Itxa/829/2016 Of Principal Commissioner Of Income Tax 32 Mum v. Rajesh D Nandu Huf

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 829 OF 2016 Pr. Commissioner of Income Tax-32,Mumbai .. Appellant v/s. Rajesh D. Nandu (HUF) .. Respondent Mr. Arvind Pinto for the appellant Mr. F.V. Irani a/w Mr. Atul Jasani for the respondent CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. P.C. DATED : 18[th] DECEMBER, 2018. 1.This Appeal under Section 260-A of the Income Tax Act, 1961(the Act) challenges the order dated 17[th] April, 2015, passed by theIncome Tax Appellate Tribunal (the Tribunal). This appeal relates toAssessment Year 2004-05. 2.The Revenue has urged the following questions of law for ourconsideration :- (i)Whether in law and on the facts of the instant case, wasthe decision of the Tribunal not perverse holding that the AO hadto make further enquiry and gather material to come to entertaina belief that income has escaped assessment; whereas Court haveheld that it is only necessary that there be a prima facie belief recored by the AO and the process of gathering further material isonly at the stage of assessment. (ii)Whether in law and on the facts of the instant case, wasthe Tribunal perverse in coming to the conclusion that sincecertain facts were brought to the notice of the AO for AY 2005-06, the reopening of AY 2004-05 is bad in law? 3.The respondent assessee is an HUF. It is a proprietor of M/s. Nandu Financial Services and has shown it brokerage income in thesubject assessment year. The assessee filed its return of income o 5[th]October, 2005 declaring income of Rs.1.34 lakhs for Assessment Year2004-05. The return of income was accepted and processed underSection 143(1) of the Act. 4.Thereafter, on 25.03.2008, a reopening notice under Section 148of the Act was issued to the respondent seeking to reopen theassessment for A.Y. 2004-05. The reasons in support of the reopeningnotice as provided to the respondent reads as under :- “Return of income was filed on 05.10.2004 with a total incomeof Rs.1,34,255/-. Return was processed only under section143(1). The balance sheet filed along with the return of income showsthat a gift of Rs.22,73,313/- was received by the assessee fromone Mr. Kunal Arvind Bhansali of Hong Kong, China. Thisdonor is not related to the assessee. During assessmentproceedings for A.Y. 2005-06, assessee produced only copy ofpassport and bank account of the donor. The genuineness of the gift is to proved. Therefore, I have reasons to believe that income to the tune ofRs.22,73,313/- has escaped assessment u/s 148 for A.Y. 2004-05.” 5.The impugned order of the Tribunal on perusal of the reasonsconcluded that they were unable to appreciate as to how the AssessingOfficer come to the conclusion that the gift received by the respondentassessee was not genuine. Admittedly, the balance sheet, bankstatement as well as the passport were perused during the assessmentproceedings for A.Y. 2005-06. The Tribunal observed that reopeningnotice issued under Section 148 of the Act, cannot be issued merely forfishing inquiry. The reasons to believe must have the rationalconnection to material facts on record. The impugned order of theTribunal records that no material has come to the notice of theAssessing Officer for the formation of the belief that the assessee'sincome has escaped assessment on account of the gift not beinggenuine. The impugned order particularly records that in theassessment order for A.Y. 2005-06, there is no mention about the giftbeing received by the assessee not being genuine. Thus, on the abovebasis, the Tribunal concluded that the reasons as recorded do notindicate reasons to believe that income chargeable to tax has escaped assessment. In fact, the impugned order while allowing the respondent's appeal in particular records as under :- assessment. In fact, the impugned order while allowing the respondent's appeal in particular records as under :- “Thus, we are of the opinion that the “reasons recorded” by theAssessing Officer for reopening the case is vague and farfetchedand there is no rational and intelligible nexus between thereasons and the belief and therefore, the proceedings initiated forreopening the assessment u/s 147 vide notice dated 25.03.2008u/s 148 is bad in law and without jurisdiction.” 6.Mr. Pinto, learned Counsel appearing in support of the appealcontends that gift has been received as indicated in the reasons, from aperson who is not related to the respondent assessee. It is submittedthat only the creditworthiness and the identity of the donor standsproved by virtue of the bank account and passport of the donor. Thegenuineness of the gift is yet not proved. It is submitted that the issueof genuineness would be examined during the reassessmentproceedings. Thus, this appeal requires consideration. 7.There can be no dispute that in case where a return of incomehas been processed under Section 143(1) of the Act, the Revenue has agreater latitude in reopening an assessment. However, even in suchcases, the reopening of an assessment can only be done if there isreason to believe that income chargeable to tax has escaped assessment.The reason recorded in support of the reopening notice must disclose the basis of the reasons to believe that income chargeable to tax hasescaped assessment. The reasons must provide a link between thematerial available and the formation of reasonable belief that incomechargeable to tax has escaped assessment. The reason to believe mustbe based on some material available with the Assessing Officer and noreasonable belief can be formed without some material to support thesame. 8.We find that the impugned order of the Tribunal has correctlyheld that the reopening of the assessment cannot be for the purpose offishing inquiry. The reopening of the assessment has to be based onsame material which is available with the Assessing Officer whichwould give rise to reason to believe that the income chargeable to taxhas escaped assessment. The reasons as recorded in support of theimpugned notice to doubt the genuineness of the gift is not based onany material. At the highest, it is only a suspicion subject to enquiry.In fact, this is a case of fishing enquiry. Thus, there is no materialavailable with the Assessing Officer to have the reason to believe thatincome chargeable to tax has escaped assessment. The view taken bythe impugned order of the Tribunal cannot be found fault with. 9.In the above view, the question as proposed does not give rise to any substantial question of law. 10.Thus, appeal is dismissed. No order as to costs. (M.S. SANKLECHA, J.) (AKIL KURESHI, J.)