2021 (5) TMI 91 - HC - Income Tax

Validity of reopening of assessment - assessee has claimed loss on transfer of shares from trading to investment - Assessee contended that the element of reasons to believe as contemplated under Section 147 of the Income Tax Act is absolutely missing in the present case - HELD THAT - The source of information may be irrelevant for the purpose of initiation of proceedings under Section 147 of the Act. Section 147 unambiguously enumerates that if the Assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any Assessment Year. The escaped assessment includes even the subject matters considered in the assessment, which all are escaped, the word escape undertakes that it is not only the materials, which were not adjudicated during the original assessment but the materials adjudicated and certain aspects escaped from assessment during such original assessment. Thus, it is made clear that even the material facts, which all are provided by the assessee during the original adjudication and the Assessing Officer also passed an order under Section 143(3)of the Act, thereafter, if any materials are made available to establish that any income chargeable to tax has escaped assessment for the assessment year, then the Assessing officer is well within his power to institute proceedings under Section 147 of the Act. It is insufficient that the assessee has compared the reasons stipulated in the order by the respondents with reference to certain informations provided in the original assessment order. Beyond such comparable factors, with reference to the original assessment order and the reasons furnished for reopening of assessment, the Assessing Officer, if found any new materials, which were not considered, though provided, constitute a cause for 'reason to believe' regarding the income escaped assessment, then also the Assessing Officer is empowered to reopen the assessment by invoking the powers under Section 147 of the Act. Undoubtedly, the informations or materials etc., for reopening of the assessment must be new and not considered by the Assessing Officer during the original assessment. However, the word 'New' does not mean that there is an impediment to cull out the new facts from the informations or materials provided by the assessee at the time of original assessment. The very purpose and object of the proviso under Section 147 is to ensure that the assessee pays the income tax in the manner prescribed under the Statute and therefore, the Courts are expected to be cautious, while dealing with such intricacies and the disputed facts, which all are to be adjudicated by the competent authority by following the procedures as contemplated. High Court shall scrutinize the processes, through which, a decision is taken by the competent authorities with reference to the provisions of the Statute and the established principles and certainly, not the decision itself. Roving enquiry cannot be undertaken by the High Court in a writ proceedings under Article 226 of the Constitution of India. Thus, this Court has no hesitation in forming an opinion that the petitioner has not made out any acceptable ground for the purpose of interfering with the initiation of proceedings for reopening of assessment under Section 147 of the Income Tax Act. Accordingly, the Writ Petition fails and stands dismissed

Summary

Issues Involved:
1. Legality of the initiation of proceedings under Section 147 of the Income Tax Act.
2. Validity of the notice issued under Section 148 of the Income Tax Act.
3. Allegation of change of opinion by the Assessing Officer.
4. Compliance with procedural requirements for reopening the assessment.
5. Jurisdiction of the Assessing Officer to reopen the assessment within four years.
6. Consideration of objections and legal submissions by the petitioner.
7. Relevance of new materials or information for reopening the assessment.

Detailed Analysis:

1. Legality of the initiation of proceedings under Section 147 of the Income Tax Act:
The petitioner challenged the initiation of proceedings under Section 147 of the Income Tax Act, arguing that the reasons to believe, as required by the Act, were absent. The court noted that the power under Section 147 is broad enough to cover information or materials not considered during the original assessment, provided there is a reason to believe that income has escaped assessment. The court emphasized that even if materials were available during the original assessment but not considered, it could still constitute a reason to believe for reopening the assessment.

2. Validity of the notice issued under Section 148 of the Income Tax Act:
The petitioner contended that the notice issued under Section 148 was based on a change of opinion. The court, however, found that the reasons recorded for reopening the assessment were not merely a change of opinion but were based on new materials that were not considered during the original assessment. The court referenced several judgments, including those of the Supreme Court, to support the view that the Assessing Officer has the jurisdiction to reopen assessments if there is reason to believe that income has escaped assessment.

3. Allegation of change of opinion by the Assessing Officer:
The petitioner argued that the reopening of the assessment was based on a change of opinion, as the same materials were available during the original assessment. The court rejected this argument, stating that the Assessing Officer had identified new materials that were not considered during the original assessment. The court cited the judgment in the case of Commissioner of Income Tax Vs. Corporation Bank Limited, which held that if there is no failure on the part of the assessee to disclose material facts, Section 147(a) does not apply.

4. Compliance with procedural requirements for reopening the assessment:
The court examined whether the procedural requirements for reopening the assessment were met. It noted that the Assessing Officer had recorded reasons for reopening the assessment and issued the notice under Section 148 within the stipulated time frame. The court referred to the judgment in PVP Ventures Ltd. Vs. ACIT, which outlined the criteria for reopening assessments, including the existence of a reason to believe, recording of reasons, and issuance of notice.

5. Jurisdiction of the Assessing Officer to reopen the assessment within four years:
The court observed that the reopening of the assessment was initiated within four years from the end of the relevant assessment year. Therefore, the proviso to Section 147, which imposes additional conditions for reopening assessments beyond four years, was not applicable. The court cited the judgment in the case of Assistant Commissioner of Income Tax Vs. ICICI Securities Primary Dealership Limited, which held that reopening based on a mere re-look of accounts is not permissible as it constitutes a change of opinion.

6. Consideration of objections and legal submissions by the petitioner:
The petitioner argued that their objections and legal submissions were not duly considered by the respondent. The court noted that the respondent had considered the objections and case laws submitted by the petitioner but found them not applicable as they pertained to reopening beyond four years. The court emphasized that the petitioner should now file objections on the merits of the issues and convince the Assessing Officer about the merits of their claim.

7. Relevance of new materials or information for reopening the assessment:
The court highlighted that the source of information for reopening the assessment is irrelevant as long as the Assessing Officer has reason to believe that income has escaped assessment. The court stated that even if the materials were available during the original assessment but not considered, it could still constitute a reason to believe for reopening the assessment. The court concluded that the Assessing Officer is empowered to reopen the assessment if new materials or information come to light that were not considered during the original assessment.

Conclusion:
The court dismissed the writ petition, holding that the petitioner had not made out any acceptable ground for interfering with the initiation of proceedings for reopening the assessment under Section 147 of the Income Tax Act. The court emphasized that the Assessing Officer has the jurisdiction to reopen the assessment if there is reason to believe that income has escaped assessment, and the procedural requirements were duly met. The petitioner was directed to file objections on the merits of the issues before the Assessing Officer.