2017 (6) TMI 600 - HC - Income Tax

Validity of reopening of assessment - Whether it is right in law to initiate parallel proceedings u/s.148 when proceedings u/s.142(1) is still pending? - Held that - In the affidavit dated 22.06.2016 filed on behalf of the revenue, it is stated that a notice u/s.148 of the Income Tax Act was issued on 23.9.2011 for the assessment year 2009-10 and no notice was issued under section 142(1) of the Income Tax Act for the assessment year 2009-10. The Letter dated 29.07.2011 was a covering letter addressed to the assessee. No notice u/s.142(1) was enclosed for the assessment year 2009-10 and it was only for the assessment year 2010-11. Therefore, the contention of the appellant that there are parallel proceedings one under section 148 and another under section 142(1) of the Income Tax Act is untenable. It is also pertinent to note that no such ground was raised either before the appellate authority or Income Tax Tribunal. Existence of reasons to believe - information received from a third party - Held that - AO is empowered to re-open the assessment if he has reasons to believe that the income has escaped from the assessment. It is not required by the revenue to show that income which has escaped assessment was due to the failure on the part of the appellant to disclose fully and truly all the materials relevant to the assessment. Both the appellate authority and the Income Tax Tribunal has found that the assessing officer was empowered to re-open the assessment in the instant case. It is an admitted fact that the assessee had failed to file his return of income for the assessment year 2009-10. Pursuant to the survey conducted under section 133A of the Act in the business premises of Smt.Leela Surana, a Share Sub-Broker, on 25.11.2009, it came to light that the assessee had made cash payments of ₹ 6,80,000/- on 17.09.2008 and ₹ 30,000/- on 24.9.2008 to Smt. Leela Surana for purchase of shares and had obtained back dated contract note for the purchase of 4,700 share of Shyam Star . Subsequently, the assessee had sold these shares on 17.9.2008 and 24.9.2008 for ₹ 6,75,838.61 and 27,378.47 and remitted the sale proceeds to his bank account. Therefore, the assessing officer had the reasons to re-open the assessment of the assessee. Hence, in our view, the Tribunal was justified in assessing the correctness of the notice for reopening the assessment under Section 148 on the basis of the reasons which were disclosed by the Assessing Officer. - Decided against assessee.

Summary

Issues Involved:
1. Validity of initiating parallel proceedings under Sections 142(1) and 148 of the Income Tax Act.
2. Whether information from a sworn statement of a third party satisfies the "reason to believe" clause for reopening an assessment under Sections 147/148.
3. Validity of reopening assessment based on third-party information.
4. Whether calling for records without reasoning them out constitutes a valid reason for reopening under Sections 147/148.
5. Validity of reopening based on inter-departmental information without clear satisfaction of income escape.

Issue-wise Detailed Analysis:

1. Validity of initiating parallel proceedings under Sections 142(1) and 148:
The appellant contended that parallel proceedings under Sections 142(1) and 148 were invalid. However, the court found that no notice under Section 142(1) was issued for the assessment year 2009-10, and the letter dated 29.07.2011 was only a covering letter for the assessment year 2010-11. Therefore, the claim of parallel proceedings was untenable and not raised before the appellate authority or the Tribunal.

2. Information from a sworn statement of a third party for "reason to believe":
The appellant argued that reopening the assessment based on a third-party sworn statement did not satisfy the "reason to believe" clause. However, the court noted that the appellate authority found additional evidence apart from the sworn statement indicating income escapement. The reopening was within four years from the end of the relevant assessment year, making the first proviso of Section 147 inapplicable. The assessing officer had sufficient reasons to believe that the income had escaped assessment, justifying the reopening.

3. Validity of reopening assessment based on third-party information:
The court held that the assessing officer was empowered to reopen the assessment based on information from a third party if it indicated income escapement. The Tribunal and appellate authority both found the reopening valid, given the appellant's failure to file a return for the assessment year 2009-10 and the evidence of cash payments for shares discovered during a survey.

4. Calling for records without reasoning them out:
The appellant's contention that merely calling for records without reasoning them out does not constitute valid grounds for reopening was dismissed. The court found that the assessing officer's reasons for reopening were based on substantial evidence, including the appellant's cash payments for shares and subsequent sale proceeds, supporting the belief that income had escaped assessment.

5. Validity of reopening based on inter-departmental information:
The court rejected the appellant's argument that inter-departmental information without clear evidence of income escape was insufficient for reopening. The assessing officer had concrete reasons to believe income had escaped assessment, supported by the survey findings and the appellant's transactions. The Tribunal's decision to remit the matter back to the assessing officer for further verification of the statement of accounts was upheld.

Conclusion:
The court found no substance in the appellant's questions of law and dismissed the appeal, affirming the Tribunal's order to remit the matter back to the assessing officer to verify the statement of accounts. The reopening of the assessment was deemed valid, and the appellant's arguments were rejected.