2018 (12) TMI 1463 - HC - Income Tax

Reopening of assessment - reasons to believe - unexplained investment - Held that - The reply of the assessee in this case we notice whether it is categorical or otherwise is unsupported by any document or statement containing the investments made or copies of the investment account or the shares and securities purchased and traded in. The assessee was afforded an opportunity to provide this but chose not to provide the materials other than denying the transactions altogether. Laying the blame on the door of the AO and characterizing the re-assessment as illegal in the opinion of this Court is not accurate. The primary task of the AO is to probe whether any income had escaped assessment when the original returns were accepted or merely framed under Section 143(1) - as it so happened in this case. AO cannot be expected to conduct a mini-investigation or assessment during the course of ascertaining whether the re-assessment notice needs to be gone further into. On the basis of these parameters of what he is expected to do the Court is of the opinion that at least in this case the AO confined himself to the jurisdiction conferred. Furthermore the aspects on which the re-assessment has been ordered were concededly not gone into since assessment was merely framed with an intimation under Section 143(1) which does not even amount to an assessment order in law as held by Deputy Commissioner of Income-Tax And Another Versus Zuari Estate Development And Investment Company Ltd. 2015 (8) TMI 480 - SUPREME COURT - Decided against assessee.

Summary

Issues:
1. Validity of re-assessment notice under Section 148 of the Income Tax Act for AY 2011-12 based on vague reasons to believe.
2. Adequacy of reasons provided by the Revenue for re-assessment.
3. Assessee's contention against the re-assessment notice.
4. Evaluation of the AO's decision based on the explanations provided by the assessee.
5. Compliance with legal standards in issuing the re-assessment notice.

Analysis:
1. The petitioner challenged the re-assessment notice issued by the Revenue under Section 148 for AY 2011-12, arguing that the reasons to believe were vague. The petitioner contended that the mentioned scrips were not transacted during the relevant year, rendering the re-assessment attempt erroneous. The petitioner's counsel highlighted the lack of examination of complete records by the Revenue to support a valid reassessment.

2. The Revenue presented information received through email regarding penny scrips transactions, indicating potential income escapement for AY 2011-12. The AO, based on investigation reports and electronic records, concluded that reassessment was necessary. The reasons provided by the Revenue included details of transactions and the belief that income had escaped assessment due to undisclosed investments and capital gains/losses.

3. The petitioner's response to the re-assessment reasons emphasized the incorrectness of the provided information, denying any transactions in the mentioned scrips. The petitioner argued against the reopening of the case, citing biased and incorrect data supplied by the Directorate of Income Tax (Investigation) Kolkata.

4. The AO considered the objections raised by the assessee and referred to relevant case law, including Supreme Court judgments, to justify the decision for reassessment. The Court noted that the assessee's denial lacked supporting documents or statements regarding investments made, and the AO acted within the jurisdiction conferred in probing potential income escapement.

5. The Court dismissed the petition, ruling that the reassessment was not unwarranted. The Court emphasized the AO's duty to probe potential income escapement and clarified that the original assessment under Section 143(1) did not constitute a full assessment. The Court upheld the legality of the re-assessment notice based on the parameters of the AO's responsibilities and the necessity to investigate potential income discrepancies thoroughly.