Case Law Details
Sujay Pankajbhai Shah Vs ACIT (ITAT Ahmadabad)
A bare glance of the reasons recorded gives an unflinching impression that powers exercised under section 147 of the Act was to enable the AO to carry out detailed verification of the various aspects of such matter in reference made to the AO herein by the office of Director of Income Tax, Delhi. Thus, it is self-evident that no definite formation of belief towards escapement of income was existing at the time of issuance of notice by the AO. What the AO really intended is to make an objective inquiry into the correctness or otherwise of the information received from other wing of the department to find out if there is any escapement of chargeable income indeed. The AO merely seeks to conclude that there is a case for investigation to unearth and ascertain truthfulness of alleged transactions. This is not the same thing as saying that there are ‘reasons to believe’ that some chargeable income has escaped assessment. Ostensibly, the AO, at best, has made out a case of probable escapement in contrast to a definite prima facie conclusion of escapement of income. Mere quoting of Section or iteration of expression ‘reason to believe’ would not satisfy the requirement of law. Thus, the requirement of section 147 of the Act is clearly not fulfilled in the instant case.
Needless to say, the provisions of section 147 of the Act which gives drastic powers to reopen a time barred/completed assessment can be invoked only when the conditions precedent for exercising the jurisdiction clearly exists. Exercise of power under section 147 of the Act cannot be made on the basis of mere ipse dixit of Revenue. A receipt of some information from another wing of the Department cannot be equated with a realization of escapement per se. Such information/evidence can possibly give birth to realization or belief of the AO as contemplated under section 147 of the Act. However, an independent formation of belief thereon is sine qua non for taking action under section 147 of the Act.
It is well settled by plethora of judicial precedents, including Pr.CIT vs. Manzil Dineshkumar Shah (2018) 406 ITR 326 (Guj), the SLP against which has been dismissed in (2019) 101 taxmann.com 259 (SC) that reopening is not permissible merely to seek investigation of facts collected without holding at least prima facie belief towards escapement of income based on relevant material. The conditions set out for invocation of Section 147 of the Act have not been met in the instant case. Hence, the notice issued under section 148 of the Act is not backed by authority of law and consequently bad in law.
The assessment under section 147 of the Act as a sequel to the illegal notice under section 148 of the Act is therefore a nullity and requires to be quashed.
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