2017 (3) TMI 1238 - HC - Income Tax

Reopening of assessment - reasons to believe - Held that - The respondents have placed on record the materials that gave them the reason to believe that there is escapement of Income. The ground for re-assessment is under-invoicing which in the opinion of this Court is sufficient reason to believe that there is escapement of income. The sufficiency of reasons cannot be gone into in a writ proceedings. The contents of the Invoices have to be ascertained which is a factual issue and to be adjudicate after hearing the assessee. Hence, prima-facie no illegality can be attached to the reasoning of the assessing authority for arriving at a conclusion, that there has been under invoicing and consequent escapement of income. The expression reasons to believe indicates a satisfaction that is subjective in nature but such satisfaction must be arrived at and must be based on relevant material. The report by the Commissions and the various invoices relied upon, can by no stretch of imagination be described as irrelevant material. But the issue whether the said relevant material are sufficient to actually re-assess and penalize the assessee can be arrived at only after a through examination of the material and after opportunity to the party. Thus, the same is a fact finding exercise which this court ought not to enter in the exercise of its jurisdiction under Articles 226 of the Constitution of India. The reasoning of the authorities is sound and proper. There being no illegality, the writ petitions assailing the notice and the order on the objection is premature and the proceedings initiated under section 148 of the Act are justified and do not call for interference at the hands of this Court.

Summary

Issues involved:
1. Reopening and reassessment of income tax assessment for the years 2009-10 and 2010-2011 under Section 147 of the Income Tax Act.
2. Validity of the notice dated 30.09.2015 issued by the first respondent.
3. Objections raised by the petitioner against the notice and their rejection by the second respondent.
4. Allegations of under-invoicing and involvement in illegal mining leading to income escapement.
5. Legality of the reasons provided for reassessment and the time limit for reassessment.

Analysis:

1. The petitioner sought a writ of certiorari to challenge the notice issued under Section 148 of the Income Tax Act for reopening and reassessment of the income tax assessment for the years 2009-10 and 2010-2011. The petitioner contended that the returns were filed on time, and there was no suppression or failure on their part leading to income escapement. Additionally, it was argued that the proceedings were time-barred as they exceeded the four-year limit under Section 147 of the Act.

2. The petitioner requested reasons for the reassessment, which were provided, indicating under-invoicing allegations related to illegal mining activities. The authorities relied on a report by a commission and invoices showing discrepancies in income declarations. The court noted that the grounds of under-invoicing were sufficient to believe in income escapement, and the sufficiency of reasons could not be challenged in a writ proceeding.

3. The court found that the assessing authority's reasoning for under-invoicing and income escapement was not illegal. The reassessment beyond four years was deemed justified based on the provisions of the Act, exempting reassessment in cases of failure to disclose material facts necessary for assessment. The objections raised by the petitioner were considered in light of new evidence from the commission's report, justifying the reassessment proceedings.

4. The court emphasized that the sufficiency of the material relied upon by the authorities for reassessment was a factual issue and not within the purview of a writ jurisdiction. The subjective satisfaction of the authorities based on relevant material, including the commission's report and invoices, was deemed sound and proper. The court stated that the legality of the reassessment proceedings could only be determined after a thorough examination of the material and providing an opportunity to the party.

5. Ultimately, the court rejected the petitions, concluding that they lacked merit. It upheld the validity of the notice and the order rejecting the objections, stating that the reassessment proceedings were justified and did not warrant interference. The court highlighted that entering into fact-finding exercises was beyond its jurisdiction under Article 226 of the Constitution of India.

This detailed analysis of the judgment highlights the key issues involved in the case and provides a comprehensive overview of the court's reasoning and decision regarding the challenges to the reassessment of income tax for the specified years.