Looking only at the credit entries of the bank and assessment made u/s 144. The assessment framed is vague without looking at the complete bank of the assessee. This article contains the written submissions regarding how important it is looking at the complete material for reopening of assessment and assessment framed u/s 144 of the Income Tax Act, 1961.
Written Submissions before the Hon’ble Commissioner of Income Tax -XX, XXXXX in the case of Sh. XXXXXXXX, XXXXX for the A.Yr. 2011-12 (PAN : XXXXXXXX )
Respected Sir/ Madam,
The source of cash deposit of Rs. 2646990.00 in the saving bank account of the assessee has been explained here. The Assessee has filed his ROI vide e filing acknowledgement No. XXXXXXXXXXXX Dt. 7.01.2019 in which the turnover of the Assessee is Rs. 1955800.00 and the net profit declared is Rs. 159800.00 which is 8.17 % of the total turnover . The turnover is part of the cash deposited with the bank for which the assessing officer has treated the entire turnover as income of the assesse which is gross negligence on the part of the AO. The entire cash deposited with the bank cannot be income of the assessee. It is seen that the income of the Assessee is non-taxable . The reason for non-filing of the return is non-taxable income of the assesse which never exceeded the taxable amount.
No bank statement was with the Assessing officer at the time of making assessment u/s 144 of the Act. In the assessment order he himself has mentioned that no bank statement has been provided by the bank. He formed the opinion for escapement of income without bank statement. PCIT gave approval without this very important document u/s 151 and AO framed assessment without this important document .Hence the opinion framed , approval given and assessment framed all is bad , illegal to be made null and void .
The AO has relied only on the information as provided by the bank u/s 285BA of the Income tax Act, 1961 . The AO has written in the order itself that the bank has not made the compliance of the notice u/s 133(6) of the Act, In the absence of bank statement , he has not gathered the material fully before passing the order u/s 144 of the Act .
He has passed the order on the basis of the gathered material but truly he has not gathered any material. There is no material with the AO before passing the order u/s 144 of the Act .
The notice u/s 148 was duly served upon the assesse but approval obtained from the Pr.CIT was never supplied to the assesse . Reasons recorded u/s 148(2) were never supplied to the assesse .The entire assessment deserved to be made null and void. Mandatory requirement has not been fulfilled .
The AO without application of mind treated the entire cash deposited with the bank as income of the assesse and not applied even presumptive taxation @8% . He has framed the assessment without application of mind , reasons framed are without application of mind , approval obtained from principal CIT is without application of mind . However acting on the probabilities he made the assessment without looking at the entire bank account of the assesse , without looking at the debit entries of the assesse .
Assessee was doing small business as unregistered dealer in XXXXX, XXXXX. The Assessee earned no money out of this small business. The cash deposit with the Bank Account is sale proceeds of Camera and accessories of different sizes and the cash withdrawals were used for purchase of material and other expenses were made. This was quite start of the business. The business of the assesse was quite new during the F.Yr. 2010-11.
The other cash deposited is nothing but withdrawals from the same bank. Only this bank account has been used for the purpose of the business. The detail of the sales outstation is enclosed with the Paper book.
During the F.Yr. 2010-11 he received sale proceeds in cash and deposited with his SB A/C No. XXXXXXXX maintained with XXXX Bank ,XXXXX and made withdrawals from the same bank as and when required to meet out the expenses and purchases to be made. Genuinely assesse has done the business of Camera and accessories .
The case of the assesse was reopened u/s 147 and notice was issued u/s 148 of the Act . The reopening is quite illegal .All the cash deposited with the bank is nothing but the sale proceeds of Cameras and its accessories. From the same bank assesse has made withdrawals for purchase of material from the market and other business expenses. As and when the same is required he made withdrawls from the same bank .Detail of cash deposited and cash withdrawls is enclosed . Sometimes it is the same cash which has been deposited with the bank which was withdrawn earlier.
Moreover the reason to believe for reopening of the assessment is being challenged here with the Hon’ble CIT as there was no tool with the AO for reopening of the assessment. Merely looking at the credit entry of the bank is no base unless all the debit entries are also looked. Moreover approval obtained u/s 151 from PCIT ,XXXXX for reopening of the assessment u/s 147 has never been supplied to the assesse . Copy of the same has never been given to the assessee .
As per assessment order the reasons recorded has not been discussed by a single word. If it has been recorded or not .The AO has made no application of mind at the time of recording of the reasons and sent to the PCIT for approval who in turn has also not applied his mind for grant of approval. Copy of approval u/s 151 was never supplied to the assessee.
The assesse has relied on the judgment in the case of Harmeet Singh , Delhi Vs. ITO , New Delhi ITA No. 1939/Del/2016 A.Yr. 2008-09
Where in stated that the reopening the assessment purely on the ground that the cash deposited with the bank is income of the assesse is purely a doubt that it is income of the assesse not a confirmed finding , not any tangible evidence with the ITO to form the opinion that the income of the assesse has escaped assessment. The reopening is bad enough .
The reasons recorded are highly vague ,far fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and therefore merely presumption in nature .
Thus it was a mere suspicion of the AO , that prompted him to initiate assessment proceedings under section 147 , which is neither countenanced , nor sustainable in law .
In the case of ITAT , Delhi Bench decision in the case of Parveen Kumar Jain Vs ITO No. 133/D/2015 for the A.Yr. 2006-07 Dt. 22.01.2015 wherein it has been held as under .
Thus it is clear that the basic requirement for reopening of assessment that the AO must apply his mind to the materials in order to have reasons to believe that the income of the assesse escaped assessment was found to be missing when the AO proceeded to reopen the assessment.
At the time of formation of belief by the ITO that the income has escaped assessment , the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment.
The observations of the Hon’ble Supreme Court in the case of ‘ITO vs. Lakhmani Mewal Das’103 ITR 437(SC), were reproduced as under:
It may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escapement assessment.”
The AO decided the case of the assesse u/s 144 of the Act without acknowledging the relevant document on the file, Moreover he has not tried to look to the bank account of the assesse with XXXX Bank Ltd., XXXXX. He has not touched the bank account at the time of framing of the assessment
The Ld. AO indulged in speculation, surmises and conjectures in treating the cash deposit of Rs. 2646990/- as net income of the assessee. Before making best judgment assessment the AO is duty bound to gather all material including history and past records of the assesse including ROI filed or not filed for the relevant assessment year to come at a genuine conclusion.
AO has not bothered to arrive at a reasonable figure looking at peak figure of the cash deposited with the bank and also ignored withdrawals from the same bank which is unjustified. The cash deposited is nothing but out of the gross receipts of the assesse and also withdrawls from the same bank.
Though the assesse has filed his return u/s 44AD of the Income tax Act , 1961 but has maintained such books of accounts which can be produced on demand any time .
The ITO has not recognized the peak credit principal. He has recognized credit entries with the bank but not debit entries. There are multiple debit and credit entries in the form of cash deposit and cash withdrawals. The assesse has relied the judgment of the Hon’ble Supreme Court of India in the case of Baladin Ram vs. CIT(1969) 71 ITR 427 (SC) and the ITAT, Lucknow ‘B’ Bench in the case of ITO, Barabanki Vs. Kamal Kumar Mishra reported in (2013), 33 taxman. Com 610 (Lucknow- Trib). The assesse has relied these judgments where there are multiple entries in the one bank and ITO has to look to the complete bank. He has to look to the credit entries as well as debit entries and reach at some decent conclusion and has to look at the peak figure.
Best Judgment assessment u/s 144 of the Act .
If any person-
a) fails to make the return required under sub section 1 of section 139 and has not made a return or a revised return under sub-section (4) or sub section (5) of that section , or
b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142[ or fails to comply with a direction used under sub-section (2A) of that section], or
c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143,
the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, [ shall, after giving the assesse an opportunity of being heard, make assessment] of the total income or loss to the best of his judgment and determine the sum payable by the assesse on the basis of such assessment:
The AO will decide the case u/s 144 taking into consideration all the relevant material on record and will gather all the relevant material which he has not done . The assessment made u/s 144 is illegal , bad and void ab initio.
Here it is seen that the income of the assesse is non-taxable .The reason for non-filing of the return is non-taxable income of the assesse which never exceeded the taxable amount .
Approval u/s 151 of the Income tax Act .
The approval from the Principal commissioner of Income tax ,XXXXX has been obtained in a mechanical manner without any concrete finding , without looking at the bank account of the assesse . without preparing separate notes . Mere writing “ I am satisfied “ is an abuse and misuse of powers enshrined in the Act . Regarding this issue assesse has relied the the Judgment of ITAT , Delhi Bench , ITA No. 988/Del/2018 in the case of Sunil Aggarwal Vs. ITO , Ward No. 1(3) (3) , Haridwar .
The Hon,ble Supreme Court of India in the case of CIT Vs. S.Gayanka Lime and Chemical Ltd. Reported in (2015) 64 taxmann.com 313(SC) in the Head notes has held that (Section 151, read with section 148 of the Income tax Act , 1961 – Income escaping assessment –Sanction for issue of notice ( Recording of Satisfaction) – High court by impugned order held that where joint commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice u/s 148 , reopening of assessment was invalid – Whether special leave petition filed against impugned order was to be dismissed – Held ,yes( in favor of the assesse ) “
Denial of Principal of Natural Justice to the assesse .
In a recent decision of Rajasthan High Court in Income Tax appeal no. 117/2004 decided on 21-01-2014 in the case of CIT v Ram Singh, the Court laid the importance of giving reasons in the orders and held as under:
“Recording of reasons is part of fair procedure and reasons are harbinger between the mind of the maker of the decision in the controversy and the decision or conclusion arrived at and they always substitute subjectivity with objectivity and as observed in Alexander Machinery (Dudley) Ltd. Crabtree, 1974 L.C.R. 120, failure to give reasons amounts to denial of justice and this is what was also observed by the Apex Court in 2005 (2) SC 329 Mangalore Ganesh Beedi Works Vs. CIT & Anr.”
CIT ( A ) is competent enough to accept additional evidence which could not be produced at the AO level .
The ITO has not considered the debit entries of the bank .
At the time of recording of the reasons the AO has not looked at the debit entries of the bank but formed an opinion/ guess work that the assesse has escaped income to the tune of Rs. 2646990.00
Copy of reasons not supplied to the assesse.
Copy of the reasons were not supplied to the assesse and it has been recorded with Blind eyes . Approval granted with blind eyes .
At the stage of recording the reasons for reopening the assessment , the formation of prima facie belief that an income has escaped assessment is necessary . However it is also necessary that there must be something which indicates , even if not established , the escapement of income from assessment . The reassessment proceedings could not be resorted to unless there was reason to believe , rather than suspect that income has escaped assessment .Thus reassessment proceedings is to be set aside .
The reopening u/s 147 of the Act is challenged .
The reopening is bad only on the basis of cash deposited with bank not seen bank account not seen debit entries. It is purely guess work of the AO that income has escaped . The AO proceeded on the fallacious assumption that bank deposits in cash constituted undisclosed income and overlooked facts that the cash deposits need not necessarily be the income of the assesse . It can be the gross receipts but entire cash deposits can not be the income of the assesse . The assesse has relied on the judgment IN the ITAT Delhi bench “A” Bir Bahadur Sijwali VS ITO , Ward 1 , Haldwani Appeal No. 3814(Delhi) of 2011
(1) At the stage of recording the reasons for reopening the assessment , the formation of prima facie belief that an income has escaped the assessment is necessary .However , it is also necessary that there must be something which indicates , even if not established , the escapement of income from assessment .
(2) Merely because some further investigation had not been carried out, which could have led to detection to an income escaping assessment could not be a reason enough to hold the view that income had escaped assessment .
(3) In the instant case , merely the fact that deposits have been made in a bank account do not indicate that these deposits constitute an income which had escaped assessment
(4) The AO proceeded on the fallacious assumption that bank deposits constituted undisclosed income and overlooked the fact that the sources of deposit need not necessarily be income of the assesse . The reassessment proceedings could not be resorted to unless there was reason to believe , rather than suspect , the income had escaped assessment . Thus , reassessment proceeding was to be set aside .
In the case of the assesse
The approval obtained from Pr. CIT ,XXXXX was never supplied to the assesse neither on mail , nor on income tax portal and not in person and not by speed post which is mandatory requirement hence the entire assessment is prayed to be quashed .
In the instant case , pursuant to receipt of AIR information from an external agency that cash has been found deposited in assessee’s saving bank account , there has been no further examination by the AO . It is submitted that the reason to believe has no nexus and live link with the escapement of income of the assessee. The ITO has opened the case of the assesse on the basis of AIR information which is a borrowed information. Therefore , information received by the AO throws only doubt or suspicion . Suspicion , however strong cannot take the place of evidence as laid down by the Hon’ble Apex Court in the case of Dhakeshwari Cotton Mills Ltd. Vs CIT (1955) AIR 65 (1955 SCR 01 1941)
In Hindustan Lever Ltd. Vs. R.B. Wadkar 26 ITR 332(Bom). It was observed that the reasons recorded must point out to an income escaping assessment and not merely need of an enquiry, which may result in detection of an income escaping assessment. That there has to be some kind of cause and effect of relationship between the reasons recorded and the income escaping assessment.
Thus it was a mere suspicion of the AO, that prompted him to initiate assessment proceedings under section 147, which is neither countenanced, nor sustainable in law .
The text of reason recorded styled as “ reason to believe” is in the present case is nothing but reason to suspect .
The assesse has relied on the judgment of High court of Delhi in the case of Signature Hotels (P) Ltd. 338ITR 51 (Delhi) where in it was held that “
“ the reasons and the information referred to were extremely scanty and vague .There was no reference to any document or statement except AIR information . The AIR could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The AIR information was not a pointer and did not indicate escapement of income. Further it was apparent that the assessing officer did not apply his own mind to the information and examine the basis and material of the information. The assessing officer accepted the plea on the basis of vague information in a mechanical manner. The commissioner also acted on the same basis by mechanically giving her approval , therefore proceedings under section 148 were to be quashed.
The Income of the assesse was below taxable limit, therefore he was not required to file his return of Income for the relevant assessment year. He has NOT FILED THE RETURN OF Income before finalization of the assessment but later on he filed his correct return.
The case of the assesse was decided ex- party u/s 144 of the Income tax Act 1961 not following the principal of natural justice. There was sufficient time with the AO to finalize the assessment before 31.12.2018 but he decided the case exparte Dt. 09.12.2018 which is too earlier
The entire assessment has been done at the back of the assesse which is contrary to the legal position.
It is submitted that the reasons to believe has no nexus and live link with the escapement of Income of the assesse .
The notice u/s 148 is issued when a definite information is there not for an enquiry. The notice has been issued on the presumption that the cash deposited with the bank is income of the assesse . This is only a presumption.
Therefore information received by the AO throws only doubt or suspicion. Suspicion however strong cannot take the place of evidence as laid down by the Hon’ble Apex court in the case of Dhakeshwari Cotton Mills Ltd. Vs CIT (1955) AIR 65 (1955 SCR 011941 )
The reasons recorded are totally silent on three issues
(a) Mere cash deposit is treated to be equivalent to income escaping assessment
(b) No details of whatsoever of any bank are mentioned.
(c) Contents of information available to the Ld AO
That the Ld. AO passed the order only on non existing basis .The impugned order passed is ex-parte to Assessee without material on record. Prayer is made to quash the impugned order u/s 147/144 of the Act for non fulfillment of prior jurisdictional conditions.
Apex Court judgment in the case of Parimisetti Sethramamma Vs CIT reported in 57 ITR 532 has held as under: –
By section 3 and 4 of the Income Tax Act, 1961 imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax.
That the initiation of reassessment proceedings is illegal being void-ab-initio in as much as the reasons recorded are not in accordance with the provisions contemplated u/s 147 of the Act as well as judicial pronouncements . Rather reasons have been recorded in a mechanical manner and without application of mind. The ground purely legal may please be admitted in view of the decision of the Apex Court in the case of National Thermal Power Co. 229 ITR 393 SC
That the initiation of reassessment proceedings is illegal being void ab initio in as much as the approval u/s 151 of the Act is purely mechanical one and contrary to the judicial opinion. The ground being purely legal may please be admitted in view of the decision of the Apex court in the case of National Thermal Power Co. 229 ITR 393 SC
The Assessee has relied on judgment of M/s Deepraj Hospital P Ltd. Vs. ITO in the ITAT Agra I.T.A no. 41/Agra 2017
1. Proceedings initiated u/s 147 and the notice issued u/s 148 is wrong, bad-in-law, the facts and circumstances of the case.
2. No valid material and ground justifying the reasons recorded. The reasons are wholly irrelevant, general, vague and wrong.
3. Reasons recorded based on borrowed satisfactions.
4. The Assessee has not filed his return of Income. No Bank Statement was called for by ITO in the absence of complete Bank statement looking at the entries the formation of belief that the cash deposited with the Bank is nothing but income of the Assessee is wrong. That the reasons have been recorded on mere surmises incorrect presumption and wrong assumption of facts.
5. That the condition precedent for taking action u/s 147 of the Act in the case of Assessee firm are wholly non- existent and cannot be said to be valid in the eyes of law because section 147 of the Act mandates that it is exclusively the satisfaction of assessing authority based on some direct, correct and relevant material which is material and which could lay the foundation for issuing notice u/s 148 of the Act.
6. The text of reason recorded styled as “reason to believe” in the present case is nothing but reason to suspect. On mere surmises and presumption that too on incorrect facts as recorded in the reasons, the proceedings u/s 147 of the Act cannot be validly initiated more so in the absence of any adverse material or information directly gathered by your good self. If there is any adverse material or information in possession of your good self the same may kindly be communicated to the Assessee in the interest of natural justice.
7. That without prejudice to the above mentioned submission and at the most if there is any information though neither the same has been mentioned in the reason recorded nor otherwise confronted with the Assessee, the said information is clearly termed as borrowed satisfaction and until unless the belief is directly not of the officer recording reasons the initiation u/s 147 is invalid and without jurisdiction.
The only information with the assessing officer is that the assessee has deposited cash more than 10 lakhs with his saving bank account and no other information is there with the assessing officer this is just an information based on AIR but no definite information. On the basis of this information, the assessing officer believed that entire deposit of cash in the saving bank account by the Assessee is income of the Assessee. the assessing officer reopened assessee’s assessment merely on the basis of AIR information and no separate reason disclosing satisfaction of Assessing Officer for formation of belief that income of Assessee had escaped assessment had been recorded, notice issued u/148 of the Act was to be quashed and assessment made in pursuance thereof was to be annulled.”
In the present case, like in ‘Meenakshi Overseas’ (supra), the link between the information available with the AO and the formation of belief by the AO is missing. 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. As such, ‘Meenakshi Overseas’ (supra), is squarely applicable.
Merely stating the reasons in a letter addressed by the AO, is not enough. Then, the reasons to believe escapement of income need to spell out all the reasons and grounds available with the AO for reopening the assessment. 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.
The assessee has further relied on the judgment
In ‘Birbahadur Singh Sijwali’ (supra), it has been held that where the AO issued a notice u/s 148 on the ground that there was, fine escapement of income and belief regarding such escapement of income was formed on the fallacious assumption of the AO that bank deposits constituted undisclosed income, over-looking the fact that the source of the deposits need not necessarily be the income of the Assessee, the reassessment proceedings cannot be sustained. In the present case, similarly, the basis of initiation of the assessment proceedings u/s 147 was the information with the Department, of the deposits made by the Assessee in his bank account.
It may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escapement assessment.”
Thus, it was a mere suspicion of the AO, that prompted him to initiate assessment proceedings under section 147, which is neither countenanced, nor sustainable in law.
The material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment, in our humble understanding, cannot be drawn.”
It is a Continuous proceeding before CIT(A) and what AO left CIT(A) can do the same. As held in Sri Shankar Khandasari Sugar Vs. CIT 193ITR 669.”
“The revenue must act fairly in the matter of assessment as much as it is interested in collection the tax. In the absence of any prejudice to the revenue and the basis of the tax under the Act being to levy tax, as far as possible, on the real income, the approach should be liberal in applying the procedural provisions of the Act. An appeal is but a continuation of the original proceedings and what the Income Tax Officer could have done, the appellate authority also could do.”
In the case of CIT vs. Videsh Sanchar Nigam Ltd. (2012) 340 ITR 66(Bom.) has held that though the reopening of assessment was within time, since the reasons recorded for reopening of the assessment were not furnished to the assesses till date the completion of assessment, the reassessment order cannot be upheld.
10.3 Similarly in the case of CIT v. Indo Arab Air Services (2016) 130 DTR 78/ 283 CTR 92 (Delhi)(HC) it was held that mere information that huge cash deposits were made in the bank accounts could not give the AO prima facie belief that income has escaped assessment. The AO is required to form prima facie opinion based on tangible material which provides the nexus or the link having reason to believe that income has escaped assessment. The AO was also required to examine whether the cash deposits were disclosed in the return of income to form an opinion that income has escaped assessment.
10.4 The power to reopen an assessment is conditional on the formation of a reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The existence of tangible material is necessary to ensure against an arbitrary exercise of power.
Aventis Pharma Ltd. vs. ACIT (2010) 323 ITR 570 (Bom)
Irrelevant and non existing reasons : Vague and General reasons not permissible:
Balakrishna H. Wani vs. ITO 321 ITR 519 (Bom)
Notice based on suspicion and surmise – Notice is not valid. The requirement of law is “reason to believe” and not reason to “suspect”.
CIT v. Maniben Velji Shah (2006) 283 ITR 453 (Bom.)(High Court)
h) The AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year.
Explanation 2 of s. 147 authorizes the AO to reopen an assessment wherever there is an “understatement of income”, the AO is not entitled to assume that there is “understatement of income” merely because the assessee’s income is “shockingly low” and others in the same line of business are returning a higher income. The invocation of the jurisdiction u/s 147 on the basis of suspicions and presumptions cannot be sustained. (WP. No. 36483/2016, dt. 13.02.2017) (AY. 2012-13 )
Rajendra Goud Chepur v. ITO (AP&T)(HC)
The mere cash deposit is not Prima facie reasons and material with the AO which makes him satisfied that Income of the Assessee has escaped assessment.
AIR Information in respect of the Assessee:
In absence of necessary nexus between the tangible material and formation of belief, the reassessment proceedings cannot be sustained in the instant case. It is submitted by the Assessee here that the AO had initiated the reassessment proceedings only on the basis of information as per AIR which as per his presumption was not verifiable due to non appearance of assessee’s Income tax return for AY 2010-11 in the Income tax department IT system. It was submitted that the reasons to believe are de hors, vague and does not lead to formation of belief for the escapement of income on the part of the assessee. It was submitted that the reasons to believe has no nexus and live link with the escapement of income of the assessee
This is only a wild guess work of the AO that cash deposit is income of the assessee. AIR information is not sufficient. The AO has checked one limb of the bank account and not checked debit entries at the time of assessment.
Therefore information received throws only doubt or suspicion. Suspicion however strong cannot take the place of evidence as laid down by the Hon’ble Apex Court in the case of Dhakeswari Cotton Mills Ltd. Vs. CIT (1955) AIR 65 (1955 SCR 011941).
Moreover, Even when no return filed, reasons must be recorded, as held in Renuka Travels Vs. ITO (1998) 66 ITD 143 (Banglore).
Furnishing reasons to Assessee : What is reasonable time
The Supreme Court in the case of GKN Driveshaft (India) Limited v. ITO(2003) 259 ITR 19 (SC) had clarified that the Assessing, Officer is bound to furnish reasons within a reasonable time. The term ‘reasonable time’ is interpreted by the High Court of Delhi, in the case of Haryana Acrylic Manufacturing Co. v. CIT (2009) 308 ITR 38 (Del.), in following manner:
A notice under section 148 without the communication of the reasons therefore is meaningless inasmuch as the Assessing Officer is bound to furnish the reasons within a reasonable time. In a case where the notice has been issued within the said period of six years but the reasons have not been furnished within that period, any proceedings pursuant thereto would be hit by the bar of limitation inasmuch as the issuance of the notice and the communication and furnishing of reasons go HAND-IN- HAND. The expression ‘within a reasonable period of time’ as used by the Supreme Court in the case of GKN Driveshaft (India) Ltd. (supra) cannot be stretched to such an extent that it extends even beyond the six years’ period stipulated in section 149. Then, the validity of the notice under section 148 and any proceedings pursuant thereto could not be upheld.
The above decision of Delhi High Court is further followed by ITAT Delhi bench in the case of Shri Balwant Rai Wadhwa v. ITO, in ITA No. I.T.A. No.4806/Del/10. The ITAT bench held that if reasons are not supplied to the Assessee within the period of 6 years then it would be constructed that assessment has not been validly reopened.
It is well settled that the court cannot go beyond the recorded reasons, nor can it take into account any supplementary reasons which did not enter into the mind of the assessing authority at the time of issuing the reassessment notice.-[S. sree rama chandra Murthy v. DCIT (2000) 243 ITR 427 (AP)]
The appellant also craves to add or amend the grounds of appeal if required at the time of hearing of appeal and also prays to produce additional evidence under Rule 46A of the Income Tax Rules, 1962 at the time of hearing or before it and further prays to accept additional grounds of appeal under section 250(5) of the Act.
Thanking You ,
Yours Faithfully
For XXXXXXXX ,
Advocate
XXXXX
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