2019 (4) TMI 1806 - HC - Income Tax

Reopening of assessment u/s 147 - validity of reopening reasons - HELD THAT - ITO has recorded reasons that the issue under consideration were never examined by the Assessment Officer during the course of regular assessment/ re-assessment and have, thus, escaped assessment because material facts relevant for the assessment on the issue under consideration were not filed during the course of assessment proceeding or were not considered during the assessment. In Phool Chand Bajrang Lal 1993 (7) TMI 1 - SUPREME COURT the Supreme Court has held that the Assessment Officer may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. It is held therein that since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming this belief is not for the court to judge. In all the cases there exists material to infer that income has escaped assessment, therefore, issuance of notice under Section 148 of the Act is based on such reasons as is permissible in law, therefore, reassessment notice itself cannot be set aside at this stage. This Court is satisfied that the notice under Section 148 of the Act or the reasons recorded for issuance of such notice do not suffer from any illegality or infirmity.- Decided against assessee.

Summary

Issues:
Challenge to re-assessment notices under Section 148 (1) of the Income Tax Act, 1961 and orders rejecting objections. Challenge to sanction under Section 151 of the Act. Proper reasons for re-assessment notice. True and full disclosure at the time of assessment. Legality of re-assessment notice and jurisdiction. Validity of reasons recorded under Section 151. Existence of tangible material for re-opening assessment. Maintainability of petitions after re-assessment. Jurisdiction of Assessment Officer. Validity of reassessment notice based on escaped income. Compliance with twin requirements for valid reassessment notice. Veracity of information supplied during regular assessment. Material for forming belief in reassessment. Legality and infirmity of notice under Section 148.

Analysis:
The petitioner challenged re-assessment notices under Section 148 (1) of the Income Tax Act, 1961, and orders rejecting objections, along with the sanction under Section 151. The argument was made that proper reasons for the re-assessment notice were lacking, as the income had not escaped assessment due to any undisclosed material facts. It was contended that the re-assessment was a change of opinion, impermissible in law, and the disposal of objections lacked proper reasoning.

The petitioner cited various legal precedents to support their argument, emphasizing the necessity of specific, reliable, and relevant information for reassessment. The Revenue, however, argued that the Principal CIT had recorded cogent reasons for re-opening the assessment, supported by tangible material, thus not constituting a change of opinion.

The Revenue further contended that the re-assessment proceedings had been completed, and the petitioner had the remedy of filing an appeal, making the present petitions non-maintainable. The jurisdiction of the Assessment Officer to determine if income had escaped assessment was highlighted, stating it could not be challenged in a writ petition.

Legal authorities were referenced by both parties, including decisions by the Supreme Court and various High Courts, to support their respective contentions. The Supreme Court's stance on the validity of reassessment notices and the importance of specific reasons for reassessment were discussed in detail.

The judgment concluded that the reasons recorded for the issuance of the notice under Section 148 did not suffer from any illegality or infirmity. It was held that the reassessment notice based on the belief that income had escaped assessment was lawful, and thus, all writ petitions were dismissed for lacking merit.