2022 (2) TMI 1360 - HC - Income Tax

Validity of reopening of assessment - deposits of cash during demonetization period - fresh material in the possession to form the belief that the deposited cash was in the nature of undisclosed income or not? - as argued deposit of cash during the demonetization period had been disclosed in the return itself - HELD THAT - In the present case the reassessment notice had been issued within four years of filing of the assessment and there had been no scrutiny assessment of the petitioner. The only requirement for reopening of assessment would be reason to believe . Courts cannot enter into the merits of the subjective satisfaction of the AO or judge the sufficiency of the reasons recorded and/or determined whether such opinion is based on tangible concrete and new information that is capable of supporting such a conclusion. See Raymond Woolen Mills Ltd. vs. ITO 1997 (12) TMI 12 - SUPREME COURT The petitioner herein had admittedly deposited in cash in his bank account. Though the said entry is reflected in the return of income yet no supporting evidences are available to prove the source of deposit. This Court is of the view that in the present case there is reason to believe that income otherwise chargeable to tax has escaped the assessment. Submission that the appropriate authority had not granted sanction had not been raised by the petitioner in its objection petition and consequently the same has not been dealt with by the Revenue while deciding the petitioner s objections. Accordingly in the event the petitioner wishes to raise the issue of lack of sanction by the appropriate authority the petitioner shall be at liberty to do so during the reassessment proceedings.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 and order disposing of objections related to Assessment Year 2017-18.

Analysis:
The petition challenged a notice issued under Section 148 of the Income Tax Act, 1961, and an order disposing of objections regarding Assessment Year 2017-18. The petitioner argued that the notice was based solely on cash deposits during demonetization, which were already disclosed in the return. The petitioner contended that there was no new material to suggest the deposited cash was undisclosed income, citing the requirement for positive evidence of income escapement for reopening assessments. Reference was made to the Sabharwal Properties case emphasizing the need for concrete evidence. The petitioner also raised the lack of sanction by the appropriate authority as a point of contention.

The Court noted that the reassessment notice was issued within four years of the assessment filing, with no prior scrutiny assessment. Therefore, the standard of "reason to believe" was the only requirement for reopening the assessment. It was emphasized that Courts cannot delve into the subjective satisfaction of the Assessing Officer or assess the sufficiency of reasons recorded, citing the Raymond Woolen Mills case. The Court acknowledged the petitioner's cash deposit but highlighted the absence of supporting evidence for the source of the deposit, leading to the belief that taxable income had escaped assessment.

Regarding the lack of sanction by the appropriate authority, the Court observed that this issue was not raised in the petitioner's objection petition and thus not addressed by the Revenue in its decision on the objections. However, the Court granted the petitioner the liberty to raise this issue during the reassessment proceedings. The writ petition and applications were disposed of, providing the petitioner with the opportunity to address the lack of sanction during the reassessment process.