2021 (8) TMI 243 - HC - Income Tax

Validity of reopening of assessment u/s 147 - assessee contended that absolutely there is no reason for the purpose of reopening nor the reasons furnished are in compliance with the requirements contemplated u/s 147 - reasons for reopening was furnished to the petitioner after a lapse of more than one year - disallowance of expenditure incurred during the year in foreign currency - HELD THAT - The High Court is not expected to conduct a rowing enquiry in respect of facts and circumstances as narrated by the respective parties to the lis on hand. It is improper on the part of the Courts to form an opinion with reference to the disputed facts at this point of time as several alternate and efficacious remedies are available to the assessee under the provisions of the Income Tax Act and only after exhausting all those remedies the High Court can rely on those findings of the appellate authorities for the purpose of forming an opinion with reference to the facts.' This Court is of the considered opinion that the assessee is bound to furnish further details or the documents or materials so as to establish the expenditure, which are all now considered as the reason for the purpose of reopening of assessment. This Court cannot go into the factual details now furnished by the petitioner at the time of original assessment nor made a comparison with reference to the original explanations or submissions along with inferences drawn by the Assessing Officer for reopening of assessment. Reasoning furnished for reopening of assessment would reveal that there is no indication either in the return of income or the accompanying statement or the details filed that the assessee had deducted tax on the above payments. If at all the Assessing Officer's finding in this regard is not in consonance with the facts and circumstances, it is for the assessee to place all materials and at any stage, there is a possibility of dropping of further proceedings by the Assessing Officer if he is satisfied. Therefore, the petitioner need not shy away from participation and to explain before the Assessing Officer that the reasons to believe is incorrect as the petitioner is having materials to establish the contrary. Reasons for reopening as stated has got sum and substance and the said differences or inferences are to be answered and explained by the assessee by participating in the process of re-assessment. Contrarily the High Court cannot form an opinion with reference to the doubt raised by the Assessing Officer in the impugned orders and made a finding with reference to the documents relied on by the petitioner. This being the scope of the provisions of Sections 147/148 of the Act, this Court has no hesitation in forming an opinion that the petitioner has to participate in the process of re-assessment and establish their case in the manner known to law and by availing the opportunities to be provided by the respondent.

Issues Involved:
1. Legality of the reopening proceedings under Section 147 of the Income Tax Act.
2. Adequacy and timing of the reasons furnished for reopening.
3. Allegation of change of opinion versus reason to believe.
4. Compliance with procedural requirements under Section 148(2) of the Act.
5. Adjudicability of factual details in writ proceedings.

Issue-wise Detailed Analysis:

1. Legality of the Reopening Proceedings under Section 147 of the Income Tax Act:
The writ petitions challenge the reopening proceedings initiated under Section 147 of the Income Tax Act, specifically questioning the order disposing of the rejections filed by the petitioner. The petitioner argues that there is no valid reason for reopening, and the reasons furnished do not comply with the requirements under Section 147. The court notes that the final assessment order for the assessment year 2002-03 is undisputed, but the initiation of reopening under Section 147 is contested. The court emphasizes that reopening must be based on tangible materials and not merely on a change of opinion.

2. Adequacy and Timing of the Reasons Furnished for Reopening:
The petitioner contends that the reasons for reopening were furnished more than a year later, suggesting a lack of reasons at the time of issuing the notice under Section 148. The court examines whether the reasons were recorded prior to the issuance of the notice, as mandated by Section 148(2). The court finds that the reasons were indeed recorded by the predecessor of the current officer and communicated to the petitioner, thus complying with the procedural requirements.

3. Allegation of Change of Opinion versus Reason to Believe:
The petitioner argues that the reopening is a classic case of change of opinion, as the same materials were considered during the original assessment. The court distinguishes between "reason to believe" and "change of opinion," noting that the former must be based on new materials or information. The court acknowledges that the reasons furnished for reopening include new details that were not previously adjudicated, thus constituting a valid reason to believe.

4. Compliance with Procedural Requirements under Section 148(2) of the Act:
The petitioner asserts that the reasons were not recorded before issuing the notice under Section 148, violating Section 148(2). The court, however, finds that the reasons were recorded by the predecessor officer and communicated to the petitioner, fulfilling the procedural requirements. The court emphasizes that mere statements without proof are insufficient to challenge the validity of the reasons recorded.

5. Adjudicability of Factual Details in Writ Proceedings:
The court highlights that it is not expected to conduct a detailed enquiry into the facts at the initiation stage of reopening proceedings. The court's role is to ensure that the procedures for reopening are followed, not to adjudicate on the merits of the factual details provided by the petitioner. The court advises the petitioner to participate in the reassessment process and present all relevant materials to the Assessing Officer.

Conclusion:
The court concludes that the reasons for reopening have substance and directs the petitioner to participate in the reassessment process. The writ petitions are dismissed, and the reopening proceedings are to continue and be concluded expeditiously.

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