2021 (4) TMI 1230 - HC - Income Tax

Reopening of assessment u/s 147 - undisclosed contract receipts - HELD THAT - The reasons for reopening of assessment intimated to the writ petitioner reveals that from revised 26AS details, the assessee company has received contract receipts of ₹ 5,78,10,06,904/-, on which, tax at source has been deducted to the tune of ₹ 12,54,24,815/-. The assessee company claimed the TDS of ₹ 12,41,50,256/-. However, the assessee company credited P L account as contract receipts and sales for ₹ 521,79,70,864/- only. Thus, the assessee has not offered receipts of ₹ 56,30,36,040/- for taxation, resulting in escapement of income due to failure on the part of the assessee company to correctly account its income. Thus, the Assessing officer has reason to believe that income of ₹ 57,97,88,686/- has escaped assessment within the meaning of Section 147 of the Income Tax Act due to the failure on the part of the assessee company to disclose fully and truly all material facts necessary for its assessment. in the presence of materials on record, if the power under Section 147 is invoked by the competent authority, then the authorities competent must be allowed to proceed with the reopening proceedings by following the procedures as contemplated. High Court cannot adjudicate the disputed facts and materials to form an opinion in a writ proceedings. The High Court, under Article 226 of the Constitution of India, is empowered to scrutinize the process, through which, the decision is taken and the reasons and in consonance with the statutory requirements, but not the decision by itself. Thus, the scope of Article 226 of the Constitution of India cannot be expanded for the adjudication of the disputed facts and circumstances with reference to the documents, evidences produced by the respective parties and such an adjudication must be allowed to be done by the competent authorities under the provisions of the Statutes by following the procedures as contemplated and by affording opportunity to the assessee. As in these writ petitions, the respondent could able to establish that sufficient materials are available for the purpose of reopening of assessment for the Assessment Years 2009-10 and 2010-11 and thus, the respondent must be allowed to proceed with the reopening of assessment by following the procedures as contemplated and the writ petitioner is bound to co-operate by defending their case by availing the opportunities to be provided under the Statute. - Decided against assessee.

Issues Involved:
1. Legality of reopening of income tax assessments under Section 147 of the Income Tax Act for the Assessment Years 2009-10 and 2010-11.
2. Validity of the reasons provided for reopening the assessments.
3. Impact of the MB Shah Commission report on the reopening of assessments.
4. Consideration of previous Tribunal and High Court orders on the same matter.
5. Adequacy of the petitioner's disclosure of material facts.

Detailed Analysis:

1. Legality of Reopening of Income Tax Assessments:
The petitioner challenged the proceedings dated 13.10.2016, initiated by the Assistant Commissioner of Income Tax under Section 147, for reopening the assessments for the Assessment Years 2009-10 and 2010-11. The petitioner argued that the reopening was unjustified as the initial assessments had already been completed and no new substantial evidence was presented.

2. Validity of the Reasons Provided for Reopening the Assessments:
For the Assessment Year 2009-10, the petitioner filed its return on 29.09.2009, which was processed under Section 143(1) and later scrutinized under Section 143(3). A notice under Section 148 was issued on 25.09.2014 for reopening the assessment. Similarly, for the Assessment Year 2010-11, the return was filed on 29.09.2010, scrutinized, and a notice under Section 148 was issued on 26.09.2014. The petitioner contended that the reasons for reopening were not based on any new tangible material and were merely surmises.

3. Impact of the MB Shah Commission Report:
The respondent cited the MB Shah Commission report on illegal mining in Odisha as a basis for reopening the assessments. The report alleged that the petitioner, as a raising contractor, was involved in the clandestine disposal of iron ore, leading to a significant shortage of stock. The respondent argued that this constituted new material evidence justifying the reopening of assessments.

4. Consideration of Previous Tribunal and High Court Orders:
The petitioner argued that the Income Tax Tribunal had quashed similar proceedings on 16.01.2012, and this decision was upheld by the High Court of Odisha on 08.08.2016. The petitioner claimed that these orders rendered the reopening proceedings non-est in law. However, the respondent contended that the new materials from the MB Shah Commission report were not considered in the previous orders, thus justifying the reopening.

5. Adequacy of the Petitioner's Disclosure of Material Facts:
The respondent argued that the petitioner failed to disclose fully and truly all material facts necessary for assessment. Specifically, the revised 26AS details revealed discrepancies in the contract receipts and the amount credited to the P&L account, leading to an alleged escapement of income. The respondent maintained that this failure warranted the reopening of assessments.

Conclusion:
The court held that the presence of new material evidence from the MB Shah Commission report provided sufficient grounds for reopening the assessments under Section 147. The court emphasized that the scope of Article 226 does not extend to adjudicating disputed facts and materials, which should be addressed by the competent authorities following statutory procedures. Consequently, the writ petitions were dismissed, allowing the reopening of assessments to proceed.

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