2021 (9) TMI 326 - HC - Income Tax

Reopening of assessment u/s 147 - Reason to believe - Assessment is reopened beyond a period of four years, but within a period of six years - HELD THAT - As based on the return of income filed by the petitioner / assessee, the assessment order has been passed and subsequently certain new tangible materials were traced out for the purpose of reopening as the AO has reason to believe that income chargeable to tax has escaped assessment - the assessee cannot say that he has produced all the material facts and books of accounts etc., Even if such materials are produced, if the authorities formed an opinion that the tax escaped assessment, then they are empowered to initiate reopening proceedings. Assessment is reopened beyond a period of four years, but within a period of six years and therefore, mere availability of tangible material would be sufficient for the purpose of invoking the powers under Section 147 of the Act. This failure on the part of the petitioner was considered for reopening of assessment and the finding is given that the assessee company has misleading the assessing authorities by furnishing incorrect particulars - this Court cannot arrive a finding in this regard. It is for the assessee to establish his case during the course of reassessment proceedings. The writ petition is filed, challenging the reopening proceedings. Thus, objective satisfaction would be sufficient for the purpose of allowing the Assessing authority to proceed with the reopening proceedings. Objective satisfaction would be sufficient for the purpose of allowing the Assessing authority to proceed with the reopening proceedings. Once, the materials are available and such materials were not taken into consideration by the original assessing authority, or any findings are given in the assessment order, which would be sufficient for the purpose of reopening of assessment and once such reopening is made based on tangible materials, then the assessee has to defend his case by furnishing further particulars or explanations or documents during the course of reopening proceedings. High Court cannot form any opinion in respect of such findings to be made. Only endeavour of the High Court is to ensure that, whether the conditions stipulated and the process adopted for the purpose of reopening of assessment in consonance with the provisions of the Act and in accordance with the Directives of the Hon ble Supreme Court of India in the case of GKN Driveshafts 2002 (11) TMI 7 - SUPREME COURT are not. If the conditions are fulfilled, then it is for the assessee to defend their case in the manner known to law. The reasons furnished in the case of the petitioner would be sufficient for the purpose of reopening of assessment as the case of the petitioner is initiated beyond a period of four years, but within a period of six years and therefore, the petitioner is bound to participate in the reopening proceedings for the purpose of defending their case. - Decided against assessee.

Issues Involved:
1. Legal validity of initiation of reopening proceedings.
2. Disposal of objections by the respondent.
3. Compliance with Section 147 of the Income Tax Act, 1961.
4. Application of the proviso to Section 147.
5. Consideration of "reasons to believe" and "change of opinion".
6. Allegation of failure to disclose material facts.
7. Requirement of tangible material for reopening.
8. Jurisdictional validity of the reopening notice.

Issue-wise Detailed Analysis:

1. Legal Validity of Initiation of Reopening Proceedings:
The petitioner challenged the reopening proceedings initiated by the respondent under Section 148 of the Income Tax Act, 1961, arguing that there was no failure on their part to disclose fully and truly all material facts. The petitioner contended that the reopening was based on a mere change of opinion, which is not permissible.

2. Disposal of Objections by the Respondent:
The respondent issued a notice under Section 148, and upon receiving the petitioner's objections, they were disposed of by rejecting the same. The petitioner argued that the objections were not adequately considered and that the reasons for reopening were based on incorrect facts.

3. Compliance with Section 147 of the Income Tax Act, 1961:
The petitioner argued that the conditions stipulated under Section 147, particularly the requirement for the Assessing Officer to have "reason to believe" that income had escaped assessment, were not met. They relied on various judgments to support their contention that "reason to believe" must be based on tangible material and not on suspicion or change of opinion.

4. Application of the Proviso to Section 147:
The petitioner contended that the proviso to Section 147, which requires the Assessing Officer to have reason to believe that income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts, was not satisfied. They argued that all necessary facts were disclosed during the original assessment proceedings.

5. Consideration of "Reasons to Believe" and "Change of Opinion":
The petitioner argued that the reopening was based on a change of opinion, which is not a valid ground for reopening an assessment. They cited various judgments, including the Supreme Court's decision in CIT Vs. Kelvinator of India Ltd., to support their contention that reassessment must be based on tangible material and not on a mere change of opinion.

6. Allegation of Failure to Disclose Material Facts:
The petitioner contended that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. They argued that the reasons recorded for reopening were based on the same material that was already available during the original assessment proceedings.

7. Requirement of Tangible Material for Reopening:
The petitioner argued that no fresh tangible material had surfaced to justify the reopening of the assessment. They contended that the reasons recorded for reopening were based on incorrect facts and that there was no new information that warranted the reopening of the assessment.

8. Jurisdictional Validity of the Reopening Notice:
The petitioner argued that the reopening notice was issued without proper jurisdiction as the conditions for reopening under Section 147 were not met. They contended that the notice was based on incorrect facts and that there was no failure on their part to disclose material facts.

Judgment Analysis:
The court dismissed the writ petition, holding that the reopening of the assessment was valid. The court observed that the Assessing Officer had "reason to believe" that income chargeable to tax had escaped assessment, which was sufficient for initiating reopening proceedings. The court noted that the reopening was based on tangible material and that the petitioner had the opportunity to defend their case during the reassessment proceedings. The court emphasized that the High Court's role was to ensure that the conditions and process for reopening were in accordance with the law and not to form an opinion on the merits of the reassessment itself.

← Previous Next →