2022 (6) TMI 807 - HC - Income Tax

Reopening of assessment u/s 147 - notice beyond period of four years - as submitted that Explanation-1 vests Assessing Officer with the authority to invoke Section 147 of the IT Act in respect of cases pertaining to assessment year more than four years old when it is found that their account books or other material furnished by the assessee were insufficient for the AO to discover escaped income despite exercise of due diligence - HELD THAT - Explanation-1 circumscribes the aforesaid exception (ii) that if the material and account books produced by the assessee for the relevant assessment year are such where despite exercise of due diligence, the Assessing Officer could not discover escaped income then such disclosure would not provide immunity to assessee from the clutches of Section 147 of the IT Act. The reasons assigned by the Assessing Officer in Annexure P/7 dated 04.02.2022 is that the material and accounts books furnished qua the relevant assessment year were insufficient despite exercise of due diligence to discover escaped income. The contents of Explanation-1 to proviso of Section 147 of the IT Act vests the Assessing Authority with ample power to invoke Section 147 of the IT Act qua assessment year more than four years old. This Court cannot go into the sufficiency of reasons assigned specially when the case is pending before the Assessing Authority to adjudicate upon in regard to alleged escaped income of year 2013-14. Writ jurisdiction of this Court under Article 226 of the Constitution of India or supervisory jurisdiction of this Court under Article 227 of the Constitution of India cannot be invoked to attack the sufficiency of the reasons assigned for re-opening of a case of escaped income so long as the power exercised and the reasons assigned therefore are traceable to any statutory provision. Thus, it cannot be said that the impugned notice of the assessment and re-opening of the case u/s 147 of the IT Act is bereft of jurisdiction.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for assessment year 2013-14. Interpretation of proviso to Section 147 regarding re-opening of assessment proceedings after four years.

Analysis:
The petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961, seeking to re-open assessment proceedings for the year 2013-14. The petitioner contended that as per the proviso to Section 147, assessment proceedings cannot be re-opened after four years from the end of the relevant assessment year. The Revenue argued that Explanation-1 to the proviso allows re-opening in cases where the Assessing Officer couldn't discover escaped income despite due diligence. The court analyzed Section 147 and the proviso, noting exceptions allowing re-opening if income escaped assessment due to the assessee's failure to make a return or disclose material facts. Explanation-1 limits the exception, stating that inadequate material provided by the assessee doesn't protect from re-opening under Section 147.

The Assessing Officer justified re-opening based on insufficient material and account books for the relevant assessment year, invoking the power granted by Explanation-1 to the proviso of Section 147. The court held that it cannot question the sufficiency of reasons when the case is pending before the Assessing Authority for adjudication on the alleged escaped income of 2013-14. The court emphasized that writ jurisdiction under Article 226 or supervisory jurisdiction under Article 227 cannot be used to challenge the sufficiency of reasons for re-opening as long as the power exercised and reasons given are within statutory provisions. Therefore, the court concluded that the notice for assessment and re-opening under Section 147 was not lacking jurisdiction, dismissing the petition and advising the petitioner to participate in the assessment proceedings or seek other available remedies in law.