2018 (10) TMI 1906 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe or reasons to suspect - HELD THAT - This Court after going through the ingredients of Section 147 of the Act 1961 finds that the Assessing Officer has wider power in respect of covering the escaped assessments for the purpose of reopening the assessment. The power under Section 147 of the Act 1961 is to be exercised in various circumstances enabling the Assessing Officer to assess or reassess such income other than the income involved in the matters which are the subject matters of any appeal reference or revision. This Court finds that in the instant case in the notice which was communicated to the petitioner it was informed to the petitioner that he was the actual beneficiary owner of some bank account in the case of one Munna Lal Pareek. This Court finds that the Assessing Officer has further given sufficient material to the petitioner by furnishing copy of assessment order of Munna Lal Pareek and order passed by the CIT (Appeals) in the case of Munna Lal Pareek. The said material or information available with the Assessing Officer has led the Assessing Officer to think that petitioner is required to be confronted by giving notice to explain the income which was to be assessed in the hands of petitioner as the same is correct or not. In the instant case that there is no issue of jurisdiction which can be said to be raised by the petitioner and it is only allegation in respect of cryptic order passed by the Assessing Officer without having any reasons to believe or to initiate the proceedings under Section 148 of the Act 1961. This Court further finds that the petitioner who is given notice under Section 142 (1) to further explain and to place before the Assessing Officer the relevant facts relating to income which is now sought to be assessed can always satisfy the authorities that the income which is now taken to be the income of the petitioner instead of one Shri Munna Lal Pareek is well explained by their own sources. Considering all the facts this Court finds that there is no infirmity in the orders passed by the Income Tax Authorities and if any order of assessment/reassessment is passed petitioner is always free to file an appeal contemplated under the Income Tax Act 1961. The present writ petition is not maintainable before this Court.

Issues Involved:
1. Validity of reassessment notice under Section 148 of the Income Tax Act, 1961.
2. Requirement for providing reasons for reassessment.
3. Jurisdiction of High Court to entertain writ petitions under Article 226 against reassessment notices.
4. Compliance with procedural requirements under Sections 147 and 148 of the Income Tax Act, 1961.
5. Interpretation of "reasons to believe" versus "reasons to suspect."

Detailed Analysis:

1. Validity of Reassessment Notice under Section 148:
The petitioner challenged the reassessment notice dated 29th March 2018, asserting that it was issued without valid reasons. The court emphasized that reassessment under Section 148 is permissible if the Assessing Officer has "reasons to believe" that income has escaped assessment. The court cited that the reasons for reassessment were based on an order passed by CIT(A) in another case, which indicated that the petitioner was the actual beneficiary of a bank account used by another individual, leading to income escaping assessment.

2. Requirement for Providing Reasons for Reassessment:
The petitioner argued that the reassessment notice was issued without providing the reasons for initiating reassessment proceedings. The court noted that the reasons were eventually provided on 21st August 2018, and the petitioner was given an opportunity to raise objections. The court held that the reasons must be recorded and communicated to the assessee to enable them to respond adequately, aligning with the procedural requirements of the Act.

3. Jurisdiction of High Court to Entertain Writ Petitions:
The court examined whether it could entertain a writ petition under Article 226 of the Constitution against orders passed by the Income Tax Authority. It was held that judicial review against the initiation of reassessment procedures is limited and that the High Court should not interfere routinely. The court emphasized that writ petitions are maintainable only if the notice is issued without jurisdiction, involves mala fides, or violates statutory rules.

4. Compliance with Procedural Requirements:
The court reviewed the compliance with Sections 147 and 148 of the Income Tax Act, 1961. It was emphasized that the provisions aim to address suppressed materials or new information that comes to the department's notice. The court found that the Assessing Officer had followed the required procedures, including recording reasons and providing them to the petitioner, thus validating the reassessment process.

5. Interpretation of "Reasons to Believe" vs. "Reasons to Suspect":
The petitioner contended that the reassessment was based on mere suspicion rather than "reasons to believe." The court clarified that "reasons to believe" must be based on prima facie evidence or new material that suggests income has escaped assessment. The court concluded that the Assessing Officer had sufficient material to form a belief that reassessment was warranted, and the proceedings were not based on mere suspicion.

Conclusion:
The court dismissed the writ petition, holding that the reassessment notice and subsequent proceedings were valid and in compliance with the statutory requirements. The petitioner was advised to pursue the available appellate remedies under the Income Tax Act, 1961, if aggrieved by the reassessment order. The court reiterated the limited scope of judicial review in such matters and emphasized the importance of following procedural safeguards to ensure fairness and transparency in the reassessment process.

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