2009 (9) TMI 17 - HC - Income Tax

Re-opening of assessment assessment completed earlier u/s 143(3) assessee challenged the reassessment held that - at the stage of issuing of notices under Section 148, it is not necessary that the materials must be extensive and detailed - Income Tax Officer during the subsequent assessments for the year 1983-1984 realised that various cash credits/loans were bogus and consequently, detailed reasons have been given for these assessments years as reproduced above which reasons are good enough for reopening of the assessment - during the scrutiny of the returns of the assessment year 1983-84 whereby time and again the ITO asked the assessee to file particulars with respect to the details of the persons with respect to whom the credits were appearing in the books of accounts as loans and which were not complied with by the assessee - The assessment proceedings are, therefore, rightly initiated under Section 147(a)

Issues Involved:
1. Quashing of notices issued under Section 147/148 of the Income Tax Act, 1961.
2. Furnishing of reasons for reopening the completed assessments.
3. Validity of reopening assessments based on alleged change of opinion.
4. Sufficiency of material for reopening assessments.
5. Application of Section 147(a) versus Section 147(b) of the Income Tax Act.

Detailed Analysis:

1. Quashing of Notices Issued under Section 147/148:

The petitioners sought the quashing of notices issued under Section 147/148 of the Income Tax Act for Assessment Years 1977-1978 to 1982-1983. The court examined whether the reopening of assessments was justified based on the reasons provided by the Income Tax Officer (ITO). The court noted that the reasons for reopening were provided in the counter-affidavit and that the challenge was based on the claim that these reasons amounted to a mere change of opinion without new material.

2. Furnishing of Reasons for Reopening the Completed Assessments:

One of the prayers in the writ pertained to directing respondent No.1 to furnish a copy of the reasons for reopening the completed assessments before issuing the impugned notices. This part of the relief became infructuous as the respondents provided the reasons along with their counter-affidavit.

3. Validity of Reopening Assessments Based on Alleged Change of Opinion:

The petitioners argued that the reopening of assessments was based on a mere change of opinion, which is illegal. They contended that the reasons provided did not constitute new material but were merely a reevaluation of the same facts. The court examined the reasons given for each assessment year, noting that the ITO cited the introduction of cash credits whose genuineness was not proved by the assessee despite several opportunities.

4. Sufficiency of Material for Reopening Assessments:

The court referred to the relevant provisions of Section 147 and 148, emphasizing the requirement for "reasons to believe" that income had escaped assessment. The court cited the Supreme Court's judgment in Assistant Commissioner of Income-Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd., which clarified that at the stage of issuing notices under Section 148, it is not necessary for the material to be extensive and detailed. The court found that there were sufficient materials, including letters and correspondence between the ITO and the assessee, to justify the reopening of the assessments.

5. Application of Section 147(a) versus Section 147(b) of the Income Tax Act:

The petitioners contended that the impugned notices were issued under Section 147(a) and that it was impermissible to refer to Section 147(b) to sustain the notices. The court found that the reasons for reopening the assessments for the years 1977-1978 to 1980-1981 incorporated the detailed reasons provided for the years 1981-1982 and 1982-1983. The court applied the doctrine of incorporation, deeming the detailed reasons for the later years to be included in the reasons for the earlier years. Consequently, the court held that the assessment proceedings were rightly initiated under Section 147(a) and there was no need to rely on Section 147(b).

Conclusion:

The court concluded that there existed sufficient materials for the ITO to initiate proceedings under Section 147/148. The reasons provided for reopening the assessments were valid and not merely a change of opinion. The writ petitions were dismissed, and the assessment proceedings were upheld. The parties were directed to bear their own costs.

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