2016 (7) TMI 69 - HC - Income Tax

Reopening of assessment - Return accepted u/s 143(1) without scrutiny - Validity of notice issued u/s 148 - Held that - AO had considered the objections of the petitioner and disposed them of on the basis of material on record. The sole ground of the petitioner therefore, must fail. - AO would have considerable latitude in issuing notice for re-opening if it is found that he had tangible material to form a belief that income chargeable to tax had escaped assessment, it would not be appropriate on our part to strike down the notice.

Summary

Issues Involved:
1. Validity of the notice for re-opening the assessment.
2. Whether the Assessing Officer abandoned the original reasons for re-opening the assessment.

Detailed Analysis:

Issue 1: Validity of the Notice for Re-opening the Assessment
The petitioner challenged a notice dated 21.3.2014 which sought to re-open the assessment for the assessment year 2007-2008. The initial return was filed on 15.11.2007 and was accepted without scrutiny under section 143(1) of the Income Tax Act, 1961. The re-opening was based on information from DDIT (Inv)-III(2), Mumbai, following a search and seizure action on Shri Praveen Kumar Jain's group on 1.10.2013. The search revealed that the group was involved in providing accommodation entries such as bogus unsecured loans, share application money, and bogus sales. The petitioner allegedly received accommodation entries from entities controlled by Shri Praveen Kumar Jain, amounting to ?12,61,70,000. The Assessing Officer believed that the petitioner failed to disclose all material facts fully and truly, leading to the issuance of the notice under section 148.

Issue 2: Abandonment of Original Reasons for Re-opening
The petitioner raised objections to the re-opening notice, arguing that the information on which it was based was erroneous. The petitioner contended that it received only ?90,00,000 in share application money from two different entities, not the ?12,61,70,000 from the three entities mentioned in the notice. The petitioner claimed that the notice was based on incorrect information and should be dropped.

The court examined the objections and the Assessing Officer's response. The Assessing Officer maintained that the entities mentioned in the notice were controlled by Shri Praveen Kumar Jain and were involved in providing bogus entries. The petitioner did not deny transactions with these entities but argued that the amount was incorrectly stated. The Assessing Officer reasoned that the petitioner might have routed the transactions through different accounting treatments to obscure the actual nature of the entries.

Conclusion:
The court found that the original assessment was not framed after scrutiny, and the return was accepted under section 143(1). Referring to the Supreme Court's decision in Assistant Commissioner of Income-Tax v. Rajesh Jhaveri Stock Brokers P. Ltd., the court noted that an intimation under section 143(1)(a) is not an assessment order, and thus, the question of change of opinion does not arise.

The court concluded that the Assessing Officer did not abandon the original reasons for re-opening the assessment. The objections raised by the petitioner were considered and addressed based on the material on record. Given that the assessment was not originally scrutinized, the Assessing Officer had considerable latitude in issuing the re-opening notice if there was tangible material indicating that income had escaped assessment.

Therefore, the petition was dismissed, and the notice for re-opening the assessment was upheld.