2017 (1) TMI 1378 - HC - Income Tax

Validity of reopening of assessment - on money paid by assessee in respect of land - Held that - From the reasons recorded, it appears that all the allegations are with respect to Shri Kamal M. Gohil and ISCON Group and in most of the transactions, which are referred in the reasons recorded, the petitioner assessee is not at all connected. So far as the petitioner assessee is concerned, the petitioner assessee is connected with the transactions with respect to the lands situated at Sanathal, Taluka Sanand in which as observed hereinabove the petitioner assessee is the purchaser, who has paid the entire sale consideration by cheques and as observed hereinabove, there is no allegation whatsoever that any on money is paid by the petitioner assessee. Under the circumstances on the ground that there is no tangible material available with the Assessing Officer to form an opinion that the income chargeable to tax has escaped the assessment in the case of the petitioner assessee, the Assessing Officer is not justified in reopening the assessment on such belief, which has no base. Under the circumstances, on the aforesaid ground alone, the impugned reassessment proceedings deserves to be quashed and set aside. - Decided in favour of assessee

Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act, 1961.
2. Alleged escapement of income chargeable to tax for the Assessment Year 2009-10.
3. Connection of the petitioner with transactions involving Shri Kamal M. Gohil and ISCON Group.
4. Jurisdiction of the Assessing Officer under Section 147 of the Act.

Issue-wise Detailed Analysis:

1. Validity of the notice under Section 148 of the Income Tax Act, 1961:
The petitioner, a builder engaged in property development, challenged the notice under Section 148 of the Income Tax Act, 1961, issued by the Assessing Officer (AO) to reopen the assessment for the Assessment Year 2009-10. The petitioner argued that the notice was "patently bad and contrary to law" as there was no tenable material available with the AO to suggest that any income had escaped assessment.

2. Alleged escapement of income chargeable to tax for the Assessment Year 2009-10:
The AO sought to reopen the assessment based on information received about transactions involving one Shri Kamal M. Gohil, who was allegedly a front man for ISCON Group. The AO noted that Shri Kamal M. Gohil had engaged in multiple transactions involving substantial sums of money, which led to the belief that income chargeable to tax had escaped assessment. However, the petitioner contended that there was no evidence of any "on money" payment by the petitioner to the sellers or Shri Kamal M. Gohil.

3. Connection of the petitioner with transactions involving Shri Kamal M. Gohil and ISCON Group:
The petitioner argued that the main allegations were against Shri Kamal M. Gohil and ISCON Group, and the petitioner had no involvement in most of these transactions. The only transaction involving the petitioner was the purchase of land at Sanathal, Taluka Sanand, for which the petitioner paid the entire sale consideration of ?9,20,20,500/- by cheques. The petitioner emphasized that there were no allegations of any "on money" payments in this transaction.

4. Jurisdiction of the Assessing Officer under Section 147 of the Act:
The petitioner contended that the AO had "materially erred in assuming the jurisdiction under Section 147 of the Act" as there was no tangible material to form an opinion that income had escaped assessment. The respondent, representing the revenue, argued that the reopening was based on specific information and discreet field inquiries that revealed Shri Kamal M. Gohil was a front man for ISCON Group. The AO formed an opinion based on this tangible material and issued the notice under Section 148 after obtaining appropriate approval.

Judgment:
The court concluded that there was no tangible material available with the AO to form an opinion that income chargeable to tax had escaped assessment in the case of the petitioner. The court noted that the allegations were primarily against Shri Kamal M. Gohil and ISCON Group, and the petitioner was only involved in a single transaction where the entire sale consideration was paid by cheques with no allegations of "on money" payments. Consequently, the court held that the AO was not justified in reopening the assessment based on such belief, which lacked a substantial basis. The impugned reassessment proceedings were quashed and set aside. The petition was allowed, and the notice under Section 148 of the Act was invalidated.

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