2017 (1) TMI 51 - HC - Income Tax

Validity of reopening of assessment - reason to believe - Held that - Machinery has been provided by the Act for assessment/reassessment. Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer should serve on the assessee a notice requiring him to furnish a return of income within such period as may be specified in the notice. But, before issuing a notice, the Assessing Officer is required to record reasons for doing so. In the present case, find that required notice has been sent to the petitioner. Further, reasons for issuance of notice/initiation of proceeding have also been disclosed to the petitioner. Required sanction was also obtained from competent authority. In such situation, the Court is not inclined to entertain the writ petition for quashing the notice issued under Section 148 of the Act. Rather, it will be appropriate for the petitioner to approach the Assessing Officer and reply the notice. It is always open for the petitioner to take all the pleas before the Assessing Officer which he has taken before the Court. It is not the case of the petitioner that the Authority has not proceeded as per relevant provisions of the Act or is proceeding in the mater in defiance of the fundamental principles of judicial procedure, or has not/is not providing proper opportunity of hearing to the petitioner. - Decided against assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Alleged escapement of income from assessment for the Assessment Year 2009-10.
3. Timeliness and procedural compliance of the notice under Sections 148 and 142(1).
4. Jurisdiction of the Assessing Officer to initiate reassessment proceedings.

Issue-wise Detailed Analysis:

1. Validity of the Notice under Section 148:

The petitioner sought the quashing of the notice issued under Section 148 of the Income Tax Act, 1961, dated 31.03.2016, proposing to reassess the income for the Assessment Year (AY) 2009-10. The petitioner argued that the notice was time-barred and not served within the stipulated period, thus rendering it invalid. The court, however, found that the notice was issued and served on 31.03.2016, within the permissible time frame, and that the required sanction from the competent authority was obtained. Therefore, the court upheld the validity of the notice.

2. Alleged Escapement of Income:

The petitioner contended that there was no escapement of income as alleged by the respondent. The petitioner had disclosed all transactions, including the sale of immovable property and cash deposits, in the audited books of accounts and tax returns. The court noted that the Assessing Officer had reason to believe that income amounting to ?1,08,00,000/- had escaped assessment based on discrepancies in the reported transactions and the information available with the department. The court concluded that the Assessing Officer had sufficient grounds to initiate reassessment proceedings under Section 147.

3. Timeliness and Procedural Compliance:

The petitioner argued that the reassessment proceedings were initiated beyond the permissible period and were procedurally flawed. The court examined the timeline and found that the notice under Section 148 was issued on 31.03.2016 and served on the same day, thus falling within the six-year limit prescribed under Section 149(1)(b) of the Act. The court also noted that the petitioner was given an opportunity to respond to the notice and the reasons for reassessment were duly communicated. Therefore, the court held that the procedural requirements were met.

4. Jurisdiction of the Assessing Officer:

The petitioner challenged the jurisdiction of the Assessing Officer to initiate reassessment proceedings, arguing that the original assessment proceedings initiated by a notice under Section 142(1) dated 26.08.2011 should have been completed within the stipulated period. The court observed that no assessment order under Section 143(3) or Section 144 was passed in response to the notice issued on 26.08.2011, and thus, the reassessment proceedings initiated under Section 148 were not barred. The court further stated that the Assessing Officer had the jurisdiction to issue the notice based on the information indicating potential escapement of income.

Conclusion:

The court dismissed the writ petition, holding that the notice issued under Section 148 was valid and procedurally compliant. The court emphasized that the petitioner could present all objections and defenses before the Assessing Officer during the reassessment proceedings. The court did not express any opinion on the merits of the case, leaving it to the Assessing Officer to decide based on the petitioner's submissions in accordance with the law.

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