2019 (1) TMI 1360 - HC - Income Tax

Reopening of assessment - non-genuine expenditure - assessment beyond a period of four years - information received information from Addl. Director of Income Tax - Held that - AO had received information from Addl. Director of Income Tax (Inv.) after the Assessment was framed that, ₹ 90 lacs paid to M/s. S N Enterprises through bank transfers and that, M/s. S N Enterprises in turn, withdraw a sizeable amount from said payments in order to make cash payments to farmers owners of buffalo. This information by itself, cannot ultimately lead to the inference that, said payment was for non-genuine expenditure. Merely because M/s. S N Enterprises made cash payments for purchase of buffalos, would not destroy genuineness of the expenditure made by the assessee. There had to be some additional material which would establish the live-link for the formation of belief by the Assessing Officer that, income chargeable to tax has escaped assessment. AO in the present case, neither had time to carry out any follow up enquiries nor had he, in fact, carried out any such enquiry. As per the reasons, the information received from the Investigation Wing, was placed before him at 6.30 p.m. on 31st March, 2017, which was the last date for issuing notice of reopening of an assessment. He, therefore, apparently, acted under great constraint of time. This by itself, in appropriate case may not be fatal the notice of reopening, if the Assessing Officer can otherwise, point out that he had examined information placed before him before forming belief that, on the basis of information, it can be stated that, income chargeable to tax has escaped assessment. Additionally, we also find that, the entire issue was examined by the AO during the original assessment proceedings. Along with letter, Petitioner supplied full breakup of its account with the said M/s. S N Enterprises. It was after such detailed scrutiny, the Assessing Officer passed order of assessment on 5th March, 2013 in which, he made certain observations but had not disturbed the Petitioner s claim of expenditure, particularly, in relation to the payments made to said M/s. S. N. Enterprises. After such minute scrutiny, the AO could not have reopened the assessment beyond a period of four years from the end of the relevant Assessment Year on the basis of information supplied to him and the reasons recorded by him. In the result, impugned notice is quashed and set aside. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice of reopening of assessment dated 31st March, 2017.

Analysis:
The petitioner, a company engaged in the business of manufacturing and processing frozen meat, challenged a notice of reopening of assessment for the Assessment Year 2010-11. The notice was issued by the Assessing Officer based on information received from the Investigation Wing regarding transactions between the petitioner and a supplier, M/s. S N Enterprises. The information suggested inflated purchases by the petitioner, leading to under-assessment of income. The petitioner contended that the notice was issued beyond the statutory period of four years and that there was no failure to disclose material facts. The petitioner argued that the Assessing Officer had already examined the transactions during the original assessment, and the payments to M/s. S N Enterprises were accepted.

The petitioner raised objections to the notice of reopening, which were rejected by the Assessing Officer. The petitioner argued that the reasons for reopening did not indicate any material supporting the belief that income had escaped assessment. The court noted that the information received from the Investigation Wing alone was insufficient to establish non-genuine expenditure by the petitioner. The court highlighted that the Assessing Officer had not conducted any follow-up inquiries or provided additional material to support the reopening of assessment.

During the original assessment proceedings, the petitioner had provided detailed information and ledger details of purchases made from various suppliers, including M/s. S N Enterprises. The Assessing Officer had scrutinized these details and observations but did not question the petitioner's claim of expenditure related to M/s. S N Enterprises. The court emphasized that after such detailed scrutiny, reopening the assessment beyond the statutory period was not justified. Consequently, the court quashed and set aside the impugned notice of reopening, disposing of the petition.