Reassessment: S/s. 115AD, 147 and 148: A. Y. 2006-07: Validity to be determined with reference to reasons recorded for belief: Assessment u/s. 143(1) determining Nil income: Notice u/s. 148 on the ground that that section 115AD may be applicable: Not valid:

The assessee company was owned by the Government of Singapore. For the A. Y. 2006-07, in the return of income, the assessee had claimed that the profits earned from the transactions in Indian securities are not liable to tax in India in view of Article 7 of the India-Singapore tax treaty. Accordingly, the assessee had returned Nil income. The assessment was completed u/s. 143(1) of the Income-tax Act, 1961 determining Nil income. Subsequently, the Assessing Officer issued notice u/s. 148 dated 16-3-2011 on the ground that the possibility of escapement of income taxable as STCG under the Act may not be ruled out.

The Bombay High Court allowed the writ petition filed by the assessee and held as under:

“i) The Assessing Officer has power to reopen an assessment, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Reason must have a live link with the formation of the belief. The validity of the notice reopening the assessment u/s. 148 of the Act, has to be determined on the basis of the reasons which are disclosed to the assessee. Those reasons constitute the foundation of the action initiated by the Assessing Officer of reopening the assessment. Those reasons cannot be supplemented or improved upon subsequently.

ii) Reading the reasons of the Assessing Officer, it was evident that there was absolutely no tangible material on the basis of which the assessment for the A. Y. 2006-07 could have been reopened. Upon the return of income being filed by the assessee both in electronic form and subsequently in the conventional mode, the assessee received an intimation u/s. 143(1).

iii) While disposing of the objections of the assessee, the Assessing Officer had purported to state that the assessee had filed only sketchy details in its return filed in the electronic form. The relevant provisions expressly make it clear that no document or report can be filed with the return of income in the electronic form.

iv) The notice was not valid and was liable to be quashed.”