2018 (7) TMI 1558 - HC - Income Tax

Reopening of assessment - validity of sanction provided under section 151 - borrowed satisfaction - Held that - None of the alleged inaccuracies or the errors are demonstrated to be so fundamental as to vitiate the very proceeding for reassessment. No further discussion on this ground is needed. Coming to the question of lack of sanction as required under section 151 of the Act before issuance of notice of reopening, we have perused the original files which would show that the Assessing Officer having recorded the reasons for reopening, presented the same for approval of the Principal Commissioner in prescribed format on 29. 03. 2017. On 30. 03. 2017, the Joint Commissioner of Income Tax as an intermediatory officer, processing such reasons and opining whether it was a fit case for reopening of the assessment under section 147 of the Act, in his own handwriting put the remarks I am satisfied that it was a fit case for reopening under section 147 of the Act. On 31. 03. 2017, the Principal Commissioner of Income Tax put his remarks that based on the reasons recorded by the Assessing Officer, he was satisfied that it was a fit case for reopening the assessment under section 147 of the Act. Thus, the sanction for reassessment was granted on 31. 03. 2017 i. e. the date on which such notice was issued. The contention with respect to the borrowed satisfaction and fishing inquiry overlap - Assessing Officer has not even called for any information or document from the assessee or any other person in relation to the assessee s proposed assessments. He has, by all accounts, merely contacted the Investigation Wing of the Income Tax department at Kolkata and based on the process of shortlisting, has called for information with respect to dealings of such shortlisted companies. If on the basis of the information so collected, no further information, is made available to the Assessing Officer which would enable him to form a belief that income chargeable to tax had escaped assessment, he would not be justified in issuing notice for reopening. Only in cases, where on the basis of such information he could bona fide form a belief that income chargeable to tax had escaped assessment, he could exercise powers for reassessment. Mere fact, that instead of such information being supplied to him by the Investigation Wing of the Income Tax Department at Kolkata he sought such information, would not be of any consequence. Appeal dismissed.

Issues Involved:
1. Sanction under Section 151 of the Income Tax Act.
2. Factual discrepancies and inaccuracies in the notice and reasons recorded.
3. Borrowed satisfaction without independent application of mind.
4. Fishing and roving inquiries by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Sanction under Section 151 of the Income Tax Act:
The petitioner contended that the sanction under Section 151 of the Act by the Commissioner before the issuance of the notice of reopening was not obtained. Upon reviewing the original files, it was observed that the Assessing Officer recorded the reasons for reopening and presented them for approval to the Principal Commissioner on 29.03.2017. The Joint Commissioner opined on 30.03.2017 that it was a fit case for reopening. The Principal Commissioner granted the sanction on 31.03.2017, the same date the notice was issued. The court found no evidence to support the petitioner’s claim that the notice was issued before obtaining the sanction. Thus, this issue was resolved in favor of the respondent.

2. Factual discrepancies and inaccuracies in the notice and reasons recorded:
The petitioner argued that there were numerous factual discrepancies and inaccuracies in the notice and the reasons recorded. However, the court found that none of the alleged inaccuracies or errors were fundamental enough to vitiate the reassessment proceedings. Therefore, this contention was dismissed without further discussion.

3. Borrowed satisfaction without independent application of mind:
The petitioner claimed that the Assessing Officer acted on borrowed satisfaction without independent application of mind. The court noted that the Assessing Officer had specific and definite information from the Investigation Wing of the Income Tax Department, Kolkata, regarding the petitioner receiving share application money from shell companies. This information was based on statements from directors of these companies admitting to providing bogus accommodation entries. The court concluded that the Assessing Officer had sufficient material to form a belief that income chargeable to tax had escaped assessment, thereby rejecting the contention of borrowed satisfaction.

4. Fishing and roving inquiries by the Assessing Officer:
The petitioner argued that the Assessing Officer carried out fishing and roving inquiries by contacting the Investigation Wing of the Income Tax Department, Kolkata, without any basis. The court observed that the Assessing Officer had the power to carry out preliminary inquiries before issuing a notice of reopening to collect information. Section 133 of the Income Tax Act allows the Assessing Officer to call for information even when no assessment is pending. The court found that the Assessing Officer’s actions were within the scope of his authority and did not amount to impermissible fishing or roving inquiries. The court emphasized that the Assessing Officer can form a belief based on the information collected and act accordingly.

Conclusion:
The court dismissed the petition, upholding the actions of the Assessing Officer and finding no merit in the petitioner’s contentions. The court confirmed that the reopening of the assessment was justified based on the specific information and material available to the Assessing Officer.

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