2017 (1) TMI 1040 - HC - Income Tax

Reopening of assessment - Held that - In the present case on receipt of information that, a suspicious transaction of ₹ 2.20 crores had happened in respect of the account of the assessee for the relevant financial year, the assessing officer had undertaken the exercise of issuance of notice under Section 148 of the Act of 1961. It appears from the material made available on record that, the assessing officer had applied his mind to the materials placed before him before issuance of the notice under Section 148. He was informed of a suspicious transaction which had resulted in a sum of ₹ 2.20 crores approximately coming into the account of the assessee by way of diverse transactions. On basis of such information, he had applied his mind and formed an opinion that he should undertake an exercise under Section 148. He has explained his stand after the objections were raised on behalf of the assessee. In the order dated August 5, 2016 while disposing of the objections the assessing officer has stated that, during the verification of a report of suspicious transaction, it was found that, huge unaccounted cash deposit made in the bank account of individual person of a concerned bank and the deposited cash of such bank account was finally transferred by issued cheque routed through various companies to the assessee and other beneficiaries during relevant financial year. In such circumstances, he finds that, the assessee had received a fund of ₹ 2.20 crores from sources which were not found to be disclosed. The assessing officer has given reasons for the invocation of Section 148. He has disclosed the foundational basis for doing so. The basis cannot be wished away as mere surmise. He is not required to have conclusive proof at the stage of Section 148.

Issues:
1. Invocation of Section 148 of the Income Tax Act, 1961 against the petitioner based on alleged income escaping assessment.
2. Validity of reasons given for invoking Section 148.
3. Sufficiency of material available to the assessing officer for forming a reasonable opinion.
4. Disposal of objections raised by the petitioner.
5. Interpretation of relevant case laws regarding the formation of belief by the assessing officer.
6. Justifiability of interference in the facts of the case.

Analysis:
1. The petitioner contested the invocation of Section 148 of the Income Tax Act, 1961, arguing that the assessing officer lacked sufficient material to form a reasonable opinion. The petitioner's advocate highlighted the vagueness of the reasons provided for invoking Section 148, specifically pointing out the lack of details regarding the source of funds and transactions. The assessing officer was accused of not specifying particulars, making it difficult for the petitioner to respond effectively to the allegations.

2. The assessing officer justified the invocation of Section 148 by citing suspicious transactions involving a substantial amount received by the petitioner. The officer emphasized the need to investigate cash and cheque transactions related to the petitioner, which were not adequately explained during the initial assessment. The officer's decision was based on the belief that income had escaped assessment, supported by findings of unaccounted cash deposits and fund transfers.

3. The court examined the contentions of both parties and noted that the assessing officer initiated proceedings under Section 148 four years after the relevant assessment year. The reasons provided for invoking Section 148 highlighted suspicious transactions, including fund receipts and changes in company management. The court emphasized the importance of the assessing officer forming a valid opinion based on available information before issuing a notice under Section 148.

4. The disposal of objections raised by the petitioner was also scrutinized, with the court observing that the assessing officer had considered objections and provided detailed reasoning for proceeding with the reassessment. The officer's decision was supported by the findings of unaccounted cash deposits and fund transfers, indicating potential undisclosed income sources.

5. The court referenced relevant case laws, such as Atul Jain, Sarthak Securities Co. (P.) Ltd., and Chhugamal Rajpal, to underscore the necessity of a valid reason for issuing a notice under Section 148. These cases emphasized the importance of a well-founded belief by the assessing officer, rather than mere satisfaction, in initiating reassessment proceedings.

6. Ultimately, the court declined to interfere in the present case, citing the assessing officer's clear reasoning and valid basis for invoking Section 148. The court dismissed the petitioner's plea and vacated the interim order, highlighting the assessing officer's obligation to reopen the assessment before taking coercive actions. The request for a stay was denied due to the absence of an immediate threat of coercive measures.

In conclusion, the judgment upheld the validity of the assessing officer's decision to invoke Section 148 based on suspicious transactions and undisclosed income sources, emphasizing the importance of a well-founded belief supported by available evidence.

← Previous Next →