2002 (5) TMI 8 - HC - Income Tax

Notice for reopening of the assessment u/s 148 - whether when the first reopening of the assessment has been set aside by the Tribunal can this second reopening be done or not - The confessional statement of Jethanand Madhavdas is the basis on which a belief has been arrived at by the Income-tax Officer and the same having been affirmed by the Central Board of Direct Taxes is sufficient for reopening of the assessment - Therefore it cannot be said that there are no materials to arrive at a belief of the escapement of the income during the relevant assessment year Held that impugned notice is valid

Issues Involved:
1. Validity of the notice for reopening the assessment for the year 1958-59 under Section 148 of the Income-tax Act, 1961.
2. Whether the second reopening of the assessment was permissible after the Tribunal set aside the first reopening.
3. Adequacy of material for reopening the assessment.

Issue-wise Detailed Analysis:

1. Validity of the notice for reopening the assessment for the year 1958-59 under Section 148 of the Income-tax Act, 1961:
The learned single judge dismissed the writ petition and upheld the validity of the notice issued on March 25, 1975, for reopening the assessment for the year 1958-59 under Section 148 of the Income-tax Act, 1961. The reopening was based on the confessional statement of Jethanand Madhavdas, recorded on August 6, 1968, which indicated that he was merely a name lender and did not advance any hundi loans. This statement provided sufficient material for the authorities to justify the reopening of the assessment.

2. Whether the second reopening of the assessment was permissible after the Tribunal set aside the first reopening:
The Tribunal previously set aside the first reopening of the assessment on the grounds of non-application of mind by the Commissioner of Income-tax, as the confessional statement of Jethanand Madhavdas was not available at the time of the initial reopening notice in 1967. The Tribunal's decision was based on procedural grounds rather than the merits of the case. Consequently, the second reopening, initiated on March 25, 1975, with the sanction of the Central Board of Direct Taxes (CBDT), was deemed permissible. The CBDT's sanction was obtained after considering all relevant materials, including the confessional statement of Jethanand Madhavdas, which was not available during the first reopening.

3. Adequacy of material for reopening the assessment:
The confessional statement of Jethanand Madhavdas, recorded in 1968, provided sufficient material to justify the reopening of the assessment. The Central Board of Direct Taxes reviewed all pertinent documents, including the proposal for reopening, the show cause notice, the Income-tax Officer's report, and the Tribunal's order. The CBDT's sanction indicated that there was adequate material to support the reopening. The court referenced several Supreme Court decisions to highlight that the formation of belief for reopening must have a rational connection or relevant bearing on the material facts. The confessional statement of Jethanand Madhavdas met this criterion, establishing a direct nexus between the material and the belief of income escapement.

In conclusion, the court found that the second reopening of the assessment for the year 1958-59 was valid, based on the confessional statement of Jethanand Madhavdas, and that the Central Board of Direct Taxes had duly applied its mind to the materials presented. The appeal was dismissed, affirming the learned single judge's decision, with no order as to costs.

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