appeal of the Revenue is accordingly dismissed. accordingly dismissed.

has not adjudicated the issue on merit. In our opinion, once the icated the issue on merit. In our opinion, once the icated the issue on merit. In our opinion, once the

basis of the re-assessment has been demolished, adjudicating on assessment has been demolished, adjudicating on assessment has been demolished, adjudicating on

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merit is merely academic. merit is merely academic. Therefore, this ground of Revenue is also his ground of Revenue is also

dismissed.

any adjudication; hence, dismissed. any adjudication; hence, dismissed.

Order pronounced under Rule 34(4) of the ITAT Rules, Order pronounced under Rule 34(4) of the ITAT Rules, Order pronounced under Rule 34(4) of the ITAT Rules,

1963 on 06/01/2023. 01/2023.

Sd/- sd/- sd/ (ABY T VARKEY ABY T VARKEY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 06/01/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.

BY ORDER, BY ORDER, //True Copy// (Sr. Private Secretary) (Sr. Private Secretary) ITAT, Mumbai ITAT, Mumbai