2022 (4) TMI 1021 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - proof of fresh tangible materials available at the hands of the assessing officer to reopen the assessment under section 147 - HELD THAT - The assessment for the year 2014-15 in respect of the appellant firm was completed under section 143(3) on 07.10.2016. Subsequently, the respondent reopened the assessment under section 147 by issuing notice under section 148 of the Act, to which, the appellant filed its objections on 12.07.2021. Thereafter, as per the order of this court in 2021 (8) TMI 1294 - MADRAS HIGH COURT at the instance of the appellant, the respondent passed the order rejecting the said objections, on the premise that there are fresh tangible materials available at the hands of the assessing officer to reopen the assessment under section 147 - The said order was put to challenge before the learned Judge 2022 (1) TMI 1230 - MADRAS HIGH COURT which was dismissed, by the order dated 10.01.2022 impugned herein. We find no reason to interfere with the order of the learned Judge 2022 (1) TMI 1230 - MADRAS HIGH COURT even prior to the passing of final order in the re-assessment proceedings. Judge has pointed out in the order impugned herein that the respondent has only indicated the reasons and justifications for reopening the assessment and has not come to a definite conclusion as to whether any case has been made out for re-computing the income of the appellant. Judge has granted liberty to the appellant to file reply/representation as to why the completed assessment proceedings deserves to be confirmed. Such a conclusion arrived at by the learned Judge, in our opinion, does not require any interference.

Issues:
1. Reopening of assessment under Section 147 of the Income Tax Act, 1961 based on alleged escaped income for the assessment year 2014-15.
2. Disallowance of prior period expenses and interest expenditure paid to relatives deposit loans leading to the reopening of assessment.
3. Challenge to the notice of reopening on the grounds of change of opinion and lack of jurisdiction.
4. Dismissal of writ petition seeking to quash the notice of reopening.
5. Appeal against rejection of objections to the reopening of assessment.
6. Adherence to the mandate of First Proviso to Section 147 and jurisdictional issues.
7. Legal arguments based on lack of fresh materials for reopening assessment and lack of jurisdiction under proviso to Section 147.

Analysis:

1. The appellant, a wholesale trading firm, filed its return of income for the assessment year 2014-15, which was accepted after scrutiny under Section 143(3) of the Income Tax Act. However, after five years, the respondent issued a notice under Section 148 for reopening the assessment, alleging escaped income. The appellant challenged the reopening on the grounds of change of opinion and lack of jurisdiction.

2. The respondent justified the reopening based on disallowances of prior period expenses and interest expenditure paid to relatives deposit loans. The appellant objected to the reopening, contending that the original assessment was comprehensive and there were no fresh materials to warrant reassessment.

3. The writ petition filed by the appellant to quash the reopening notice was dismissed as premature, with directions to the respondent to consider the objections raised by the appellant. Subsequently, the objections were rejected, leading to the filing of another writ petition, which was disposed of by the learned Judge.

4. The learned Judge observed that the respondent had not conclusively determined the need for reassessment and granted the appellant liberty to provide explanations for why the original assessment should stand. The appellant's jurisdictional arguments were also noted, with directions for participation in the reassessment proceedings.

5. The appellant argued for adherence to the First Proviso to Section 147, emphasizing the lack of fresh materials for reassessment. Legal precedents were cited to support the contention that the jurisdiction for reopening was questionable.

6. The Senior Panel Counsel defended the reopening based on disallowances identified in the scrutiny of records, asserting that the reassessment was justified. The learned Judge upheld the respondent's actions, allowing the appellant to present their case during the reassessment proceedings.

7. The High Court, after considering the arguments presented, dismissed the writ appeal, emphasizing that the respondent had not conclusively determined the need for reassessment. The Court affirmed the liberty granted to the appellant to contest the reassessment and raised no objections to the learned Judge's decision.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the case and the arguments presented by both parties.

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