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DATE: May 31, 2018 (Date of pronouncement)
DATE: June 13, 2018 (Date of publication)
AY: 1995-96
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CITATION:
S. 282/ 292B: Entire law on "service of notice" and difference between "issue" and "service" of notice explained. S. 147 proceedings are initiated when the notice is "issued". Though "service" of notice u/s 147/148 is not a mere procedural requirement, but a condition precedent for initiation of proceedings, the service upon a person who was not authorized to receive notice does not render the proceedings null and void if the assessee complied and entered appearance

A company being a juristic and a legal person, service cannot be in person on the Company, and has to be affected by sending the notice to the registered office or at the place of business. In the context of the present case, we would only observe that the object and purpose of service of notice was to inform and make the company aware that proceedings under Section 147/148 of the Act had been initiated. Initiation of proceedings under Section 147/148 of the Act was upon recording of reasons to believe and upon necessary approvals. Initiation to this extent was valid and not disputed and challenged.

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DATE: June 1, 2018 (Date of pronouncement)
DATE: June 2, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 147/148: If the reopening is based on information received from the investigation dept, the reasons must show that the AO independently applied his mind to the information and formed his own opinion. If the reopening is done mechanically, it is void. Also, if the reasons refer to any document, a copy should be provided to the assessee. Failure to do so results in breach of natural justice and renders the reopening void

No independent application of mind by the AO to the material forming the basis of the reasons recorded is evincible from the reasons. The AO, in the reasons, has just stated the information received and his conclusion about the alleged escapement of income. As to what the AO did with the information made available to him, is not discernible from the reasons. The reasons must also paraphrase any investigation report, which may form the basis of the reasons and any enquiry conducted by the AO thereon, as also the conclusions thereof. Further where the reasons make a reference to any document, such document and / or relevant portion thereof must be enclosed along with the reasons

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DATE: May 7, 2018 (Date of pronouncement)
DATE: May 29, 2018 (Date of publication)
AY: 2009-10
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CITATION:
S. 147: Even a s. 143(1) assessment cannot be reopened without proper 'reason to believe'. If the reasons state that the information received from the VAT Dept that the assessee entered into bogus purchases "needed deep verification", it means the AO is reopening for doing a 'fishing or roving inquiry' without proper reason to believe, which is not permissible

It is equally well settled that the notice of reopening can be supported on the basis of reasons recorded by the Assessing Officer. He cannot supplement such reasons. The third principle of law which is equally well settled and which would apply in the present case is that reopening of the assessment would not be permitted for a fishing or a roving inquiry. This can as well be seen as part of the first requirement of the Assessing Officer having reason to believe that income chargeable to tax has escaped assessment. In other words, notice of reopening which is issued barely for making fishing inquiry, would not satisfy this requirement

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DATE: May 24, 2018 (Date of pronouncement)
DATE: May 26, 2018 (Date of publication)
AY: 2008-09
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CITATION:
S. 147/ 151: If the AO reopens on the basis of information received from another AO without further inquiry, it means he has proceeded "mechanically" and "without application of mind". If the CIT does not give reasons while according sanction, it implies that he has also not applied his mind. Both render the reopening void (All imp judgements referred)

Section 151 of the Act clearly stipulates that the CIT(a), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression ‘approved’ says nothing. It is not as if the CIT(A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer

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DATE: April 24, 2018 (Date of pronouncement)
DATE: April 26, 2018 (Date of publication)
AY: 2001-02
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CITATION:
S. 147/ 148: In order to constitute "change in opinion", the assessment earlier made must either expressly or by necessary implication have expressed an opinion on the subject matter of reopening. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the AO any opinion on the questions that are raised in the proposed re-assessment proceedings. The reassessment cannot be struck down as being based on "change of opinion" if the assessment order does not address itself to the aspect sought to be examined in the re-assessment proceedings.

Before interfering with the proposed re-opening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed re-assessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the re-assessment proceedings.

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DATE: April 6, 2018 (Date of pronouncement)
DATE: April 19, 2018 (Date of publication)
AY: 2004-05
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CITATION:
S. 147 Reopening: Passing the reassessment order before the expiry of 4 weeks of passing the order of objections renders the reassessment order void. Also, if the reasons state “bogus accommodation entries were provided/taken” and it is not clear whether the assessee has received or provided accommodation entries, it means there is no application of mind by the AO while recording reasons

All these things do not inspire any confidence that the learned AO has reached any conscious decision that any income of the assessee has escaped assessment and the modus operandi thereof. We, therefore, hold that the satisfaction of the learned AO is not based on any sound reasoning and on that ground, we hold that the reopening of assessment is bad

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DATE: April 6, 2018 (Date of pronouncement)
DATE: April 10, 2018 (Date of publication)
AY: -
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CITATION:
S. 292-B: A s. 148 notice issued in the name of a company which does not exist upon its conversion into a LLP is valid if there is material to show that the issue in the name of the company was a clerical mistake. The object and purpose behind s. 292-B is to ensure that technical pleas on the ground of mistake, defect or omission should not invalidate the assessment proceedings, when no confusion or prejudice is caused due to non-observance of technical formalities

Object and purpose behind Section 292-B is to ensure that technical pleas on the ground of mistake, defect or omission should not invalidate the assessment proceedings, when no confusion or prejudice is caused due to nonobservance of technical formalities. The object and purpose of this Section is to ensure that procedural irregularity(ies) do not vitiate assessments. Notice/summons may be defective or there may be omissions but this would not make the notice/summon a nullity. Validity of a summon/notice has to be examined from the stand point whether in substance or in effect it is in conformity and in accordance with the intent and purpose of the Act. This is the purport of Section 292B

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DATE: March 14, 2018 (Date of pronouncement)
DATE: March 24, 2018 (Date of publication)
AY: -
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CITATION:
S. 148: The AO is not entitled to issue a reopening notice only on the basis that the foreign company has a permanent establishment (PE) in India if the transactions in respect of which it is alleged that there has been an escapement of income had already been disclosed by the Indian subsidiary and found by the Transfer Pricing Officer (TPO) to be at arm's length

In the judgment of this Court dated 24th October, 2017 in Assistant Director of Income Tax-I, New Delhi v. M/s. E-Funds IT Solution Inc., Civil Appeal NO.6082 of 2015 and connected matters, it has been held that once arm’s length principle has been satisfied, there can be no further profit attributable to a person even if it has a permanent establishment in India. Since the impugned notice for the reassessment is based only on the allegation that the appellant(s) has permanent establishment in India, the notice cannot be sustained once arm’s length price procedure has been followed

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DATE: February 9, 2018 (Date of pronouncement)
DATE: March 9, 2018 (Date of publication)
AY: 2005-06
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CITATION:
S. 147 Reopening: The grant of approval by the CIT with the words “Yes. I am satisfied” proves that the sanction is merely mechanical and he has not applied independent mind while according sanction as there is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment u/s 148 of the Act

Apparently, from the approval recorded and words used that “Yes. I am satisfied.”, it has proved on record that the sanction is merely mechanical and Addl.CIT has not applied independent mind while according sanction as there is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment u/s 148 of the Act

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DATE: February 24, 2018 (Date of pronouncement)
DATE: March 8, 2018 (Date of publication)
AY: 2004-05
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CITATION:
Law on reopening u/s 147 pursuant to an audit objection opposed by the AO explained in the context of (i) the notice being silent on whether it was issued pursuant to the audit objection, (ii) there being a gap between the AO's opposition and the issue of notice and (iii) the reasons for reopening being supported by a subsequent Supreme Court judgement

The decision of the Apex Court in Liberty India (Supra) was rendered on 31st August 2009 and the notice seeking to reopen the Assessment year for Assessment Year 2004-05 was issued on 18th March 2009. Therefore, at the time when the reasons for issue of reopening notice was recorded by the Assessing Officer, he could not have had any reasonable belief on the basis of Apex Court decision in Liberty India (Supra) to come to a prima facie view that income chargeable to tax has escaped assessment. In this appeal we are concerned with the issue of jurisdiction of the Assessing Officer to issue the reopening notice and not with the merits of the dispute. Thus when the reopening notice was issued in March 2009, the Apex Court decision was not available and there was a divergence of views. This has to be read in the context of the Assessing Officer’s response to the audit objection on the above issue duly supported by case law

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