2019 (8) TMI 1417 - HC - Income Tax

Reopening of assessment u/s 147 - Reasons to believe - whether the AO, at the time of making the original assessment, could or could not have found by further inquiry or investigation whether the transactions were genuine or not? - HELD THAT - It cannot be said that there is a total non-application of mind on the part of the AO while recording the reasons for reopening of the assessment. It also cannot be said that his conclusion was merely based on the observations and information received from the Investigation Wing. AO could be said to have applied his mind to the same. AO could not be said to have merely concluded without verifying the facts that it is the case of reopening of the assessment. No merit in the vociferous submission of the learned counsel appearing for the writ applicant that the contents of the reasons recorded by the AO for the reopening of the assessment is merely an introduction about the investigations conducted by the Investigation Wing, the modus operandi of the entry provided, the summing up of inquiry of the Investigation Wing, the information received from the Investigation Wing etc. As examined the belief of the AO to a limited extent to look into whether there was sufficient material available on record for the AO to form a reasonable belief and whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. The case on hand is not one where it could be argued that the Assessing Officer, on absolutely vague or unspecific information, initiated the proceedings of reassessment without taking the pains to form his own belief in respect of such materials. No case is made out by the writ applicant for interference.

Issues Involved:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act, 1961.
2. Whether the reopening was based on a mere change of opinion.
3. Sufficiency and adequacy of reasons recorded for reopening.
4. Application of mind by the Assessing Officer.
5. Relevance of information from the Investigation Wing.

Detailed Analysis:

1. Validity of reopening of assessment under Section 147 of the Income Tax Act, 1961:
The court examined whether the reopening of the assessment was permissible under Section 147 of the Income Tax Act, 1961. According to Section 147, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, he may assess or reassess such income. The court emphasized that the reasons for reopening should be based on tangible material and not merely on suspicion or for conducting a fishing or roving inquiry. The court noted that the reasons recorded by the Assessing Officer indicated a belief based on information from the Investigation Wing regarding bogus loan transactions. The court concluded that the reopening was valid as it was based on tangible material and not merely on suspicion.

2. Whether the reopening was based on a mere change of opinion:
The court addressed the argument that the reopening was based on a mere change of opinion. It was argued that the Assessing Officer had already examined the unsecured loan transactions during the original assessment, and reopening on the same grounds constituted a change of opinion. The court referred to various judgments, including those of the Supreme Court, which held that reopening is permissible if fresh information comes to light that exposes the untruthfulness of the facts disclosed during the original assessment. The court concluded that the reopening was not based on a mere change of opinion but on fresh information regarding the bogus nature of the loan transactions.

3. Sufficiency and adequacy of reasons recorded for reopening:
The court examined whether the reasons recorded by the Assessing Officer for reopening the assessment were sufficient and adequate. It was argued that the reasons should demonstrate a link between the tangible material and the belief that income had escaped assessment. The court emphasized that the sufficiency of the reasons is not a matter for the court to investigate, but the existence of the belief can be challenged. The court found that the reasons recorded by the Assessing Officer were based on specific information from the Investigation Wing and were sufficient to form a belief that income had escaped assessment.

4. Application of mind by the Assessing Officer:
The court considered whether the Assessing Officer had applied his mind to the information received from the Investigation Wing before reopening the assessment. It was argued that the Assessing Officer had merely acted on the report of the Investigation Wing without forming an independent belief. The court noted that the Assessing Officer had perused the materials and formed a belief based on the information received. The court concluded that the Assessing Officer had applied his mind to the information and the reopening was not mechanical.

5. Relevance of information from the Investigation Wing:
The court addressed the relevance of the information received from the Investigation Wing in the context of reopening the assessment. It was argued that the information from the Investigation Wing was not sufficient to reopen the assessment. The court referred to various judgments where information from the Investigation Wing was considered sufficient for reopening the assessment. The court found that the information regarding the bogus nature of the loan transactions provided by the Investigation Wing was relevant and constituted tangible material for reopening the assessment.

Conclusion:
The court concluded that the reopening of the assessment was valid and permissible under Section 147 of the Income Tax Act, 1961. The reopening was not based on a mere change of opinion but on fresh information regarding bogus loan transactions. The reasons recorded by the Assessing Officer were found to be sufficient and adequate, and the Assessing Officer had applied his mind to the information received from the Investigation Wing. The information from the Investigation Wing was considered relevant and constituted tangible material for reopening the assessment. Therefore, the writ applications were rejected, and the interim relief granted earlier was vacated.

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