2016 (7) TMI 67 - HC - Income Tax

Reopening of assessment - series of deposits in the accounts unexplained - Held that - Reopening of an assessment cannot be resorted to for roving or fishing inquiry. The Assessing Officer must have some tangible material at his command to form a belief that income chargeable to tax has escaped assessment. In the present case this requirement was not satisfied. The Assessing Officer made no effort to find out the assessee and to serve him at his permanent address given to the department which was also mentioned in his PAN card. Thus the reasons were based on mere suspicion and unverified details. Reopening may not be permitted for mere verification purpose. If full and sincere efforts were made to trace the assessee by issuing notice for production of materials either in terms of powers under subsection (1) of section 131 or 133 of the Act but such efforts failed for nonavailability or nonappearance of the assessee a different situation may arise. However on mere dropping of a letter at the address given in the bank account without any further effort to trace the assessee at his permanent address declaration by the Revenue authorities would not be sufficient to enable the Assessing Officer to jump to the conclusion that such entries remained unexplained and that therefore there was valid reason to believe that income chargeable to tax has escaped assessment. The element of failure on part of the assessee to disclose truly and fully all material facts would also depend substantially on this very aspect. - Decided in favour of assessee

Summary

Issues:
Challenge to notice seeking to reopen assessment for the assessment year 2008-09 beyond the statutory period of four years.

Analysis:
The petitioner, engaged in diamond trading, filed an income tax return for the assessment year 2008-09, which was scrutinized and assessed in 2010. The Assessing Officer sought to reopen the assessment in 2015 based on a report regarding bank transactions of the petitioner with an ING Vysya Bank branch in Mumbai. The notice was issued beyond the four-year limit, necessitating the Assessing Officer to establish that income had escaped assessment due to the assessee's failure to disclose material facts.

Upon reviewing the reasons recorded by the Assessing Officer, it was found that the notice was based on the inability to trace the petitioner for verifying bank transactions totaling over &8377; 114 crores. The petitioner raised objections to the reopening process, arguing that his permanent address was known to the authorities, and the bank account transactions were reflected in audited books. The Revenue contended that the large transactions in the bank account required verification, which was hindered by the petitioner's untraceable whereabouts.

The court emphasized that reopening assessments should not be for fishing expeditions but require tangible material to show income evasion. In this case, the Assessing Officer failed to make sufficient efforts to locate the petitioner, merely dropping a notice at an address without further attempts. The court ruled that suspicion and unverified details were inadequate grounds for reopening, especially when the petitioner's permanent address was known. Without diligent efforts to engage the assessee, the notice lacked validity, and the element of failure to disclose material facts was not established.

In conclusion, the court set aside the notice dated 30.03.2015, allowing the petitioner's challenge and disposing of the petition in their favor.