2021 (2) TMI 103 - HC - Income Tax

Reopening of assessment u/s 147 - only information received from the Investigation Wing relied upon or independent enquiry done by AO - Proof of on application of mind by AO - HELD THAT - Having regard to the materials on record, it cannot be said that there is total non-application of mind on the part of the Assessing Officer 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 as the Assessing Officer could be said to have applied his mind to the same. The Assessing Officer could not be said to have merely concluded without verifying the fact that it is the case of reopening of the assessment. No merit in the submission of Mr. Divatia, the learned counsel appearing for the writ applicant that the contents of the reasons recorded by the Assessing Officer for reopening of the assessment is merely an introduction to the investigation conducted by the Investigation Wing, the sum up of inquiry of the investigation wing or the information received from the Investigation Wing etc. As examined the belief of the Assessing Officer to a limited extent to look into whether there was sufficient or any tangible materials available on the record for the Assessing Officer to form the reasonable belief and whether there was 'live link' existing of the material and the income chargeable to tax that escaped assessment. The case on hand is not one, where it can be argued that the Assessing Officer on absolutely vague or unspecific information, initiated the proceedings of re-assessment without taking pains to form his own belief in respect of such materials. We are convinced that we should not interfere in this matter. In the result, present writ application fails and is hereby rejected.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Justification for reopening the assessment for the year 2012-2013.
3. Adequacy of the reasons provided for the reopening of the assessment.
4. Examination of the objections raised by the assessee against the reopening of the assessment.

Issue-Wise Detailed Analysis:

1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:
The primary issue in this case is the validity of the notice dated 30.03.2019 issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the year 2012-2013. The notice was challenged by the petitioner on the grounds that it was based on mere suspicion and lacked tangible evidence. The court examined whether the Assessing Officer (AO) had "reason to believe" that income chargeable to tax had escaped assessment, which is a prerequisite for issuing such a notice.

2. Justification for Reopening the Assessment for the Year 2012-2013:
The court analyzed whether the AO had sufficient cause or justification to reopen the assessment. The AO's reasons for reopening included information that the assessee had booked expenses in the names of various entities and claimed bogus commission expenses. The AO believed that the income chargeable to tax had escaped assessment, justifying the reopening under Section 147 of the Act. The court noted that the AO had received specific information from the Investigation Wing, which was verified against the return of income filed by the assessee.

3. Adequacy of the Reasons Provided for the Reopening of the Assessment:
The court examined the adequacy and sufficiency of the reasons recorded by the AO for reopening the assessment. The AO's reasons included details of the entities involved and the amounts claimed as expenses, which were suspected to be inflated. The court emphasized that at the time of reopening, the AO only needed to form a prima facie opinion based on tangible material, and the sufficiency or correctness of the material was not to be considered at that stage. The court found that the AO had applied his mind and formed a reasonable belief that income had escaped assessment.

4. Examination of the Objections Raised by the Assessee Against the Reopening of the Assessment:
The assessee raised several objections, questioning the basis of the AO's belief and the evidence supporting the claim of bogus expenses. The AO disposed of these objections, stating that the information received from the Investigation Wing and the data in the return of income provided a prima facie basis for reopening the assessment. The court upheld this view, stating that the AO had independently verified the details and formed a prima facie opinion. The court also noted that the assessee did not deny the transactions with the entities mentioned in the reasons for reopening.

Conclusion:
The court concluded that the reopening of the assessment was justified and based on tangible material. The AO had formed a reasonable belief that income chargeable to tax had escaped assessment, and the reasons recorded were adequate and sufficient. The objections raised by the assessee were duly considered and disposed of by the AO. Therefore, the writ applications challenging the notice under Section 148 and the reopening of the assessment were rejected. The court emphasized that the reopening of assessment is a potent power and should be exercised judiciously, but in this case, the AO had acted within the legal framework and justified the reopening with tangible material.

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