2018 (12) TMI 1337 - HC - Income Tax

Reopening of assessment - seeking sanction from the Principal Commissioner - return filed by the petitioner is accepted without scrutiny - eligibility of reason to believe - Held that - We are satisfied that the reasons did exist on file, were duly recorded by the Assessing Officer before obtaining sanction from the Principal Commissioner, that the Joint Commissioner perused such reasons and forwarded the same to the Principal Commissioner with his own remarks and lastly that the Principal Commissioner also put his endorsement that it was a fit case for reopening of assessment. The mix up by the Departmental Authorities in conveying reasons twice would not be fetal in the present case. Firstly, it was later set of reasons conveyed to the petitioner which exist on file. Secondly, the earlier communication dated 22nd May, 2018 also concerns the gist of same reasons. So far as the material aspects are concerned, we notice no change. In essence under communication dated 22nd May, 2018 the Assessing Officer had merely conveyed the gist of his reasons to the petitioner. The present case is one where return filed by the petitioner is accepted without scrutiny. The Assessing Officer therefore, would have much wider latitude to reopen the assessment. The reasons recorded by him show that according to the Assessing Officer, the petitioner had invested the cash amount of ₹ 61,34,800/for purchase of an immovable property to be developed by one M/s Soni & Associates. The Petitioner had given a statement to the Police Authority, in which he had made such declaration. The return filed by the petitioner declared a total income ₹ 6,04,017/. It can thus be seen that the Assessing Officer had tangible material at his command to form a reasonable belief that income chargeable tax had escaped assessment. In the result, the petition is dismissed.

Summary

Issues:
Challenge to notice of reopening of assessment under Income Tax Act, 1961.

Analysis:
1. The petitioner challenged a notice of reopening of assessment issued by the Income Tax Officer, based on reasons related to cash payments for a residential property. The Assessing Officer believed that the cash amount invested for the property was undisclosed income of the assessee.

2. The petitioner requested reasons from the Assessing Officer, who provided details regarding cash payments for a property under an SRA scheme. The petitioner raised objections to the notice of reopening, which were rejected, leading to the filing of the present petition.

3. The Assessing Officer supplied reasons for reopening the assessment, indicating that the cash investment was from undisclosed sources and unexplained. The Officer believed that income exceeding a certain amount had escaped assessment, justifying the reopening under section 147 of the Income Tax Act, 1961.

4. The petitioner's counsel argued that the Assessing Officer did not record satisfaction that income had escaped assessment, lacked tangible material for reassessment, and did not provide the petitioner with the referenced information. The Department contended that there was sufficient material to support the reopening.

5. The High Court examined the original files and found that the reasons for reopening were duly recorded by the Assessing Officer before obtaining sanction from the Principal Commissioner. The Court confirmed that the reasons existed on file and justified the reopening of the assessment.

6. The Court noted that the return filed by the petitioner was accepted without scrutiny, giving the Assessing Officer wider latitude to reopen the assessment. The tangible material available to the Officer, including the petitioner's statement to Police Authorities, supported the reasonable belief that income had escaped assessment.

7. Ultimately, the Court dismissed the petition, concluding that the Assessing Officer had sufficient grounds to reopen the assessment based on the available material and the petitioner's cash transactions for the property purchase.