2013 (11) TMI 1447 - HC - Income Tax

Re-assessment u/s 147 - Held that - The reasons to believe recorded refer to the information which was provided and made available to the assessing officer - If the assessee wanted to challenge and question that the information received from the Directorate of Income Tax vide letter dated 2.3.2006 as not specific or vague, such plea or contention should have been raised before the Tribunal. The nature and character, what was contained and formed part of the information is primarily factual - The assessee has not raised this aspect before Tribunal - The AO had received specific information from the specialized wing of the Department, DIT(Inv) - The nature of information was specific - Decided against assessee.

Summary

Issues:
Condonation of delay in filing appeal under Section 254(2) of the Income Tax Act, 1961; Validity of re-assessment proceedings under Section 147/148 based on accommodation entries; Merits of the addition on grounds of unexplained credit entries in bank accounts; Adequacy of reasons recorded by the assessing officer for initiating re-assessment proceedings; Compliance with legal requirements for issuing notice under Section 147/148; Judicial interpretation of "reasons to believe" for escaping assessment.

Analysis:
1. The appellant failed to file an application under Section 254(2) of the Income Tax Act, resulting in a belated appeal by 753 days. The High Court declined to entertain the appeal on merits due to the delay, refusing to issue notice for condonation of delay.

2. Re-assessment proceedings under Section 147/148 were initiated based on specific information regarding accommodation entries received by the assessee. The assessing officer passed an order assessing income at a higher amount, primarily attributing unexplained credit entries to share application money. The Commissioner of Income Tax (Appeals) upheld the initiation of re-assessment, emphasizing the validity of the action taken by the assessing officer.

3. The appellant challenged the adequacy of reasons recorded by the assessing officer for initiating re-assessment, arguing that the reasons lacked specific details of the alleged accommodation entries. However, the High Court found no merit in this contention, noting that the original return was not subjected to a regular assessment order under Section 143(3), as per legal precedents.

4. The High Court referred to judicial interpretations regarding "reasons to believe" for escaping assessment, emphasizing the requirement for the assessing officer to have a genuine belief supported by discernible material. The court highlighted that the initiation of proceedings does not necessitate conclusive proof of income escapement, as the final determination occurs during the assessment stage.

5. The court underscored the importance of complying with legal requirements for issuing notices under Section 147/148, emphasizing the need for a link between reasons recorded and available evidence. The court dismissed arguments questioning the sufficiency of reasons, emphasizing that factual aspects should have been raised before the Tribunal.

6. The High Court differentiated between issues relating to the validity of re-assessment proceedings and merits of additions on grounds like cross-examination. The court concluded that the appeal lacked merit and dismissed it, declining to issue notice for condonation of delay. The fate of another appeal filed by the revenue was left to be decided on its own merits.