2021 (4) TMI 1226 - HC - Income Tax

Reopening of assessment u/s 147 - huge difference between data reflected in Form 26AS and assessee's statement - HELD THAT - As seen from the Form 26AS downloaded that assessee was in receipt of income of ₹ 419,47,44,777/-, whereas the total amount credited in P L account is ₹ 387,30,50,376/-. In this context, the Assessing officer relied on the breakup details. In view of large discrepancy and mismatch, the Assessing officer has reason to believe that income of ₹ 41,59,51,722/- has escaped assessment within the meaning of Section 147 due to the failure on the part of the assessee to disclose all and true material facts necessary for assessment. The rectification application dated 20.07.2011, submitted by the assessee company was also considered by the Assessing Officer and the Assessing Officer verified the informations provided in the rectification application and found that very Form 26AS that was downloaded in view of assessee's application for the rectification, it was found that there was huge mismatch in receipts appearing in 26AS vis-a-vis receipts credited in P L Account. Assessing Officer has reason to believe that the income of the assessee as escaped assessment and decided to reopen the assessment. This apart, the Assessing officer relied on the MB Shah Commission, set up by the Government of India to enquire into the cases of illegal mining in the State of Odisha. The petitioner/assessee was a raising contractor, employed by one KJS Ahulwalia, who was a lessee found in the Shah Commission report. For all these reasons, the Assessing officer has reason to believe for reopening of assessment. The respondents have placed on record the materials and informations and evidences that gave them reason to believe that there is escapement of income. The grounds placed before this Court for reopening of assessment is sufficient reason to believe that there is escapement of income and the sufficiency of the reasons cannot be gone into by the High Court in a writ proceedings under Article 226 of the Constitution of India. The contents of the breakup details, evidences, documents, invoices etc., have to be adjudicated during the course of hearing and certainly, not by the High Court in a writ proceedings - there is no illegality or irregularity as such, which can be attached to the reasoning of the competent authority for arriving a conclusion that there is a reason to believe for reopening of assessment. Thus, the grounds raised in the present writ petition are neither candid nor convincing and the petitioner has to co-operate with the Assessing Officer in the reassessment proceedings by availing the opportunities to be provided as contemplated under the Statute. WP dismissed.

Summary

Issues Involved:
1. Legality of reopening the income tax assessment under Section 147 of the Income Tax Act.
2. Adequacy of the reasons provided for reopening the assessment.
3. Validity of the discrepancies identified between the petitioner’s submissions and Form 26AS.
4. Impact of the MB Shah Commission report on the reopening of the assessment.
5. Whether the petitioner made full and true disclosure of all material facts.

Detailed Analysis:

1. Legality of Reopening the Income Tax Assessment under Section 147:
The petitioner challenged the proceedings dated 23.02.2016, initiated under Section 147 of the Income Tax Act for the Assessment Year 2008-09. The respondents argued that the reopening was justified as the assessment was based on new material discovered, indicating income had escaped assessment. The court held that the scope of Section 147 is clear and allows reopening if the Assessing Officer has "reason to believe" that income has escaped assessment, even beyond four years but within six years, provided there is a failure to disclose fully and truly all material facts.

2. Adequacy of the Reasons Provided for Reopening the Assessment:
The petitioner contended that the notice under Section 148 was vague and lacked material reasons for reopening the assessment. The respondents countered that the reasons were based on discrepancies found in Form 26AS and the rectification application filed by the petitioner. The court found that the reasons recorded for reopening were elaborate and clearly showed a failure on the petitioner's part to disclose fully and truly all material facts, thus justifying the reopening.

3. Validity of the Discrepancies Identified Between the Petitioner’s Submissions and Form 26AS:
The petitioner argued that the discrepancies regarding TDS were acknowledged by them through rectification applications and should not have led to reopening. The respondents highlighted that there was a significant mismatch between the income credited in the P&L account and the figures in Form 26AS. The court noted that the petitioner credited ?377,87,93,055/- in the P&L account out of total receipts of ?419,47,44,777/-, indicating a substantial discrepancy. This mismatch justified the reopening of the assessment.

4. Impact of the MB Shah Commission Report on the Reopening of the Assessment:
The petitioner claimed no connection to illegal mining activities reported by the MB Shah Commission. The respondents argued that the petitioner, as a raising contractor for one of the lessees involved in illegal mining, might have suppressed contract charges corresponding to the excess production. The court found that this information, combined with the discrepancies in income disclosure, provided the Assessing Officer with valid reasons to believe that income had escaped assessment.

5. Whether the Petitioner Made Full and True Disclosure of All Material Facts:
The petitioner asserted that they made full and true disclosure by filing rectification applications. However, the respondents maintained that mere production of account books does not amount to full disclosure if material evidence could have been discovered with due diligence. The court agreed with the respondents, stating that the information provided by the petitioner did not constitute full and true disclosure, thus validating the reopening of the assessment.

Conclusion:
The court concluded that the reopening of the assessment was justified based on the discrepancies identified and the new material discovered. The grounds for reopening were sufficient, and the petitioner failed to make full and true disclosure of all material facts. Consequently, the writ petition was dismissed, and the petitioner was directed to cooperate with the reassessment proceedings.