2016 (12) TMI 616 - HC - Income Tax

Validity of reopening of assessment - disposal of objections filed by the Assessee - Held that - In the light of the reasons assigned by the respondent in the impugned order dated 16.11.2016, the case on hand cannot be stated to be one where the respondent has not considered the petitioner s objections and in the process of consideration, the respondent has taken a stand to the extent permissible at this point of time as if any further findings are rendered by him it would amount to pre-deciding the matter. Therefore, the respondent has satisfied the directions issued by the Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd vs. Income Tax Officer and others (2002 (11) TMI 7 - SUPREME Court ) 1 SCC 72 and has disposed of the objections filed by the Assessee by passing a speaking order which does not call for any interference at this stage. Accordingly, the writ petition is dismissed leaving it open to the petitioner to work out their remedies available under the Act.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for the year 2009-2010 and rejection of objections filed by the petitioner.

Analysis:
The petitioner, a Private Limited Company engaged in Corporate Advisory, Commission, and Real Estate, filed a writ petition challenging a notice under Section 148 of the Income Tax Act reopening the assessment for the year 2009-2010 and the subsequent order rejecting objections. The petitioner disclosed a loss in the return of income for that year and had issued compulsory convertible cumulative preference shares. The petitioner contended that the notice for reopening lacked tangible material and referred to various decisions to support dropping the proceedings. The counsel argued that without a final assessment order, reopening cannot be done without reason to believe income escaped assessment, citing relevant legal precedents.

In response, the revenue argued that the petitioner had alternative remedies under the Act and should not bypass them. The respondent's notice under Section 148 was based on a reason to believe that income had escaped assessment, focusing on the introduction of share premium and questioning its genuineness. The respondent's decision did not require conclusive proof of income escapement at the notice issuance stage. The court noted that the petitioner's objections primarily relied on judicial precedence rather than factual details, emphasizing the need to present facts before applying legal precedents. The court also addressed discrepancies in the type of shares issued and the applicable tax sections.

The court emphasized that the reason to believe must be linked to the formation of belief, which was present in this case. The respondent considered the objections and referred to relevant legal principles, stating that even without fresh materials, if there is a reason to believe income escaped assessment, a notice under Section 148 can be issued. The court concluded that the respondent had considered the objections satisfactorily, adhering to legal directions, and passed a speaking order. The court dismissed the writ petition, allowing the petitioner to pursue remedies under the Act.

In summary, the court upheld the validity of the notice under Section 148, emphasizing the importance of factual details over legal precedents in objections. The court found the respondent's actions in line with legal requirements and dismissed the petition, granting the petitioner the option to explore remedies under the Act.