Point of Law: If an assessing authority forms an opinion during the original assessment proceedings on the basis of material facts and subsequently finds it to be erroneous; it is not a valid reason under the law for reassessment. Thus, reason to believe cannot be said to be the subjective satisfaction of the assessing authority but means an objective view on the disclosed information in the particular case and must be based on firm and concrete facts that some income has escaped assessment.

JUDGMENT :

ILESH J. VORA, J.

1. By filing this writ application under Article 226 of the Constitution of India, the writ applicant has assailed the legality and validity of the impugned notice dated 26.07.2018 issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as “the Act” for short) proposing to reassess the income of the writ applicant for the A.Y. 201213 on the ground that the income chargeable to tax for the said year had escaped assessment within the meaning of Section 147 of the Act.

2. The brief facts leading to filing of the present writ application are as under:

1. The writ applicant is a Limited Liability Partnership (LLP) Firm carrying the business of real estate development.

2. The writ applicant filed its return of income for the A.Y. 201213 on 30.09.2012 declaring total income NIL and claimed loss of Rs.3,66,93,809/. The case was selected for scrutiny and the same was finalized under Section 143 of the Act on 05.03.2015 determining the total loss at Rs.3,32,86,950/and subsequently, notice under Section 148 of the Act dated 26.07.2018 was issued and assessment was reopened by recording the following reasons :

1. In this case, the assessee filed return of income for A.Y. 2012-13 on 30.09.2012 declaring a loss of Rs.3,66,93,809/. During the period, the assessee has shown loss from business and profession and income from capital gains & other sources. The assessee is engaged in the business of real estate development.

2. From the records, it is noticed that the assessee has debited interest expenses of Rs.9,77,80,572/and had shown exempt income of Rs.34,06,856/.

3. The assessee was required to make a disallowance under Section 14 A of the Act r.w.r 8 D of the IT Rules in such case as per the following calculation:

Average of investment: Rs.103,34,98,799/[ 1/2 of Rs.206,23,83,210/+ Rs.46,14,388/] Average of total assets : Rs.219,02,72,277/[1/2 of Rs.318,20,26,792//+ Rs.119,85,17,757/] Total interest Expenditure : Rs.9,77,80,572/.

Disallowance :

(i) Nil

(ii) Rs.4,61,38,603/= (Rs.9,77,80,572/X 103,34,98,799//) Rs.219,02,72,277/

(iii) Rs.51,67,493/= 0.5 % of Rs.103,34,98,799/Total disallowance = Rs.5,13,06,096/.

4. The documents filed by the assessee during the course of assessment was perused.

5. The assessee was required to disallow an amount of Rs 5,13,06,096/u/s 14A of IT Act r.w.r 8D of IT Rules which the assessee failed to do.

6. The assessee was required to disallow an amount of Rs 5,13,06,096/u/s 14A of IT Act r.w.r 8D of IT Rules which the assessee failed to do. During the course of original assessment, disallowance was made only for Rs 34,06,859/restricting to the extent of exempted income. Therefore, the income of Rs 4,78,99,237/has escaped assessment. Considering the above facts, I have reason to believe that by omission on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, the income chargeable to tax for AY 2012-13 has escaped assessment within the meaning of Section 147 of the IT Act.

“7. Not applicable.

8. The assessee was required to disallow an amount of Rs 5,13,06,096/u/s 14A of IT Act r.w.r 8D of IT Rules which the assessee failed to do. During the course of original assessment, disallowance was made only for Rs 34,06,859/restricting to the extent of exempted income. Therefore, the income of Rs 4,78,99,237/has escaped assessment. . Considering the above facts, I have reason to believe that by omission on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, the Income chargeable to tax for A.Y 2012-13 has escaped assessment within the meaning of Section 147 of the IT Act.

9. In this case, return of income was filed for the AY 2012-13 by the assessee and regular assessment u/s 143(3) was made on 05/03/2015. Since, 04 years from the end . of the relevant year has expired in this case and the assessee