2021 (4) TMI 1111 - HC - Income Tax

Reopening of assessment u/s 147 - re-opening beyond a period of four years - DGIT (Investigation) has for forwarded information regarding Assessee who had taken bogus purchase bills to reduce and suppress profits - HELD THAT - There is some merit in the case. Till the next date, there shall be ad-interim relief in terms of prayer clause (d) which reads thus - that pending the hearing and final disposal of the present petition, this Court may be pleased to stay the operation of the notice dated 28th March, 2019 ( Exhibit E ), subsequent proceeding which has been undertaken in consequence of the said notice and the subsequent order dated 29th March, 2021 ( Exhibit T ) and grant an injunction restraining the Respondents, their subordinates, servants, agents, successors-in-office from taking any steps in furtherance or in implementation of the notice dated 28th March, 2019 ( Exhibit E ) subsequent proceeding which has been undertaken in consequence of the said notice and the subsequent order dated 29th March, 2021 ( Exhibit T ).

Summary

Issues:
Challenge to notice dated 28th March, 2019 issued under Section 148 of the Income Tax Act, 1961 and subsequent order dated 29th March, 2021.

Analysis:
The Petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961, dated 28th March, 2019, and the subsequent order dated 29th March, 2021, which disposed of the objections raised by the Petitioner. The main contention was that the re-opening of the assessment was done beyond the four-year period. The Petitioner's counsel argued that all primary facts had been disclosed during the original assessment under Section 143(3) of the Act. It was highlighted that during the original assessment, issues related to certain transactions, including with Loha Ispat Ltd., had already been addressed. The reasons for re-opening the assessment in 2021 were based on information received regarding bogus purchase bills used to suppress profits, involving the Petitioner and Loha Ispat Ltd. The Petitioner contended that the re-opening was a mere attempt to re-agitate concluded issues, amounting to a change of opinion, which is impermissible under the law.

The Revenue's counsel argued that post the original assessment, new information came to light regarding Assessees using bogus purchase bills to suppress profits. It was alleged that the Petitioner had not fully disclosed all material facts, specifically related to payments to a sub-contractor. The Revenue contended that the notice issued in 2021 was justified as there were reasons to believe that income chargeable to tax had escaped assessment. After hearing both parties, the Court found some merit in the case and granted ad-interim relief to the Petitioner by staying the operation of the notice dated 28th March, 2019, and the subsequent proceedings until the matter is finally disposed of. The case was adjourned for further hearing on a later date.

This judgment involved a crucial analysis of the legality of re-opening an assessment beyond the prescribed time limit, the concept of change of opinion, and the obligation of the Assessee to disclose all material facts. The Court's decision to grant interim relief indicates a prima facie consideration of the Petitioner's arguments regarding the validity of the re-opening of the assessment. The case highlights the importance of thorough disclosure by the Assessee during the original assessment to avoid potential issues during re-assessment proceedings.