2013 (7) TMI 537 - HC - Income Tax

Reopening of the assessment u/s 147 whether the reopening of the assessment by the AO valid - Held that - There exist no reasons to be lacking validity permitting the Assessing Officer to assess the income - So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued - there was sufficient material with the Assessing Officer to form a belief that income chargeable to tax had escaped assessment - Court relied upon the decision of Assistant Commissioner of IncomeTax vs. Rajesh Jhaveri Stock Brokers P.Ltd. (2007 (5) TMI 197 - SUPREME Court) - in an assessment which was previously not taken in scrutiny, the AO found that there were no cash sales in the financial year 2004-05 and that therefore total sales was unexplained - AO also pointed out that the total sum through different entries was deposited in cash in the bank account of the assesse during the said period which is also unexplained - notices for reassessment have been issued in case of a non-scrutiny assessment - appeal decided against assesse

Summary

Issues:
Challenge to notice proposing income assessment for AY 2005-06 based on alleged escaped assessment.

Detailed Analysis:
1. Background and Challenge to Notice: The petitioner challenged a notice issued by the Deputy Commissioner proposing to assess the petitioner assessee's income for AY 2005-06 due to alleged escaped assessment. The petitioner sought reasons for the notice, which were provided later.

2. Objections and Rejection: The petitioner raised objections to the reopening of the assessment, which were subsequently rejected. This led to the filing of the petition challenging the notice.

3. Validity of Reasons for Reopening: The petitioner contended that the reasons recorded by the Assessing Officer lacked validity, especially in a case of non-scrutiny assessment. The counsel argued that the conclusions drawn by the Assessing Officer were erroneous and lacked proper verification.

4. Legal Precedent and Assessment Process: Referring to legal precedents, including the case of Assistant Commissioner of Income-Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd., the court highlighted the distinction between assessment under Section 143(1) and reassessment under Section 147. The court emphasized that the Assessing Officer must have a valid reason to believe that income has escaped assessment, even in cases of non-scrutiny assessments.

5. Assessment Findings and Conclusion: The court noted that in the present case, the Assessing Officer found discrepancies in the financial records of the assessee, such as unexplained cash sales and deposits. Based on these findings, the court determined that there was sufficient material for the Assessing Officer to form a belief that income chargeable to tax had escaped assessment.

6. Judgment and Clarification: The court dismissed the petition, stating that it would not interfere with the Assessing Officer's decision. However, it clarified that the dismissal did not imply an opinion on the taxability of the disputed amount. The court highlighted that the final decision on the additions to income would depend on the evidence presented during the reassessment proceedings.

In conclusion, the court upheld the validity of the Assessing Officer's reasons for reopening the assessment and emphasized the importance of proper justification for reassessment, especially in cases of non-scrutiny assessments. The judgment clarified that the decision did not prejudge the taxability of the disputed amount, leaving room for further evidence and arguments during reassessment proceedings.