2018 (4) TMI 806 - HC - Income Tax

Reopening of assessment - copy of the information received from the Office of the Additional Director of Income Tax (Investigation) which forms the basis of the impugned notice not supplied to petitioners - Held that - In identical circumstances, this Court in Shri Dhlraj Uttamchand Jain Vs. Asstt. Commissioner of Income Tax & Ors. (2018 (3) TMI 673 - BOMBAY HIGH COURT) had restored the objections of the petitioners to the AO to pass a fresh order after considering the fresh objections to be filed by the petitioners to the reasons in the context of the material relied upon by the Assessing Officer to come to the conclusion that there has been an escapement of income. In our view, this petition could be disposed of on similar lines. Although, it was contended that the Assessing Officer may pass the same order rejecting the petitioners objections, we do not accept this submission. We are confident that the Assessing Officer would independently apply his mind to the petitioners objections and dispose of the same showing utmost fidelity in the letter and spirit - thus restore the objection to the Assessing Officer. Therefore, the parties are put to notice that on the next date it is likely that the petition itself would be finally disposed.

Summary

Issues:
Challenge to Notice under Section 148 of the Income Tax Act, 1961 and order disposing of objections to the reasons for reopening assessment for Assessment Year 2010-11.

Analysis:
The petitions under Article 226 of the Constitution of India challenge the Notice dated 31st March, 2017 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for Assessment Year 2010-11. The reasons for reopening the assessment were based on information received regarding unsecured loans obtained by the assessee from another company, triggering suspicion of escaped assessment. The petitioners objected to these reasons, requesting a copy of the information forming the basis of the notice, which was not provided. Their objections were subsequently rejected by an order dated 17th November, 2017.

The Assessing Officer filed an affidavit supporting the reasons for issuing the notice, citing information received from the Additional Director of Income Tax (Investigation) as the basis for believing that income chargeable to tax had escaped assessment. In a similar case, the Court had directed the Assessing Officer to consider fresh objections before passing a final order. The Court emphasized the importance of providing relevant documents or reports when referring to external information in the reasons for reopening assessments, as per guidelines set by other courts. The Revenue sought to rely on a report received from the Assistant Director of Income Tax (Investigation) in their affidavit-in-reply, which the petitioner had not been given an opportunity to address in their objections.

The Court decided to follow a similar approach as in the previous case, emphasizing the need for the Assessing Officer to independently review the petitioners' objections and adhere to legal principles to avoid unnecessary litigation. The Court aimed to reduce the burden of re-assessments and encourage thorough consideration of objections. The parties were informed that the petition would likely be finally disposed of in the next hearing, scheduled for 26th April, 2018. The interim relief granted earlier was to continue until then.