2009 (2) TMI 70 - HC - Income Tax

Reopening of assessment contention that income which has already been declared under Voluntary Disclosure of Income Scheme (VDIS) cannot be subjected to tax in any further proceedings contention that reasons recorded for reopening do not disclose any income which has escaped assessment since there is no material which can lead the AO to believe that any income has escaped assessment, impugned notices u/s 148 are quashed - A completed assessment cannot be reopened merely to make inquiries

Summary

Issues:
Challenging notices issued under Section 148 of the Income-tax Act, 1961 for Assessment Years 1995-96, 1996-97, and 1997-98.

Analysis:
1. The petitioner, a partnership firm, conducts business selling fresh vegetables on commission basis in a market managed by Agricultural Produce Market Committee (APMC). The petitioner contends receiving summons under Section 131 of the Act in November 1997 due to search and seizure proceedings involving other dealers in the market. The petitioner declared an amount under the Voluntary Disclosure of Income Scheme, 1997 for each of the three years under consideration.

2. The impugned notices for the three Assessment Years were received subsequently, challenging the re-opening of assessments concluded under the VDIS. The petitioner argued that the reasons recorded did not disclose any escaped income justifying the re-assessment.

3. The respondent authority argued that there was a substantial difference between the market fee paid and the commission received by the petitioner, suggesting unaccounted income. They relied on a presumption that gross receipts were taxable if not proven otherwise. The respondent emphasized the need for evidence to establish any reduction in the gross receipts.

4. The Court examined the reasons recorded by the respondent authority for re-opening the assessments. The reasons focused on discrepancies between the market fee paid and commission received, indicating potential escaped income. However, the Court found a lack of material linking the gross receipts to chargeable income. The Assessing Officer failed to establish any nexus between the gross receipts and taxable income.

5. The Court highlighted that the Assessing Officer's reasons did not demonstrate any material to treat the gross receipts as taxable income. The respondent's argument that the VDIS disclosure did not prevent inquiries into escaped income was acknowledged, but it was emphasized that re-opening assessments required concrete evidence of chargeable income evasion.

6. Consequently, the Court quashed and set aside the impugned notices dated 23.03.1999, ruling in favor of the petitioner. The judgment emphasized the necessity for concrete evidence linking gross receipts to chargeable income before re-opening assessments, in line with the provisions of the Income-tax Act, 1961.