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2013 (2) TMI 206 - HC - Income TaxReassessment u/s 147 - Cash credit in the book - the income-tax return for the assessment year 2006-07 was submitted - notice was issued under section 143(2) - cash credit found in the books Held that - Section 68 is a special provision of the Act which empowers the Assessing Officer to tax any cash credit found in the books of the assessee if the nature and source thereof are not established by the assessee. In the present case, the identity of the three parties from whom the assessee has received cash is doubtful since they do not exist at the addresses given and the TIN numbers mentioned in respect of them are fictitious as per the information received from the State Government.- In the case of CIT v. Sophia Finance Ltd. 1993 (8) TMI 62 - DELHI HIGH COURT it was held that it is immaterial as to whether the amount so credited is given the colour of a loan or a sum representing sale proceeds or even receipt of share application money. The aforesaid fact came to the notice to the AO while conducting assessment proceedings for the assessment year 2008-09 and, therefore, there was a reason to believe in the matter that the income chargeable to tax has escaped assessment in the peculiar facts and circumstances of the case. In the case of CIT v. Kelvinator of India Ltd. reported in 2010 (1) TMI 11 - SUPREME COURT OF INDIA it has been held that reassessment proceeding cannot be initiated only upon the mere change of opinion - However, in the present case reassessment has not been done only upon the mere change of opinion - petitioner-company is having an alternate remedy in the matter as per the provisions of the Income-tax Act, 1961, - Decided against assessee
Issues Involved:
1. Legality and validity of the notice issued under Section 148 of the Income-tax Act, 1961. 2. Rejection of objections raised by the petitioner-company against the reassessment notice. 3. Applicability of Section 68 to trading transactions. 4. Whether the reassessment is based on a mere change of opinion. 5. Availability of an alternate remedy under the Income-tax Act, 1961. Detailed Analysis: Issue 1: Legality and Validity of the Notice Issued Under Section 148 The petitioner challenged the notice dated January 4, 2011, issued under Section 148 of the Income-tax Act, 1961, for the assessment year 2006-07, which initiated reassessment under Section 147. The petitioner argued that the assessing authority must have a "reason to believe" that any income chargeable to tax has escaped assessment, and a mere difference of opinion does not suffice. The court examined Sections 147 and 148, emphasizing that the Assessing Officer must have tangible material to conclude that there was escapement of income from assessment. Issue 2: Rejection of Objections Raised by the Petitioner-Company The petitioner-company's objections to the reassessment notice were rejected by the Additional Commissioner of Income-tax, Ujjain, on May 9, 2011. The court reviewed the detailed order which stated that the identity of the three parties (M/s. Pravin Trading Co., M/s. Mohan Traders, and M/s. Maa Bhagvati Traders) from whom the petitioner received cash was doubtful. These parties did not exist at the provided addresses, and their TIN numbers were fictitious. The court agreed that there was a reason to believe that income chargeable to tax had escaped assessment based on these findings. Issue 3: Applicability of Section 68 to Trading Transactions The petitioner contended that Section 68, which deals with unexplained cash credits, should not apply to trading transactions. However, the court referred to the Full Bench decision of the Delhi High Court in CIT v. Sophia Finance Ltd., which clarified that Section 68 is broadly worded and can apply to any sum credited in the books, regardless of whether it is labeled as a loan, sale proceeds, or share application money. The court concluded that the provisions of Section 68 were applicable since the petitioner failed to establish the identity of the parties involved in the transactions. Issue 4: Whether the Reassessment is Based on Mere Change of Opinion The petitioner argued that the reassessment was initiated based on a mere change of opinion, which is not permissible. The court referred to the Supreme Court's ruling in CIT v. Kelvinator of India Ltd., which held that reassessment cannot be initiated solely on a change of opinion. However, the court found that the reassessment in this case was not based on a mere change of opinion but on new tangible material discovered during the assessment proceedings for the year 2008-09. Therefore, the reassessment was justified. Issue 5: Availability of an Alternate Remedy The court noted that the petitioner-company has an alternate remedy available under the Income-tax Act, 1961. Given this, the court found no reason to interfere with the order passed by the Assessing Officer. The petitioner could pursue the alternate remedy instead of seeking judicial intervention at this stage. Conclusion The court concluded that no case for interference was made out. The reassessment notice under Section 148 was valid, the objections raised by the petitioner were rightly rejected, Section 68 was applicable to the transactions in question, the reassessment was not based on a mere change of opinion, and the petitioner had an alternate remedy available. Hence, the court declined to admit the petition.
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