2014 (3) TMI 154 - HC - Income Tax

Reassessment proceedings u/s 147 / 148 - validity of notice - non supply of documents to the assessee i.e. 2G Spectrum Report Held that - The order sheet entries demonstrate a clear and chronological compliance with the earlier order of the Court - In any case, the previous order of the Court expressly bars any objections by the petitioner to the fresh notice on the ground that the Revenue had earlier issued notice under Sections 147/48 dated 5 July, 2011 - the petitioner s present argument is that the proceedings are vitiated because the reasons in this case were recorded before the earlier notice was dropped the argument is attempting to play the legality of the second notice against the existence of the first notice was one that the previous order of this Court foresaw and specifically barred in terms of the order dated 28.5.2012, which is now final and binding upon both parties thus, the notice is required to be set aside would set to nought the direction of the Court in the earlier writ petition Decided against Assessee. Adequacy of the material disclosed to justify reassessment proceedings - Whether the Revenue is within its right to keep the 2G Spectrum Report from the assessee on the ground of confidentiality or whether the failure to supply the report vitiates the proceedings and Whether the reasons to believe that income has escaped assessment in this case meet the test under Section 148 and judicial directives in that regard Held that - Far from holding that all documents used by the AO, let alone specific documents indicated by the assessee, are to be disclosed - Only when the privilege is claimed as regards the reasons recorded or when no material is provided in addition to the mere assertion of the subjective satisfaction of the AO, may the principle denying privilege or confidentiality operate - Even then, the claim for privilege may still prevail in that the Court may consider the manner in which the documents are to be inspected, but such questions does not arise in cases such as the present, where concrete and specific details which support the belief under Section 147/148 are communicated to the assessee independent of the document sought to be disclosed - Thus, the non-disclosure of the 2G Spectrum Report does not affect the notice Decided against Assessee with costs.

Summary

Issues Involved:
1. Timing of the notice under Section 147/148.
2. Confidentiality of the 2G Spectrum Report and its non-disclosure to the assessee.
3. Adequacy of the reasons to believe that income has escaped assessment under Section 148.

Detailed Analysis:

1. Timing of the Notice under Section 147/148:

The petitioner argued that the fresh notice under Section 147/148 was issued while the previous proceedings were still pending, thus vitiating the reassessment process. The Court observed that the first reassessment proceedings were withdrawn as per the order dated 28.5.2012, which allowed the issuance of a fresh notice. The previous proceedings were dropped on 18.6.2012, and the reasons for the fresh notice were recorded on 17.7.2012, with the notice being issued on 19.7.2012. The Court held that the chronological compliance with the earlier order was methodical, and the preparation of reasons before the issuance of the fresh notice did not vitiate the proceedings. The petitioner's argument that the proceedings would only be justified if the earlier notice was withdrawn before recording the new reasons was rejected. The Court emphasized that the relevant date is when the reasons are communicated to the petitioner, not when they are prepared within the Revenue.

2. Confidentiality of the 2G Spectrum Report:

The petitioner argued that the non-disclosure of the 2G Spectrum Report, which formed the basis of the reassessment notice, rendered the proceedings void. The Court reiterated that in its writ jurisdiction, it cannot judge the sufficiency of the reasons recorded but can determine if the opinion is based on tangible, concrete, and new information. The AO had provided detailed reasons, including the undervaluation of shares and the precise monetary differential, which constituted new and tangible information. The Court noted that the primary facts leading to the AO's satisfaction were spelt out, and the non-disclosure of the 2G Spectrum Report did not affect the validity of the notice, as the reasons provided were sufficient on their own terms. The Court held that the law does not mandate the disclosure of any specific document but requires that the information or material on which the AO records satisfaction be communicated to the assessee.

3. Adequacy of Reasons to Believe Income Has Escaped Assessment:

The petitioner contended that the reasons provided by the AO were incorrect and based on a change of opinion. The Court emphasized that at the stage of a Section 147/148 notice, the inquiry is preliminary, and the Court cannot enter into the merits of the AO's satisfaction. The reasons provided by the AO included specific details of the transactions, the alleged undervaluation of shares, and the charging section under the Act. These facts were capable of supporting the inference that income had escaped assessment. The Court held that the adequacy of the reasons falls outside its review powers and within the domain of the AO. The petitioner's arguments regarding the incorrectness of the AO's views and the applicability of Section 28(iv) were matters to be raised before the AO and within the appellate regime provided by the Act.

Conclusion:

The Court dismissed the writ petition, holding that the timing of the notice, the non-disclosure of the 2G Spectrum Report, and the adequacy of the reasons provided by the AO did not vitiate the reassessment proceedings. The petitioner was ordered to bear the costs of the proceedings, quantified at Rs.50,000/-.