2022 (4) TMI 43 - HC - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - reasons to believe recorded by AO only mentions that information available with department is that petitioner is involved in obtaining bogus bills from a paper shell company of Kolkata, but name of company from whom petitioner has obtained bogus bills has not been specifically mentioned by AO - HELD THAT - If reasons are recorded by Assessing Officer based on certain information, then such information should be concrete and specific name of paper shell company should have been mentioned by Assessing Officer in reasons to believe, which is lacking in present case. Approval/sanction granted under Section 151 of the Act of 1961 is also not proper because sanctioning/approving authority in approval has only written 'approved'. From the assessment order u/s 143 (3) and reasons recorded by AO, it is apparent that Assessing Officer has committed mistake, which vitiates the entire proceedings. Had the Approving / Sanctioning authority considered the record in proper manner, the mistake committed by Assessing Officer could have been detected by it and sanction/approval might have not been granted. In these circumstances, pending final decision of this petition, some interim protection may be granted to the petitioner. Taking into consideration facts and circumstances of case, particularly contents of assessment order u/s 143 (3) of the Act of 1961 where total income of petitioner assessee has been accepted by AO, as also contents of reasons to believe recorded by AO, determining total loss and further considering that name of paper shell company has not been specifically mentioned by Assessing Officer in the reasons recorded, we are inclined to grant interim relief to petitioner pending disposal of this petition.

Summary

Issues:
1. Validity of notice under Section 148 of the Income Tax Act, 1961 served to the petitioner for assessment year 2014-15 after a lapse of four years.
2. Adequacy of reasons to believe recorded by the Assessing Officer for re-assessment.
3. Proper approval/sanction under Section 151 of the Act of 1961.
4. Granting of interim relief to the petitioner.

Validity of Notice under Section 148:
The petitioner argued that the notice served after four years from the end of the relevant assessment year was improper. The assessment order under Section 143 (3) showed a total income of ?1,96,62,420, and the reasons to believe for re-assessment did not mention the specific paper shell company from which bogus bills were allegedly obtained. The petitioner contended that the Assessing Officer had not applied his mind, and the approval under Section 151 was also inadequate as it only stated 'approved'. The petitioner sought interim protection citing errors in the proceedings and referred to relevant case laws.

Adequacy of Reasons to Believe:
The respondent contended that the Assessing Officer initiated proceedings based on information collected, alleging the petitioner's involvement in obtaining bogus bills from a specific paper shell company in Kolkata. The amount involved was mentioned, and upon objection, the company was identified as M/s Krishna Enterprises. The respondent argued that the Assessing Officer had applied his mind while initiating the proceedings, contrary to the petitioner's claim.

Proper Approval/Sanction under Section 151:
The petitioner raised concerns about the adequacy of the approval granted under Section 151, emphasizing the importance of a thorough review to detect any mistakes made by the Assessing Officer. The petitioner argued that the lack of specific mention of the paper shell company in the reasons to believe and the vague approval 'approved' indicated flaws in the approval process.

Granting of Interim Relief:
Considering the facts presented, including the accepted total income of the petitioner and the absence of the specific name of the paper shell company in the reasons recorded, the court leaned towards granting interim relief to the petitioner until the final decision on the petition. Consequently, the court allowed the interim relief, staying the proceedings initiated against the petitioner until the next hearing date.

The judgment addresses the validity of the notice under Section 148, adequacy of reasons for re-assessment, proper approval under Section 151, and the granting of interim relief to the petitioner. The court found merit in the petitioner's arguments regarding the lack of specific details in the reasons to believe and the approval process, leading to the decision to grant interim relief. The case highlights the importance of thorough assessments and proper approvals in income tax proceedings to ensure fairness and accuracy in tax assessments.