Case: Debashu Services Private Limited Vs. Deputy Commissioner of Income Tax, Circle 1 &amp; Others

by the AO nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the AO to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the AO to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the AO to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of the mind of the AO. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The AO, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the AO cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the Court, on the strength of affidavit or oral submissions advanced.Looking to the facts of the present case the observations recorded and the view taken by the Division Bench as above may also not be of any help to advance the case of the petitioner further. The Devision Bench of this Court set aside the impugned notices in the said cases on the ground that the reasons recorded by the A.O. were nowhere stating that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year and the second reason for setting aside the notices was that the impugned notices were beyond the period of 4 years from the end of A.Y. 1996 1997. It was also recorded by the Court that the A.O. had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under Section 143(3) of the Act. In the present matters we have already noticed that the reasons which were communicated to the petitioner along with covering letter dated 8/8/2013 contain sufficient particulars. Moreover, in the reasons so communicated, the A.O. has expressly mentioned that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of those assessment years.35. The decision of the Honble Apex Court in Chhugmal Rajpal V/s. S.P. Chaliha and Ors. reported at (1971) 79 ITR 306 (SC) was also pressed in service by the learned counsel for the petitioner to urge that in the impugned reassessment notices under Section 148, since, the A.O. has not set out any reason for coming to the conclusion that it is a fit case to issue notice, both the notices are liable to be quashed. On the face of the contents of the impugned notices the argument so made by the petitioner is liable to be rejected. We have already noted that in the reasons supplied to the petitioner the A.O. has clearly recorded his opinion that he has reason to believe that the income has escaped assessment by the reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment.36. After having thoroughly considered the pleadings of the parties the resulting position according to us is:(i) that the reasons were recorded before issuance of the impugned notices;(ii) that no malafides seen in the delay caused in communicating the said reasons;(iii) that the facts revealed to the Assessing Officer during the assessment proceedings for A.Y. 2010 2011 is an information contemplated by Section 147 of the Act;(iv) that the information so revealed pertains to the assessment years to which the impugned notices relate;(v) that the said information has direct nexus and/or live link with the tax liability for A.Y. year 2006 2007 and A.Y. 2008 2009;(vi) that the material in the hands of A.O. is prima facie sufficient for him to form a belief that income had escaped assessment of the assessment years to which the impugned notices relate and therefore, reassessment is needed;(vii) that the issuance of impugned notices is not an outcome of change in opinion of the successor Assessing Officer but is based on tangible material received to him during the assessment proceedings of the subsequent year.37. The other two objections raised by the petitioner, first about the competence of respondent no.1 to issue the impugned notice and the other that the impugned action is beyond the period of limitation are kept open to be agitated before the appropriate authority.38. In view of the above, we do not find any fault with the impugned notices. It does not appear to us that the respondents have committed any illegality in initiating an action against the petitioner of reopening the assessment for A.Y. 2006 2007 and A.Y. 2008 2009. No case is made out by the petitioner to interfere in the action so initiated.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Looking to the facts of the present case the observations recorded and the view taken by the Division Bench as above may also not be of any help to advance the case of the petitioner further. The Devision Bench of this Court set aside the impugned notices in the said cases on the ground that the reasons recorded by the A.O. were nowhere stating that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year and the second reason for setting aside the notices was that the impugned notices were beyond the period of 4 years from the end of A.Y. 1996 1997. It was also recorded by the Court that the A.O. had no jurisdiction toreopen the assessmentproceedings which were concluded on the basis of assessment under Section 143(3) of the Act. In the present matters we have already noticed that the reasons which were communicated to the petitioner along with covering letter dated 8/8/2013 contain sufficient particulars. Moreover, in the reasons so communicated, the A.O. has expressly mentioned that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of those assessment years.35. The decision of the Honble Apex Court in Chhugmal Rajpal V/s. S.P. Chaliha and Ors. reported at (1971) 79 ITR 306 (SC) was also pressed in service by the learned counsel for the petitioner to urge that in the impugned reassessment notices under Section 148, since, the A.O. has not set out any reason for coming to the conclusion that it is a fit case to issue notice, both the notices are liable to be quashed. On the face of the contents of the impugned notices the argument so made by the petitioner is liable to be rejected. We have already noted that in the reasons supplied to the petitioner the A.O. has clearly recorded his opinion that he has reason to believe that the income has escaped assessment by the reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment.36. After having thoroughly considered the pleadings of the parties the resulting position according to us is:(i) that the reasons were recorded before issuance of the impugned notices;(ii) that no malafides seen in the delay caused in communicating the said reasons;(iii) that the facts revealed to the Assessing Officer during the assessment proceedings for A.Y. 20102011 is ancontemplated by Section 147 of the Act;(iv) that the information so revealed pertains to the assessment years to which the impugned notices relate;(v) that the said information has direct nexus and/or live link with the tax liability for A.Y. year 20062007 and A.Y. 20082009;(vi) that the material in the hands of A.O. is prima facie sufficient for him to form a belief that income had escaped assessment of the assessment years to which the impugned notices relate and therefore, reassessment is needed;(vii) that the issuance of impugned notices is not an outcome of change in opinion of the successor Assessing Officer but is based on tangible material received to him during the assessment proceedings of the subsequent year.37. The other two objections raised by the petitioner, first about the competence of respondent no.1 to issue the impugned notice and the other that the impugned action is beyond the period of limitation are kept open to be agitated before the appropriate authority.38. In view of the above, we do not find any fault with the impugned notices. It does not appear to us that the respondents have committed any illegality in initiating an action against the petitioner of reopening the assessmentfor A.Y. 20067 and A.Y. 20082009. No case is made out by the petitioner to interfere in the action so initiated.