10 June 2024


Income Tax Appellate Tribunal

Aruna Garg, Ghaziabad vs. ACIT



Direct Taxation

Suspicion towards possible escapement would not permit the Assessing Officer to reopen a completed assessment in defiance of statutory requirement

Present appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals). As per the grounds of appeal, the assessee has challenged the assumption of jurisdiction under Section 147 of the Income Tax Act, 1961 (IT Act) as well as additions of Rs.8,95,285 on account of client code modification.The learned counsel for the assessee submits that, Assessing Officer has wrongly assumed jurisdiction by issuing notice under Section 148 of the Act relevant to Assessment Year 2009-10 in question, without authority of law.

Assessing Officer has propelled himself to reopen a concluded assessment on the grounds of alleged fictitious losses claimed in the transactions carried on the platform of the Stock Exchange. The Assessing Officer has merely made averments towards some information received for transfer of profit and loss of one constituent to another by modification of the client code but however, there is no reference to any relevant material which can given rise to prima facie belief of an escapement. There is no iota of reference to the nature of information received, the source of supply of such information, the contents of information and specific transaction wise details, where the client code has been subjected to any modifications causing wrongful transfer of profits from assessee to any other party/constituent.

The allegation towards escapement of income must be backed by expression 'reasons to believe' and such belief requires to be based on some credible or relevant material. There is no clarity on the nature of information purportedly received by the Assessing Officer. The Assessing Officer is expected to exercise jurisdiction under Section 147 of the Act with scrupulous care and based on material which are clear and beyond reasonable doubt. The reasons recorded in the instant case are in complete disarray. Mere reiteration of statutory language employed in Section 147 of the Act that the Assessing Officer has 'reason to believe' towards escapement of income is not, by itself, adequate.

The belief towards escapement in the instant case is only pretence and a mere doubt and suspicion towards probable escapement though worded as 'reason to believe'. The Hon'ble Supreme Court in Lakhmani Mewal Das has underscored that, the word of the statute 'reason to believe' are not 'reason to suspect'. The vague feeling or suspicion of the Assessing Officer towards possible escapement would not permit to reopen a completed assessment in defiance of statutory requirement of substantial nature. The notice issued under Section 148(1) is thus ultra vires the provision of Section 147 of the Act.

Hence, the re-assessment notice under Section 148 giving rise to the jurisdiction under Section 147 of the Act is quashed and consequently the re-assessment order appeal against is also similarly quashed and set aside. The appeal of the assessee is allowed.

Tags : Assessment Jurisdiction Legality

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