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2021 (2) TMI 585 - HC - Income TaxValidity of Reopening of assessment u/s 147 - unaccounted cash transactions - Whether non-application of mind on the part of the Assessing Officer? - Whether in a case where the return filed by the assessee is accepted under Section 143 1 of the Act without scrutiny, since the Assessing Officer had not formed any opinion, the principle of change of opinion would not apply? - HELD THAT - 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 some documents seized in the course of search undertaken at the premises of the Venus Group under Section 132 - AO cannot be said to have merely concluded without verifying the fact that it is a case of reopening of the assessment. It is not in dispute, as evident from the reply filed by the department that the search and survey proceedings were carried out under Section 132 and documents were seized under Section 133A of the Act from the various premises of the Venus Group During the course of the search, various documents related to the unaccounted cash transactions of the Venus Group were seized. Upon due verification of all such seized documents, it was found that the unaccounted cash transactions were first recorded on the vouchers and thereafter in the day cash book. The seized documents reflected the unaccounted cash transactions for the period between January, 2007 to March, 2015. The cash book was written in the coded form. Further details and documents were obtained from the office of the Sub-Registrar for the purpose of identifying the beneficiaries in the transactions with the Venus Group. It can thus be seen that the Assessing Officer had analyzed the voluminous material collected by the Revenue during the search operations in connection with the Venus Group. This material, prima facie suggested huge cash transactions in connection with sale of lands against the total declared sale consideration of ₹ 5.38 Crore rounded off . The material prima facie suggests that the total cash transactions of ₹ 9,07,26,000/- had taken place. When we are concerned with the re-opening of the assessment, that too, in the case of Heval Navinbhai Patel, where the return was not filed for the assessment year and in the case of Navinbhai Patel, where the return filed by him was accepted without scrutiny, the material at the command of the Assessing Officer is sufficient to permit the process of reopening - As held in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Limited 2007 (5) TMI 197 - SUPREME COURT and Raymond Woolen Mills Limited 1997 (12) TMI 12 - SUPREME COURT , the reason to believe cannot be equated with finally established fact that the income chargeable to tax having escaped assessment additions will invariably be made and further, the sufficiency of reasons enabling the Assessing Officer to form such a belief would not be gone into. Whether proceedings under Section 148 of the Act are not tenable in law, as the case falls within the ambit of Section 153(C)? - Indisputably in the case on hand, the search was undertaken prior to 01.06.2015. If that be so then, it is clear that before issuing the notice under Section 153(C) of the Act, the primary condition has to be fulfilled and which is that the money, bullion, documents etc., seized should belong to such other person. If this condition is not satisfied, no proceedings could be taken u/s. 153C of the Act. The seized documents do not belong to the two writ applicants herein but were seized from the premises of the Venus Group. It is not the case of the revenue that the seized documents are in handwriting of the two writ applicants. In such circumstances, the Assessing Officer could not have initiated proceedings under Section 153(C) of the Act but based on the information, could be said to be justified in reopening the assessment for the reasons assigned and referred to above. We are not impressed with the submissions canveassed by Mr. Shah that the proceedings under Section 147 are not tenable in law, as the case is covered by Section 153(C) of the Act.
Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961. 2. Validity of the reopening of assessment based on seized documents. 3. Applicability of Section 153C vs. Section 148 for reopening assessments. 4. Adequacy of the reasons recorded for reopening the assessment. 5. Compliance with procedural requirements for reopening the assessment. Issue-wise Detailed Analysis: 1. Legality of the Notice Issued under Section 148: The petitioners challenged the notice issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2012-13. They argued that the reopening of the assessment was based on general observations and lacked tangible material. The court noted that the reasons for reopening were based on documents seized during a search operation at the Venus Group, which indicated unaccounted cash transactions. The court found that the Assessing Officer had recorded proper reasons and had tangible material to form a belief that income chargeable to tax had escaped assessment. 2. Validity of the Reopening of Assessment Based on Seized Documents: The petitioners contended that the reopening was not supported by any seized material directly implicating them. The court observed that the seized documents from the Venus Group indicated unaccounted cash transactions related to the sale of land, in which the petitioners were involved. The court held that the Assessing Officer had analyzed the voluminous material collected during the search operations, which prima facie suggested huge cash transactions. Therefore, the material at the command of the Assessing Officer was sufficient to permit the process of reopening. 3. Applicability of Section 153C vs. Section 148 for Reopening Assessments: The petitioners argued that the proceedings should have been initiated under Section 153C of the Act, not Section 148. The court clarified that Section 153C applies when seized documents belong to a person other than the searched person. Since the search was conducted before 01.06.2015, the primary condition for invoking Section 153C was that the seized documents should belong to the other person. In this case, the documents did not belong to the petitioners but were seized from the Venus Group. Therefore, the Assessing Officer was justified in reopening the assessment under Section 148 based on the information received. 4. Adequacy of the Reasons Recorded for Reopening the Assessment: The court reiterated that for reopening an assessment, the Assessing Officer must have a "reason to believe" that income chargeable to tax has escaped assessment. The reasons recorded must demonstrate a link between the tangible material and the formation of belief. The court found that the reasons recorded by the Assessing Officer were based on seized documents indicating unaccounted cash transactions and were sufficient to form a belief that income had escaped assessment. The sufficiency or correctness of the material was not a matter to be considered at this stage. 5. Compliance with Procedural Requirements for Reopening the Assessment: The petitioners raised objections regarding the lack of approval under Section 151 and the absence of tangible material. The court noted that the approval for issuing the notice under Section 148 was accorded by the Principal Commissioner of Income Tax, and the Assessing Officer had followed the proper procedure. The court also referred to judicial pronouncements stating that at the stage of initiation of reassessment proceedings, it is not required to conclusively prove that income has escaped assessment. The court found that the Assessing Officer had complied with the procedural requirements and had a reasonable belief based on tangible material. Conclusion: The court dismissed the writ applications, holding that the Assessing Officer had valid reasons and tangible material to reopen the assessments under Section 148. The proceedings under Section 153C were not applicable as the seized documents did not belong to the petitioners. The procedural requirements for reopening the assessment were duly followed, and the court found no reason to interfere with the notices issued under Section 148.
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