2010 (12) TMI 716 - HC - Income Tax

Income escaping assessment - Gold ginnies - Whether the material sought to be relief upon by the Assessing Officer at the stage of initiation would conclusively prove the escapement is not the concern at that stage - The material available with the Assessing Officer at the stage of initiation was relevant, it came from the relevant person and was sufficient prima facie evidence enabling the Assessing Officer to entertain a belief about escapement of income form assessment in the hands of the assessee on account of variation in the number of gold ginnies declared in the return of income vis-a-vis the number of ginnies claimed to be received by Shri Sat Pal Grover(co-purchaser) - hold that having regard to the facts and material on record, the ingredients of section 147 are fulfilled in this case and the Assessing Officer was justified in initiating proceedings u/s 147 of the Act by issuance of notice u/s 148 of the Act - Thus, the appeals are dismissed.

Summary

Issues:
1. Validity of reassessment under section 147/148 of the Income-tax Act, 1961.
2. Correctness of remanding the case to the Assessing Officer.
3. Consideration of previous case order in the assessment.
4. Legality of initiating proceedings under section 147 of the Act.

Issue 1: Validity of reassessment under section 147/148 of the Income-tax Act, 1961:
The judgment dealt with the appeal against the reassessment order under section 147/148 of the Income-tax Act, 1961, for the assessment year 1994-95. The assessee contended that the reassessment lacked jurisdiction as it was based on an alleged memorandum not signed by the assessee. However, the Tribunal found that the Assessing Officer had justifiable cause to believe that income had escaped assessment based on the information provided. The Tribunal emphasized that at the initiation stage, only a prima facie justification about escapement of income was required, not an established fact. The Tribunal concluded that the Assessing Officer was justified in initiating proceedings under section 147 of the Act, as there was relevant material to support the belief of income escapement.

Issue 2: Correctness of remanding the case to the Assessing Officer:
The Tribunal remanded the case to the Assessing Officer on the grounds that the assessee was not given a proper opportunity. The appellant argued against this decision, claiming that the reassessment was without jurisdiction. However, the Tribunal found that there was a valid formation of opinion for reassessment based on the material available. The Tribunal held that the Assessing Officer had sufficient material to justify the reassessment, as the information provided indicated a discrepancy in the number of gold ginnies declared by the assessee. Consequently, the Tribunal upheld the remand decision, stating that no substantial question of law arose from the factual position.

Issue 3: Consideration of previous case order in the assessment:
One of the substantial questions of law raised was whether the Tribunal's order was vitiated by not considering the order passed in a previous case involving a co-sharer. The Tribunal, in its analysis, did not find this argument persuasive. It emphasized that the Assessing Officer had justifiable cause to believe that income had escaped assessment based on the information available. The Tribunal's decision was based on the material on record and the relevant provisions of the Income-tax Act, rather than considering the outcome of a separate assessment involving a co-sharer.

Issue 4: Legality of initiating proceedings under section 147 of the Act:
The judgment addressed the legality of initiating proceedings under section 147 of the Act. The Tribunal concluded that the Assessing Officer was justified in initiating proceedings under section 147 based on the belief that income had escaped assessment. The Tribunal emphasized that at the initiation stage, the Assessing Officer only needed a prima facie justification for the belief, not an established fact of income escapement. The Tribunal found that the material available at the initiation stage was relevant and provided prima facie evidence to support the belief of income escapement, fulfilling the requirements of section 147 of the Act.

In conclusion, the High Court dismissed the appeals, upholding the validity of the reassessment under section 147/148 of the Income-tax Act, 1961, and confirming the Tribunal's decision to remand the case to the Assessing Officer. The judgment emphasized the importance of relevant material and a prima facie justification for initiating proceedings under section 147, highlighting that the final outcome of the proceedings was not relevant at the initiation stage.