2012 (4) TMI 48 - HC - Income Tax

Reassessment - Assessment was completed u/s 143(3) - The investigation had been conducted and on the basis of information received, the Assessing Officer formed a prima facie or tentative opinion that the assessee had received bogus credit entries of Rs.42,03,250/- from the parties mentioned in the table - the information provided by the Directorate of Income Tax Investigation was not available with the Assessing Officer during the course of the first/original proceedings - Decided against the assessee. Regarding approval u/s 151 - assessee submits that one of the conditions raised by the assessee was that there was no valid approval under Section 151 of the Act and the said aspect has not been examined by the tribunal as they had decided the appeal as noticed above on a different contention/argument. It will be open to the tribunal to examine the question whether or not there was a valid approval under Section 151 of the Act and decide the appeal of the Revenue on merits. - Matter remanded back to tribunal.

Issues Involved:
1. Validity of reassessment proceedings under Section 147/148 of the Income Tax Act, 1961.
2. Jurisdictional pre-conditions for reassessment.
3. Full and true disclosure of material facts by the assessee.
4. Validity of approval under Section 151 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147/148:
The primary issue was whether the Income Tax Appellate Tribunal (ITAT) was correct in setting aside reassessment proceedings on the grounds that the Assessing Officer (AO) failed to prove that the assessee did not fully and truly disclose material facts during the original assessment. The High Court scrutinized the reasons recorded by the AO, which included specific details such as the name of the operator, instrument number, bank account, and dates of the alleged bogus transactions. The AO had formed a prima facie opinion based on information from the Investigation Wing that the assessee had introduced unaccounted money through accommodation entries.

2. Jurisdictional Pre-conditions for Reassessment:
The Tribunal quashed the reassessment proceedings, stating that the AO did not explicitly mention the assessee's failure to disclose fully and truly all material facts necessary for assessment. The High Court, however, emphasized that reasons recorded by the AO should be read holistically. It concluded that the AO had indeed formed a tentative opinion that the assessee had introduced unaccounted money, fulfilling the jurisdictional pre-conditions for reassessment.

3. Full and True Disclosure of Material Facts by the Assessee:
The Tribunal's decision was based on the absence of an explicit statement in the AO's reasons that the assessee failed to disclose material facts. The High Court disagreed, noting that the AO's reasons, when read as a whole, indicated that the assessee had not made a full and true disclosure. The AO's detailed recording of the bogus transactions and the operators involved was deemed sufficient to infer that the assessee had not disclosed all material facts.

4. Validity of Approval under Section 151:
The High Court acknowledged that the Tribunal had not examined the validity of the approval under Section 151 of the Act, as it had decided the appeal on different grounds. The High Court directed that this issue, along with the merits of the addition deleted by the CIT(Appeals), should be examined by the Tribunal. It clarified that it had not expressed any opinion on these aspects.

Conclusion:
The High Court answered the question of law in favor of the Revenue, setting aside the Tribunal's order. It allowed the appeal, directing the Tribunal to examine the merits of the addition and the validity of approval under Section 151. The parties were instructed to appear before the Additional Registrar of the Tribunal for further proceedings.

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