2012 (8) TMI 794 - HC - Income Tax

Reopening of assessment after a period of about six years - petitioner contended that the fact regarding the show-cause notice issued by the customs authorities as well as the report in the newspaper and the electricity theft were well within the knowledge of the Assessing Officer while framing the original assessment Held that - If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for reassessment - Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act. In the circumstances, the said contention also does not merit acceptance - pre-requisite conditions necessary for assumption of jurisdiction under section 147 of the Act after the expiry of a period of four years from the end of the relevant assessment year, having been satisfied - Reopening of assessment upheld Though various contentions have been advanced by the learned advocate for the petitioner contending that the electricity was being used only by the contractors and that the petitioner was not utilising the electricity for production and that the machinery on which depreciation had been claimed by the petitioner was leased out to the contractors and as such, the petitioner did not have any unaccounted production on account of theft of electricity ; all those contentions relate to the sufficiency of the reasons recorded by the Assessing Officer. It is well settled legal position that while examining the validity of proceedings under section 147 of the Act, the court is only required to see whether there was prima facie some material on the basis of which the assessment could be reopened. The sufficiency or the correctness of the material cannot be considered at this stage.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income-tax Act, 1961.
2. Assumption of jurisdiction under Section 147 of the Income-tax Act, 1961.
3. Failure to disclose fully and truly all material facts necessary for assessment.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The petitioner challenged the notice dated February 15, 2010, issued under Section 148 of the Income-tax Act, 1961, seeking to reopen the assessment for the assessment year 2003-04. The petitioner contended that the notice was invalid as it was based on a letter from the Joint Commissioner of Customs and a newspaper report from 2003, both of which were available during the original assessment. The petitioner argued that there was no new tangible information to justify reopening the assessment.

2. Assumption of Jurisdiction Under Section 147:
The petitioner argued that the notice under Section 148 was issued beyond the period of four years from the end of the relevant assessment year, and hence, the conditions for reopening the assessment under Section 147 were not satisfied. The petitioner emphasized that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. The petitioner further contended that the Assessing Officer (AO) did not form a belief that income had escaped assessment but merely sought to investigate the facts.

The respondent argued that the AO had formed an opinion based on the letter from the Joint Commissioner of Customs and the newspaper report, which indicated discrepancies in the petitioner's books of account and stock, suggesting manipulation and unaccounted profits. The respondent asserted that the AO had sufficient reason to believe that income had escaped assessment due to the petitioner's failure to disclose material facts fully and truly.

3. Failure to Disclose Fully and Truly All Material Facts:
The petitioner contended that all material facts were disclosed during the original assessment, and there was no failure on their part. The petitioner argued that the AO did not specifically state in the reasons recorded that the income had escaped assessment due to the petitioner's failure to disclose material facts fully and truly.

The respondent countered that the discrepancies in the books of account and stock, as well as the unaccounted production due to electricity theft, indicated a failure to disclose material facts. The respondent argued that the reasons recorded by the AO implied that there was a failure on the part of the petitioner to disclose fully and truly all material facts, satisfying the conditions for reopening the assessment under Section 147.

Conclusion:
The court held that the reasons recorded by the AO, based on the letter from the Joint Commissioner of Customs and the newspaper report, provided sufficient material for the formation of belief that income had escaped assessment. The court also held that the reasons recorded implied a failure on the part of the petitioner to disclose fully and truly all material facts, satisfying the conditions for reopening the assessment under Section 147. Consequently, the court dismissed the petition and upheld the validity of the notice issued under Section 148.

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