2021 (9) TMI 1006 - HC - Income Tax

Reopening of assessment u/s 147 - Satisfaction recorded by AO - HELD THAT - CBI, Mumbai has filed FIR against the directors of the assessee company and M/s Ardor International Private Limited in which it was stated that modus operandi was a circular routing of funds among inter related parties having common management and address. This information also emphasized that the income chargeable to tax has escaped assessment. The AO with independent application of mind has reopened and the instant proceeding under Section 147 have been initiated after deriving at a satisfaction by the AO. He has also recorded the reasons in writing with independent application of mind. He is expected to form only a prima facie opinion or belief and therefore, according to the respondent, presently no interference is desirable. The rejoinder affidavit is also filed denying all these aspects and also calling various decisions. The Court has heard extensively both the sides and also examined the material on record. It also called for the details of the FIR filed by the CBI. Since the Court was disinclined to entertain this petition, learned advocate Mr. Mehta has, on instruction, chosen to withdraw this petition.

Summary

Issues:
Challenge to reopening of assessment under Section 148 of the Income Tax Act, 1961.

Analysis:
1. The petitioner, a Private Limited Company, challenged the reopening of assessment for the Assessment Year 2012-13 under Section 148 of the Income Tax Act, 1961. The respondent, the Assessing Officer (AO), issued the impugned notice stating that income had escaped assessment and requested the petitioner to file its return of income. The petitioner contended that during the assessment proceedings under Section 143(3), various details were requested by the AO, which were duly provided by the petitioner. The assessment under Section 143(3) was completed on 07.11.2014, determining the income accordingly.

2. The respondent, on the other hand, justified the reopening of assessment based on information received regarding bank transactions with Rajkot Nagrik Sahkari Bank Limited and Axis Bank Limited. The respondent alleged that the petitioner failed to comply with summons and did not explain the nature and sources of the amounts credited in the bank accounts. The respondent further claimed that the petitioner was involved in circuitous transactions of rotation of undisclosed income of directors of certain companies, which led to the reopening of the assessment under Section 147 of the Income Tax Act, 1961. The AO, after verifying the information received, had reason to believe that income had escaped assessment, satisfying the core ingredients necessary for reopening the assessment.

3. The petitioner objected to the reopening of assessment, arguing that the reasons provided were based on unsustainable grounds, as mere financial transactions between entities would not lead to income escapement. The petitioner also disputed any connection between the company and the entities mentioned in the CBI complaint. However, the respondent maintained that the reopening was justified based on the information received from the Deputy Director of Income Tax (Investment) and the subsequent verification of the case record.

4. After extensive hearings and examination of the material on record, the Court, disinclined to entertain the petition, allowed the petitioner to withdraw the petition. Consequently, the petition was disposed of as withdrawn, with the notice discharged and the interim relief vacated.