DCIT-4(2)(2), MUMBAI vs. M/S.JHAWAR TRADE AND INVESTMENT PRIVATE LIMITED, MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal of the revenue in Cross Objection No.161/Mum/2019 for A.Y.2010-11 of the assessee arise out of the order by the ld. Commissioner of Income Tax (Appeals)-9, Mumbai in appeal No.CIT(A)-9/DCIT-4(2)(2)/44/2016-17 dated 21/09/2017 (ld.

CO No.161/Mum/2019 M/s. Jhawar Trade and Investment P. Ltd CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/03/2016 by the ld. Dy. Commissioner of Income Tax – 4(2)(2), Mumbai (hereinafter referred to as ld. AO).

CO No.161/Mum/2019 (A.Y.2010-11)

2. We find that the Cross Objection preferred by the assessee is delayed by 144 days. The assessee had filed an affidavit explaining the reasons for the delay with a prayer to condone the same. We find that the assessee had affirmed that due to some renovation work carried out in their office, the relevant appeal files got dislocated as the same were erroneously kept with some old files and that relevant appeal files could be located only in the second week of May 2019 at the time of re- indexing of all the files in the office. Within two weeks of such location of the relevant files, the assessee had ultimately filed the cross objection before this Tribunal. We find in the facts and circumstances of the case, we deem it fit and proper to condone the delay of 144 days in filing the appeal before us as assessee was prevented from reasonable cause in not filing the appeal in time before this Tribunal and admit the cross objection of the assessee for adjudication.

2.1. In the Cross Objection of the assessee, the assessee had challenged the validity of reopening of assessment u/s.147 of the Act by the ld. AO.

2.2. We have heard rival submissions and perused the materials available on record. We find that the brief facts of this issue are that the assessee company is engaged in the business of investment in properties, renting on properties, investment and trading in shares and securities.

CO No.161/Mum/2019 M/s. Jhawar Trade and Investment P. Ltd The return of income for the A.Y.2010-11 was filed by the assessee on 10/09/2010 declaring total income of Rs.2,08,34,350/- which was duly processed u/s.143(1) of the Act. Later, the assessment was sought to be reopened by issuing notice u/s.148 of the Act on 25/03/2015.

2.3. In response thereto, the assessee vide its letter dated 08/04/2015 requested the ld. AO to treat the return of income filed already on 10/09/2010 to be the return filed in response to notice u/s.148 of the Act. The assessee sought for the reasons recorded by the ld. AO for reopening the assessment. The reasons recorded by the ld. AO as reproduced in page 2 of the assessment order are as under:-

2.4. From the perusal of the aforesaid reasons, we find that the ld. AO had only re-looked the existing facts that are already available with him on records and sought to reopen the assessment of the assessee for the A.Y.2010-11. There is absolutely no tangible material brought on record by the ld. AO in the reasons recorded having any live link for formation of belief that income of the assessee had escaped assessment. This is a classic case of ld. AO trying to review the assessment in the garb of reopening. We find that even though the assessment was originally completed u/s.143(1) of the Act and the reopening being made in the instant case within a period of four years, still the law is very well settled that the necessary ingredients of Section 147 of the Act should be duly satisfied for the purpose of reopening. The necessary ingredients would be availability of tangible material with the ld. AO having a live link which enables him to form a belief that income of the assessee has escaped assessment. From the perusal of the aforesaid reasons, it could be safely concluded that there is absolutely no tangible material available with the assessee to draw to any such conclusion that income of the assessee had CO No.161/Mum/2019 M/s. Jhawar Trade and Investment P. Ltd escaped assessment. These facts are very much evident from the bold portion (emphasis supplied by us) in the reasons recorded by the ld AO for reopening the assessment.

2.5. On the contrary, the reasons recorded only indicate that action of the ld AO to reopen the case was for making roving enquiries with regard to the facts already available on record. The AO had effectively tried to frame the assessment u/s.147 of the Act as an alternative for not selecting the case for scrutiny originally. Selection of case for scrutiny is not in the hands of the assessee. It is always left to the wisdom of the Income Tax department to select the case for scrutiny either manually or through computer assisted selection of cases for scrutiny (CASS) based on the respective scrutiny norms issued by the Central Board of Direct Taxes from time to time. We find that the ld AO had also categorically stated in the reasons recorded that since no scrutiny assessment was framed originally, the receipt of share premium was not examined by the revenue. This, in our considered opinion, cannot be a ground for reopening an assessment already completed, unless there is any tangible material available with the ld AO. We hold that there is absolutely no tangible material available with the ld. AO to reopen the assessment in the instant case and hence, the necessary ingredients of Section 147 of the Act have not been fulfilled. It is well settled with the reasons recorded by the ld. AO should be elaborate and should speak for itself about the action of the ld. AO for formation of belief that income had escaped assessment. It should not be vague. It should not be for the purpose of making roving enquiries on an issue. The satisfaction of the ld. AO that income had escaped assessment should emanate from the reasons recorded at the time of initiation of re-assessment itself and the same cannot be ratified or strengthened by subsequent investigations or evidences. Reliance in this regard is placed on the decision of the Hon’ble

CO No.161/Mum/2019 M/s. Jhawar Trade and Investment P. Ltd Jurisdictional High Court in the case of Hindustan Lever Limited reported in 268 ITR 332 (Bom).

2.6. We hold that there is a conceptual difference between power to review and power to re-assess. The ld. AO had got power only to re- assess but the said re-assessment has to be based on the fulfilment of necessary ingredients of Section 147 of the Act that income of the assessee had escaped assessment which is supported by the tangible material available with the ld. AO. This understanding of law has been approved by the Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. reported in 320 ITR 561 (SC).

2.7. It is already very well settled that in determining whether commencement of assessment proceedings was valid or not, it has to be seen whether there was primafacie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at that stage. This has been laid down by the Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd., vs. ITO and others reported in 236 ITR 34(SC). But we find in the instant case that no such primafacie material is available with the ld. AO or any tangible material that is available with the ld. AO was brought on record in the reasons recorded which would enable the ld. AO to form a belief that income of the assessee had escaped assessment.

2.8. In view of the aforesaid observations in the facts and circumstances of the case, the cross objection preferred by the assessee challenging the validity of reopening of assessment is hereby allowed. Accordingly, re- assessment framed by the ld. AO is hereby quashed.

CO No.161/Mum/2019 M/s. Jhawar Trade and Investment P. Ltd ( A.Y..)

Order pronounced in the open court on this 25/10/2019