2018 (5) TMI 1551 - HC - Income Tax

Reopening the assessment u/s 147 - valid sanction being granted by the competent authority before issuing the impugned Notice of reopening of assessment or not? - HELD THAT - As is well known subsection (1) of Section 151 of the Act provides that no notice shall be issued u/s.148 of the Act by the Assessing Officer after the expiry of a period of 04 years from the end of relevant Assessment Year unless the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issuance of such Notice. Subsection (1) of Section 151 of the Act thus provides a safeguard whereby in a case where the Assessing Officer desires to reopen an assessment by issuing notice beyond the period of 04 years from the end of relevant Assessment Year sanction from the above mentioned higher authority would be needed. We discarded the petitioner s first argument that no sanction at all was granted by the competent authority. Addl. Commissioner of Income tax had not only put his remarks on the proforma presented before him by the Assessing Officer but also separately conveyed his satisfaction to the Assessing Officer in a separate letter. The application of mind and grant of sanction was thus one integrated exercise. Even independently we have no reason to believe or hold that this was a case of nonapplication of mind. The Addl. Commissioner of Income tax had perused the materials on record which included the reasons recorded by the Assessing Officer. He had recorded his satisfaction and opinion that it was a fit case for issuance of Notice u/s.148(1) of the Act. Decided against assessee.

Issues Involved:
1. Validity of the Notice dated 21.03.2014 for reopening the petitioner’s assessment for the A.Y. 2007-08.
2. Whether the sanction required under Section 151 of the Income Tax Act was validly granted.

Issue-wise Detailed Analysis:

1. Validity of the Notice for Reopening the Assessment:

The petitioner challenged the notice dated 21.03.2014 issued by the respondent-Assessing Officer to reopen the petitioner’s assessment for the A.Y. 2007-08. The petitioner, an individual engaged in the business of brokerage in land dealings, had his return for A.Y. 2007-08 processed under Section 143(1) of the Income Tax Act, 1961 without scrutiny. During a survey operation on 23.03.2013, certain diaries and loose papers were found and impounded, which led the Assessing Officer to believe that income chargeable to tax had escaped assessment. The impounded materials indicated unaccounted transactions and receipts, leading to the issuance of the impugned notice.

The petitioner’s return was processed without scrutiny, giving the Assessing Officer a wider scope for reopening the assessment. The Supreme Court in cases like Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd. and Dy. Commissioner of Income Tax v. Zuari Estate Development and Investment Company Ltd. has discussed this aspect, affirming that no opinion is formed in such cases, and hence, the question of change of opinion does not arise.

The reasons recorded by the Assessing Officer indicated that the petitioner was involved in sizeable land dealings not reflected in his books of accounts, leading to the belief that an income of ?44.50 Crores had escaped assessment. The petitioner did not challenge the validity of these reasons but contended that the sanction required under Section 151 of the Act was not validly granted.

2. Validity of the Sanction under Section 151:

The petitioner’s counsel argued that no valid sanction was granted by the competent authority before issuing the notice of reopening. Initially, the Assessing Officer conceded that no sanction order was available on record. However, in the affidavit in reply, the respondent produced a copy of the sanction, which the petitioner claimed was mechanically granted.

The court examined whether the sanction was granted after due application of mind. The respondent produced documents showing that the proposal for issuance of notice, along with the reasons recorded, was placed before the Deputy Commissioner of Income Tax. The Deputy Commissioner, after perusing the materials, forwarded the proposal to the Additional Commissioner of Income Tax, who recorded his satisfaction that it was a fit case for issuing the notice under Section 148 of the Act.

The court noted that the Additional Commissioner had not only put his remarks on the proforma but also conveyed his satisfaction in a separate letter, indicating an integrated exercise of application of mind. The court found no reason to believe that this was a case of non-application of mind.

The court referred to the judgment in Lalita Ashwin Jain v. Income Tax Officer, which held that brief reasons by the Joint Commissioner are desirable to avoid allegations of non-application of mind. The court concluded that the provisions of the Act were duly complied with, and the sanction was validly granted.

Conclusion:

The court dismissed the petition, holding that the notice for reopening the assessment was validly issued and the sanction required under Section 151 of the Income Tax Act was validly granted. The petitioner’s contentions regarding the invalidity of the sanction were rejected, and the court found that there was due application of mind by the competent authority.

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