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DATE: (Date of pronouncement)
DATE: December 20, 2018 (Date of publication)
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S. 147 Reopening of s. 143(1) assessment: Law on whether reopening to assess alleged Bogus Capital gains from penny stocks is permissible explained in the context of Rajesh Jhaveri 291 ITR 500 (SC) & Zuari Estate 373 ITR 661 (SC)

In the present case the Assessing Officer has heard the material on record which would prima facie suggest that the assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of long term and short term capital gain. The company was prima facie found to be a shell company. The assessee had claimed exempt of long term capital gain of Rs.1.33 crores by way of sale of share of such company

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DATE: November 16, 2018 (Date of pronouncement)
DATE: December 7, 2018 (Date of publication)
AY: 2011-12
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CITATION:
S. 147/ 148: A report of the Revenue audit party is merely information and opinion. It is not new or fresh or tangible material. If the reassessment notice is solely based on an audit opinion, it means it is issued on change of opinion which is not permissible

We find that the arguments on behalf of the petitioner are well founded and it must succeed. The audit report merely gives an opinion with regard to the non-availability of the deduction both under section 80-IA was not deducted from the profits of the business while computing deduction under section 80HHC. Clearly, therefore, there was no new or fresh material before the Assessing Officer except the opinion of the Revenue audit party. Since it is settled law that mere change of opinion cannot form the basis for issuing of a notice under section 147/148 of the Act, therefore, we do not propose to burden out judgment with the said judgments

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DATE: November 14, 2018 (Date of pronouncement)
DATE: December 3, 2018 (Date of publication)
AY: 2007-08
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CITATION:
S. 148/ 151: If the AO issues the notice for reopening the assessment before obtaining the sanction of the CIT, the reopening is void ab initio. The fact that the sanction was given just one day after the issue of notice makes no difference

No doubt in the present case, the ld.AO has applied for such approval which was granted on 29.3.2017, but before grant of approval, the ld.AO has already issued notice on 28.3.2014 which is without any jurisdiction. He can issue notice only after getting approval. Thus, the ld.CIT(A) has rightly quashed the assessment because the very foundation for issuance of notice under section 148 is the approval from the competent authority, i.e. Commissioner of Income Tax, and in the absence of such, such notice is void ab initio

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DATE: April 16, 2018 (Date of pronouncement)
DATE: November 9, 2018 (Date of publication)
AY: 2003-04
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CITATION:
S. 147 Reopening of s. 143(1) intimation: The submission of the Dept that in view of Rajesh Jhaveri 291 ITR 500 (SC), the AO can reopen the assessment for "whatever reason" is preposterous. The AO cannot reopen on the basis of info received from DIT (Investigation) that a particular entity has entered into suspicious transactions without linking it to the assessee having indulged in activity which could give rise to reason to believe that income has escaped assessment. Such reopening amounts to a fishing inquiry. The AO has to apply his mind to the information received by him from the DDIT (Inv.) and cannot act on on borrowed satisfaction

The reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a reopening notice on the basis of intimation regarding reopening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that reopening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction

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DATE: October 3, 2018 (Date of pronouncement)
DATE: October 18, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 148: A notice u/s 143(2) issued by the AO before the assessee files a return of income has no meaning. If no fresh notice is issued after the assessee files a return, the AO has no jurisdiction to pass the reassessment order and the same has to be quashed

In view of consistent view of jurisdictional High Court and Delhi High Court, in the absence of pending return of income, the provisions of section 143(2) of the Act is clear that notice can be issued only when a valid return is pending for assessment. Accordingly, this notice has no meaning

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DATE: October 15, 2018 (Date of pronouncement)
DATE: October 16, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 147/ 92: The information given by DIT (Inv) can only be a basis to ignite/ trigger "reason to suspect". The AO has to carry out further examination to convert the "reason to suspect" into "reason to believe". If the AO acts on borrowed satisfaction and without application of mind, the reopening is void (All judgements considered)

Allegations leveled by DIT (Inv.) can only raise suspicion in the mind of the AO which is not the sufficient/requirement of law for reopening of assessment. The ‘reasons to believe’ is not synonymous to ‘reason to suspect’. ‘Reason to suspect’ based on an information can trigger an enquiry to find out whether there is any substance or material to substantiate that there is merit in the information adduced by the DIT(Inv.) and thereafter the AO has to take an independent decision to re-open or not. And the AO should not act on dictate of any other authority like in this case DIT(Inv.) because then it would be borrowed satisfaction

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DATE: June 15, 2018 (Date of pronouncement)
DATE: October 10, 2018 (Date of publication)
AY: 2013-14
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CITATION:
S. 147: The computation of income is the basic document for making the s. 143(3) assessment. If there is a disclosure in the computation, it leads to the prima facie necessary inference that there is application of mind by the AO. The fact that the AO did not raise specific queries & is silent in the assessment order does not mean there is no application of mind (Techspan 404 ITR 10(SC) followed, other contra judgements distinguished)

There was also no reason in the present facts for the Assessing Officer to ask any queries in respect of this claim of the petitioner, as the basic document viz. computation of income at note 21 (Assessment Year 2013-14) and note 22 (Assessment Year 2014-15) thereof explained the basis of the claim being made to the satisfaction of the Assessing Officer. Thus, it must necessarily be inferred that the Assessing Officer has applied his mind at the time of passing an assessment order to this particular claim made in the basic document viz. computation of the income by not disallowing it in proceedings under Section 143(3) of the Act as he was satisfied with the basis of the claim as indicated in that very document. Therefore, where he accepts the claim made, the occasion to ask questions on it will not arise nor does it have to be indicated in the order passed in the regular assessment proceedings. Thus, issuing the impugned notices on the above ground would, prima-facie, amount to a change of opinion

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DATE: March 21, 2018 (Date of pronouncement)
DATE: September 26, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 147/148: If the AO reopens the assessment on the incorrect premise that the assessee has not filed a return, the reopening is invalid. The fact that the AO may be justified in the view that income has escaped assessment owing to the capital gains not being computed u/s 50C cannot save the reopening is the reasons do not refer to s. 50C

The Assessing Officer may be correct in pointing out that when the sale consideration as per the sale deed is Rs.50 lakhs but the registering authority has valued the property on the date of sale at Rs.1,18,95,000/for stamp duty calculation, section 50C of the Act would apply, of course, subject to the riders contained therein. However, this is not the cited reason for reopening the assessment

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DATE: September 10, 2018 (Date of pronouncement)
DATE: September 13, 2018 (Date of publication)
AY: 2011-12
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CITATION:
S. 147/ 56(2)(vii): Law explained on (i) reopening of assessment by issue of s. 148 notice at the 11th hour and based on "stale" material, (ii) nature of sanction to be accorded by the CIT u/s 151 and (iii) scope of s. 56(2)(vii) and whether difference between 'fair market value' and face value of unquoted shares can be assessed as income. All important judgements referred

When the assessees acquired the shares through allotment, the taxing event, as it were, occurred on account of the differential between what is said to be market value and what was value paid by them. As a result, it is held that the primary obligation to disclose about the acquisition of shares, was not relieved by virtue of the notification under Section 25 (6) of the (now repealed) Companies Act, 1956. It is, therefore, held that prima facie, there is no merit in this argument; it cannot be said that the effect of the exemption notification was to relieve the assessees from their obligation to disclose about the acquisition of the shares, which appears to be the taxing event (on account of the differential between the acquisition cost and the fair market value).

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DATE: June 23, 2018 (Date of pronouncement)
DATE: September 3, 2018 (Date of publication)
AY: 2009-10
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CITATION:
S. 56(2)(viib), 68, 147 Bogus share capital/ premium: Entire law on whether alleged excessive premium charged for allottment of shares and alleged inability to prove genuineness of transaction can be assessed as unexplained cash credit explained in the light of High Court judgements

It was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders, i.e., they are bogus. The Apex Court in a case in this context to the preamended section 68 has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Incometax Officer to proceed by reopening the assessment of such shareholder and assessing them to tax in accordance with law. It does not entitle the revenue to add the same to the assessee’s income as unexplained cash credit

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