2007 (5) TMI 357 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the notices issued under section 148.
2. Emphasis on the word "information" used in pre-amended sub-section (b) of section 147.
3. The merit of additions made by the Assessing Officer.

Detailed Analysis:

1. Validity of the notices issued under section 148:
The Revenue challenged the quashing of notices issued under section 148 by the CIT (Appeals), Bareilly. The CIT (Appeals) had quashed the notices on the grounds that the reasons to believe for reopening the assessments were based on findings from a different assessment year (2001-02) and not the years under appeal (1999-2000, 2000-01, and 2002-03). The CIT (Appeals) held that the Assessing Officer did not have any information specific to the years under appeal to justify the reopening. However, the Tribunal found that the reopening was valid as the returns were originally processed under section 143(1) and sufficient reasons were recorded for reopening after a survey was conducted. The Tribunal emphasized that the scope of section 147, as amended, allows reopening if the Assessing Officer has reason to believe that income has escaped assessment, without the precondition of full and true disclosure by the assessee.

2. Emphasis on the word "information" used in pre-amended sub-section (b) of section 147:
The CIT (Appeals) had relied on the pre-amended provisions of section 147 and emphasized the word "information" used in sub-section (b). However, the Tribunal clarified that the scope and effect of section 147, as substituted with effect from 1st April 1989, are substantially different from the provisions as they stood prior to such substitution. Under the amended provisions, the existence of only the first condition (reason to believe that income has escaped assessment) suffices for reopening the assessment. The Tribunal noted that the Assessing Officer's belief must be bona fide and not based on vague or arbitrary information.

3. The merit of additions made by the Assessing Officer:
The CIT (Appeals) did not decide on the merits of the additions made by the Assessing Officer. The Tribunal noted that the Assessing Officer had made additions on account of gifts received by the assessee and expenses claimed in the mint business. The Tribunal found that the assessee failed to substantiate the carrying on of the mint business by producing books of account or establishing the genuineness of the expenses incurred. Additionally, the assessee could not substantiate the gifts received, as the donors were found to lack the capacity to make such gifts. The Tribunal emphasized the well-settled legal proposition that the primary onus is on the assessee to establish the identity of the donors, the genuineness of the transaction, and the creditworthiness of the donors.

Conclusion:
The Tribunal concluded that the assessments were validly reopened after recording sufficient reasons following the survey conducted at the business premises where the assessee was a partner. The Tribunal restored the matter back to the file of the CIT (Appeals) for deciding the issues on merits afresh, providing due opportunity to the assessee. The appeals of the Revenue for the assessment years 1999-2000, 2000-01, and 2002-03 were allowed for statistical purposes.