Crown Consultants (P.) Ltd. v. CIT [2014] 362 ITR 368/224 Taxman 81 (Mag.)/44 taxmann.com 397 (Bombay High Court) has taken a view that where an objection is not taken before the Assessing officer while responding to the reasons in support of a notice seeking reopen an assessment, then it is not open to assessee to raise such objection for the first time before this (High) Court in writ proceedings under Article 226. The exception of course being if the impugned notice is ex-facie without jurisdiction and no determination of facts are required to establish it is without jurisdiction.

During the regular assessment proceedings leading to the assessment order, the eight lenders referred to in the reasons were a subject matter of examination and then assesse provided evidence in the form of loan confirmation to establish its genuineness. However, during search of one person, he admitted to have given entry only. Thus, it is submitted by the assesse that this is a case of change of opinion. High Court held that the exact nature of the transaction is only privy to the parties to the transaction and when one of the parties to the transaction states that what appears is not factually so, then the Assessing Officer certainly has tangible material to form a reasonable belief that income chargeable to tax has escaped assessment. [para 8] Bright Star Syntex (P.) Ltd. [2016] 71 taxmann.com 64 (Bombay)

Supreme Court in Phoolchand Bajranglal v. ITO [1993] 203 ITR 456/69 Taxman 627 - "One of the purposes of Section 147 appears to us to be to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn round and say "you accepted my lie, now your hands are tied and you can do nothing."

The Court will certainly interfere in 148 matters where the reason to believe that income has escaped assessment, is a clear case of change of opinion i.e. the same material was subject to consideration in regular assessment proceedings or where the reopening is being done only on suspicion and/or to carry out investigation or where the assessment is sought to be reopened after a period of more than four years from the end of the relevant assessment year and there has been no failure on the part of the assessee to truly and fully disclose all material facts necessary for assessment [para 6] Bright Star Syntex (P.) Ltd. [2016] 71 taxmann.com 64 (Bombay)

Apex Court in ITO v.Lakhmani Mewal Das [1976] 103 ITR 437 held that the expression "reason to believe" cannot be read to mean that the Assessing Officer should have finally established beyond doubt that income chargeable to tax has escaped assessment. It held that the only requirement to reopen an assessment is a reasonable belief on the part of the Assessing Officer issuing the reopening notice that income chargeable to tax has escaped assessment.

The Notice itself does not indicate the approximate amount of income, which the Assessing Officer has reason to believe has escaped assessment- Bombay High Court in Khubchandani Healthparks

It is settled position in law that the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what logically flows therefrom as held by the Supreme Court in Ambica Quarry Works Vs. State of Gujarat, 1987(1) SCC 213. The Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra)not having dealt with the issue of reason to believe that income chargeable to tax has escaped assessment on the part of the Assessing Officer in cases where regular assessment was completed by Intimation under Section 143(1) of the Act, it would not be wise for us to infer that the Supreme Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has held that the condition precedent for the issue of reopening notice namely, reason to believe that income chargeable to tax has escaped assessment, has no application where the assessment has been completed by Intimation under Section 143(1) of the Act. The law on this point has been expressly laid down by the Apex Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) and the same would continue to apply and be binding-Bombay High Court in Khubchandani Healthparks

Scope of AO to reopen an assessment on the basis of intimation u/s 143(1) is much wider that scope of reopening on the basis of 143(3) because no opinion is formed by accepting return u/s 143(1) without scrutiny. This is in sum and substance held by the Supreme Court in the case Rajesh Jhaveri Stock Brokers P. Ltd. And Zuari Estate Development and Investment Company . However, even in the case of assessment previously framed without scrutiny which is sought to be reopened by issuance of notice under section 148 of the Act, the principle requirement that the Assessing Officer has reason to believe that the income chargeable to tax had escaped assessment would still survive. Of course, this formation of belief by the Assessing Officer must be prima facie and at the stage when the Court is testing validity of such a notice; it would not be necessary for the Assessing Officer to conclusively establish that the income chargeable to tax had escaped assessment. [Para 7] Prakriya Pharmacem [2016] 66 taxmann.com 149 (Gujarat) JANUARY 18, 2016

In the reasons provided it is stated that the assessee has transferred shares during year under consideration whose market value on the date of transfer was Rs. 7.63 crores (rounded off). This transfer had taken place in favour of sister concern without consideration under transfer deed dated 26.02.2010. In view of such facts, the Assessing Officer has reason to believe that the income chargeable to tax in excess of Rs.1,00,000/- had escaped assessment. Held that reasons themselves record merely the transaction and nothing more. There is no live link between the first portion of the reasons recorded, namely, by merely duplicating the recording of transaction of transfer of sizable number of shares having considerable market value without consideration and second portion of the reasons where he concluded that the income chargeable to tax had escaped assessment. Hence reopening u/s 148 can not be made. [Para 9 and 10 of the Judgement] Comments: This judgement can be helpful where cases are reopened u/s 148 merely on the basis of AIR information Prakriya Pharmacem [2016] 66 taxmann.com 149 (Gujarat) JANUARY 18, 2016

The Apex Court upheld the order of the High Court wherein it was held that the condition precedent for issuing a notice under section 148 read with section 149(1)(c) of the Act invoking the extended period of limitation of sixteen years is that income which has escaped assessment must have relation to any asset outside India which was not satisfied as the Revenue did not bring anything on record to prove that there was an asset located outside India. ITO and Ors v Deccan Digital Networks Pvt Ltd [SPL No 9577/2015] – TS-510-SC-2015

Delhi High Court in Tupperware India (P) Ltd [2016] 65 taxmann.com 17 (Delhi)[10-08-2015] held that in absence of any tangible material available with Assessing Officer to form requisite belief regarding escapement of income, reassessment of return u/s 143(1) can not be done . It followed Orient Craft Ltd. [2013] 354 ITR 536 (Del) which pronounced that Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 (SC) does not give a carte blanche to the Assessing Officer to disturb the finality of the intimation under section 143(1) and reopening in absence of new material is bad in law. In present case, AO after having processed the return u/s 143(1) took note of audit report which stated that since no tax deducted on management fee, expesnse is not allowable u/s 40(a)(ia). This fact earlier went unnoticed in processing of return. Comments: Delhi High Court has however not taken note of another Supreme Court Judgement in Zuari Estate on 17-04-2015, which has stated that since as per Rajesh Jhaveri (supra) intimation is not assessment, hence no opinion is formed by accepting return u/s 143(1) and there fore reopening in the absence of new material does not entail change of opinion and hence reopening is valid.

SC in Zuari Estate Development & Investment Company Limited has held that intimation u/s 143(1) is not assessment and hence while issuing notice u/s 148 there is no change of opinion and hence notice is valid. Bombay High Court Judgement is set aside and matter restored to ITAT to decide on merits. Comments : In this case the notice u/s 148 was issued for not reflecting capital gain u/s 2(47)(v) rws 53A of Transfer of Property Act in respect of an agreement entered in 1984 by which property was stipulated to be transferred in 1991 only. However section 2(47)(v) has come into operation w.e.f. AY 1988-89 only and high court had held in para 18 of its judgement that “ no prudent or reasonable person, reasonably instructed in law, could have come to the conclusion that an agreement as contemplated by section 53A of the Transfer of Property Act had been entered into for the assessment year 1991-92” and that mere exchange of letters is not agreement u/s 53A. SC has not considered this part of the judgement. How shall now ITAT decide the issue ?

Reassessment with in four years from the end of relevant assessment year can also not be made for mere change of opinion in the absence of tangible material on the basis of which assessment could have been made [Rallis India 190 taxman 1 (Bom)]Para 12

Retrospective Amendment of law not operative on date of order u/s 263 or issue of notice u/s 148

ž  If retrospective amendment of law was not enforceable on the day, CIT exercised its powers u/s 263, order u/s 263 is bad in law[Supreme Court in Max India [295 ITR 282]]. In this case amendment in section 80HHC was brought retrospectively on the definition of profit in FA 2005 while order u/s 263 was passed 5-03-1997

ž  Similarly notice u/s 148 can also not be issued , held by Bombay HC in Rallis India [Para 18] 190 taxman 1. In this case notice u/s 148 was issued on 16-07-2008 and Finance Act 2009 amended the law on S.115JB requiring increase in book profits by provision on diminution in  value of assets w.e.f. 1-4-2001.[Consequent to SC Order in HCL Comet  292 ITR 299 that  provision for bad debts can not be equated with  amount set aside for meeting liabilities] 

Where search warrant was issued in name of person other than person searched and some incriminating documents were found at the premises of person searched. Search proceedings were however dropped suo motto by the department due to search warrant wrongly issued. There after proceedings u/s 153C were initiated on one of the promoters on the basis of documents found in his premises, but proceedings u/s 153C were also dropped because original proceedings got vitiated. However department initiated action u/s 148 in respect of documents found at the premises of person searched. Action of the department upheld by Allahabad High Court in SHIVAM GRAMODYOG SANSTAN Oct 14, 2015(2015) 94 CCH 0052 AllHC, relying upon Dr.Sarad B. Sahai 235 CTR 596 which said that although search is declared illegal but the post- search assessment has to take place

Where search warrant was issued in name of person other than person searched and some incriminating documents were found at the premises of person searched. Search proceedings were however dropped suo motto by the department due to search warrant wrongly issued. There after proceedings u/s 153C were initiated on one of the promoters on the basis of documents found in his premises, but proceedings u/s 153C were also dropped because original proceedings got vitiated. However department initiated action u/s 148 in respect of documents found at the premises of person searched. Action of the department upheld by Allahabad High Court in SHIVAM GRAMODYOG SANSTAN Oct 14, 2015(2015) 94 CCH 0052 AllHC, relying upon Dr.Sarad B. Sahai 235 CTR 596 which said that although search is declared illegal but the post- search assessment has to take place

Held by Gujrat High Court in Sukhini P. Modi (10.3.14) 52 TMC 50 that reassessment notice issued without issuing 143(2) notice is void

Where notice under section 148 was issued after obtaining sanction from Commissioner instead of Joint Commissioner who is competent authority to approve issuance of notice, assessment framed consequent thereto was not valid and same was void ab initio -Sardar Balbir Singh[2015] 61 taxmann.com 320 (Lucknow - Trib.)MARCH 13, 2015

Jai Prakash Ahuja v. ITO [2014] 48 taxmann.com 86 [2015] 152 ITD 592 (Luck. - Trib.) (para 7)  CIT v.SPL's Siddhartha Ltd. [2012] 345 ITR 223 (Delhi),followed.

Assessee filed returns in response to notices under section 148 issued by ITO, Erode - While said returns were pending for disposal, assessee's file was transferred to jurisdiction of ITO, Madras, who issued second notice under section 148 - Whether, while reassessment proceedings were pending, impugned second notice was valid - Held, no-A.S.S.P. & Co. [1986] 27 Taxman 623 (Madras)

Notice u/148 issued to address in PAN data base which is no longer occupied by assessee. Assessee not precluded from pleading that notice served to wrong address. Also even if assessee participates in reassessment proceedings , the Jurisdictional defect does not get cured.IN THE HIGH COURT OF DELHI AT NEW DELHI 2. + ITA 665/2015 ATLANTA CAPITAL PVT. LTD.