2018 (12) TMI 1873 - HC - Income Tax

Reopening of assessment u/s 147 - Whether parallel proceedings under Section 158-BC as well as under Section 148 of the Income Tax Act is impermissible in law? - HELD THAT - The block assessment is undertaken with reference to Section 132-A of the Income Tax Act. Now block assessment proceedings are initiated and actions under Section 158-BC are commenced. Pursuant to the block assessment made, based on the informations received on account of search operations, the reopening of the assessment is also simultaneously done with reference to the assessment years 1995-1996 and 1996-1997 alone. Thus, the reopening of the assessment is initiated based on other reasons. The learned Senior Standing Counsel also clarified that reopening of the assessment is taken with reference to two assessment years based on the materials available with the Assessment Officer. The notice issued under Section 148 of the Act itself stipulates that the Department has received information that the writ petitioner has made an investment of ₹ 45,71,26,016/- from U.K. Companies and also incurred expenses during the year ended 31.3.1995. But the writ petitioner has not admitted any income accrued or received based on the investment during the previous year ended 31.3.1996 relating to the assessment year 1996-1997. The learned Senior Standing Counsel for the Department also clarifies that these informations or materials are independent and unconnected with the block assessment made with reference to Section 158-BC for ten years. Thus, when the Assessing Officer has got reason to believe under Section 147 of the Act, then they are empowered to issue notice under Section 148 of the Act and deal with the case under Sections 147 to 153 of the Act and by following the procedures contemplated under the provisions of the Act. When the Income Tax Department come out with a plea that the reopening of the assessment is made based on the independent informations and the documents available, it is left open to the assessee to seek the reasons from the Department, which was already given to the writ petitioner and accordingly, submit his defence to the reasons stated and allow the Assessing officer to assess the income and pass final orders of assessment under the Act. In the present cases on hand, the reasons for reopening of the assessment had already been provided to the writ petitioner. Thus, the writ petitioner ought to have given his explanations/objections in respect of the reasons stipulated in the reply by the Income Tax Department. Contrarily, if this Court adjudicate the merits and demerits, the same would cause prejudice to the Income Tax Department in concluding the reassessment proceedings with reference to Sections 147 to 153 of the Act. The very object and purpose of the reassessment and reopening of the assessment is to ensure that the tax evaders are dealt in accordance with law. If the assessee failed to disclose the actual income to the Department in a parallel assessment year, the Assessing Officer is empowered to reopen the assessment with reference to Sections 147 to 153 of the Act. Once the proceedings are commenced under Section 148 of the Act, then this Court must allow the Assessing Officer to adjudicate the reassessment and arrive a conclusion and pass assessment orders by affording opportunities to the assessee and by following the procedures. This being the concept and the object sought to be achieved under the provisions of the Act and by quashing the very notice, the very purpose of the proceedings would be defeated. Even in the case of Dayanidhi Maran vs. Assistant Commissioner of Income Tax, Non-Corporate Circle-1, Chennai 2018 (10) TMI 811 - MADRAS HIGH COURT this Court had reiterated the principles that no writ petition can be entertained against the notice in a routine manner. Judicial review against such statutory notices are limited and the aggrieved persons are at liberty to submit their explanations/objections with reference to the reasons stated in the impugned notice and participate in the proceedings so as to reach a logical conclusion. In the present cases on hand, admittedly there was search operations. Admittedly, certain materials were secured by the Authorities Competent. Admittedly, in its order dated 15.11.1996, the Assistant Commissioner of Income Tax provided opportunity to the writ petitioner to inspect all those documents. However, opportunities proposed to be provided was informed by the Assistant Commissioner of Income Tax. However, now the learned Senior Standing Counsel for the Income Tax Department made a submission that an opportunity will be provided to the writ petitioner by following the procedures. This being the submission made, this Court is of an opinion that complete opportunity as contemplated under the Act must be provided to the assessee, enabling him to submit his explanations/objections and the documents if any along with the statements for the purpose of concluding the proceedings in all respects and to ensure that the proceedings reaches its logical conclusion.

Summary

Issues Involved:
1. Challenge to the notices issued under Section 148 of the Income Tax Act for reopening assessment years 1995-1996 and 1996-1997.
2. Challenge to the notice issued under Section 158-BC of the Income Tax Act for block assessment for the period 1987-1988 to 1997-1998.
3. Allegation of denial of fair opportunity to the petitioner.
4. Legality of parallel proceedings under Section 158-BC and Section 148 of the Income Tax Act.

Detailed Analysis:

1. Challenge to Notices under Section 148:
The writ petitions WP Nos. 1143 and 1144 of 2003 challenge the notices issued under Section 148 of the Income Tax Act for reopening assessments for the years 1995-1996 and 1996-1997. The petitioner argued that such reopening is impermissible in law, especially when parallel proceedings under Section 158-BC are ongoing. The court noted that the reopening of the assessment is permissible if there are independent reasons and materials available, as stated by the Income Tax Department. The reasons for reopening had already been provided to the petitioner, and the petitioner should have given explanations or objections accordingly.

2. Challenge to Notice under Section 158-BC:
The third writ petition, WP No. 7623 of 2002, challenges the notice issued under Section 158-BC for the block period 1987-1988 to 1997-1998. The petitioner contended that the materials gathered during the search operations were not shared, depriving him of the opportunity to defend himself. The court emphasized that the materials secured during search operations must be served or permitted to be seen by the aggrieved persons. The Income Tax Department assured that opportunities would be provided to the petitioner to inspect the documents and submit his defense.

3. Allegation of Denial of Fair Opportunity:
The petitioner argued that a fair opportunity to present his case was not provided, as the materials gathered during the search were not shared. The court acknowledged the importance of providing such opportunities and noted that the Income Tax Department is willing to allow the petitioner to inspect the documents as per the procedures. The court directed the Department to ensure that all opportunities contemplated under the Act are provided to the petitioner.

4. Legality of Parallel Proceedings:
The petitioner contended that parallel proceedings under Section 158-BC and Section 148 are impermissible and cause prejudice to the rights of the assessee. The court examined the provisions of the Income Tax Act and relevant case law, including judgments from the Gujarat High Court and Delhi High Court, which held that parallel proceedings are impermissible if they cause prejudice or if there is an express bar under the statute. However, the court concluded that parallel proceedings are permissible if they are based on independent and unconnected materials. The court found that the reopening of the assessment for 1995-1996 and 1996-1997 was based on independent information and documents, and thus, parallel proceedings were allowed.

Conclusion:
The court dismissed all three writ petitions, holding that the notices issued under Section 148 and Section 158-BC were valid. The court emphasized the need for providing fair opportunities to the petitioner to inspect the documents and submit his defense. The court also clarified that parallel proceedings are permissible under the Income Tax Act if based on independent materials. The court urged the Income Tax Department to conclude the proceedings expeditiously, given the long pendency of the cases.