2016 (8) TMI 276 - HC - Income Tax

Reopening of assessment - reasons to believe - information provided by DGIT (Investigation) Mumbai - Held that - Perusal of the said reasons postulate that an information has been received by DGIT (Inv.) branch of Ahmedabad about bogus purchases wherein, it has been emerged that two survey operations were carried out by the competent authority, Kolkata in case of Vikrant Kayan and Arvind Kayan and the information which has been gathered is that these Kayans are well known entry operators of Kolkata and have been giving entires of bogus share capital, bogus billing entries pertaining and bogus long term capital gains to various beneficiaries across the country and it has been revealed in the said information that this very assessee i.e. present petitioner is also a beneficiary of such entry operation of Kayans to the extent of ₹ 127.94 lacs (accommodating co. Agnes Bruno Ltd.) pertaining to A.Y.2008-09 and based upon this material, the authority has issued notice under Section 148 of the Act for reopening of assessment as from the material, the authority found that there is a reasonable belief that income of the petitioner assessee has escaped assessment and therefore, it is justified to reopen the assessment. It is also emerging from the order passed by the authority rejecting the objections submitted by the petitioner dated 21.1.2016 that each and every material submitted by the petitioner has been extensively dealt with and a detailed order came to be passed and the said order is supported by cogent reasons, the decision arrived at to reopen the assessment appears to be just and proper. From the material available, the authority prima facie found that petitioner assessee is also the beneficiary of those Kayans brothers, who are well known entry operators across the country and to the extent of sizable amount, the petitioner has also been benefited and this part of the income appears to have been escaped assessment in the belief of the authority, the said belief cannot intercepted by exercising extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. - Decided against assessee.

Summary

Issues Involved:
1. Legality and validity of the notice issued under Section 148 of the Income-Tax Act, 1961.
2. The rejection of objections filed by the petitioner against the reopening of assessment.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Notice Issued Under Section 148 of the Income-Tax Act, 1961:

The petitioner challenged the legality and validity of the notice dated 31.3.2015 issued under Section 148 of the Income-Tax Act, 1961, which suggested that income chargeable to tax had escaped assessment. The petitioner argued that the initial assessment was thoroughly scrutinized, and all material facts were fully and truly disclosed. The petitioner contended that the reopening of the assessment was based on information from a third party (the DGIT (Investigation), Ahmedabad) without independent satisfaction or application of mind by the authority. The petitioner cited that the reasons for reopening were not valid and reflected no independent satisfaction, merely relying on third-party information about bogus entries.

The court examined whether the authority's reasonable belief was based on some material. It was noted that the DGIT (Investigation), Ahmedabad, received information about bogus purchases and entries from surveys conducted on known entry operators in Kolkata. The petitioner was identified as a beneficiary of such bogus entries. The court concluded that the information received provided a reasonable belief that income had escaped assessment, justifying the reopening of the assessment. The court referenced the Supreme Court's decision in Assistant Commissioner of Income-Tax V/s. Rajesh Jhaveri Stock Brokers Pvt. Ltd., which clarified that at the stage of issuing a notice, the requirement is a reason to believe, not established fact of escapement of income.

2. Rejection of Objections Filed by the Petitioner Against the Reopening of Assessment:

The petitioner filed objections against the reopening, arguing that all material facts were disclosed during the initial assessment and that the reopening was based on information from another agency without independent verification. The authority rejected these objections, leading to the petitioner's challenge in court.

The court reviewed the authority's order rejecting the objections and found it to be detailed and supported by cogent reasons. The authority had extensively dealt with the material submitted by the petitioner and concluded that the petitioner was a beneficiary of the bogus entries. The court held that the reopening of the assessment was justified based on the material available and the reasonable belief formed by the authority. The court emphasized that at the stage of issuing a notice, the requirement is a reason to believe, not established fact of escapement of income, and that the Assessing Officer's function is to administer the statute with fairness to taxpayers.

The court also referenced a recent decision in a group of tax appeals where it was held that reopening based on information from another wing (Excise Department) was permissible. The court concluded that the authority's decision to reopen the assessment was justified and dismissed the petition, discharging the notice and vacating any interim relief granted earlier.