Subject: Dr. Rakesh Gupta, the learned counsel submitted that it is settled law that the information
Referred Sections:
Section 148 of the Income Tax Act,
Section 263 of the Act.
Sections 147/148 of the Act,
Section 147 of the Income tax Act,
Section133(6)
Section 143 (3)
Section 131 (1A)
Section 147 (a)
Referred Cases / Judgments
Consultants Pvt. Ltd. v. Income Tax Officer
CIT v. Gupta Abhushan
ITO v. Lakhmani
Bajrang Lal v. ITO
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 30.07.2018
+ W.P.(C) 11324/2017, C.M. APPL.46251/2017
SKYVIEW CONSULTANTS PVT. LTD. ..... Petitioner
Through : Dr. Rakesh Gupta, Sh. Sonil Agarwal,
Ms. Monika Ghai and Sh. Rohit Kumar Gupta,
Advocates.
versus
INCOME TAX OFFICER WARD 23(4), NEW DELHI AND ANR.
..... Respondents
Through : Sh. Zoheb Hossain, Sr. Standing
Counsel with Sh. Deepak Anand, Jr. Standing
Counsel.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A.K. CHAWLA
MR. JUSTICE S. RAVINDRA BHAT
%
1. The writ petitioner, which is engaged in consultancy business in the
segment of product promotion and sales services marketed by M/s.
Seagrams India Ltd is aggrieved by the re-opening of its assessment for
A.Y. 2010-11 under Section 148 of the Income Tax Act, 1961 [hereafter "the
Act"]. It seeks directions for quashing of the reassessment notice.
2. The facts briefly are that for two previous years A.Y.s 2007-08 and
2008-09, orders seeking to re-examine the original scrutiny assessments
were made under Section 263 and later under Sections 147/148 of the Act,
respectively. These attempts to revisit the original scrutiny assessments, (on
the allegation that claims for bogus expenditures were made) were
unsuccessful and the final orders for the assessment year (A.Y. 2007-08)
culminated in the revisional and subsequent remand orders by the Assessing
W.P.(C) 11324/2017 Page 1 of 17
Officer (hereafter "AO") finally in the assessees favour. The order pursuant
to the remand was, in fact, accepted after the appellate Commissioner
endorsed that view on 08.05.2014.
3. The reassessment for A.Y. 2009-10 was through a notice dated
30.03.2016 which inter alia claimed that upon receipt of a Tax Evasion
Petition (TEP), investigation was conducted which showed that for the year
ending 31.03.2009, the contract charges claimed were unduly high
`24,01,79,349/-. The TEP also alleged that these amounts were distribution
of illegal gratifications by the assessee. The reassessment notice proceeded
to state as follows:
"5. From the above referred TEP, and report of the ITO (Inv)
OSD-1,Unit-3, New Delhi, the modus operandi of the assessee
in the AY 2009-10 is same as was in AY 2007-08 & 2008-09. It
appears that contractor's charges amounting to ` 2,41,79,349/-
claimed as expenses by the assessee in its profit & loss account
pertaining to FY 2008-09 relevant to AY 2009-10 has been used
by the assessee for non-business purposes, thus concealing its
true income.
6. In this case, Director General of Income Tax (Vigilance)
vide their letter No.DIT(Vig)/NZ/2011-12 dated 02.11.2011
(Placed as annexure C) after their detailed enquiry in a
complaint case against the then AO of Cir 8(i), New Delhi has
also suggested to look into the claim of the expenses, as they are
in crores in one year itself, and will have a major impact on
revenue, taking into the number of years involved, as the
assessee is doing the same business till date.
7. In view of the additional information/documents received
from the Investigation Wing, material/documents available on
record I have reason to believe that Contractor's charges
shown in its P&L Accounts are bogus and the assessee has
willfully and knowingly concealed its particulars of income to
W.P.(C) 11324/2017 Page 2 of 17
avoid tax and that income of ` 2,41,79,349/- chargeable to tax
has escaped assessment for AY 2009-10,within the meaning of
Section 147 of the Income tax Act, 1961."
3. On 17.08.2017, the revenue sought to re-open the assessment by
issuing notice under Sections147/148 of the Act, on 27.03.2017, but for A.Y.
2010-11. In response to the assessees request, the Revenue furnished the
reasons for reopening an assessment. This inter alia reads as follows:
"2. In fact investigation into the affairs of the company
started on receipt of TEP bearing UIN No. 090845052X
(Placed as annexure B). As per the TEP received in the
investigation wing of the department the said company made
collections from their principals i.e. M/s Pernod Ricard India
Pvt Ltd. The company further issued accounts payee cheques in
the name of various sub-contractors (allegedly bogus entities)
in their names and withdraw cash by self cheques from their
accounts and distributed cash in Defence canteens as bribes.
On the basis of said TEP and other material available on
record case of the assessee for the AY 2007-08 was reopened
u/s 263of the Income Tax Act, 1961 and for AY 2008-09
proceedings u/s 147 of the Income Tax Act,1961 were
completed and therein a substantive addition of Rs.
1,60,94,586/- on account of disallowance of subcontracting
expenses. Further the case of the assessee company for
A.Y.2009-10 was also reopened on the similar grounds however
the matter for this year is sub-judice with the Hon'ble Delhi
High Court are currently in progress.
3. On perusal of P&L for the year ending 31.03.2010
received along with above quoted letter of ITO (Inv) OSD-1,
Unit-3, New Delhi the assessee is showing Consultancy Income
of Rs. 3,31,14,209/- and expenses on account of Contractor's
charges amounting to Rs.3,07,95,559/- and has shown net
income only at Rs. 3,10,336/-. It was alleged in the TEP that for
the A Y 2007-08 & 2008-09 the contractor charges being
W.P.(C) 11324/2017 Page 3 of 17
claimed by the assessee is the bribe amount distributed by the
assessee.
4. ITO (Inv) OSD-1, Unit-3, New Delhi in his findings has
stated that the assessee was provided opportunity to explain the
expenses and to provide the necessary details which were called
for vide summons u/s 131 (1A) dated04.03.2015 so that
independent enquiries could be conducted from the third
parties. As per his report the assessee has neither provided any
justification with documentary evidence nor the details of the
parties to whom the contract charges were paid.
5. From the above referred TEP, and report of the ITO (Inv)
OSD-1, Unit-3, New Delhi, the modus operandi of the assessee
in the A Y 2010-11 was same as was in A Y 2007-08, 2008-09
&2009-10. It appears that contractor's charges amounting to
Rs. 3,07,95,559/- claimed as expenses by the assessee in its
profit & loss account pertaining to FY 2009-l 0 relevant to A Y
2010-11 has been used by the assessee for non business
purposes, thus concealing its true income.
6. In this case Director General of Income Tax (Vigilance)
vide their letter No.DIT(VIg)/NZ/2011-12 dated 02.11.2011
(Placed as annexure C), after their detailed enquiry in a
complain case against the then AO of Cir 8(1), New Delhi has
also suggested to look into the claim of the expenses, as they are
in crores in one year itself, and will have a major impact on
revenue, taking into the number of years involved, as the
assessee is doing the same. Business till date. Further in the
letter of the office of Joint, DIT(Vigilance), North Zone-II, New
Delhi has specifically give remark as under for the A.Y. 2010-
11:-
"Make a proposal to the concerned CIT to take-up the case of
M/s Skyview Consultants Pvt. Ltd. for A. Y. 2010-11 under
scrutiny and issue directions for proper examinations of the
charge in business pattern & purchases made during the year.
W.P.(C) 11324/2017 Page 4 of 17
It may also be suggested that the reason for "NIL" closing
stock as on 31.03.2010 be also examined."
7. In view of the additional information/documents received
from the Investigation Wing and O/o DGIT (Vigilance), New
Delhi material/documents available on record I have reason to
believe that Contractor's charges shown in its P&L Accounts
are bogus and the assessee has willfully and knowingly
concealed its particulars of income to avoid tax and that income
of Rs.3,07,95,559/- chargeable to tax has escaped assessment
for A.Y. 2010-11, within the meaning of section 147 of the
Income tax Act, 1961."
4. The petitioner assessee objected to the re-opening of its assessment for
A.Y. 2010-11. It relied importantly upon the fact that its challenge to the
opening of reassessment for A.Y. 2009-10 was sub judice and pending
before this Court in W.P.(C) 10507/2016 Sky View Consultants Pvt. Ltd. v.
Income Tax Officer. It pointed out that on 07.09.2016, this Court had decided
the cases and had allowed the petition, ruling that information relating to one
A.Y. was not relevant for another A.Y. Besides quoting the decisions, it
relied upon the assessee objecting to omission by the AO to refer to the
previous orders for A.Y. 2007-08 which had gone into the same aspects to
suspect expenditure. It was also stated that no changes were forthcoming and
that revisiting sole issues did not constitute a valid ground for invoking the
power of reassessment under Sections 147/148. In fact, the mechanical citing
of same reasons vitiated and rendered invalid the impugned notice under
Section 147. The other grounds, such as failure to mention the fact that
though there was mention of substantive addition of ` 1,60,94,586/- for A.Y.
2008-09 that was subject matter of an appeal, that relevant facts were not
intentionally considered. The assessee complained that re-opening besides
W.P.(C) 11324/2017 Page 5 of 17
being the result of a mechanical exercise, appears to be on the basis of
directions of higher authorities.
5. These objections were rejected, therefore, the assessee has approached
this Court. Dr. Rakesh Gupta, the learned counsel submitted that it is settled
law that the information which forms the basis for reassessment notice
should have a live link or nexus to the assessment order in question. This
resort to information in respect of another year was an entirely irrelevant
factor. It was stressed that though Section 147 states broadly that the power
can be resorted to for any assessment, it is in the context of a particular
assessment year that it is always sought recourse to. Citing CIT v. Gupta
Abhushan (P) Ltd.2009 (312) ITR 166 (Del), it was submitted that not
picking certain expenditures for one given year did not per se establish that
such expenses were not spread over three previous years. It was emphasized
that the expression "reasons to believe" have to explain only the concurred
facts and do not amount to "reasons to suspect". Citing ITO v. Lakhmani
Mewal Das 1976 (103) ITR SC 437 (SC), it was argued that the AO should
have specific information to show that particular transactions relied upon
were not genuine. It was stated that merely because certain accounts of
expenditure were disallowed to the extent of 5% in a given previous year per
se did not constitute a valid reason for reopening of assessment. It cannot be
a matter of surmise or guesswork, but has to based upon specific evidence.
Reliance was placed on the assessment for AY 2007-09 order made pursuant
to remits after revision to say that the final order, endorsed by the CIT
nowhere indicated that similar expenditure was not genuine. This constituted
,,material available, but was deliberately avoided by invoking power of
reassessment under Section 148.
W.P.(C) 11324/2017 Page 6 of 17
6. In its counter affidavit, and during oral arguments, the revenue,
through its counsel, Zoheb Hossain argued that the present controversy arose
because of a TEP by the revenue contending that the assessee was engaging
in claiming bogus expenditure on account of sub-contractors in its books. It
was also alleged that the amount so booked was later withdrawn in cash and
used for payment of bribes. Significantly, a complaint was also received
against the particular assessing Officer who conducted the assessment
proceedings for A.Y. 2007-08, wherein the bogus expenditure was allowed.
It was emphasized that the application of mind by the revenue was at two
levels- i) by the Investigation Unit on the contents of the TEP by issuing
summons to the assessee and providing it an opportunity to establish the
genuineness of the said expenditure; and ii) by the AO in the present case
who did not blindly follow the recommendation of the investigation unit but
considered the facts of the relevant period. It is highlighted that in the
reasons for reassessment, the AO noted that assessee was showing
consultancy income of ` 3,31,14,209/- from its single client Pernod Ricard
and had debited an amount of ` 3,07,95,559/- as sub-contractor charges and
returned an income of ` 3,10,336/- only. The counsel distinguished the
reasons which persuaded this court to quash reassessment proceedings for
AY 2009-10 urging that the reasons on which this Court was constrained to
pass the said order do not exist in the factual matrix for the relevant period.
Learned counsel emphasized that in the present case the AO did not blindly
follow the investigation unit's recommendation or the assessment order for
A.Y.2008-09 but rather examined that material in light of the facts of the
relevant period that the assessee was showing consultancy income of `
3,31,14,2091/- from its single client Pernod Ricard and has debited an
W.P.(C) 11324/2017 Page 7 of 17
amount of ` 3,07,95,5591- as sub- contractor charges and returned an
income of ` 3,10,3361- only. Therefore, the live nexus missing in A.Y.
2009-10 is present in the present case. Counsel pointed out, moreover, that
that the AO who had passed the assessment order for the A. Y. 2008-09 was
the same person who recorded the reasons for reopening of the case for the
A.Y. 2010-11. After detailed enquiry and receipts of information called for
under Section133(6), the assessment was concluded, on remand after
revision, with a resultant addition of ` 1,60,94,586/- on account of sub-
contracting expenses. Therefore, on the date of recording the reasons AO
had sufficient and tangible material on the file as the assessee company was
following the same pattern of business.
7. The revenue submits that there is anything on record which shows that
summons were issued by the ITO (Investigation) as claimed by the assessee.
The letter dated 23.03.15, ITO (lnv.), OSD-1, Unit-3, New Delhi mentioned
that "after getting approval of the Addl. DIT(Inv.), Unit-3, summon u/s
131(1A)"was issued on 04.03.15. However, ipso facto this did not establish
that such summons was issued. It is also urged that the revenue has
sufficient material to reassess the petitioner's affairs as regards the claim of
bogus expenditure. Reliance is placed on the judgment of Phool Chand
Bajrang Lal v. ITO (1993) 203 ITR 456 (SC).
8. The disputed reassessment notice, according to the petitioner/assessee
is based upon stale material, which does not have a "live link" with the
original assessment and at best only points to suspicion and conjectures with
respect to bogus business expenditure, but does not point to tangible fresh
material. The assessee relies on unsuccessful attempts by the revenue, for
past assessment years to re-open concluded scrutiny assessments, notably
W.P.(C) 11324/2017 Page 8 of 17
2007-08 and 2008-09, on virtually the same grounds. It is also highlighted
that these unsuccessful attempts, though a matter of record, and pointedly
referred to in its objections, was studiously ignored when the reassessment
notice was issued. Lastly, it was argued that even the revised assessment for
previous years, on the same ground, resulted in insignificant additions, thus
implying that the expenses were genuine.
9. The note recommending reassessment, in this case, through a letter
dated 23.03.2015 inter alia, the ITO (Inv) to the Deputy Commissioner of
Income tax, stated as follows (after referring to the previous assessment,
revision, addition and reduction of the amounts added by the CIT, and the
reassessment for A.Y. 2009-10, and that the assessee was asked to explain
its position on the expenditure for A.Y. 2010-11):
"The assessee forwarded his submission vide letter dated NIL on
18-03-2015 through a massager Sh. Pankaj Kumar which is
placed on the record. In this submission it is submitted that the
assessee is working for a single client M/s Pernord Ricard India
P. Ltd. And the agreement with them was terminated w.e.f. 31-03-
2010 and since then there is no operation in the company. The
assessee has not given the details called at point no. 2-5 above.
The assessee has simply stated that the company used to get some
job work carried out by various contractors/sub-contractors and
the entire payment has been made through account payee
cheques.
It is also submitted that in assessment year 2007-08 the AO
after recording the statements of 5 contractor parties made 5%
disallowance and added an amount of Rs. 8,03,431/-. This case
was re-opened u/s 263 of the IT Act and the assessee has filed an
appeal before the ITAT against the order of the CIT u/s 263 which
is pending for disposal. A fresh assessment was made u/s
143(3)/263 on 28-03-2013 in which disallowance was increased
to 7% as against 5% by earlier order. The CIT(A) vide order
dated 08-05-2014 has reduced the disallowance to 5% of the
reimbursement expenses. The assessee has also filed copy of the
W.P.(C) 11324/2017 Page 9 of 17
ITR and balance sheets for the AY 2008-09 to 2014-15 based on
which the following chart is prepared
Particulars/asses 2007-08 2008-09 2009-10 2010-11 2011-12
sment year
Total turnover 2,22,40,233 2,14,37,482 2,70,24,069 3,31,14,209 0
Contractor 2,00,99,268 1,89,34,807 2,41,79,349 3,07,95,559 20,50,130
Net income as 6,90,424 10,78,485 13,44,742 3,10,336 (-)20,11,551
per P&L account
From the above table it seems that from assessment year 2007-
08 to 2010- 11 the assessee had the same pattern of business.
FINDINGS & RECOMMENDATION
In order to verify the allegations of bogus expenses claimed
under the head "contract charges" claimed in the P&L account,
the assessee was asked to provided opportunity to explain the
expenses and to provide the necessary details which were
called for vide summons u/s 131(1A) dated 04-03-2015 so that
independent enquiries could by conducted form the third
parties. The assessee has neither provided any justification with
documentary evidence nor the details of the parties to who the
contract charges were paid. Mere clam that the payments were
made to the contractors through account payee cheque does not
prove the genuineness of the transaction and also the identity of
the person to whom the payments have been made as claimed
under the head contract charges.
In view of the above facts of the case, the assessee did not
discharge its onus to prove the genuineness of the expenses
claimed under the head contract charges, therefore, I am
directed to forward the TEP to you with request to take
necessary remedial action u/s 147 of the IT Act for assessment
year 2008-09 to 2011-12.
This issues with the approval of the Principal Director of
Income Tax(lnv)-1, New Delhi."
An interesting feature is that the assessee had app ealed the CITs decision,
under Section 263, for AY 2007-08. The ITAT, in the appeal (ITA
W.P.(C) 11324/2017 Page 10 of 17
No.2158/Del/2012) held that the assessee did not conceal any particulars,
and that
"We find that the AO has made assessment after issuing
summons to five parties to whom reimbursements were made.
During the assessment proceedings, the AO recorded
statements of the above persons, who also filed their
computation of incomes and copies of income tax returns and
other relevant records to prove that they had genuinely
received the payments. The above documents obtained by the
AO during original assessment proceedings are placed in PB
98 to 158 and further at PB 225 to 230. All these documents
highlight the existence of agreement between these persons and
the assessee. The documents further prove that the payments
were made to these persons and taxes were duly deducted
thereon. These documents further show that the contractors had
declared the income received from the assessee in their returns
of income. The statements recorded by the AO of these persons
clearly show that the AO had examined them sufficiently to
ascertain the authenticity and genuineness of the expenses.
Therefore, it is not a case where there were no enquiries. It is
not a case of lack of enquiry as the AO had made sufficient
enquiries. The various Courts has distinguished the cases of
inadequate enquiries & lack of enquiries."
In fact, the CIT (A) who reduced and set aside the disallowance of 7% over
the previous disallowance also observed as follows:
It is observed that all the payments (both fixed as well as
reimbursement) were subject to TDS and the contractors have
already shown these payments as their receipts in their income
tax returns. Moreover, the AO had already examined these
persons u/sl31 of the Act and they have admitted the services
rendered by them to the appellant and the receipt of payments
in lieu of their services. Considering the nature of business and
the evidences/witnesses produced by the appellant before the
AO, there remains no valid ground for making further
W.P.(C) 11324/2017 Page 11 of 17
disallowance of Rs.3,21,371/- out of total payments made under
the head 'Contractors Reimbursement Expenses'. A reasonable
view by disallowing such expenses @ 5% taken by the AO in
the original assessment order and which was acceptable to the
appellant due to his personal conditions, is justified and no
further disallowance is called for. The disallowance of Rs. 3,21
,371/- made by the AO is directed to be deleted."
10. In W.P.(C) 10507/2016, which was allowed by this Court on
07.09.2017, it was held that:
"11. In the present case, the fact that the assessment order
passed after the re- opening of the assessment for AY 2008-09
may have found the entities to whom the Petitioner issued
cheques to be fictitious cannot be looked into for the simple
reason that it was an order passed 21 days after the reasons in
the present case were recorded for re-opening of the
assessment for AY 2009-10. In any event, this will not answer
one of the principal grounds urged by Dr. Gupta that the
tangible material that is required to be shown for justifying the
re-opening of assessment has to be relevant to the AY in
question, i.e. AY 2009-10.
12. In Commissioner of Income Tax v Gupta Abhushan (P) Ltd.
[2009] 312 ITR 166 (Del), it is emphasised that information
relating to one AY will not automatically become relevant for
re-opening the assessment for another AY. If that would be the
position, then the re-opening would be only on the basis of
suspicion and not 'belief'. This decision in fact reiterated what
was earlier explained by the Bombay High Court in
Ramakrishna Ramnath v Income Tax Officer [1970] 77 ITR
995 (Bom).
13. There is no answer by the Revenue to the Petitioner's
contention that the TEP pertained only to two FYs and
therefore only corresponded to two AYs, i.e. AY 2007-08 and
2008-09. Further, it is not disputed that the original assessment
W.P.(C) 11324/2017 Page 12 of 17
order for AY 2007-08 was passed by the AO on 11th December,
2009. It was re-opened by the CIT (A) by the order dated 28th
March 2012 under Section 263 of the Act. This resulted in a
further assessment order dated 28th March 2013 by the AO
under Section 143 (3) read with Section 263 of the Act. Only
7% of the 'contractor's expenses' was disallowed and added
back. Therefore, even for AY 2007-08, the TEP did not result in
adding back the entire amount. The decision in AGR
Investments Ltd v Additional CIT (supra) only lays down a
general proposition regarding assessments being reopened on
the basis of reports of investigation. It does not obviate the need
to show that there is tangible material relevant to the AY in
question that warrants reopening of the assessment for that
particular AY.
14. More importantly, it is not understood how despite being
aware of the above orders pertaining to AY 2007-08, the AO in
his reasons for reopening the assessment for AY 2009-10 did
not refer to them while recording his reasons on 10th March
2016. Clearly this was an instance of non-application of mind
by the AO to the relevant material. Since the AO failed to justify
his reasons to believe that income has escaped assessment for
AY 2009-10 on the basis of the TEP pertaining to AY 2007-08,
it was all the more important for the AO to refer to all the
subsequent developments in relation to reopening of the
assessment for AY 2007-08.
15. As already pointed out hereinabove, the Revenue has no
answer to the submission that the entire exercise undertaken by
the ITO (Inv.) was without jurisdiction. Which is why in the
counter affidavit filed in the present writ petition, the stand
taken by the Revenue is that it is not the only reason for re-
opening the assessment. The fact remains that it could not form
tangible material for re-opening the assessment. The fact
remains that the power under Section 131 (1A) can be
exercised only by officers named therein and they are all
officers in the Department superior to the ITO. If the ITO had
to exercise the powers under that provision, he had to be duly
authorized to do so. He clearly was not and, therefore, the
W.P.(C) 11324/2017 Page 13 of 17
reports submitted by him could not have formed the valid basis
for re-opening the assessment.
16. The third material referred to in the reasons for reopening
the assessment, is the investigation undertaken by the DGIT
(Vigilance) into the conduct of the erstwhile AO of the
Petitioner. A perusal of the letter dated 2nd November 2011
written by the Director (Vigilance) to the DGIT (Vigilance)
does not throw any light on any material relevant to AY 2009-
10. In fact, the concluding paragraph of the said letter a
request is made for reopening of the assessment for the AY
2007-08 by invoking Section 263 of the Act. This explains why
that route was resorted to for AY 2007-08.
17. This Court is therefore satisfied that the jurisdictional
requirement for reopening of the assessment for AY 2009-10
has not been fulfilled in the present case. Consequently, the
notice dated 29th March 2016 issued by the AO under Section
148 of the Act as well as the consequent order dated 4th July
2016 of the AO rejecting the Petitioner's objections, are
hereby quashed"
11. The revenues explanation to distinguish the facts of the present case,
from those in A.Y. 2009-10 which was dealt with in the earlier proceeding,
in this Courts opinion, is specious and unconvincing. The AO has
mechanically followed the investigation unit's recommendation for
A.Y.2008-09. The examination was of material in light of the facts of the
relevant period that Petitioner is showing consultancy income of `
3,31,14,2091- from its single client Pernod Ricard and has debited an
amount of ` 3,07,95,5591- as sub-contractor charges and returned an income
of ` 3,10,3361/- only. However, though the letter from the Investigation
unit mentioned that the suspicion of bogus expenditure was later dealt with
in revision and the addition was revised to only 5% disallowance, the notice
W.P.(C) 11324/2017 Page 14 of 17
recording reasons to justify the reopening of assessment for AY 2010-11
willfully omits to note that. Furthermore, the order of ITAT in the assessees
appeal, for the previous year, which had been reassessed, in fact found that
the AO had called the concerned sub-contractors, who had disclosed the
amounts received from the present assessee, in their returns.
12. No doubt, each assessment year is to be seen differently; however, the
note from the investigation unit talks of a pattern of expenditure claims over
a five-year period. Three of those years were dealt with; the assessee
emerged unscathed. Given these circumstances, this is clearly a case where
the revenue is attempting to fish from the same stale pond, when it dipped
into the TEP as the basis for the investigation, to suddenly discern a pattern
of suspect or bogus expenditure.
13. The decision in Phoolchand Bajrangi (supra) pertinently stated that:
"From a combined review of the judgments of this Court, it
follows that an Income-tax Officer acquires jurisdiction to
reopen an assessment under Section 147 (a) read with Section
148 of the Income-tax Act, 1961, only if on the basis of specific,
reliable and relevant information coming to his possession
subsequently, he has reasons, which he must record, to believe
that, by reason of omission or failure on the part of the assessee
to make a true and full disclosure of all material facts
necessary for his assessment during the concluded assessment
proceedings, any part of his income, profits or
gains chargeable to income-tax has escaped assessment. He
may start reassessment proceedings either because some fresh
facts had come to light which were not previously disclosed or
some information with regard to the facts previously disclosed
comes into his possession which tends to expose the
untruthfulness of those facts. In such situations, it is not a case
of mere change of opinion or the drawing of a different
inference from the same facts as were earlier available but
acting on fresh information."
W.P.(C) 11324/2017 Page 15 of 17
In Gupta Abhushan (supra), in respect of a similar reassessment notice,
which relied on a survey conducted after the concerned assessment period,
the reopening of assessment under Sections 147/148 was quashed; the Court
observed that:
"Here too, we note that the survey was conducted on
07.03.2002, which falls in the year subsequent to the three
years in question in these appeals. The fact that the
renovation expenses had not been booked in that year, i.e.,
financial year ending on 31.03.2002 does not by itself
indicate that renovation work had been carried on in the
earlier three years and, if so, the expenses in respect of the
same had not been booked. The conclusion of the Assessing
Officer, based on what was noticed in the course of the
survey, cannot be extrapolated to other years. The purported
belief of the Assessing Officer, on this aspect of the matter,
was not a belief at all but was merely a suspicion. Such
suspicion cannot take the place of a belief and that too a
belief which is based on reasons."
14. In this case, the trigger for all the reassessment attempts by the
revenue was the same TEP, which led to previous attempts to re-open
completed assessments. The material on record show that the AO had
conducted inquiries at the time of completion of the original assessments.
There is nothing to show that the entities to whom payments were made (by
the assessee) were fictitious; in fact TDS amounts were apparently deducted.
There was no fresh evidence supporting the reassessment. Consequently,
there was no tangible, specific material to justify the impugned reassessment
notice.
W.P.(C) 11324/2017 Page 16 of 17
15. For the above reasons, this petition has to succeed. The impugned
reassessment notice dated 30.03.2016 and all further proceedings are hereby
quashed. The petition is allowed in these terms; without order on costs.
S. RAVINDRA BHAT
(JUDGE)
A.K. CHAWLA
(JUDGE)
JULY 30, 2018
W.P.(C) 11324/2017 Page 17 of 17
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