2021 (7) TMI 968 - HC - Income Tax

Reopening of assessment u/s 147 - reopening of assessment beyond the period of four years - Sufficiency of reason to believe - HELD THAT - This Court is of the considered opinion that intricacies of non-disclosure of certain informations, materials, fully and truly, cannot be gone into by the High Court. In other words, the High Court has to ensure whether the mandatory condition of reason to believe is satisfied or not. Sufficiency of the reasons cannot be gone into by the High Court in a writ proceedings. The provisions of the Act enumerates mainly the reason to believe and the findings provided to form such an opinion, which are the material factors to be considered. Therefore, the High Court has to scrutinise the reasons and the reasons are sufficient enough to meet out the requirements as contemplated under the Act. Other aspects, on merits, are to be adjudicated by the Assessing Officer and High Court is not expected to adjudicate the disputed facts with reference to the accounting system followed or the materials which all are to be adjudicated with reference to the documents and evidences. This being the factum and the principles to be followed, this Court has no hesitation in forming an opinion that the petitioner is bound to cooperate for the completion of reopening of assessment proceedings initiated under Section 147 of the Act, by producing all the relevant materials and documents and the authorities competent are expected to complete the process by affording opportunity to the writ petitioner, as contemplated and as expeditiously as possible. Petitioner made a submission that the reason for reopening of assessment is the assessment order passed for the Assessment Year 2009-10. However, the said assessment order was reversed by the Income Tax Appellate Tribunal in its order dated 06.01.2016. Therefore, the reasons furnished for reopening of assessment is not in existence as of now and therefore, the authorities cannot proceed further. This Court is of the considered opinion that the order of the Tribunal, its findings, as well as the applicability with reference to the materials produced and informations regarding the Return of Income for the Assessment Year 2006-07 all to be considered by the competent authorities and this Court cannot go into those merits and demerits and it is for the petitioner to establish the same before the Assessing Officer, by availing the opportunities to be provided for the purpose of completion of re-assessment proceedings.

Summary

Issues:
1. Reopening of assessment beyond four years under Section 147 of the Income Tax Act, 1961.
2. Validity of reasons furnished for reopening of assessment.
3. Obligations of the assessee in providing full and true disclosure of material facts.
4. Scope of High Court's interference in assessing sufficiency of reasons for reopening of assessment.

Issue 1: Reopening of assessment beyond four years under Section 147:
The petitioner, a company incorporated under the Companies Act, challenged the reopening of assessment beyond four years for the Assessment Year 2006-2007. The petitioner contended that all relevant details were submitted during the original assessment and subsequent proceedings, thus arguing against the need for reopening the assessment after the specified period. The respondents, however, justified the reopening based on the retention money issue from a later assessment year. The court analyzed the provisions of Section 147 and emphasized the conditions for reopening assessments beyond four years but within six years. The court discussed the relevance of Explanation 1 and 2 to Section 147, highlighting the authority's power to reopen assessments if the assessee fails to fully disclose material facts, even if books of accounts were submitted.

Issue 2: Validity of reasons furnished for reopening of assessment:
The court examined the reasons provided for reopening the assessment and the objections raised by the petitioner. The respondents argued that non-disclosure of certain facts led to the necessity of reopening the assessment. The court stressed that the Assessing Officer has the authority to reopen assessments if there is a failure to disclose material facts fully and truly. The court noted that the High Court's role is to ensure the satisfaction of the mandatory condition of "reason to believe," rather than delving into the intricacies of non-disclosure. It emphasized that the sufficiency of reasons is a matter for the Assessing Officer to determine, not the High Court.

Issue 3: Obligations of the assessee in providing full and true disclosure:
The judgment highlighted the importance of the assessee providing full and true disclosure of material facts during assessments. It explained that the Income Tax Act trusts the information provided by the assessee in the Return of Income, emphasizing the voluntary nature of such disclosures. The court underscored that the scheme of the Act provides opportunities for assessees to settle disputes by cooperating and providing accurate information. Failure to do so may lead to consequences, as seen in the present case where non-disclosure led to the reopening of assessment.

Issue 4: Scope of High Court's interference in assessing sufficiency of reasons:
The court clarified the role of the High Court in assessing the sufficiency of reasons for reopening assessments. It stated that the High Court should scrutinize whether the mandatory condition of "reason to believe" is satisfied. However, the court noted that the High Court should not delve into the sufficiency of reasons during writ proceedings, as this falls under the Assessing Officer's jurisdiction. The court emphasized that the High Court's role is not to adjudicate disputed facts but to ensure that the reasons provided meet the requirements of the Act.

In conclusion, the court dismissed the Writ Petition, emphasizing the need for the petitioner to cooperate in the completion of the reassessment proceedings by providing all relevant materials. The judgment underscored the importance of full and true disclosure by assessees and the authority's power to reopen assessments if material facts are not fully disclosed.