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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
Per Chandra Poojari, Accountant Member These appeals are by the assessee against the common order of the CIT(Appeals)-4, Bangalore dated 30.11.2017 for the assessment years 2006-07 & 2007-08. The common grounds raised in these appeals are as follows:- “1. The learned Deputy Commissioner of Income Tax, had erred in passing the order in the manner passed by him and the learned Commissioner of Income tax (Appeals) has erred in confirming the same. The order passed is bad in
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law, without jurisdiction and against the principles of natural justice and is required to be quashed in toto. 2. The learned CIT(A) has erred in holding that the matter of Jurisdiction is internal matter of the department and further that the appellant has been given an opportunity during assessment proceedings. The question of Jurisdiction is not an internal matter and mere participating in assessment proceedings does not give jurisdiction to the Officer. The CIT(A) has erred in simply going by the conclusion of Assessing officer without considering specific ground raised by the Appellant. The Assessing officer passing the order lacking jurisdiction makes the impugned order bad in law and such order is liable to be quashed. 3. Without prejudice to above, the Assessing Officer has erred in reopening the assessment for the following: a) Conditions precedent for reopening being absent; b) The legal compliances required for reopening having not been done; c) The noting made calling it to be reasons being not qualified to be -reason to believe d) Not passing separate speaking order disposing of the objections raised. All this makes the reopening bad in law and consequentially all subsequent proceedings including the impugned order become bad in law. The CIT(A) instead of quashing the order in toto has erred in confirming the same. The Order passed being bad in law and is liable to be quashed. 4.1 In any case and without prejudice, the Authorities below have erred in adding a sum of Rs. 2,89,69,405/- to the income of the appellant U/s. 69 of the I.T. Act, for the reasons: a) That the provisions of Section 69 of the I.T. Act, are not applicable to the case of the appellant;
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b) There is no basis for arriving at such figure; c) There is no basis to state that such figure is the income of the appellant; d) There is no basis to state that such figure is income of the appellant for the year under consideration; e) There is no basis to conclude that such amount belongs to the appellant. And the learned CIT(A) has erred in partially confirming the same. The addition having been made on surmises, conjectures and guess work and not on the basis of any proper and correct evidence, requires to be deleted in entirety. 4.2 In any case, the Authorities below have erred in holding that on a piece of paper on the basis of which the assessment is made belongs to the appellant. The CIT(A) also has erred in holding that the appellant undeniably having account in HSBC Bank Geneva. The conclusion of Authorities below being totally erroneous both on facts and law applicable is to be rejected and the addition made on the basis of piece of paper is to be deleted. 5. The appellant also denies liability to pay interest levied U/s. 234B of I.T. Act, 1961. The interest having been levied erroneously is to be deleted. 6. In view of the above and other grounds to be adduced at the time of hearing, it is requested that the impugned order be quashed or atleast the addition made to income be deleted and interest levied be also deleted. ” 2. The assessment order for all the above years were passed in the case of assessee Sri. Romesh Madhok, who expired on 12-05-2015 and hence by a letter dated 05-03-2016 the legal heir of the deceased was brought on record.
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The details of assessment orders passed for all the years are as under:- Asst. Passed U/s. Date of amount of Passed by Nature Year Order disputed addition 2,89,69,405/- 2002- 143(3) 27.03.2015 ACIT/C- Unexplained investment deposit in 1(2)(1) HSBC Bank Account 2003 RWS 147
2,89,69,405/- 2003- 143(3) RW 27.03.2015 ACIT/C- Unexplained investment deposit 1(2)( I ) 2004 S 147 in HSBC Bank Account
2004- 143(3) 27.03.2015 ACIT/C- Unexplained investment deposit 2,89,69,405/- 2005 RWS 147 1(2)(1) in HSBC Bank Account
ACIT/C- 2005- 143(3) 27.03.2015 Unexplained investment deposit 2,89,69,405/- 1(2)(1) 2006 RWS 147 in HSBC Bank Account
2006- 143(3) 27.03.2015 ACIT/C- Unexplained investment deposit 2,89,69,405/- 1(2)(1) 2007 RWS 147 in HSBC Bank Account
ACIT/C- 2007- 143(3) 12.11.2014 Unexplained investment 2,89,69,405/- 2(1) 2008 RWS 147 deposit in HSBC Bank Account
The above chart would show that for all the years, identical addition has been made by the AO by stating as follows (for AY: 2002-03):-
"I accordingly consider the aggregate amount of cash credit of Rs. 2.89 Crores (Rupees Dollar Exchange rate in the Financial Year 2001-2002 has been considered at 40.26 i.e., 719558 X 40.26) as unexplained investment within the meaning of Section 69 of I.T. Act, 1961 and adding it to the total income of the assessee". 5. It can be seen that identical amount in dollar is considered as unexplained investment for all the years and for all the year identical
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conversion rate of Rs. 40.26 is adopted. the conversion rate of dollar at the end of each of previous year relevant to year under appeal was as under:- As at Asst. Year Dollar rate in Rs. 31.03.2002 2002-2003 48.73 31.03.2003 2003-2004 47.47 31.03.2004 2004-2005 43.35 31.03.2005 2005-2006 43.62 31.03.2006 2006-2007 44.54 31.03.2007 2007-2008 43.59 Source: http://www.xe.com/currencytables 6. A survey U/s. 133A of the I.T. Act, 1961 was conducted in the residential premises of the appellant on 28.07.2011. In the course of survey nothing incriminating was found. However, the deceased Sri. Romesh Madhok was shown a piece of paper by the same party. This paper purported to be related to an account in HSBC Bank, Geneva in the name of Troyes Investing Corporation [TIC] in which the deceased assessee was a Director.
It is submitted that under stressed circumstances and pressure, a letter was taken from the deceased assessee, regarding declaration of income. This letter read as follows:-
"This has reference to the survey proceedings at our premises. In the course of the proceedings, a bank account in the name of M/s. Troyes Investing Corporation, held in Geneva, Switzerland was mentioned and details were asked, wherein I am one of the beneficiaries with the other family members. This account was a company account opened with assistance of my children who have been NRI for last 10-12 years and is already closed. I do not remember any transactions in this bank account. ln fact, this account has been closed and neither my family nor I have any records.
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I did not have any extra income, to be deposited in such bank account. Effectively therefore, there should be no tax effect on account of the information contained in only a rough slip of paper, which is not even a copy of bank account. However, as I am a senior citizen and an aged person, and I want to have mental peace, in as much as, I am not keeping good health and any furthering of proceedings in this matter will cause stress and worries to me and greatly affect my existing ill health. Therefore, in order to avoid the hassles and to buy peace, subject to the verification of the records and documents, I agree to offer for declaration and account balance, based on the information provided by your goodself to my tax advisor over phone, of USD 719558. The calculation is as under:- ‘USD — 719558@ Rs.40.26/- (being average rate for the year 2007-08- Source www.ananda.com)’. This letter is given without prejudice, and subject to no other consequences, and no penalties under any law, and is given only to have the matter closed." 8. The assessee was originally assessed to Income tax by Income tax Officer, Ward-10(1), Bengaluru. Later, by a notification, the case of the assessee was specially assigned to Deputy Commissioner of Income tax, Circle-2(1), Bengaluru. As per the Notification, the assessee’s case was specifically assigned u/s. 127 of the Act to DCIT, Circle-2(1), Bengaluru and therefore the assessee came out of the territorial jurisdiction and the case was assigned to a specifically designated officer.
After the survey, the notices u/s. 148 of the Act were issued by DCIT, Circle-2(1), Bengaluru. However, the impugned assessment orders for Assessment Years 2002-2003 to 2006-2007 were passed by Assistant Commissioner of Income tax, Circle-1(2)(1), Bengaluru. The assessee objected to the jurisdiction of the Assessing Officer, Circle 1(2)(1), Bengaluru but the objection has not been accepted to, on the
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ground that by an order dated 15.11.2014, passed consequent to implementation of cadre restructuring, the Assessing Officer, Circle-1(2)(1) assumed jurisdiction.
It is submitted that since the assessee’s case had moved out of territorial jurisdiction and was assigned to a specific officer, the order dated 15.11.2014 would not apply to the case of the assessee since the cadre restructuring applied only to cases with Territorial Jurisdiction. Therefore, the Officer passing the impugned orders has no jurisdiction to pass the orders and hence the impugned orders become bad in law and void for want of jurisdiction and hence are required to be quashed. The copy of the notification dated 22.10.2014 is placed on record. Even otherwise, according to territorial jurisdiction also, the assessee’s case would not come under DCIT, Circle-1(2)(1), Bengaluru.
For the years, the assessee has asked for the reasons recorded for issue of notices U/s. 148 of the Act. The assessee received the copy of reasons which read as under:- Assessment Year 2002-2003: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2002-03" Assessment Year 2003-2004: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block,
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Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2003-04" Assessment Year 2004-2005: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2004-05" Assessment Year 2005-2006: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864 which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A. Y. 2005-06" Assessment Year 2006-2007: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC,—Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2006-07"
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Assessment Year 2007-2008: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of' USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the come chargeable to tax has been escaped assessment for the A. Y. 007-08" 12. Accordingly, the assessment orders for these years were passed in the case of assessee Sri Romesh Madhok (deceased) u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 [the Act]. It came to the notice of the AO, through Diplomatic Channels that the assessee Sri Romesh Madhok had entered into transactions into a Bank account operated by HSBC Bank, Geneva, as Director of the company, M/s. Troyes Investing Corporation (TIC) amounting to $ 719558. It was revealed that M/s. TIC was a corporate entity incorporated in British Virgin Islands and that transactions in favour of the corporate account, were essentially intra-group transactions. It also came to the AO's notice, pursuant to further survey action u/s. 133A, that the assessee was a beneficiary and an Authorized Signatory of the aforesaid account maintained, at HSBC, Geneva. In consequence to the information in possession of the Department and in view of the fact that the aforesaid transactions / income were not reflected in the respective returns of income, the AO proceeded to initiate and conclude the assessment / re-assessment proceedings and made addition on account of unexplained investment deposit in HSBC bank account of Rs.2,89,69,406 for both the years. Against this, the assessee went in appeal before the CIT(Appeals).
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The CIT(Appeals) upheld the validity of reassessment proceedings by the AO. He observed that the assessee undeniably had an account in HSBC, Geneva. The name of the assessee, family members and TIC clear appear in the statement and bank account particulars and the amounts of deposit in the bank. The assessee never denied existence of the bank account, but only expressed ignorance about the transactions. The address in the bank account is also statedly of the assessee’s premises / residence. On being confronted with the bank account, in the statement recorded during the course of survey, the assessee acknowledged the bank account and admitted to offer certain tax for the AY 2007-08. The impugned transactions were conducted on behalf of the assessee in individual capacity of the sole Director of TIC. The assessee’s plea that TIC had an independent existence apart from the assessee was not found tenable on the peculiar facts and circumstances on record. The assessee had not disclosed the relevant bank receipts in his return of income. The assessee made deposits in the said bank account at least to the extent of US $ 719568 upto end of March, 2007. On query by the AO to furnish bank transaction statement of the respective account, the assessee contended that the account in HSBC was in the name of firm, TIC having operating powers with all the 4 members of his family, though it was accepted he was the sole director of TIC. According to the CIT(A), the additional income offered for AY 2007-08 in his individual capacity corroborated the above fact. The assessee stated that the bank account was closed in 2006, but in the statement recorded before the Investigation Wing of the department, the assessee stated that the account was closed in 2008. He observed that the assessee was not in a position to either refute or substantially explain the sources or the nature of investment/deposit into bank account. He therefore confirmed the addition. He directed the AO to adopt the applicable exchange rate relevant for FY
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2005-06 in AY 2006-07. As against this, the assessee is in appeal before us for the AYs 2006-07 & 2007-08.
By common Ground No.2, the assessee objects to the very assumption of jurisdiction of AO for passing the impugned assessment order by the ACIT, Circle 1(2)(1) in AY 2006-07. The ld. AR submitted that as per the territorial jurisdiction u/s. 124 of the Act, the assessee was assessable to income tax by Income tax Officer, Ward-10(1), Bangalore. Vide an order dated 02.05.2013, passed u/s. 127(2) of the Act, the case of the assessee was taken out from the territorial jurisdiction and specifically transferred to a designated officer being Deputy Commissioner of Income tax, Circle-2(1), Bengaluru as per page 18 of the submissions made by Departmental representative vide letter dated 11.02.2021. Thus, the appellant came out of the jurisdiction of the territorial officer u/s. 124 and was under the jurisdiction of the designated officer u/s. 127 of the I.T. Act.
Vide a notification dated 22.10.2014 issued by CBDT there was a restructuring of the jurisdiction in respect of the territorial areas. The details of restructuring as far as the State of Karnataka is concerned, the Schedule clearly shows that restructuring is only for territorial jurisdiction. It was submitted that the assessee was out of territorial jurisdiction and therefore this restructuring did not affect the jurisdiction over the assessee and the jurisdiction over the assessee should have continued with designated officer Deputy Commissioner of Income tax, Circle-2(1), Bangalore.
Thereafter, one more notification U/s. 127 was passed on 15.11.2014, whereby the case of the assessee was transferred from Assistant Commissioner of Income tax, Circle-4(2)(1), Bangalore to Assistant Commissioner of Income tax, Circle-1(2)(1), Bangalore. This is how it is contended by the Department that the jurisdiction of the appellant
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is vested with Assistant Commissioner of Income tax, Circle-1(2)(1), Bangalore.
The ld. AR further submitted it is admitted by the department that jurisdiction over the assessee was with Income tax Officer, Ward-10(1), Bangalore and vide order U/s. 127 of the Act, the jurisdiction changed to Deputy Commissioner of Income tax, Circle-2(1), Bangalore. However, the Department contends that after the restructuring, the jurisdiction of the assessee changed to Principal Commissioner of Income tax-4, Bengaluru and therefore, he could pass a fresh order U/s. 127 of the I.T. Act.
It is submitted that the assessee being out of the territorial jurisdictional area was not hit or covered by territorial restructuring done on 22.10.2014 because his jurisdiction was with designated officer U/s. 127 of the Act. Thus, the assessee continued to be under the jurisdiction of PCIT- 2, Bengaluru and it is wrong on the part of the department to state that the jurisdiction of the assessee reverted to PCIT-4, Bengaluru. Being so, the notification U/s. 127 of the Act, dated 15.11.2014 itself was erroneous and without jurisdiction and therefore the ACIT/DCIT, Circle-1(2)(1) never assumed proper jurisdiction over the case of the assessee.
Further, for the first time, the assessee received a communication from ACIT, Circle-1(2)(1), Bangalore as per his letter dated 18.12.2014 and the assessee immediately vide letter dated 19.01.2015 objected to the very assumption of jurisdiction by ACIT, Circle-1(2)(1), Bengaluru as under:- "8. It may be mentioned here that though the earlier notices were received from Assistant Commissioner of Income tax/Deputy Commissioner of Income tax, Circle-2(1), Bengaluru, it is not known as to how this letter dated 18.12.2014 is received from Assistant Commissioner of Income tax, Circle-1(2)(1), Bangalore. Even as per new jurisdiction, the earlier Assistant Commissioner of Income tax/Deputy Commissioner of Income tax, Circle-2(1), will now be in Circle-3.
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I therefore, at the outset object to the very assumption of the jurisdiction by Assistant Commissioner of Income tax, Circle- 1(2)(1), Bangalore. 10. The submissions that follow are all without prejudice to my rights in law and subject to the objection regarding the jurisdiction." 20. The point of jurisdiction is discussed by the AO at Paras 5 and 7 of his order. On appeal, the Commissioner of Income tax (Appeals) observed that the assessee has not put forth any specific grounds with respect to the contention that the impugned order was not based on appropriate jurisdiction. The assignment of case-wise jurisdiction is the internal exercise of the department keeping in view, the factors of administrative convenience. Further, the AO conducted and concluded the proceedings in line with internal jurisdictional notification. In this connection, at the outset, the ld. AR submitted that the CIT(Appeals) has in his order narrated the written submissions filed by the assessee and reproduced it at pages 8 and 9 of the Appellate Order. It can be clearly seen from these that the assessee had seriously objected about the jurisdiction before him, therefore, it is not correct that the assessee has not raised any specific grounds objecting to the jurisdiction.
It was submitted that, in any case, the assessee’s case was with DCIT, Circle-2(1), Bangalore, who was not a territorial jurisdictional officer but was a designated officer and therefore territorial restructuring by the Board did not affect jurisdiction over the assessee and therefore the PCIT, Bangalore-4 having no jurisdiction over the assessee could not have passed an order U/s. 127 of the Act, transferring the case to ACIT/DCIT, Circle-1(2)(1), Bangalore. Therefore, it is submitted that the impugned order as passed by the DCIT, Circle-1(2)(1), Bangalore is without jurisdiction and therefore requires to be quashed.
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The ld. DR submitted that the assessee was assessed under Ward 10(1), Bangalore prior to 2.5.2013. Consequent to the order u/s. 127 of the Act dated 2.5.2013, the jurisdiction of the assessee changed to Circle 2(1), Bangalore. She drew our attention to the copy of the order passed u/s. 127 of the Act. Subsequently, based on CBDT Notification No.S.O. 2752(E) dated 22.10.2014 published in the Gazette of India : Extraordinary [PART II – SEC. 3(ii)], the jurisdictional structure in the CBDT was redrawn and jurisdiction of the AO was changed to be assessed under PCIT-4, Bangalore. She drew our attention to the said Gazette Notification dated 22.10.2014 which is kept on record. According to her, this Notification came into effect from 15.11.2014. Further, she drew our attention to the order u/s. 127 of the Act dated 15.11.2014 of the CIT-4, Bangalore, changing the jurisdiction of the assessee from Circle 4(2)(i) to Circle 1(2)(1) in view of the administrative requirement.
We have heard both the parties and perused the material on record. For objectively adjudicating the issue it is necessary to look at the facts of the case which is brought on record so as to decide this legal issue as follows:- AY 2006-07
02.05.2013 There was an order u/s. 127(2) of the Act wherein assessee’s case was taken out from territorial jurisdiction of ITO, Ward 10(1) to DCIT, Circle 2(1). 22.10.2014 Vide CBDT Notification there was restructuring of jurisdiction. 10.5.2013 Assessment was reopened for AY 2006-07 by DCIT, Circle 2(1), Bangalore.
Notice u/s. 148 issued by DCIT, Circle 2(1), Bangalore. 26.3.2014 Notice u/s. 148 issued by DCIT, Circle 2(1), Bangalore.
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15.11.2014 There was a Notification through which by an order u/s. 127 of the Act, CIT-4, Bangalore changed jurisdiction of the assessee from Circle 4(1)(2) to Circle 1(2)(1) in view of administrative requirements. Thus ACIT Circle 1(2)(1) assumed jurisdiction. 9.12.2014 Notice u/s. 148 was issued by ACIT Circle 2(1), Bangalore. 30.1.2015 Notice u/s. 129 issued by DCIT, Circle 2(1), Bangalore.
In view of the aforesaid events, the legal question before us is whether ACIT, Circle 2(1), Bangalore can be said to have had the concurrent (territorial) jurisdiction over the assessee merely on account of Gazette Notification dated 22.10.2014 and he was competent to issue notice u/s. 148 or 143(2) to the assessee so as to frame the assessment for AY 2006-07. This question needs to be answered in the light of order u/s. 127 of the Act dated 2.5.2013 passed by the CIT, Bangalore-4, Bangalore wherein the jurisdiction of the assessee was transferred from ITO, Ward 10(1) to DCIT, Circle 2(1), Bangalore.
The argument of the ld. AR is that ACIT, Circle 1(2)(1) has no jurisdiction so as to frame the assessment for the AY 2006-07 since the assessee’s case was with the Central Circle which is the designated office to frame the assessment in view of the order passed by the CIT-IV, Bangalore, Bangalore on 2.5.2013. It cannot be taken away by CBDT Notification dated 22.10.2014 published in the Official Gazette of India as the assessee is out of territorial jurisdictional area and this Notification dated 22.10.2014 cannot be applied and the assessee continued to be under the jurisdiction of PCIT-2, Bangalore and it is wrong on the part of the department to state that jurisdiction of the assessee transferred to PCIT-4, Bangalore by Notification dated 22.10.2014.
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For understanding the legal position, we will go through the provisions of section 120, 124, 127 and 129 of the Act reproduced below:- “120. Jurisdiction of income tax authorities
(1) Income tax authorities shall exercise all or any of the powers and perform all or any of the functions Conferred on, or, as the case maybe, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities.
(2) The directions of the Board under sub-section (1) may authorise any other income tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income tax authorities who are subordinate to it. (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income tax authority authorised by it may have regard to any one or more of the following criteria, namely:- (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases.
(4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as maybe specified therein,-
(a) authorise any Director General or Director to perform such functions of any other income-tax authority as maybe assigned to him by the Board; (b) empower the Director General or Chief Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case maybe, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of ….. (5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more Assessing Officers (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed
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concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply.
(6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette,, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as maybe specified in the notification.
Jurisdiction of Assessing Officers
(1) Where by virtue of any direction or order issued under sub-section (1) or sub- section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction-
(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area. (2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief Commissioner or the Commissioner; or where the question is one relating to areas within the jurisdiction of different Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned or, if they are not in agreement, by the Board or by such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, specify. (3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer-
(a) where he has made a return under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier;
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(b) where he has made no such return, after the expiry of the time allowed by the notice under sub- section (1) of section 142 or under section 148 for the Making of the return or by the notice under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier. (c) where an action has been taken under section 132 or section 132A, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier.) (4) Subject to the provisions of sub-section (3), where an assessee calls in question the jurisdiction of an- Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub- section (2) before the assessment is made.
(5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub- section (1) or sub- section (2) of section 120.]
Power to transfer cases (1) The Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner,—
(a) where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order;
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(b) where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation: In section 120 and this section, the word "case", in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which maybe pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which maybe commenced after the date of such order or direction in respect of any year.
Change of incumbent of an office Whenever in respect of any proceeding under this Act an income tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor: Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard.”
A bare reading of the foregoing provisions reveal that an Assessing Officer (AO) has been vested with the jurisdiction by virtue of the directions or orders issued by the Board under sub-section (1) or sub-section (2) of section 120 of the Act. The direction u/s. 120(1) is given by the Board, for the exercise of the powers and performance of the functions by all or any of
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the Income Tax Authorities, as specified u/s. 116 of the Act. As per sub- section (2) of Section 120 of the Act, the Board may delegate its powers to Income tax authorities as specified in Section 116, for issuing the orders in writing, for the exercise of the powers and performance of the functions by all or any of the other Income Tax Authorities who are subordinate to that authority. We also note that the concurrent jurisdiction can be vested in more than one Assessing Officer, which is discernible by a conjoint reading of Section 120(5) with Section 120(2) of the Act. Section 124(1) of the Act confers jurisdiction on an AO, by virtue of jurisdiction vested by any direction or order issued by CBDT under sub-section (1) and/or (2) of section 120 of the Act. The AO is vested with the jurisdiction u/s. 124 of the Act, over any area within the limits of such area, he shall have jurisdiction over any person (assessee) carrying on a business or profession and if the place at which he (assessee) carries on his business or profession is situated within the area earmarked for him (Assessing Officer); or if that person's (assessee's) business or profession is carried on in more places than one, then if the principal place of his business or profession is situated within the jurisdictional territorial area, the Assessing Officer gets jurisdiction. Other than the assessees who are not in Business or Profession, in their cases, the Assessing Officer will be vested with the jurisdiction if the person (assessee) is residing within the territorial area earmarked by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120 of the Act speaks about. However, when there is a question to be determined as to whether an Assessing Officer has jurisdiction to assess any person then it would be decided by the authorities as stipulated in sub-section (2) of section 124 of the Act by Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned, as the case maybe). In case, if the question is one relating to areas within the jurisdiction of different Income tax authorities (Directors General or
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Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners as stipulated therein) then if the other Income tax authority also agrees then the question will be resolved mutually or else it will be referred to the CBDT. So, once the Assessing Officer of an assessee is vested with the jurisdiction u/s. 124, read with section 120(1) & (2) of the Act and issues statutory notices against an assessee, no person (assessee) shall be entitled to call in question the jurisdiction of an Assessing Officer within the period prescribed under clauses (a), (b) and (c) of section 124(3) of the Act. We also note that section 124(5) saves the action of the Assessing Officer who has territorial jurisdiction over the assessee in respect of the income earned by the assessee from the territorial jurisdiction vested in him by virtue of any directions or orders issued u/s. 120(1) or (2) of the Act. So, this saving provision which saves the action of an Assessing Officer is limited to the income accruing or arising or received within the limits of his territorial area as conferred to him (Assessing Officer) by order under sub-sec. (1) or (2) of sec. 120 of the Act and not otherwise. So, this saving provision will come into play only in the first place the Assessing Officer is vested with the jurisdiction by an order/direction issued under sub-sec. (1) or (2) of section 120 of the Act. Thus, as per the scheme of the Act, it can be seen that sections 120 and 124 vest jurisdiction on Income Tax Authorities and on Assessing Officer respectively and, therefore, both sections i.e., sections 120 and 124 of the Act must be read in conjunction and harmoniously to decide the territorial jurisdiction which is prescribed by the direction or orders by the CBDT under sub-sec. (1) or (2) of sec. 120 of the Act.
Having taken note of the provisions of Sections 120 & 124, we however find that Section 127 is a separate code of its own. Section 127(1) empowers, the Pr. Director General or Director General or Pr. Chief
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Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, as stipulated therein, to transfer any case from one or more Assessing Officer subordinate to him. In other words, under Section 127(1) the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, as stipulated therein, can transfer the case records of an assessee from one Assessing Officer to another functioning under his own charge. On the contrary, Section 127(2) empowers the foregoing authorities to transfer of cases from the Assessing Officers from his jurisdiction to the Assessing Officers who are not functioning under his jurisdiction and therefore who are not subordinate to such authority. In the cases covered u/s. 127(2) therefore, if the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, of the Assessing Officer to whom the case of an assessee is proposed to be transferred, agrees for the transfer, then the transfer can made u/s. 127(2)(a) of the Act. In case however there is any disagreement between such stipulated authorities, the matter is required to be referred to the Board which in turn decides the issue of transfer or the Board can then authorize an Income Tax authority by a notification as stipulated in clause (b) of sub-sec.(2) of section 127 of the Act. Sub-section(4) of Section 127 of the Act provides that upon the transfer of case by the authorities specified in sub-section (1) or (2) of section 127 of the Act, any stage of the proceedings shall not render the reissue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. In other words, Section 127(4) saves the actions of the Assessing Officer from whom the case is transferred and allows the Assessing Officer to whom the case of an assessee is transferred to take forward the proceedings from the point where the earlier jurisdictional Assessing Officer had left. Here, it would be important to note the Explanation to section 127 defines the expression 'case'. A reading of
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the said Explanation shows that the expression 'case' in relation to any person, whose name is specified in the transfer order passed u/s. 127 of the Act, means all proceedings under the Act in respect of any year which may be pending on the date of such order or direction or it may have been completed on or before such date, and includes also all proceedings under the Income Tax Act which maybe commenced after the date of such order or direction of any year. This definition of the expression 'case' implies that, once a transfer is made by the authority specified in sub-section (1) or (2) of section 127 of the Act who had the jurisdiction over an Assessing Officer who in turn had jurisdiction over the assessee/person/entity, by virtue of direction/order issued under section 120(1) or (2) of the Act, then the entire assessment of the person i.e. pre-transfer and post-transfer as on date of transfer will stand transferred and thereafter for all purposes of the Income Tax Act, the AO of the assessee to whom the case is transferred, will be the Assessing Officer in respect of the said the assessee for pre and post proceedings from the date of transfer. In other words, once transfer order of a case of an assessee is issued u/s. 127 of the Act the effect will be that (i) all the proceedings of the assessee under the Act in respect of any year which maybe pending on the date of such order will stand transferred, (ii) all the completed assessment order of the assessee on or before the date of transfer will stand transferred and (iii) all proceedings under the Act in respect of the assessee which maybe commenced after the date of such transfer order have to be undertaken by the transferred new Assessing Officer.
In the light of the above discussion, we now examine the facts of the present case for AY 2006-07 and ascertain whether ACIT, Circle 1(2)(1) assumed jurisdiction over the assessee properly so as to frame the assessment u/s. 143(3) of the Act. Originally the assessee was assessed under ITO, Ward 10(1), Bangalore prior to 2.5.2013. Consequent to order
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u/s. 127 dated 2.5.2013, the jurisdiction of the assessee was changed to DCIT, Circle 2(1) / ACIT 4(2)(1), Bangalore. Subsequently, based on CBDT Notification dated 22.10.2014, the jurisdiction of the assessee was changed to be assessed u/s. PCIT-4, Bangalore. Afterwards, there was an order u/s. 127 of the Act dated 15.11.2014 wherein the CIT-4, Bangalore changed the jurisdiction from ACIT, Circle 4(2)(1) to Circle 1(2)(1). There are two notices u/s. 148 of the Act brought on record by the ld. AR. One is notice u/s. 148 dated 10.5.2013 which is as follows:-
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The next notice u/s. 148 dated 26.3.2014 is as follows:-
In the assessment order it was mentioned that notice u/s. 148 was issued on 9.12.2014 by ACIT, 1(2)(1) and served on the assessee on 19.12.2014, however copy of the same was not produced by either of the parties. The ld. AR has not controverted this observation of the AO, as such it is considered that there is actual issue of notice u/s. 148 / 143(2) by ACIT, Circle 1(2)(1). Even going by the assessment order, notice u/s. 148 issued to the assessee on 9.12.2014 and served on him on 19.12.2014. Thus, w.e.f. 15.11.2014, the jurisdiction of the assessee was with ACIT, Circle 1(2)(1), Bangalore. The vesting of jurisdiction with this Officer was in
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terms of CBDT Notification dated 22.10.2014 u/s. 120(1) of the Act. The said ACIT, Circle 1(2)(1) enjoyed exclusive jurisdiction over the assessee from 15.11.2014. There was also order u/s. 127 of the Act by the CIT-4, Bangalore in this regard. From this order passed u/s. 127, it is found that the transfer of jurisdiction over the assessee’s case from Circle 4(2)(1) to Circle 1(2)(1) was absolute and without reserving any right to concurrent jurisdiction over the assessee with ACIT, Circle 4(2)(1), Bangalore. The contention of the ld. AR is that the assessee’s case was with designated officer, DCIT, Circle 2(1), Bangalore by order u/s. 127 dated 2.5.2013 and according to the ld. AR, CBDT Notification dated 22.10.2014 cannot be applied to assessee’s case as the assessee continued with the designated officer, DCIT, Circle 2(1), Bangalore. For adjudicating this contention, we will examine the provisions of sub-section (5) of section 124 and sub- section (4) of section 127 of the Act which reads as follows:- “Section 124(5):- Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or sub- section (2) of section 120. Section 127(4):- The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation: In section 120 and this section, the word "case", in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which maybe pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act
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which maybe commenced after the date of such order or direction in respect of any year.” 32. From a plain reading of sub-section (5) of section 124 of the Act, it is noted that though it is an overriding provision yet it has inherent limitation as prescribed in law. If one carefully reads sub-section (5) of section 124 of the Act, then it will be noted that it starts with the words "Notwithstanding anything contained in this section or in any direction or order issued under section 120 of the Act". The express language employed by the Legislature clearly shows that provisions of sub-section (5) of section 124 overrides only the other provisions of Section 124 of the Act and any orders/directions issued u/s. 120 of the Act, which necessarily means that non-obstante clause is limited to operation of sub-sections (1) to (4) of section 124 or direction/order issued under section 120 of the Act and not with regard to any order of transfer of case of an assessee made u/s. 127 of the Act. In the circumstances when one reads the definition of "case" as set out in the Explanation to Section 127 of the Act, then it means that when a Chief Commissioner or Commissioner makes an order for transfer of jurisdiction in exercise of the powers conferred by Section 127 of the Act, from an Assessing Officer who is vested with jurisdiction by virtue of direction/order issued under sub-section (1) or (2) of section 120 of the Act to another Assessing Officer who is not vested with such jurisdiction as per direction/order issued u/s. 120(1) and (2) of the Act; then by virtue of such transfer order u/s. 127 of the Act, the jurisdiction of an Assessing Officer u/s. 124 vested by virtue of an order/direction vested on an Assessing Officer as per sec. 120(1) or (2) of the Act is taken away and thus the original Assessing Officer is divested of the jurisdiction enjoyed u/s. 124, read with sub-section (1) or (2) of section 120 of the Act. We therefore hold that the concurrent jurisdiction of the assessee is with ACIT, Circle 1(2)(1) at the time of reopening of the assessment on 9.12.2014. The argument of the ld. AR is not in accordance with the provisions of section
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124(5) r.w.s. 127 of the Act. In our opinion, once an order under u/s. 127 is passed on 15.11.2014 by CIT-4, Bangalore, the jurisdiction of the assessee was with DCIT, Circle (2)(1), Bangalore or ACIT, Circle 4(2)(1) ceased to have jurisdiction over the assessee. The jurisdiction enjoyed by Circle 2(1) in terms of section 127 stood abrogated. Accordingly, after 15.11.2014, ACIT, Circle 1(2)(1) could exercise power conferred on him for the purpose of proceedings against the assessee. Being so, when ACIT, Circle 1(2)(1) received the case records in terms of order u/s. 127 dated 15.11.2014, he is having right to issue notice u/s. 148 so as to frame assessment u/s. 143(3) of the Act. In the present case, jurisdiction over the assessee was conferred by law in terms of section 127 of the Act and the case has been rightly transferred from Circle 4(2)(1) to Circle 1(2)(1), Bangalore. There is no error in assuming jurisdiction over the assessee by the present AO i.e. ACIT, Circle 1(2)(1), Bangalore. This ground of the assessee is dismissed for AY 2006-07.
For AY 2007-08, the ground relating to assumption of jurisdiction by the AO i.e., ACIT, Circle 1(2)(1), Bangalore is not pressed and accordingly this ground is dismissed as not pressed.
Vide next common ground No.3, the assessee objects to the very re-opening of the assessments mainly on the ground that reasons recorded were not actually "Reason to Believe" and that no speaking order was passed by the Assessing Officer on the objections filed on the reasons recorded.
The assessee received notice U/s. 148 of the Act for AYs 2002-03 to 2007-08 and when asked for the reasons for reopening for these years, the assessee received the copies of reasons for the years which are identically worded except for the change of assessment year in the last line of the reasons. The reasons for Assessment Year 2006-07 read as under:
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"Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 51" Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the Assessment Year 2006-07".
The ld. AR submitted that from the reasons recorded for the years, the recording of reasons was without proper application and appreciation of the facts of the case. Further, for AY 2006-2007, the sole basis is opening of an account and depositing of money in the account on 18.10.2001, relevant to AY 2002-03. There is no reasons recorded to show any escapement of income for AY 2006-07. The judicial pronouncements have held that the reasons to believe must be held in good faith; the reasons to believe must not be purely subjective satisfaction and further the reasons to believe must be such that an honest and reasonable conclusion can be drawn for escapement of income for the year under consideration.
It was submitted that the reasons as recorded would at best cover the AY 2002-03 only. The assessee in his objections to the reasons before the AO stated that the reasons so recorded do not:- a. Reveal the information received under DTAA. b. State that from which foreign government the information was received. c. State that under which DTAA the info was received. d. State that how the Asssessing Officer is informed of an account with HSBC Bank. e. State that in which branch of the bank the account is opened. f. State that when was the account opened.
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g. State that even if there is account in whose name account is there. h. State that how it is concluded that the figure has not been admitted to tax. i. State that how it is concluded that income chargeable to tax has escaped assessment.
It is submitted that the reasons recorded should be based on tangible materials and based on independent application of mind. For this proposition reliance was placed on case laws:- i) PCIT v. Meenakshi Overseas P. Ltd., 82 taxmann.com 300 (Del) ii) PCIT v. G&G Pharma India Ltd., 384 ITR 147 [2017] 81 taxmann.com 109 (Del) iii) CIT v. Sfil Stock Broking Ltd., 325 ITR 285 iv) CIT v. Insecticides (India) Ltd., 357 ITR 330
Therefore, it is submitted that there was no recording of any reasons to believe for reopening for the year and in any case there was no reasons and material for the AY 2006-07 in the reasons so recorded. Therefore, issue of notice u/s. 148 of the Act, for reopening of assessment is without any reasons and therefore bad in law and consequently, the impugned order is also bad in law and liable to be quashed.
In any case, on receipt of copy of the reasons, the assessee had filed detailed objections to which, the AO has passed an order dated 03.02.2015. The perusal of the order shows that the AO has not considered various points raised by the assessee in the objections filed and further it was not a speaking order. For this reason also, the impugned order is bad in law and liable to be quashed.
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The ld. DR submitted that the assessee has opened an account with HSBC, Geneva on 18.10.2001. In the reason, the opening date of bank account was mentioned and not the closing date. There was information received through diplomatic channel in this case from Govt. of France. The assessee has paid taxes to the extent of Rs.5 lakhs for the AY 2007-08 on account of bank account held at HSBC, Geneva. The assessee has not produced the comprehensive year wise analysis of the transaction in the impugned bank account. He deliberately withheld such information, as such it is not appropriate to question the validity of the reassessment proceedings. At the time of initial reopening, the AO is not required to establish the escapement of income. It is only at the conclusion of the assessment proceedings that the alleged escapement could be proved or disproved. For reopening an assessment, there should be prima facie a reason to come to the conclusion that there is escapement of income. Sufficiency of the reason is not open to question by the assessee. For the purpose, the ld. DR relied on the judgment of the Hon’ble Supreme Court in the case of Sri Krishna Pvt. v. ITO (1996)221 ITR 538 (SC).
Regarding non-disposal of the objections raised by the assessee for reopening the assessment, it was submitted by the ld. DR that the AO duly addressed the issue during the assessment proceedings. There was failure on the part of assessee to disclose fully and truly all material facts about the bank account at HSBC, Geneva. The requirement of the section 147 of the Act stands satisfied. Such objections against the proceedings u/s. 148 are disposed of by the AO. Further, it was submitted that the assessee actually participated in the reassessment proceedings which were based on the Bank account held at HSBC, Geneva. There is no infirmity in the reopening of assessment.
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We have heard both the parties and perused the material on record. Section 147 of the Act states that “if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income….” , Hence the basic requirement for initiating proceedings u/s. 147 is that the AO should have “reason to believe that any income chargeable to tax has escaped assessment”.
We have gone through the reasons recorded for these two assessment years which are as follows:- “Assessment Year 2006-2007: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC,—Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2006-07"
Assessment Year 2007-2008: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC Bank, Geneva on 18.10.2001 by depositing an amount of' USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the come chargeable to tax has been escaped assessment for the A. Y. 007-08"
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On a perusal of the above reasons recorded do not state what is the amount of income chargeable to tax that as escaped assessment in the hands of assessee in the assessment years under consideration. The reasons recorded in all the years is stereotyped an the amount mentioned is same as in other years and only change in the assessment year. According to the AO, based on the information received by the department, the assessee has opened an account with HSBC Bank, Geneva. The assessee opened an account with HSBC Bank, Geneva on 18.10.2001 by depositing an amount of US $ 669864. The same has not been admitted as income in the return of income filed before the tax authorities in India. Hence income chargeable to tax has escaped assessment for the AYs 2002-03 to 2007-08. The assessee did not admit of the alleged bank account as belonging to him. It was submitted that the alleged bank account does not meet with the requirements of section 147 compliance with which is necessary for assuming jurisdiction under the said section.
It was further observed that a perusal of the above reasons recorded would show that the amount of income that is chargeable to tax that has escaped assessment has not been quantified for each assessment year. As per the information, the Bank Account has been held by assessee. In such a scenario, it should be ascertained as to what transactions pertain to the assessment years under consideration. Moreover, merely entering into transactions would not mean that income is earned. The reasons recorded do not state whether the transactions are income bearing transactions or not.
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In our opinion, the expression ‘reason to believe’ cannot be a mere conjecture or surmise. The reason for formation of belief for initiating assessment u/s 147 must have a rational connection or relevant bearing on the formation of belief. The existence or otherwise of such a belief on the part of the AO, is the very foundation for him to assume jurisdiction u/s 147. In the present case, it is established that the AO did not have any ‘reason to believe’ as judicially interpreted by various courts. So the initiation of proceedings u/s 147 is bad in law. Reliance was placed on CIT v. Lalit Kumar Bardia, 84 taxman.com 212.
The Hon’ble Supreme Court in Sheo Nath Singh v. Appellate 48. Asstt. CIT [1971] 82 ITR 147 (SC) observed as under:- "There can be no manner of doubt that the words "reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstances evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court."
A three-Judge Bench of the Supreme Court in S. Narayanappa v. CIT [1967] 63 ITR 219 held as under:- "Again the expression "reason to believe" in section 34 of the Income-tax Act does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith: it cannot be merely a pretence. To put it different, it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the
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Income-tax Officer in starting proceedings under section 34 of the Act is open to challenge in a court of law (see Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District 1, Calcutta)."
In Ganga Saran & Sons (P.) Ltd. v. Income-tax Officer [1981] 130 ITR 1 (SC), the Hon’ble Supreme Court observed as under:- “The important words in section 147(a) are “has reason to belief” and these words are strong than the words “is satisfied”. The belief entertained by the Income-tax Officer must not be arbitrary or irrational. It must be reasonable or in other words, it must be based on reasons, which are relevant and material. The Court of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on fact and law could reasonably entertain the belief, the conclusion would be inescapable that the Income-tax Officer could not have reason to believe that any part of the income of the assessee has escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.” 51. The Hon’ble Gauhati High Court in Assam Co. Ltd. v. Union Of India [2006] 150 TAXMAN 571 [GAU.] held as under:- “The litmus test as is decipherable from the consistent judicial pronouncements on this facet of the lis, therefore, is the existence, relevance and rationale of the reason on which the Assessing Officer proceeds to act under Section 147 and the bearing it has on the process of formation of the belief that income has escaped assessment. If either of these two essentials is absent, the proposed action would be ex facie unauthorized.
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Not only the reason has to be one, which is relevant and recognized in law, the same has to have a rational and logical link with the belief that there has been an escapement of taxable income. The belief has to have its roots in the reasons and obviously has to be genuine and bona fide and not merely a pretence. The subjective satisfaction metamorphing into the belief has to be guided by objectivity based on existing relevant reasons acknowledged and recognized by law. A tangible and bona fide legal necessity to scuttle tax avoidance is the essence of the power and no roving enquiry on vague-hunches or indeterminate and impertinent consideration is envisaged.” 52. The entire law as to what would constitute "reason to believe" was summed up by the Hon’ble Supreme Court in ITO v Lakhmani Mewal Das [1976] 103 ITR 437. The following principles were laid down:- (a) The powers of the Assessing Officer to reopen an assessment, though wide, are not plenary. (b) The words of the statute are "reason to believe" and not "reason to suspect". (c) The reopening of an assessment after the lapse of many years is a serious matter. Since the finality of a judicial or quasi-judicial proceedings are sought to be disturbed, it is essential that before taking action to reopen the assessment, the requirements of the law should be satisfied. (d) The reasons to believe must have a material bearing on the question on escapement of income. It does not mean a purely subjective satisfaction of the assessing authority; the reason be held in good faith and cannot merely be a pretence.
The reasons to believe 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 AO and the formation is belief regarding escapement of income. The fact that the words "definite
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information" which were there in section 34 of the Act of 1922 before 1948, are not there in section 147 of the 1961 Act would not lead to the conclusion that action can now be taken for reopening an assessment even if the information is wholly vague, indefinite, far-fetched or remote. From perusal of the reasons recorded, he submitted that the reasons recorded cannot lead one to form a belief that income chargeable to tax has escaped assessment. The observations of the Hon’ble Supreme Court in Income- tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC) on this proposition are reproduced below:- “As stated earlier, the reasons for the formation of the belief 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 assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income- tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence.”.
In Commissioner of Income-tax v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), the Hon’ble Supreme Court held as under:
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“There should, in our opinion, be some direct nexus between the conclusion of fact arrived at by the authority concerned and the primary facts upon which that conclusion is based. The use of extraneous and irrelevant material in arriving at that conclusion would vitiate the conclusion of fact because it is difficult to predicate as to what extent the extraneous and irrelevant material has influenced the authority in arriving at the conclusion of fact.” 55. A Constitution Bench of the Hon’ble Supreme Court in M. Ct. Muthiah v. CIT AIR 1956 SC 269, considered the expressions "reason to believe" and distinguished the same from "reason to suspect" comparing the provisions with the un-amended provisions of section 34(1) of the Income-tax Act, 1922 and held that after amendment, the expressions "reason to believe" had to be based as a consequence of "definite information" which came into possession of the Revenue. However, there must be some material in possession of the Revenue on the basis of which an objective opinion can be formed that the person concerned has undisclosed amount for the purpose of the Act.
There is no nexus between the material coming to the notice of the AO and the formation of his belief that there has been escapement of income. The amount in the bank account with HSBC Geneva is not relating to the assessment years under consideration. Hence, the very basis for assuming jurisdiction is not factually correct, no reasonable belief can be formed based on such incorrect facts.
It is observed that the AO should have reason to believe that income chargeable to tax has escaped assessment. The learned Assessing Officer has to determine ‘income chargeable to tax’. This presupposes that the material based on which he forms reason to believe that income chargeable to tax which has escaped assessment should enable computation of income that has escaped assessment. The AO has not stated as to how the entries in the Bank account represent income in these
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assessment years. Under such circumstances, it cannot be alleged that income chargeable to tax has escaped assessment.
Reliance was placed on the following decisions:- • In Commissioner of Income-tax-V v. Orient Craft Ltd. [2013] 29 taxmann.com 392 (DELHI), the Hon’ble Delhi High Court held as under:- “We think that the point taken on behalf of the assessee that even an assessment made under Section 143(1) of the Act can be reopened under Section 147 only subject to fulfillment of the conditions precedent, which include the condition that the Assessing Officer must have "reason to believe" that income chargeable to tax has escaped assessment, is sound. It is true that no assessment order is passed when the return is merely processed under Section 143(1) and an intimation to that effect is sent to the assessee. However, it has been recognised by the Supreme Court itself in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P). Ltd. [2007] 291 ITR 500/ 161 Taxman 316, a decision that was relied upon by the revenue, that even where proceedings under Section 147 are sought to be taken with reference to an intimation framed earlier under Section 143(1), the ingredients of Section 147 have to be fulfilled; the ingredient is that there should exist "reason to believe" that income chargeable to tax has escaped assessment. This judgment, contrary to what the Revenue would have us believe, does not give a carte blanche to the Assessing Officer to disturb the finality of the intimation under Section 143(1) at his whims and caprice; he must have reason to believe within the meaning of the Section.
…………..There is nothing in the language of Section 147 to unshackle the Assessing Officer from the need to show "reason to believe". The fact that the intimation issued under Section 143(1) cannot be equated to an "assessment", a position which has been elaborated by the Supreme Court in the judgment cited above, cannot in our opinion lead to the conclusion that the requirements of Section 147 can be dispensed with when the finality of an
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intimation under Section 143(1) is sought to be disturbed. We are at pains to point out this position, which seems fairly obvious to us, because of the argument frequently advanced before us on behalf of the Revenue in other cases as well, under the misconception, if we may say so with respect, that an intimation under Section 143(1) can be disturbed on any ground which appeals to the Assessing Officer. The consequence of countenancing such an argument could be grave. The expression "reason to believe" has come to attain a certain signification and content, nourished over a long period of years by judicial refinement painstakingly embarked upon by great judges in the past. The expression has been judicially interpreted in a particular manner. When Section 147 was recast with effect from 1st April, 1989, the legislature sought to replace the expression "reason to believe" with the expression "for reasons to be recorded by him in writing". But there were representations against the proposal and bowing to them the original expression was restored. This aspect of the matter has been brought out by the Supreme Court in Kelvinator of India Ltd. (supra)……………… Having regard to the judicial interpretation placed upon the expression "reason to believe", and the continued use of that expression right from 1948 till date, the ld. AR submitted that the meaning of the expression has to be understood in exactly the same manner in which it has been understood by the courts. The assumption of the Revenue that somehow the words "reason to believe" have to be understood in a liberal manner where the finality of an intimation u/s. 143(1) is sought to be disturbed is erroneous and misconceived. As pointed out earlier, there is no warrant for such an assumption because of the language employed in Section 147; it makes no distinction between an order passed under section 143(3) and the intimation issued under section 143(1). Therefore it is not permissible to adopt different standards while interpreting the words "reason to believe" vis-a- vis Section 143(1) and Section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made u/s. 143(3) cannot apply where only an intimation was issued earlier u/s. 143(1). It would in effect place an assessee in whose case the return was processed u/s. 143(1) in
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a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 143(1) and thereafter issue notices to reopen the assessment. An interpretation which makes a distinction between the meaning and content of the expression "reason to believe" in cases where assessments were framed earlier under Section 143(3) and cases where mere intimations were issued earlier under Section 143(1) may well lead to such an unintended mischief. It would be discriminatory too. An interpretation that leads to absurd results or mischief is to be eschewed. ………………In other words, the expression "reason to believe" cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under section 143(3) and another applicable where an intimation was earlier issued under section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under section 148(2) on the ground that they do not meet the standards set in the various judicial pronouncements.
In the present case the reasons disclose that the AO reached the belief that there was escapement of income after he accepted the return for the assessment years and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the AO, both strongly deprecated by the Supreme Court in Kelvinator of India Ltd. 320 ITR 561
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(SC). The reasons recorded by the AO in the present case confirms the apprehension about the harm that a less strict interpretation of the words "reason to believe" vis-a-vis an assessment made can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the AO subsequent to the conclusion of assessment. It reflects an arbitrary exercise of the power conferred under section 147.
In Prashant S. Joshi v. Income-tax Officer, Ward 19(2)(4) [2010] 189 TAXMAN 1 (BOM.), the Hon’ble Bombay High Court held as under:- “For all these reasons, it is evident that there was absolutely no basis for the first respondent to form a belief that any income chargeable to tax has escaped assessment within the meaning of the substantive provisions of section 147. Explanation (2) to section 147 creates a deeming fiction of cases where income chargeable to tax has escaped assessment. Clause (b) deals with a situation "where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return." For the purpose of clause (b) to Explanation (2), the Assessing Officer must notice that the assessee has understated his income or has claimed excessive loss, deduction, allowance or relief in the return. The taking of such notice must be consistent with the provisions of the applicable law. The act of taking notice cannot be at the arbitrary whim or caprice of the Assessing Officer and must be based on a reasonable foundation. The sufficiency of the evidence or material is not open to scrutiny by the Court but the existence of the belief is the sine qua non for a valid exercise of power. In the present case, having regard to the law laid down by the Supreme Court it was impossible for any prudent person to form a reasonable belief that the income had escaped assessment. The reasons which have been recorded could never have led a prudent person to form an opinion that income had escaped assessment within the meaning of section 147. In these circumstances, the petition shall have to be allowed by setting aside the notice under section 148.”
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In the above case, no assessment had been carried out u/s 143(3) or 144 of the Act. Only intimation u/s 143(1) had been issued. In the present case for AY 2006-07, there was assessment u/s. 143(3) of the Act and for AY 2007-08 only intimation was issued.
The Hon’ble Tribunal in Grey Worldwide (India) Private Limited Vs. Asst Commissioner Of Income Tax 2011-TIOL-291-ITAT-MUM held as under:- “13. The expression ‘reason to believe' still continues to be part of main section 147. There is no distinction at all between the assessment deemed to be completed under section 143(1) and the assessment completed under section 143(3) of the Income Tax Act. The Hon'ble Bombay High Court in the case of Prashant S. Joshi vs. ITO 324 ITR 154(Bom) = (2010-TIOL-146-HC-MUM- IT) after considering the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500 (SC) = (2007-TIOL-95-SC-IT) has held that even when an intimation is issued u/s. 143(1) of the Act, the validity of initiation of reassessment proceedings has to satisfy the test of existence of “reason to believe” that income chargeable to tax has escaped assessment. The law regarding existence of reason to believe is by now well settled. Belief of the Assessing Officer should not be arbitrary or irrational, but based on relevant and specific information or material. In this context, it is also important to note that there should be a direct nexus or live-link between the material coming to the notice of the Assessing Officer and the formation of his belief that there has been escapement of income of the assessee. The important words under section 147 are “has reason to believe” and these words are stronger than the words “is satisfied”. The belief entertained by the Assessing Officer must not be arbitrary or irrational. It must be reasonable or in other words, it must be based on reasons, which are relevant and material. In this context it may also be noted that the Courts have got powers to examine whether the reasons are relevant and have a bearing on the matter, in regard to which, the Assessing Officer is required to entertain the belief, before he issues notice under section 147. Besides, the expression “reason to believe” does not mean a purely subjective satisfaction
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on the part of the Assessing Officer. The belief must be held in good faith, it cannot merely be pretence. In addition, suspicion, gossip or rumour would not form the basis for such belief.”
In Rambagh Palace Hotels Pvt Ltd Vs DCIT 2013-TIOL-45-HC-DEL- IT, the Hon’ble Delhi High Court held as under:- “Even so, it is necessary that the assessing officer must have “reasons to believe” that income chargeable to tax had escaped assessment. There must be tangible material before him on the basis of which he could form the belief, bona fide and in good faith, that there was escapement of income. The material must have a live link or nexus with the formation of the belief. The belief cannot be a mere pretence. These are the most basic and indispensable requirements for the validity of the notice under Section 148”
The Third Member in M/s. Telco Dadajee Dhackjee Ltd. Vs. The DCIT, Circle 2(3) 2012-TIOL-532-ITAT-MUM-TM held as under:- “section 147 applies both to section 143(1) as well as section 143(3) and, therefore, except to the extent that the reassessment notice issued under section 148 in a case where the original assessment was made under section 143(1) cannot be challenged on the ground of a mere change of opinion, still it is open to an assessee to challenge the notice on the ground that there is no reason to believe that income chargeable to tax has escaped assessment. The reason to believe must have a live link with the formation of the belief that income chargeable to tax had escaped assessment when the return was processed and accepted under section 143(1). To hold that in every case where a return was processed and accepted under section 143(1) the Assessing Officer will be free to reopen the same under section 148 even in the absence of a live link between the reasons recorded and the formation of belief would be to make the conditions of section 147 and section 148 otiose as regards notices reopening issued in cases where the return was originally processed under section
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143(1). There is no exclusion in section 147 to the effect that where the return was earlier processed under section 143(1) it is not necessary for the Assessing Officer to hold or entertain a belief that income chargeable to tax had escaped assessment for the reasons recorded by him. Therefore, the condition that the Assessing Officer must have reason to believe and the further condition that those reasons must have a live link with the formation of the belief is applicable equally to cases where the return was processed under section 143(1) as also to cases where the return was examined and an assessment was made by a speaking order under section 143(3). The only distinction recognized in section 147 between the two is where it is provided by the proviso that where the earlier assessment was made under section 143(3), no action for reopening the assessment can be taken after the expiry of four years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment because of the failure on the part of the assessee to file a return or to disclose fully and truly all material facts necessary for the assessment. Such an exception has not been provided for in a case where the return has been processed under section 143(1) in which case the proviso will have no application. If it is correct that an intimation under section 143(1) as well as an assessment order under section 143(3) are both amenable to section 147, it should also be conceded that even in a case where the original return was merely processed under section 143(1) the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment. He also has to record reasons under section 148(2) for reopening the earlier assessment made under section 143(1). All that has been excluded is that the assessee, in whose case the return was first processed under section 143(1), cannot challenge the notice of reopening on the ground that it is prompted by a mere change of opinion. Only to this limited extent there is a disability on the part of the assessee to challenge the notice of reopening in a case where his return was earlier processed under section 143(1) of the Act. ……………..the notice of reopening issued in a case where the return was first processed under section 143(1) is open to challenge on all grounds available to the assessee, including the ground that there was no reason to believe that income chargeable to tax had escaped assessment or that the materials
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before the Assessing Officer had no live link or nexus with the formation of such belief or that the reasons are based on gossip or rumour or were a mere pretence. This is made clear by the observations of the Court at page 512 of the report where it was held that “so long as the ingredients of section 147 are fulfilled” the Assessing Officer can reopen the proceedings even where intimation under section 143(1) had been issued. Thus fulfillment of the conditions of section 147, including the one that there should be “reason to believe”, is essential for the validity of the notice under section 148. It is while expounding the words “reason to believe” that the Supreme Court in the later judgment in CIT vs. Kelvinator of India Ltd. (supra) held that there should be “tangible material” to come to the conclusion that income had escaped assessment. Thus, in my humble understanding of both the judgments, while resorting to section 147 even in a case where only an intimation had been issued under section 143(1)(a) it is essential that the Assessing Officer should have before him tangible material justifying his reason to believe that income had escaped assessment.” 65. Reliance is also placed on following decisions wherein it has been held that the proceedings initiated under section 147 are liable to be quashed on the ground that there was no tangible material before the Assessing Officer, even though no assessment u/s 143(3) or 144 had been made before and the return was merely processed u/s 143(1) of the Act:- • Indivest Pte. Ltd., Singapore v. Additional Director of Income- tax-3(1), Mumbai [2012] 206 TAXMAN 351 (BOM.) • Inductotherm (India) Pvt. Ltd vs. DCIT (Guj.) 2012-TIOL-667- HC-AHM-IT
In our opinion, the ‘reason to believe’ contemplated in section 147 should be that of the Assessing Officer. The AO has to apply his mind independently to the material based on which the belief is sought to be formed. If based upon his examination, he has reason to believe that
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income chargeable to tax has escaped assessment, then he can initiate proceedings u/s 147. The AO cannot merely rely on the report of some other income-tax authority and issue notice u/s 148 that he has reason to believe that income chargeable to tax has escaped assessment. Hence, the initiation of proceedings u/s 147 is not valid.
The Tribunal in Assistant Commissioner of Income-tax, Vapi Circle v. Resham Petrotech Ltd. [2012] 136 ITD 185 (AHD.) held as under: “The ITO himself should form the reasonable belief that income has escaped assessment and then only he can reopen an assessment. Reassessment proceedings initiated on the directions given by the CIT would be invalid [CIT v. T. R. Rajkumari [1973] 96 ITR 78 (Mad.): TC 51R 430].The requisite belief u/s. 147 must be that of the ITO concerned and not of any other officer. If the ITO does not form, his own belief but merely act at the behest of any superior authority, it must be held that the assumption of jurisdiction under section 148 was bad for non- satisfaction of the conditions precedent [Sheo Narain Jaswal & Ors. v. ITO & Ors. [1989] 176 ITR 352 (Pat.); TC 51R 432.. See also Vishal Swamp Agrawilla v. ITO [1976] CTR (Cal.) 296: TC 51R 432A and Chunnilal Onkarmal (Pvt) Ltd., (1983) 349 ITR 380 (MP): TC 51R 435]'…………………….. The reasons for reopening must be recorded by jurisdictional AO because he is keeping all relevant and primary record. The basic requirement of section 147 of the Act is that the AO has reason to believe that any income chargeable to tax has escaped assessment. Such belief must be the belief of jurisdictional AO and not any other AO or authority of the department. Therefore, it is well settled that the AO's jurisdiction to reopen an assessment u/s. 147 depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction.” 68. The Tribunal in Assistant Commissioner of Income-tax v. Radheshyam Mohanlal Maheshwari [2011] 12 ITR(TRIB.) 429 (AHD.) held as under:-
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“reopening of the assessment under section 147 of the Income-tax Act as per its plain language provided in the Act provides prerogative to the Assessing Officer to reopen the assessment if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Even if the learned Commissioner of Income-tax (Appeals) has issued a direction in the appellate order dated December 11, 2003 to reopen the assessments, it is the prerogative of the Assessing Officer to reopen the assessment by satisfying the requirements of the law as mentioned above and shall have to record in writing, the reasons to believe that any income chargeable to tax has escaped assessment for any assessment year. However, the reasons recorded by the Assessing Officer in all the above cases do not find mention such facts and the satisfaction of the Assessing Officer for escapement of income. In the absence of the fulfilment of the requirements of section 147 of the Income-tax Act for initiation of the reassessment proceedings in the above cases, we are of the view that the Assessing Officer instead of complying with the requirements of law merely was swayed by the direction of the learned Commissioner of Income-tax (Appeals) in the appellate order dated December 11, 2003. Considering the above discussions, we are of the view that these are not the fit cases for initiation of the reassessment proceedings because the Assessing Officer failed to make out a case within the four corners of the provisions of section 147 of the Income-tax Act.” 69. The Hon’ble Delhi High Court in Commissioner of Income-tax v. SPL'S Siddhartha Ltd. [2012] 345 ITR 223 (DELHI) held as under:- “8. Thus, if authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorised under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be "independent" and not "borrowed" or "dictated" satisfaction. Law in this regard is now
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sell-settled. In Sheo Narain Jaiswal v. ITO [1989] 176 ITR 352/ 45 Taxman 213 (Pat.), it was held: "Where the Assessing Officer does not himself exercise his jurisdiction under Section 147 but merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was bad for non-satisfaction of the condition precedent." 70. The Apex Court in the case of AnirudhSinhji KaranSinhji Jadeja v. State of Gujarat [1995] 5 SCC 302 has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether.
The Hon’ble High Court in Mrs.Vinita Jain v. ITO 158 Taxman Magazine 167 held that where Assessing Officer reopened assessee’s assessment merely because DDIT (Inv.) believed that transaction of capital gains shown by assessee was bogus and no separate reason disclosing satisfaction of assessing Officer for formation of belief that income of assessee had escaped assessment had been recorded, notice issued under section 148 was to be quashed and assessment made in pursuance thereof was to be annulled.
The Hon’ble Supreme Court in ACIT v. Dhariya Construction Co. [2010] 328 ITR 515 (SC) held that the opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. It was held that the Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon and without the same, the Department was not entitled to reopen the assessment.
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The Hon’ble Rajasthan High Court in CIT v. Shree Rajasthan Syntex Ltd. [2009] 313 ITR 231 (Raj) held that it has been very intelligibly projected that the factum of the Assessing Officer at Mumbai having allowed depreciation allowance to the lessee did constitute a fact which came to the notice of the Assessing Officer here and that furnished reason to believe that the income of the assessee chargeable to tax had escaped assessment but then if properly appreciated all that it comes to is that a set of lease deeds had been appreciated by the Assessing Officer of the lessee at Mumbai, who after appreciating them allowed depreciation and the Assessing Officer here came to the conclusion that the assessee continues to be the owner of the assets and is entitled to depreciation allowance, while the Assessing Officer at Mumbai formed an opinion from the same set of lease deeds that the lessee should be taken to be the owner and has right to depreciation. Thus, the net result which comes to is that simply because after the Assessing Officer here had formed a particular opinion on a particular set of documents simply because the Assessing Officer at Mumbai had formed a different opinion on the same set of documents the action was sought to be initiated here for reassessment which, in our view, has rightly been found by the learned Tribunal that it was a “borrowed satisfaction” under the opinion of the Assessing Officer at Mumbai and has rightly been found to be not sufficient to confer power on the Assessing Officer to initiate reassessment proceedings.
The Department’s special leave petition against the judgment of the Rajasthan High Court reported in 313 ITR 231 (supra) whereby the High Court held that initiation of reassessment proceedings based upon the opinion of the Assessing Officer of the lessor at Mumbai was “borrowed satisfaction” and was not sufficient reason to believe that income had
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escaped assessment proceedings under section 147 has been dismissed. [CIT v. Shree Rajasthan Syntex Ltd. [2009] 313 ITR (Statutes) 27]
The Hon’ble Bombay High Court in ICICI Home Finance Co Ltd Vs ACIT, Mumbai 2012-TIOL-590-HC-MUM-IT held as under:- “The belief u/s 147 that income has escaped assessment has to be the reasonable belief of the AO himself and cannot be an opinion and/or belief of some other authority. The AO cannot blindly follow the opinion of an audit authority for the purpose of arriving at a belief that income has escaped assessment. On facts, the recorded reasons are identical to the objection of the audit authority. The reasons do not rely upon any tangible material in the audit report but merely upon an opinion and the existing material already on record. This itself indicates that there was no independent application of mind by the AO before he issued the s. 148 notice (India Eastern Newspaper Society 119 ITR 996 (SC) followed).”
The Bangalore Tribunal in M/s GMR Holdings Pvt Ltd Vs DCIT, Bangalore 2012-TIOL-114-ITAT-BANG held that issue of notice u/s. 148 of the Act only after the audit party raised certain objections is invalid.
In the present case, the reasons recorded do not show as to how the AO has come to the conclusion that income chargeable to tax has exceeded Rs. 1 lac merely based on certain bank entries. The AO considered the bank entries itself to represent the income chargeable to tax that has escaped assessment. It is submitted that the reasons recorded must disclose the process of reasoning by which the AO holds that he has reason to believe that income chargeable to tax has escaped assessment. The AO in the present case has recorded his conclusion itself as reason.
In the case of VXL India Ltd. v. Asst. CIT [1995] 215 ITR 295 the Gujarat High Court has held as under:-
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“ In a case where the Assessing Officer holds the opinion that because of excessive loss or depreciation allowance the income has escaped assessment, the reasons recorded by the Assessing Officer must disclose by what process of reasoning he holds such belief that excessive loss or depreciation allowance has been computed in the original assessment. Merely saying that excessive loss or depreciation allowance has been computed without disclosing reasons which led the assessing authority to hold such belief, in our opinion, does not confer jurisdiction on the Assessing Officer to take action under sections 147 and 148 of the Act.”
In CIT Vs ICICI Bank Ltd 2012-TIOL-512-HC-MUM-IT, the Hon’ble Mumbai High Court held as under:- “As disclosed in the reasons recorded while issuing notice under Section 148 of the Act, in the present case, the impugned notice was based on the ground that the income earned from the non fund based activities of the respondent had been included in the fund based income so as to claim excess deduction under Section 36(1)(viii) of the said Act. The reasons only provide a conclusion and give no material particulars of information obtained during the course of assessment proceedings for the assessment year 1998-99 Therefore the reasons recorded do not indicate any tangible material which has led to a reasonable belief that income has escaped assessment. As held by this court in the matter of Hindustan Lever Ltd. v. R.B. Wadkar 268 ITR 332 = (2004- TIOL-72-HC-MUM-IT), the reasons for reopening as recorded must be clear and not suffer from any vagueness so to keep the assessee guessing for the reasons. It is the reasons which provide the link between the evidence and the conclusion. In this case the reasons as recorded do suffer from the vice of vagueness.”
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The reasons recorded for reopening the assessment for AY 2006-07 are as follows:- “Assessment Year 2006-07: "Based on the information received under the DTAA from the foreign Government, a survey was conducted in the premises of Sri. Romesh Madhok residing at No. 327, 5th Main, I Block, Koramangala, Bangalore. It has come to our information that the assessee has opened an account with M/s. HSBC,—Bank, Geneva on 18.10.2001 by depositing an amount of USD 669864/- which has not been admitted to tax in the return of income filed. Hence, the income chargeable to tax has been escaped assessment for the A.Y. 2006-07"
As per reasons recorded, the assessee has invested along with his ex-wife in HSBC Bank, Geneva and the transaction with HSBC Bank were not disclosed to the department. However, it has not been stated that the said investment in HSBC was out of income which escaped assessment. The AO also has not mentioned in the aforesaid reasons that he was satisfied that the above income escaped assessment. He simply relied on the information received in his possession to come to the conclusion that this HSBC bank account belonged to the assessee.
From the provisions of section 147, it is clear that the AO must have reason to believe that any income chargeable to tax has escaped assessment. However, it cannot be said that if there is any investment or bank account it is sufficient to believe that income to that extent escaped assessment because there may be so many sources for making such investment and it is not necessary that only on the basis of investment it can be presumed that income to that extent escaped assessment. There should be concrete finding before coming to the conclusion that any income escaped
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assessment and merely on the basis of information provided by any other wing of the department, the AO cannot believe that there was income which has escaped assessment.
In the present case, the AO simply relied upon the information received by him and stated that the investment with HSBC Bank which has not been disclosed in the return of income filed by the assessee is the income which escaped assessment in the hands of assessee. It clearly shows that AO simply acted upon the information and did not apply his own mind to the information to arrive at a belief independently that on the basis of material before him to come to the conclusion that income has escaped assessment. Further, it is to be noted that it is a bank account with HSBC Bank, Geneva which was opened on 18.10.2001 cannot be considered in the AYs 2006-07 & 2007-08 in the hands of the assessee.
Further the transaction with HSBC Bank led to the conclusion of the AO that this investment was unexplained and the AO has not brought on record any material with respect to this conclusion that this deposit was unexplained in these assessment years. It was only a doubt, but not a reason to believe meaning thereby that, even if there was some material in respect of source of deposit, it was not sufficient for arriving at the conclusion that the deposit represented unexplained income of the assessee in these assessment years. In other words, the AO has just suspicion in his mind and it is trite law that an assessment cannot be reopened merely on the basis of suspicion and initiation of reassessment proceedings u/s. 148 of the Act on the basis of this aspect was invalid in the eye of law.
Further, the AO framed assessment in AYs 2002-03 to 2007-08 which clearly shows that he was not sure as to whether assessee was having income which escaped assessment in all these assessment years.
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In similar circumstances, the Bangalore Bench in the case of DCIT vs. Bullion Investments & Financial Services (P) Ltd. [2010] 123 ITD 568 held as under:- “The fact of undisclosed investment in the share capital of the assessee-company was found during the course of search and material was collected during the course of search that such investment belonged to 'G'. If such income was to be assessed in the hands. of a person other than 'G'; then the revenue should have taken recourse under section 158BD. If the revenue was not sure as to whose hands the assessment was to be made, then the revenue could have initiated proceedings against both the assessees. In the instant case, the assessment in the case of 'G' was completed on 31-7-1997. Notice under section 148 had been issued to the assessee-company on 27-7-1998. Once the revenue had taken its stand that such investment in the share capital belonged to 'G' and the assessment order was passed, then it could not be said that the Assessing Officer was having reason to believe that income had escaped in the hands of the assessee. Reassessment cannot be made on mere suspicion. The Assessing Officer has to form a belief that income has escaped assessment in the hands of the assessee. Once it had been held that such investment belonged to 'G', then there was no further material to come to the conclusion that such escaped income belonged to the assessee. [Para 2.5]. In the instant case, the revenue held that such undisclosed income belonged to 'G' and the assessment was made in the hands of 'G' on substantive basis. The case of the assessee was not reopened during the pendency of proceedings in the case of 'G'. Had the revenue made protective assessment in the case of 'G', then it could have taken action against the assessee. Thus, the basic requirement for reopening the assessment that the Assessing Officer should have reason to believe that income has escaped assessment, was not satisfied in this case. Hence, the Commissioner (Appeals) was justified in holding that the assessment could not be reopened for making protective addition. [Para 2.6] In view of the above discussion, it was to be held that the Commissioner (Appeals) was justified in cancelling the assessment in the hands of the assessee. [Para 2.8] In the result, the appeal filed by the revenue was to be dismissed.”
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In the present case also, first of all, the AO is not sure whether income has to be assessed in the hands of assessee and in which assessment year it has to be taxed, whether AY 2002-03, 2003-04, 2004- 05, 2005-06, 2006-07 or 2007-08. As such he reopened the assessment for all the assessment years which is bad in law.
Further the Hon’ble Supreme Court in the case of R.B. Jodha Mal Kuthiala v. CIT, 1971 SCC 369, had explained the term “Owner” which is as follows:- “ The question is who is the "owner" referred to in this section? Is it the person in, whom the property vests or is it he who is entitled to some beneficial interest in the property It must be remembered that S. 9 brings to tax the income from property and not the interest of a person in the property. A property cannot he owned by two persons, each one having independent and exclusive right over it. Hence for the purpose of s. 9, the owner must he that person who can exercise the rights of the owner, not on behalf of the owner but in his own right. 17. ... It is not necessary for our present purpose to examine what the word "owner" means in different contexts. The meaning that we give to the word " owner" in s. 9 must not be such as to make that provision capable of being made an instrument of oppression, must be in consonance with the principles underlying the Act.” 87. Therefore, considering the facts and circumstances of the case and also by following the precedents discussed above, we are of the considered opinion that the AO reopened the assessment merely on suspicion and surmise, without there being any positive material in his possession to prove that the assessee is the owner of the bank account or having beneficial interest in this bank account in these two assessment years. Therefore, we are of the opinion that the reopening of assessments are bad in law, which cannot be sustained. Accordingly, we quash the reassessments.
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Common Ground Nos.4.1 & 4.2 by the assessee are in respect of addition of Rs. 2,89,69,405 to the income u/s. 69 of the Act in both the assessment years. The crux and basis of addition made by AO is that there was an account in HSBC Bank, Geneva in the name of TIC and the assessee was one of the beneficiary / nominee of the account. It is held that there was a deposit of US dollars 719558 in this bank account and this amount converted into Indian at Rs. 40.26 per dollar in each assessment year was treated as unexplained investment, though it was USD 669864 recorded in the reasons for reopening the assessments in these assessment years. The AO stated that assessee did not submit the bank account statements nor did she sign a consent waiver form to enable the department to get the bank account statement. The entire transaction of deposit in the bank account remained under cloud of secrecy and therefore it is concluded that the deposit in HSBC Account is unaccounted income and thus added to the income of the assessee.
The assessee submitted that the figure of deposit 719558 USD is of May 2006 relevant to AY 2007-08. The figures as on 31.03.2006 is USD 691876.83. The CIT(A) has confirmed the fact of addition but has stated that for the year under consideration the addition of USD 719558 is not correct but the addition should be restricted to 691876.83 Dollars and upheld the addition of dollars 691876.83. The additions were confirmed on the following grounds:- (a) There was an account in HSBC Bank. (b) The name of appellant and the family members is appearing in the bank account. (c) The appellant never denied the existence of bank account. (d) The address in bank account is of the appellant premises. (e) In the course of survey, the appellant acknowledged the bank account. (f) The plea of the appellant that the bank account belongs to an independent company is not acceptable.
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(g) The appellant did not furnish the information about the bank account and did not even sign the consent form.
In this regard, the ld. AR submitted as follows:- a) The papers at pages 103 to 105 (of PB) are unsigned and unverified papers. b) The source of getting such papers are not known. c) The figures in page 105 are only asset classifications without any specification of when were the amounts if at all, invested and if so, by whom. d) The assessing officer and CIT(A) have admitted that they do not have a copy of so called bank account statement. e) The addition was sought to be made solely on the basis of admission made in the course of survey. f) The details of bank accounts and the transactions therein if available were not made available to the appellant and source of materials were not revealed thus violating the principles of natural justice. g) The legal authenticity of the paper on the basis of which the addition is made is not shown and proved. h) The addition is made without independent application of mind and without providing opportunity of cross examination. i) The statements given u/s. 133A of the Act have no evidentiary value. j) Further, it is also submitted that the so called papers show that the account was in the name of corporate entity and the. corporate entity is an independent person and it cannot be equated to its shareholders or directors. The corporate entity has a separate legal entity and perpetual succession. Therefore even it is held that there are deposit in the bank account, the same belongs to corporate entity itself and the appellant has nothing to do with it. Therefore the addition made in the hands of the appellant is not justified and is to be deleted. For this purpose reliance is placed on the following case laws:-
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i) DCIT (IT) v. Hemant Mansukhlal Pandya [2018]100 taxmann.com 280 (Mum Trib) ii) DCIT v. Dipendu Bapalal Shah [2018] 95 taxmann.com 280 (Mum Trib) iii) Shyam Sunder Jindal v. ACIT, CC 30, [2017] 81 taxmann.com 123 (Del Trib)
On merits, the ld. DR submitted that in this case as per the information was received from diplomatic channel, Govt. of France, about the impugned bank account at HSBC, Geneva which was not disclosed to the department in the return of income filed by the assessee. The assessee failed to explain the genuineness, source or nature of investment with regard to deposits to this bank account. The ld. DR relied on the decision of Renu T. Tharani v. DCIT (IT), ITA No.2333/Mum/2018 for AY 2006-07 dtd. 16.7.2020 and Manish Periwal in ITA No.5157-5162/Del/2014 for AY 2007-08 to 2012-13 dtd. 8.6.2017. Hence it was considered as unexplained income of the assessee and taxed accordingly.
We have heard both the parties and perused the material on record. The AO made addition u/s.69 of the Act in these assessment year @ USD 719558 equivalent to Rs.289,69,405 for AY 2006-07. However, CIT(Appeals) observed that it is only USD 691876.83 in the assessment year under consideration and upheld the addition to that extent only. In AY 2007-08, CIT(A) observed that the closing balance will be USD 719558 valued at Rs.2,89,69,405 and accordingly sustained the addition.
The contention of the AR is that the above additions are unsubstantiated. The addition is based on the bank account statement with HSBC, Geneva which is placed on record at pages 103 to 105 of PB. From these statements, in the previous year ended on 31.3.2006, the closing balance is USD 691876.73 (say USD 691877), but there is no
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opening balance available on record. In the reasons recorded, the AO himself recorded that there was a deposit of USD 669864 for which he framed the assessment from AYs 2002-03 to 2007-08. Even going by his version, he has to consider only the incremental deposit in these assessment year. He made addition towards the closing balance in each assessment year which is incorrect. Further, the lower authorities did not have complete details of bank account with regard to amount of deposit made by the assessee in each assessment year. The addition made by the AO is only on the basis of admission made by the assessee in the course of survey. As held by the Supreme Court in S. Khader Sons, 352 ITR 480 (SC), the admission made u/s. 133A of the Act has no evidentiary value. On this count, addition cannot be made.
Further in the present case, department was in possession of information received through diplomatic channel. Survey action was conducted on 28.7.2011. Statement was recorded u/s. 131 of the Act. Subsequent to this, statement was recorded from late Mr. Ramesh Madhok u/s. 133(6) of the Act wherein he stated that there is an account being held in the name of TIC in which he is associated as a director. He further stated that TIC is a corporate entity incorporated at British Virgin Island and the debits in the HSBC account are inter-group transactions and the account was closed in the year 2008. The assessee paid the tax of Rs.5 lakhs for AY 2007-08 on the amount involved voluntarily and filed letter to this effect on 5.9.2011. The tax has been paid by the assessee in order not to prolong the proceedings and to have amicable relations with the department. As seen from the above, addition was made on the admission of Ramesh Madhok and the unsubstantiated bank statement in the possession of the department. Further, Ramesh Madhok clearly stated that the account related to TIC which is a corporate entity incorporated at British Virgin Island and the debits related to inter-group transactions. Therefore,
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the deposit in the name of TIC cannot be brought to tax in the hands of assessee. On this count also, the addition cannot be sustained. Reliance is placed on the decision of Salomon v. Salomon & Co. [1897] AC 22.
In our opinion, the corporate veil cannot be lifted by the AO so as to make the addition. There was no compelling reason as to why the corporate veil has to be lifted. It cannot be lifted for an asking. In this connection, we place reliance on the judgment of Allahabad High Court in the case of CIT v. Sahu Investments Mutual Benefit Co. Ltd. V. CIT, 396 ITR 595 wherein the High Court observed that Hon'ble Allahabad High Court observed that the doctrine of "lifting of corporate veil" is not to be applied as a matter of course unless the relevant facts, circumstances and conditions exist. It is adopted exceptionally whenever and wherever, the situation warrants. It means a detailed investigation into the facts and affairs of the company to find out whether the veil of corporate personality needs to be lifted in a particular case. In our opinion the assessing officer has not carried out the required investigation to justify lifting of corporate veil. The circumstances mentioned in the assessment order do not lead to a conclusion that the corporate veil should be lifted.
Further, the assessee denied that he is the beneficial owner of the account. It was explained by him before the AO that TIC is an independent company and he is only associated with that company as a director and the transactions in the HSBC account are inter-group transactions and not related to him. According to the AO, this explanation offered by the assessee was not satisfactory. However, we find that the evidence gathered by the AO is not sufficient to indicate that the assessee is the beneficial owner of TIC and the bank account maintained by TIC is relating to the transactions of the assessee. The AO without bringing on record that the assessee is not the real owner of the said bank account, for which the addition cannot be made in the hands of the assessee.
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From the above, it is clear that to hold that assessee is beneficial owner of bank account of TIC, the revenue must prove that assessee is owner of asset or value articles. Unless, the Revenue proves with necessary material that the bank account belongs to the assessee or assessee is beneficial owner of such account, the provisions of section cannot be applied against the assessee. This clear proposition is further supported by the judgment of the Supreme Court in CWT v. Ellis Bridge Gymkhana, [1998] 1 SCC 384. Further, the onus to prove fully lies on the department. The department cannot be asking the assessee to prove the negative. The department cannot force impossible burden of proving negative on the assessee. This legal proposition is reiterated in the case of K.P. Varghese v. ITO, [1981] 4 SCC 137 wherein it was held that moreover to throw the burden of showing that there is no understatement of the consideration on the respondent would be attached and almost impossible burden upon him to establish the negative, namely, that he did not receive any consideration beyond that declared by him. Therefore, the addition made by the AO u/s. 69 of the Act is only on suspicion and surmise manner, without there being any material to prove that assessee is the beneficial owner of TIC or having financial interest in that bank account.
Further the Hon’ble Supreme Court judgment in the case of Vodafone (341 ITR 43) lays down a clear proposition that the companies being incorporated entities under the respective law possess independent and distinct status than their share holder or contributories. In case of structured investment transactions should not be disturbed on suspicions or casual considerations. In assessee’s case, the company TIC is duly incorporated in respective legal jurisdictions. All of these transactions are being disturbed on surmises and conjectures, assessee having furnished proper explanation supported with documents has discharged his burden. In the interest of justice, the additions have to be deleted.
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Further, the Hon’ble Supreme Court in the case of Daulat Ram Rawatmull (87 ITR 349(SC) has held as follows:- “A person can still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money is found to be not correct. From the simple fact that the explanation regarding the source of money furnished by A, in whose name the money is lying in deposit, has been found to be false, it would be a remote and far-fetched conclusion to hold that the money belongs to B. There would be in such a case no direct nexus between the facts found and the conclusion drawn therefrom.”
In the present case, the AO has not discharged the burden cast on him to prove that the appellant is the beneficial owner of TIC. The AO has merely acted on a suspicion and has not brought on record any legal evidence to prove that the appellant is the beneficial owner/shareholder of TIC. TIC is duly incorporated in respective legal jurisdiction and assessee has given proper explanation on this count. The AO has failed to carry out the necessary enquiries and investigation to prove the allegation made by him in the assessment order. The quantification of the addition based solely on the amounts mentioned in the bank account defies logic and is totally perverse. It is also not known whether the amount mentioned in the account has been deposited by the present assessee. S.69 of the Act is not applicable for the very simple reason that the appellant has not deposited these deposits.
Accordingly, the addition is deleted.
Ground No. 5 relating to levy of interest u/s. 234B which is infructuous is dismissed accordingly.
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In the result, the appeals by the assessee are partly allowed.
Pronounced in the open court on this 11th day of October, 2021.
Sd/- Sd/- ( BEENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore, Dated, the 11th + October, 2021. /Desai S Murthy /
Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order
Assistant Registrar ITAT, Bangalore.