2017 (2) TMI 119 - HC - Income Tax

Validity of notice under Section 147/148 - Held that - In the present case, it is not an investment, which is sought to be enquired or made basis for reopening of assessment but the source of money since it was not disclosed and did not form part of record on the basis whereof assessment was made, hence a new material, and show that the amount constitute escaped income and that would justify reassessment proceeding and issue of notice under Section 148 of Act, 1961. It is not a change of opinion but there is substantive material available before the Assessing Authority justifying proceedings of reassessment under Section 147, and, therefore, notice issued under Section 148 cannot be said to be illegal or without jurisdiction. The argument advanced otherwise is invalid and rejected. In the facts and circumstances of the case in hand, we do not find any illegality in issuing notice by Assessing Office under Section 147/148 of Act, 1961 and the notice issued is just and valid. - Decided in favour of Revenue and against Assessee.

Summary

Issues involved:
Validity of notice under Section 147/148 of Income Tax Act

Detailed Analysis:

1. Background: The judgment involves two appeals under Section 260A of the Income Tax Act, 1961, arising from a previous order by the Income Tax Appellate Tribunal. The primary issue revolves around the validity of a notice issued under Section 147/148 of the Income Tax Act.

2. Contention: The appellant argued that the notice under Section 148 cannot be issued for making an inquiry unless there is a case of income escapement. The authorities, however, contended that although the investment was made, the sources were not disclosed, leading to income escapement.

3. Legal Precedent: The judgment referenced the case of Phool Chand Bajrang Lal vs. Income-Tax Officer, emphasizing the conditions required for Income Tax Officer's jurisdiction under Section 147 and 148. It highlighted the necessity for the officer to have reasons to believe in income escapement due to the assessee's failure to disclose material facts.

4. Jurisdiction for Reassessment: The court clarified that an Income Tax Officer can reopen assessment under Section 147 only if specific, reliable, and relevant information comes to light subsequently, indicating income escapement due to the assessee's failure to disclose material facts during the original assessment.

5. Standard of Reasoning: Referring to State of Uttar Pradesh vs. M/s Aryaverth Chawal Udyog, the judgment emphasized that the material forming the basis for the Assessing Authority's opinion must be rational, relevant, and not arbitrary. A mere change of opinion without substantial grounds does not warrant the reopening of assessment proceedings.

6. Conclusion: The court held that if there is substantial evidence indicating income escapement, the Assessing Officer is justified in issuing a notice under Section 148. In this case, the undisclosed source of money justified the reassessment proceedings, and the notice was deemed valid and legal. The argument against the notice being issued was rejected, and the question was answered in favor of the Revenue.

7. Final Decision: Consequently, the court dismissed both appeals, upholding the validity of the notice issued under Section 147/148 of the Income Tax Act, and ruled in favor of the Revenue against the Assessee.

This detailed analysis outlines the key points and legal principles addressed in the judgment regarding the validity of the notice under Section 147/148 of the Income Tax Act.