2019 (12) TMI 1426 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe that some income of the assessee has escaped assessment - reassessment as barred by limitation - HELD THAT - The phrase reasons to believe does not mean that the Assessing Officer should have ascertained the facts by legal evidence. All that is required is that, the AO should prima facie have some material on the basis of which there should be reason to believe of certain incomes chargeable to tax escaping assessment. There need not be any concrete evidence or proof available for coming to a final conclusion. It is only an initiation of proceedings of reassessment where the assessee gets a chance to put forth their defence, explanation and justification which would further be scrutinized by the Assessing Officer while reaching the final conclusion. One should not lose sight of the fact that the final assessment on the conclusion of proceedings under section 147 of the Act is also an appealable order wherein also the assessee has a right to agitate or challenge the order passed by the Assessing Officer on a proceeding under section 147 of the Act. If we look into the proceedings under challenge, it would clearly reveal that there are sufficient reasons given by the Assessing Officer, which according to him is reason to believe of an income of more than ₹ 2.53 crores, which are chargeable to tax has escaped assessment and which has come to the notice of the Department at a later stage in the course of scrutiny. This court has no hesitation to reach to the conclusion that the case in hand cannot be said to be one which is barred by limitation as the proceedings drawn by the Assessing Officer seems to be with sufficient material in record showing income, which otherwise is chargeable to tax having escaped assessment.

Issues Involved:
1. Validity of the reassessment notice under Section 148 of the Income-tax Act, 1961.
2. Whether the reassessment proceedings are barred by limitation.
3. Adequacy and validity of the "reasons to believe" for reassessment.
4. Alleged failure of the petitioner to disclose material facts fully and truly.

Detailed Analysis:

1. Validity of the Reassessment Notice under Section 148 of the Income-tax Act, 1961:
The petitioner challenged the notice dated March 20, 2019, issued under Section 148 of the Income-tax Act, which initiated reassessment proceedings for the assessment year 2013-14. The petitioner argued that the notice was invalid as it was issued beyond the permissible time frame and without any new tangible material.

2. Whether the Reassessment Proceedings are Barred by Limitation:
The petitioner contended that the reassessment proceedings were barred by limitation as per the proviso to Section 147 of the Act, which prohibits reassessment after four years from the end of the relevant assessment year unless there is a failure to disclose fully and truly all material facts. The petitioner asserted that all relevant documents were already available with the Department at the time of the original assessment, and there was no suppression of material facts.

3. Adequacy and Validity of the "Reasons to Believe" for Reassessment:
The petitioner argued that the "reasons to believe" recorded by the Department were vague, ambiguous, and lacked any tangible material. The petitioner cited several judgments, including ITO v. Techspan India Pvt. Ltd. and CIT v. Kelvinator of India Ltd., to support the claim that mere change of opinion or re-evaluation of the same material does not justify reassessment.

4. Alleged Failure of the Petitioner to Disclose Material Facts Fully and Truly:
The Department, on the other hand, argued that during the scrutiny, it was found that there were cash transactions exceeding ?2.53 crores, which were not permissible under Section 40A(3) of the Act. This constituted sufficient tangible material to initiate reassessment proceedings. The Department maintained that the Principal Commissioner had given the necessary sanction under Section 151(1) of the Act, and thus, the proceedings were not barred by limitation.

Court's Analysis and Findings:

On Limitation:
The court referred to Section 151(1) of the Act, which requires the satisfaction of the Principal Commissioner or equivalent authority for initiating reassessment beyond four years. The court noted that the Principal Commissioner need not provide separate reasons but must be satisfied with the reasons recorded by the Assessing Officer.

On "Reasons to Believe":
The court emphasized that the term "any income" in Section 147 includes both disclosed and undisclosed information. The court held that the Assessing Officer has wide powers to initiate reassessment if there is "reason to believe" that income has escaped assessment, even if the material facts were initially disclosed. The court cited several judgments, including Phool Chand Bajrang Lal v. ITO and Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd., to support the view that the formation of belief by the Assessing Officer is based on subjective satisfaction and does not require concrete evidence at the initiation stage.

Conclusion:
The court concluded that the reassessment proceedings were not barred by limitation and that the Assessing Officer had sufficient reasons to believe that income exceeding ?2.53 crores had escaped assessment. The court dismissed the writ petition, holding that the reassessment notice and proceedings were valid and justified.

Final Judgment:
The writ petition was dismissed, and the reassessment proceedings initiated by the Assessing Officer were upheld as valid and within the permissible time frame.

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