2022 (5) TMI 117 - HC - Income Tax

Reopening of assessment u/s 147 - diversion of interest bearing funds - entire amount given to his son by the petitioner, the interest has not been charged whereas the cash credit bank account from which amount was transferred to his son, the assessee had paid interest @ 14.33 per annum - HELD THAT - The objections were duly disposed of by the Assessing officer. The order disposing of the objections is also detailed one. It was stated that notice dated 28.03.2017 was issued after obtaining sanction from the competent authority. The judgment cited by the assessee was also duly discussed and considered by the Assessing officer. It is the settled proposition that the writ jurisdiction of the court is to be exercised under certain well established principles. The courts should exercise their writ jurisdiction very sparingly if there is alternative efficacious remedy . The petitioner cannot be allowed to short circuit the procedure merely out of convenience. If a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. In Raymond Woolen Mills Ltd. 1997 (12) TMI 12 - SUPREME COURT it was inter alia held that at the time of initiating the proceedings under Section 147 of the Act, the assessing officer has to only examine whether there is prima facie material on the basis of which the assessment should have been reopened. The Supreme court has held that at this stage the court is only required to see whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency of the correctness of the material is not a thing to be considered at the stage. We consider that there was sufficient material on the record for reopening/re-assessment of the case of the petitioner for the concerned assessment year. This court is not making any comment on the merits of the case. The assessee will have complete right to put up his case before the assessing officer. We consider that there is no violation of the principles of the natural justice. The revenue department has followed the procedure prescribed by the law. We consider there is no ground to interfere at this stage. Hence the petition is dismissed.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act.

Analysis:
The petitioner challenged a notice issued under Section 148 of the Income Tax Act, dated 28.03.2017. The petitioner had filed a return of income for the assessment year 2010-11, showing income of Rs.5,94,850. The petitioner received a notice under Section 133 (6) dated 20.02.2017, followed by a reminder on 02.03.2017. The petitioner responded partially on 06.03.2017 and further on 21.03.2017, denying disallowance of interest paid to Sh.Gaurav. The Assessing Officer provided reasons on 09.08.2017, and objections filed on 05.10.2017 were disposed of on 30.10.2017. The petitioner argued that complete material was not supplied, and proper opportunity was not given before passing the order.

The petitioner contended that the funds given to his son came from his mother's account, totaling Rs.1,14,80,076, and he had contributed Rs. 39,96,043 against his capital of Rs. 3,04,14,983 as of 31.03.2010. The petitioner cited the Supreme Court's decision in M/s Hero Cycle Pvt. Ltd vs. C.I.T., 379 ITR 347, to support his claim that no interest can be disallowed if the capital exceeds ten times the interest-free loans to the son. The department alleged that the petitioner paid Rs.1.5 crores for his son's property and manipulated interest expenses to evade taxes.

The department argued that the petitioner failed to comply with the notice under Section 133 (6) and objected to the disallowance of interest expenses on purported business loans transferred to his son without commercial justification. The department claimed that the petitioner did not provide proof that the funds belonged to his mother or that they were the source of the transferred sums. The department also highlighted the petitioner's rental income and alleged siphoning of funds to evade taxes.

The court noted that the notice under Section 148 was issued after obtaining sanction, and objections were duly disposed of by the Assessing Officer. The court emphasized the need for the petitioner to utilize statutory remedies rather than resorting to writ jurisdiction. It was held that there was sufficient material for reopening/reassessment, and the revenue department followed the prescribed procedure. The court dismissed the petition, stating that there was no violation of natural justice principles and no grounds for interference at that stage.