2017 (1) TMI 726 - HC - Income Tax

Validity of reopening of assessment - absence of reasons to believe given - Held that - The orders informing reason to believe had been supplied as early as on 27/9/2015 and so far, no steps had been taken by the petitioner either to file the return or such other steps in accordance with law and therefore the writ petitions itself are not maintainable for delay and laches. That apart, it is submitted that the reason stated in the enclosure clearly indicates that there is suppression of turnover which itself is enough for the purpose of understanding the reason for reopening the assessment. The enclosure which has been annexed along with the documents clearly narrates why the assessment had to be reopened. Learned counsel for the petitioners however has a case that the enclosure that had been given was for internal purpose and was not intended to be a notice given to the petitioners indicating the reason to believe. In so far as the enclosure is enclosed along with Ext.P5 series and Ext.P7 series, necessarily, the petitioners are put to notice regarding the reason to believe by which the assessment had been reopened. Under such circumstances necessary particulars had already been given to the petitioner showing the reasons to believe and there is no reason why this Court should sit in judgment over the same and take a different view in the matter.

Summary

Issues:
Challenge to reopening of assessment under Sections 147 and 148 of the Income Tax Act, 1961 based on validity of reasons to believe.

Analysis:
1. The writ petitions challenged the Income Tax Department's action of reopening assessments under Sections 147 and 148 of the Income Tax Act, 1961. The petitioners, a husband and wife, contended that the reasons to believe, as reflected in the documents, were not valid for reopening the assessments.

2. The respondent filed a statement asserting that sufficient reasons were provided in the documents for the assessing officer to believe that there was an escaped turnover. The petitioners relied on various judgments to support their case.

3. The main contention was that the impugned documents lacked a valid reason to believe. The Income Tax Officer relied on a survey conducted at the business premises of the assessees, indicating suppression of actual receipts as the basis for believing that income had escaped assessment.

4. The reasons for initiating proceedings under Section 148 were detailed in the Annexure to the documents, which highlighted various discrepancies in the real estate business activities of the assessees, including suppression of turnover and unaccounted cash transactions. The petitioners' cooperation during post-survey inquiries was also questioned.

5. The respondent argued that the reasons for reopening assessments were clearly stated in the documents provided to the petitioners, indicating suppression of turnover as the primary reason. The delay in taking steps as per the law was also highlighted.

6. The Court emphasized that before reopening an assessment, the assessee has the right to request and receive the reason to believe. In this case, the reason to believe was provided to the petitioners. The enclosure with the documents sufficiently notified the petitioners of the reasons for reopening the assessment.

7. Considering the facts presented, the Court found no grounds to interfere with the impugned orders and dismissed the writ petitions.