M/S. PIROJSHA GODREJ FOUNDATION, MUMBAI v. THE ADIT (E)-II(1), MUMBAI

ITA 1976/MUM/2008 | 2001-2002
Pronouncement Date: 31-05-2010 | Result: Allowed

Appeal Details

RSA Number 197619914 RSA 2008
Assessee PAN AAATS1101Q
Bench Mumbai
Appeal Number ITA 1976/MUM/2008
Duration Of Justice 2 year(s) 2 month(s) 12 day(s)
Appellant M/S. PIROJSHA GODREJ FOUNDATION, MUMBAI
Respondent THE ADIT (E)-II(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-05-2010
Date Of Final Hearing 28-05-2010
Next Hearing Date 28-05-2010
Assessment Year 2001-2002
Appeal Filed On 18-03-2008
Judgment Text
ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH MUMBAI BEFORE SHRI D K AGARWAL (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER). ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PIROJSHA GODREJ FOUNDATION .APPELLANT GODREJ BHAWAN 4 A HOMI STREET MUMBAI 400001 ( PAN : AAATS1101Q ) VS. ASSISTANT DIRECTOR OF INCOME TAX (EXEMPTIONS) - CIRCLE II (1) MUMBAI . RESPONDENT APPELLANT BY : SHRI P J PARDIWALA RESPONDENT BY : SHRI K K MAHAJAN O R D E R PER PRAMOD KUMAR: 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER DATED 10 TH DECEMBER 2007 PASSED BY THE LEARNED COMMISSIONER (APPEALS) IN THE MATTER OF ASSESSMENT UNDER SECTIO N 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2001-02. 2. IN THE FIRST TWO GROUNDS OF APPEAL BOTH OF WHIC H DEAL WITH THE VALIDITY ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 2 OF 12 OF REOPENING THE ASSESSMENT THE ASSESSEE HAS RAISE D THE FOLLOWING GRIEVANCES: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE V IEW OF THE ASSESSING OFFICER IN RESPECT OF THE VALIDITY OF JUR ISDICTION ASSUMED UNDER SECTION 147 OF THE INCOME TAX ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING AND THE AS SESSING OFFICER ERRED IN LAW AND ON FACTS IN RESORTING TO S ECTION 147 OF THE INCOME TAX ACT WITHOUT HAVING VALID REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 3. THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THE ASSESSEE IS A CHARITABLE TRUST AND IS DULY GRANTED REGISTRATION B Y THE COMMISSIONER OF INCOME TAX UNDER SECTION 12 A OF INCOME TAX ACT AND IS ALSO NOTIFIED FOR THE RELEVANT PERIOD UNDER SECTION 10(23C)(IV) OF THE ACT. ON 29 TH OCTOBER 2001 THE ASSESSEE FILED ITS INCOME TAX RET URN FOR THE RELEVANT ASSESSMENT YEAR AND IN VIEW OF EXEMPTION AVAILABLE TO THE ASSESSEE UNDER SECTION 10(23C) DECLARED NIL TAXABLE INCOME. THI S INCOME TAX RETURN WAS PROCESSED UNDER SECTION 143(1)(A). HOWEVER ON 26 TH MAY 2004 THE ASSESSEE WAS SERVED A NOTICE UNDER SECTION 148 AND INCOME OF THE ASSESSEE WAS PROPOSED TO BE REASSESSED. THE REASONS FOR REOPENING THE ASSESSMENT WERE STATED TO BE AS FOLLOWS: ON VERIFICATION OF THE ACCOUNTS FILED ALONGWITH TH E RETURN OF INCOME FOR THE ASSESSMENT YEAR 2001-02 IT IS SEEN THAT THE AUDITORS HAVE POINTED OUT THAT INVESTMENT OF RS 1 0 2 00 000 WHICH WAS TO BE MADE IN 11.5% GOI LOAN 2015 WAS NOT EFFECTED AND THE CERTIFICATES REGARDING INVESTMENTS WERE NOT DELIVERED TO ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 3 OF 12 THE ASSESSEE TRUST. IT IS FURTHER VERIFIED FROM THE ACCOUNTS FOR THE AY 2002-03 WHICH SHOWS THAT THE ASSESSEE HAS CLAIME D THE AMOUNT RECEIVED OF RS 10 00 000 ON ACCOUNT OF INVES TMENTS MADE IN 11.5% GOI LOAN UNDER THE HEAD ADVANCES AND HAS ALSO CLAIMED LOSS ON INVESTMENTS MADE IN 11.5% IN THE I NCOME AND EXPENDITURE ACCOUNT. THE ASSESSEE HAS THEREFORE NOT CONFIRMED TO THE PRESCRIBED PATTERN OF INVESTMENT AS PER SECT ION 11(5) R.W.S. 13(1)(D). THE INCOME OF RS 1 02 00 000 IS TH EREFORE TO BE INCLUDED IN THE TOTAL INCOME AND SHALL HAVE TO BE T AXED AT MAXIMUM MARGINAL RATE. THEREFORE THERE IS REASON T O BELIEVE THAT INCOME OF RS 1 02 00 000 HAS ESCAPED ASSESSMEN T. 4. THE NOTICE UNDER SECTION 148 WAS CHALLENGED BEF ORE THE HONBLE BOMBAY HIGH COURT IN A WRIT PETITION FILED BY THE ASSESSEE. THEIR LORDSHIPS NOTED THAT THE ASSESSING OFFICER HAS ALRE ADY SERVED THE REASONS OF REOPENING TO THE ASSESSEE AND THAT IN VIEW OF H ONBLE SUPREME COURT JUDGMENT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LT D VS INCOME TAX OFFICER (259 ITR 19) THE ASSESSING OFFICER IS REQUIRED TO DEAL WITH ASSESSEES OBJECTIONS IF ANY TO THE NOTICE UNDER SECTION 148 . THEIR LORDSHIPS THEN TOOK NOTE OF THE ASSESSEES STAND TO THE EFFECT THA T THE OBJECTIONS FILL BE FILED WITHIN TWO WEEKS AND THE STAND OF THE ASSESSI NG OFFICER TO THE EFFECT THE OBJECTIONS SO RAISED BY THE ASSESSEE WILL BE DI SPOSED OF AS EXPEDITIOUSLY AS POSSIBLE BY WAY OF A SPEAKING ORD ER BEFORE PROCEEDING WITH THE REASSESSMENT. IT WAS IN THESE TERMS THAT T HE RULE WAS MADE ABSOLUTE AND THE WRIT PETITION WAS DISPOSED OF. THE ASSESSEE ACCORDINGLY FILED THE OBJECTIONS VIDE LETTER DATED 14 TH FEBRUARY 2005 WHICH WERE REJECTED BY THE ASSESSING OFFICER ON 17 TH JANUARY 2006. AGGRIEVED INTER ALIA BY ASSESSING OFFICERS REOPENING OF THE ASSE SSMENT ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 4 OF 12 CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICE R AND OBSERVED AS FOLLOWS :- 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF T HE APPELLANT AND GONE THROUGH THE MATERIAL BROUGHT ON RECORD TH E FACTS AND ALSO THE ORDER OF THE ASSESSING OFFICER. THE CONTEN TIONS MADE IN THE ABOVE SUBMISSIONS IN RESPECT OF INITIATION OF P ROCEEDINGS UNDER SECTION 148 OF THE INCOME TAX ACT ARE FOUND T O BE MERE REITERATION OF THE SUBMISSIONS BEFORE THE ASSESSING OFFICER. I ALSO FIND THAT THE ASSESSING OFFICER AT PAGE 2 OF THE A SSESSMENT ORDER HAS INCORPORATED A SPEAKING ORDER UNDER SECTION 148 PURSUANT TO HONBLE BOMBAY HIGH COURTS GUIDELINES IN THEIR ORD ER ON WRIT PETITION. THE ASSESSING OFFICER IN CLAUSES 1 TO 4 OF THE ORDER UNDER SECTION 148 HAS VERY CLEARLY AND SPECIFICALL Y DEALT WITH THE CONTENTIONS AND OBJECTIONS RAISED BY THE APPELLANT WITH RESPECT TO INITIATION OF PROCEEDINGS UNDER SECTION 148 AND THE CONDITIONS AND CIRCUMSTANCES UNDER WHICH THE SAME WERE INITIAT ED. I FIND THAT THE ASSESSING OFFICER WAS HAVING A VALID REASO N TO BELIEVE THAT THE APPELLANTS INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT. THE REASON WAS ALSO FOUND RECORDED ON 1 8.5.2004 PRIOR TO THE ISSUE OF NOTICE UNDER SECTION 148 ON T HE SAME DATE. ON ASKING FOR THE REASONS OF REOPENING BY THE APPEL LANT THE ASSESSING OFFICER VIDE LETTER DATED 10 TH JUNE 2004 HAD SUPPLIED THE SAME TO THE APPELLANT. SUBSEQUENTLY ALSO THE AS SESSING OFFICER HAS SHOWN THE REASONS RECORDED IN THEIR ORD ER SHEET TO THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT ON 1 3.6.2006. THUS THE APPELLANTS CLAIM THAT THE ASSESSING OFFIC ER WAS NOT HAVING ANY REASONS FOR REOPENING THE ASSESSMENT UND ER SECTION 147 IS NOT FOUND TO BE CORRECT. FURTHER IT IS AN U NDISPUTED FACT THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED WI THIN 4 YEARS FROM THE END OF THE ASSESSMENT YEAR. THEREFORE THE ONLY CONDITION TO BE FULFILLED FOR TAKING ACTION UNDER S ECTION 147 OF THE INCOME TAX ACT IS THAT THERE HAS TO BE REASON T O BELIEVE AND THE SAME IS FOUND TO HAVE BEEN RECORDED BY THE ASSE SSING OFFICER AND ALSO SUPPLIED TO THE APPELLANT. ON GOING THROUG H THE REASONS RECORDED BY THE ASSESSING OFFICER I FIND THE SAME TO BE A VALID REASON FOR INITIATING PROCEEDINGS UNDER SECTION 147 OF THE INCOME TAX ACT. FURTHER THE APPELLANT HAS NOT DISPU TED THE SERVICE OF NOTICE UNDER SECTION 148 VALIDLY AND DUL Y ISSUED BY THE ASSESSING OFFICER. MOREOVER THE EXISTENCE OF A VA LID REASON FOR ISSUING NOTICE UNDER SECTION 148 IS FOUND TO BE ADM ITTED BY THE HONBLE BOMBAY HIGH COURT AS NO COMMENTS AGAINST TH E APPELLANTS OBJECTION OF NON EXISTENCE OF ANY VALI D REASON HAS BEEN MADE. THE HONBLE HIGH COURT IN THEIR ORDER AG AINST THE WRIT PETITION MOVED BY THE APPELLANT AGAINST ISSUIN G OF NOTICE ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 5 OF 12 UNDER SECTION 148 OF THE INCOME TAX ACT HAS MERELY GIVEN THE GUIDELINES TO THE FOLLOWED ON THE BASIS OF APEX COU RTS OBSERVATIONS IN THE CASE OF GKN DRIVESHAFTS INDIA L TD 259 ITR 19. THE ASSESSING OFFICER IS FOUND HAVING FOLLOWED THE GUIDELINES OF HONBLE HIGH COURT AND PASSED A SPEAKING ORDER UNDE R SECTION 148 OF THE INCOME TAX ACT WHICH FORMS PART OF THE B ODY OF ASSESSMENT ORDER AT PAGE 2 AND 3. THEREFORE I DONO T FIND ANY MERIT IN THE CONTENTIONS RAISED BY THE APPELLANT. T HE FACT THAT THE APPELLANTS CLAIM OF HAVING INVESTED RS 1 02 00 000 IN 11.5% GOI BONDS 2015 COULD NEITHER BE EFFECTED NOR THE A PPELLANT COULD OBTAIN THE CERTIFICATES WHICH WERE ALSO REPORTED B Y THE AUDITORS OF THE APPELLANT ARE CERTAINLY SUFFICIENT AND VALI D REASONS AVAILABLE BEFORE THE ASSESSING OFFICER FOR INITIATI NG PROCEEDINGS UNDER SECTION 147 AND ISSUING NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. THE ASSESSING OFFICER ALSO HAVING C ONSIDERED THE OBJECTIONS RAISED BY THE APPELLANT AND PASSED A SPE AKING ORDER UNDER SECTION 148 BEFORE PASSING THE ASSESSMENT A RE ALSO FACTS NOT DISPUTED BY THE APPELLANT. THE SERVICE OF NOTIC E ON THE APPELLANT IS ALSO NOT DISPUTED. THUS THE ACTION OF THE ASSESSING OFFICER IN INITIATING PROCEEDINGS UNDER SECTION 147 BY DULY RECORDING THE REASONS AND ISSUING AND SERVING THE N OTICE UNDER SECTION 148 AND ALSO PASSING A SPEAKING ORDER UNDER SECTION 148 ARE THE PROCEDURES LAID DOWN IN TERMS OF GUIDELINES ISSUED BY THE HONBLE APEX COURT IN THE CASE OF GKN DRIVESHAFTS L TD. AND ALSO BY THE HONBLE BOMBAY HIGH COURT. THEREFORE I DONO T FIND ANY INFIRMITY AND ILLEGALITY BOTH IN INITIATION OF PROC EEDINGS UNDER SECTION 147 AND ISSUING NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT BY THE ASSESSING OFFICER. ACCORDINGLY THE SE TWO GROUNDS (AGAINST REASSESSMENT PROCEEDINGS) ARE DECIDED AGAINST THE APPELLANT. 5. THE ASSESSEE IS ALSO NOT SATISFIED WITH THE STAN D SO TAKEN BY THE CIT(A) AND IS IN SECOND APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AT LENGTH P ERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 7. A PLAIN READING OF THE REASONS RECORDED BY THE ASSESSING OFFICER ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 6 OF 12 WOULD INDICATE THAT THE ASSESSING OFFICER WAS OF TH E VIEW THAT THE AMOUNT OF RS 1 02 00 000 WHICH ACCORDING TO THE ASSESSING OFFICER WAS INVESTED IN VIOLATION OF SECTION 11(5) R.W.S. 13(1)(D) WAS TO BE INCLUDED IN ASSESSEES TOTAL INCOME AND IT HAS ESCAPED ASSESSME NT. THIS UNDERSTANDING OF THE ASSESSING OFFICER HOWEVER IS CLEARLY CONTRARY TO THE UNDISPUTED LEGAL POSITION. IT IS SO FOR THE REASON THAT WHILE THE ASSESSEE WAS NOTIFIED FOR EXEMPTION UNDER SECTION 10(23C) FO R THE ASSESSMENT YEARS 1999-00 TO 2001-02 SUBJECT TO INTER ALIA M AKING INVESTMENTS IN THE MANNER SPECIFIED IN SECTION 11(5) AND THE ASSE SSEE WAS INDEED TO LOSE EXEMPTION UNDER SECTION 10(23C) UPON NOT ADHERING T O THIS CONDITION OF NOTIFICATION NON AVAILABILITY OF THE SAID EXEMPTIO N WAS BY NO STRETCH OF LOGIC RESULT IN THE AMOUNT SO INVESTED BEING BROUG HT TO TAX IN THE HANDS OF THE ASSESSEE. THERE IS NO CAUSE AND EFFECT RELATION SHIP BETWEEN NON ADHERENCE TO SECTION 11(5) INVESTMENT REQUIREMENTS AND THE AMOUNT SO INVESTED OTHERWISE THAN UNDER THE MODE AND MANNER SPECIFIED UNDER SECTION 11(5) BEING BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. THERE IS NO WAY THAT THIS AMOUNT CAN BE BROUGHT TO TAX IN TH E HANDS OF THE ASSESSEE. NOT ONLY THAT IT CANNOT BE TAXED THIS NO N ELIGIBLE INVESTMENT EVEN IF THAT BE SO DOES NOT EVEN DISTURB THE EXEMP TION AVAILABLE TO THE ASSESSEE AND THERE IS NOTHING IN THE REASONS RECO RDED BY THE ASSESSING OFFICER THAT THE BENEFIT OF EXEMPTION UNDER SECTION 11 WILL BE LESS THAN SECTION 10(23C). ASSUMING THAT THERE IS A VIOLATION OF THIS CONDITION ALL THAT HAPPENS IS THAT THE ASSESSEE LOSES EXEMPTION U NDER SECTION 10(23C) ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 7 OF 12 IN RESPECT OF ITS INCOME BUT THAT DOES NOT DISTURB ITS ELIGIBILITY TO EXEMPTION UNDER SECTION 11. IN THE IMPUGNED ASSESSM ENT ORDER ITSELF THE ASSESSING OFFICER HAS GRANTED EXEMPTION UNDER SECTI ON 11 AND THE TOTAL INCOME IS COMPUTED AT RS 9 23 208 AS AGAINST THE AL LEGED ESCAPEMENT OF INCOME OF RS 1 02 00 000 IN THE REASONS RECORDED IN THE REASONS RECORDED FOR REOPENING OF ASSESSMENT. IT IS THUS CLEAR THA T REASONS FOR REOPENING THE ASSESSMENT HAVE BEEN RECORDED WITHOUT APPLICATI ON OF MIND AND WITHOUT CONSIDERING THE APPLICABLE LEGAL POSITION AS EXPECTED OF AN ASSESSING OFFICER WHILE EXERCISING HIS POWERS UNDER SECTION 147. 8. HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDU STAN LEVER LTD VS R B WADKAR ( 268 ITR 332) HAS INTER ALIA OBSERVED THAT .IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED T O BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTION OR DELETIO N IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFER ENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS OF REASONS NOT REC ORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASON S RECORDED BY HIM. HE HAS TO SPEAK THROUGH THE REASONS. THEIR LORDSHIPS ADDED THAT THE REASONS RECORDED SHOULD BE SELF EXPLANATORY AN D SHOULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND THE EVIDENCE.. HONBLE SUPREME COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD (320 ITR 561) HAS O BSERVED THAT REASONS MUST HAVE A LIVE LINK WITH FORMATION OF BELIEF . HONBLE BOMBAY HIGH ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 8 OF 12 COURT IN THE CASE OF PRASHAT S JOSHI VS INCOME TAX OFFICER (UNREPORTED JUDGMENT ON WRIT PETITION NO. 2287 OF 2009; JUDGMEN T DATED 22TH FEBRUARY 2010; SOURCE WWW.ITATONLINE.ORG ) THE ASSESSING OFFICER MUST HAVE REASONS TO BELIEVE THAT SUCH IS THE CASE (I.E. ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR A PART ICULAR YEAR) BEFORE HE PROCEEDS TO ISSUE NOTICE UNDER SECTION 147 AND THAT THE REASONS WHICH ARE RECORDED BY THE ASSESSING OFFICER ARE THE ONLY REASONS WHICH CAN BE CONSIDERED WHEN FORMATION OF BELIEF IS IMPUGNED. IN THIS LIGHT WHEN WE EXAMINE THE REASONS RECORDED FOR REOPENING THE ASSESSMENT WE FIND THAT THERE WAS NO MATERIAL BEFO RE THE ASSESSING OFFICER THAT ANY INCOME LEAVE ASIDE THE INCOME OF RS 1 02 00 000 HAS ESCAPED ASSESSMENT. AS WE HAVE POINTED OUT EARLIER EVEN IF THE INVESTMENT OF RS 1 02 00 000 COULD INDEED BE SAID T O BE IN VIOLATION OF SECTION 11(5) THAT FACT PER SE WOULD NOT LEAD TO THE CONCLUSION THAT THE SAID AMOUNT WAS INCLUDIBLE IN ASSESSEES INCOME OR EVEN THAT THE EXEMPTION AVAILABLE TO THE ASSESSEE UNDER SECTION 1 1 WILL BE LESS THAN THE EXEMPTION AVAILABLE TO THE ASSESSEE UNDER SECTION 1 0(23C). NO REASONABLE PERSON WITH BASIC UNDERSTANDING OF THE SCHEME OF INCOME TAX LAW CAN COME TO THE CONCLUSION THAT THE ASSESSING OFFICER H AS ARRIVED AT. THERE IS NO CAUSE AND EFFECT RELATIONSHIP WITH WHAT THE ASSE SSING OFFICER HAS NOTICED IN THE ATTACHMENTS TO THE INCOME TAX RETUR N AND THE CONCLUSION THAT HE HAS ARRIVED AT. ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 9 OF 12 9. A LOT OF EMPHASIS HAS BEEN PLACED BY THE AUTHORI TIES BELOW ON THE FACT THAT SINCE THE REASSESSMENT IS BEING RESORTED TO WI THIN FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR I.E. IN THE MA IN PROVISION OF SECTION 147 AND NOT THE PROVISO THERETO ALL THAT IS TO BE SEEN IS PRIMA FACIE WHETHER THE INCOME HAS ESCAPED THE ASSESSMENT. HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRASHAT S JOSHI VS ITO (SUPRA) HAD AN OCCASION TO DEAL WITH THIS QUESTION AND ALSO CONSIDER THE SC OPE OF HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF ACIT VS RAJESH JHAV ERI STOCK BROKERS PVT LTD (291 ITR 500) IN THIS REGARD. AFTER ELABORATEL Y CONSIDERING HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI (SUPRA) THEIR LORDSHIPS OF HONBLE BOMBAY HIGH COURT HAVE OBSERVED THAT HONBLE SUPREME COURT HELD THAT SO LONG AS THE INGREDIENTS OF SECTION147 ARE FULFILLED THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDINGS U NDER SECTION 147 AND THAT THE FAILURE TO TAKE STEPS UNDER SECTION 14 3(3) WILL NOT RENDER HIM POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. IN OTHER WORDS ACCORDING TO HONBLE BOMBAY HIGH COURT WHEN AN INTIMATION HAS BEEN ISSUED UNDER SECTION 143(1) THE ASSESSING OFFICER IS COMPETENT TO INITIATE REASSESSMENT PROCEEDINGS PROVIDED THAT THE REQUIREMENTS OF SECTION 147 ARE FULFILLED. IT IS THUS CONCLUDED THAT IN SUCH A CASE [I.E. WHEN THE REOPENING IS WITHIN FOUR YEARS AND THE INC OME TAX RETURN IS PROCESSED UNDER SECTION 143(1)] AS WELL THE TOUCHSTONE TO BE APPLIED IS AS TO WHETHER THERE WAS REASON TO BELIEVE THAT INCO ME HAD ESCAPED ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 10 OF 12 ASSESSMENT . IT IS THUS CLEAR THAT EVEN WHEN THE ORIGINAL ASSE SSMENT IS UNDER SECTION 143(1) AND EVEN WHEN REASSESSMENT PRO CEEDINGS ARE INITIATED WITHIN A PERIOD OF FOUR YEARS IT IS STIL L NECESSARY THAT THERE SHOULD BE REASONS TO BELIEVE THAT INCOME HAD ESCAPE D ASSESSMENT AND SUCH REASONS ARE SUBJECT TO JUDICIAL SCRUTINY. NO D OUBT THAT AT THE STAGE OF INITIATING REASSESSMENT PROCEEDINGS IT IS NOT NECE SSARY TO ESTABLISH THAT THERE HAS BEEN AN ESCAPEMENT OF INCOME BUT ESSENTI ALLY THERE HAVE TO BE VALID REASONS TO BELIEVE THAT INCOME HAS ESCAPED AS SESSMENT AND THESE REASONS ON STANDALONE BASIS MUST BE CONSIDERED AP PROPRIATE FOR ARRIVING AT THE CONCLUSION ARRIVED AT BY THE OFFICER RECORDI NG THE REASONS. 10. IN VIEW OF THE ABOVE DISCUSSIONS AND BEARING I N MIND ENTIRETY OF THE CASE WE ARE OF THE CONSIDERED VIEW THAT THE VERY I NITIATION OF REASSESSMENT PROCEEDINGS ON THE FACTS OF THIS CASE AND ON THE BASIS OF REASONS RECORDED BY THE ASSESSING OFFICER IS BAD I N LAW. WE THEREFORE QUASH THE REASSESSMENT PROCEEDINGS. AS WE HAVE QUAS HED THE REASSESSMENT PROCEEDING ITSELF WE SEE NO NEED TO D EAL WITH GROUND NO. 3 RAISED BY THE ASSESSEE TO THE EFFECT THAT ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN CONFIRMING AND THE ASSESSING OFFICER ERRED IN HOLDING THAT THE PROVISI ONS OF SECTION 11(5) R.W.S. 13(1)(D) OF THE ACT WERE VIOLATED IN RESPECT OF INVESTMENT MADE IN 11.5% GOI BONDS 2005. THAT GRIEVANCE IS RENDERED ACADEMIC AND DOES NOT CALL FOR ANY ADJUDICATION AT THIS STAGE. ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 11 OF 12 11. IN THE RESULT THE APPEAL IS ALLOWED IN THE TER MS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 31 ST DAY OF MAY 2010. SD/XX SD/XX (D K AGARWAL) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 31 ST DAY OF MAY 2010. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT MUMBAI 4. COMMISSIONER (APPEALS) MUMBAI 5. DEPARTMENTAL REPRESENTATIVE C BENCH ITAT MUMB AI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI ITA NO. 1976/MUM/08 ASSESSMENT YEAR 2001-02 PAGE 12 OF 12 DATE INITIAL 1. DRAFT DICTATED ON 28.5.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 28.5.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 28.5.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 28.5.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 28.5.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 31.5.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 31.5.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER