Sabharwal Properties Industries Pvt. Ltd vs. ITO (Delhi High Court)

(i) A plain reading of the reasons recorded for reopening reveals that the reasons are totally incoherent. In fact, a plain reading of it gives rise to doubts whether some lines have gone missing or some punctuation marks have been left out. Grammatically also the reasons recorded make little sense. However, this is the least of the problems. Essentially, the reasons recorded do not indicate what the basis for the reopening of the assessments is;

(ii) Under Section 147 (1) of the Act, the reasons recorded for reopening an assessment should state that the Assessee had failed to disclose fully and truly all the material facts necessary for his assessment in the returns as originally filed and the reasons recorded should provide a live link to the formation of the belief that income has escaped assessment (Madhukar Khosla v. Assistant Commissioner of Income Tax (2014) 367 ITR 165 (Del);

(iii) It is well settled that the reasons recorded for reopening the assessment have to speak for themselves. They have to spell out that (i) there was a failure of the Assessee to disclose fully and truly all the material facts necessary for the assessment and (ii) the reasons must provide a live link to the formation of the belief that income had escaped assessment. These reasons cannot be supplied subsequent to the recording of such reasons either in the form of an order rejecting the objections or an affidavit filed by the Revenue (Northern Exim (P) Ltd. v. DCIT [2013] 357 ITR 586 (Del) referred);

(iv) Even otherwise even the above reasons given subsequently do not satisfy the jurisdictional requirements of Section 147 (1) of the Act inasmuch as they do not indicate that there was a failure by the Assessee to disclose fully and truly all the material facts necessary for the assessment. The reasons also do not provide a live link to the formation of the belief that income had escaped assessment.