2022 (3) TMI 849 - HC - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - Proof of procedural irregularity - HELD THAT - Notices were issued under Section 148 of the Act, pursuant to which, return was filed by the petitioner for the relevant assessment years, thereafter, reasons were sought for, reasons were given by the Revenue, those reasons have been objected. Those objections having been considered, now, rejection orders have been passed by the respondent-Revenue. Therefore, absolutely there has been no procedural irregularity available in these cases. Insofar as the reason for reopening is concerned, as has been stated above, the petitioner being the Indian Subsidiary Company of a foreign company called M/s.BTL Cyprus had earned income, according to the Revenue, and the said income has not been brought or rooted through the P L account i.e., the Profit and Loss Account of the relevant Financial Year and this has been unearthed subsequently only by the Revenue and prima facie , according to the Revenue, there has been a net freight of ₹ 29,50,53,532/- collected through the Indian Subsidiary company after allowing the expenditure, which according to the Revenue, is escaped assessment. Though it was vehemently contended by the learned counsel appearing for the petitioner that, these kind of transactions and the income derived by the assessee company had already been disclosed in the earlier years, whether that would preclude the Revenue from reopening the assessment for the present Assessment Years i.e., 2013-14 and 2015-16 is concerned, it has to be gone into only by the Assessing Authority, before whom certainly the assessee can make his defence by producing books of accounts, documents, reply, etc., These kind of minute details cannot be gone into by this Court by exercising its extraordinary jurisdiction under Article 226 of the Constitution. If at all any procedural irregularities or violation of the statute or if the Revenue acted upon against the principle laid down by the Hon'ble Supreme Court in dealing with cases for reopening under Section 147 of the Act, only in those circumstances, this Court can show its indulgence at the threshold, against the very reopening of the assessment itself under Section 147 of the Act. Here no such situation has arisen after having gone through the documents, which are placed before this Court, especially on the reasons for reopening. The procedural formalities have alreay been complied with in these cases as directed by the Hon'ble Supreme Court in GKN Driveshafts 2002 (11) TMI 7 - SUPREME COURT case and therefore, on that ground also, no interference is called for against the Revenue on these impugned orders. Therefore, this Court feels that the impugned orders are to be sustained and the assessment process already commenced by invoking the Section 147 of the Act can go on. Appeal dismissed.

Summary

Issues:
1. Reopening of assessment under Section 147 of the Income Tax Act, 1961 for the Assessment Years 2013-14 and 2015-16 based on notices issued by the respondent-Revenue.
2. Objections raised by the assessee against the reasons for reopening and subsequent rejection of objections by the Revenue.
3. Legal challenge through writ petitions against the orders of reopening and rejection of objections.
4. Procedural regularity in the reopening process and compliance with legal requirements as per the Supreme Court's guidelines in GKN Driveshafts case.
5. Arguments regarding the validity of reasons cited for reopening, disclosure of income in earlier years, and the role of the Assessing Authority in determining the validity of the reopening.

Analysis:
1. The High Court considered the issue of reopening assessments for the Assessment Years 2013-14 and 2015-16 under Section 147 of the Income Tax Act based on notices issued by the Revenue. The court noted that objections were raised by the assessee against the reasons for reopening, which were subsequently rejected by the Revenue through orders dated 18.11.2021 and 08.02.2022 for the respective assessment years. The writ petitions challenged these orders, questioning the validity of the reasons for reopening.
2. The court analyzed the arguments presented by both sides. The petitioner's counsel contended that the reasons cited for reopening were not valid as the alleged income had been disclosed in earlier years, thus no suppression or non-disclosure existed for the current assessment years. The Revenue's counsel argued that the power to reopen assessments under Section 147 should not be curtailed, emphasizing the need for cooperation from the assessee in the assessment process.
3. Referring to the Supreme Court's decision in GKN Driveshafts case, the High Court highlighted the procedural requirements for reopening assessments, including providing reasons to the assessee and disposing of objections through a speaking order. The court found that the procedural formalities had been complied with in the present case, and no procedural irregularity was evident.
4. The court emphasized that detailed factual inquiries regarding income disclosure and transactions should be addressed by the Assessing Authority, not the court exercising its extraordinary jurisdiction under Article 226 of the Constitution. It was noted that unless there are procedural irregularities or violations of legal principles, the court should not interfere with the reopening process under Section 147.
5. Ultimately, the High Court upheld the impugned orders, allowing the assessment process to continue. The court directed the petitioner to present their defense before the Assessing Authority, who would objectively consider the submissions and make a decision on the revised assessment. The writ petitions were dismissed, with the option for the petitioner to participate in the assessment proceedings before the Revenue Authorities.