2022 (8) TMI 266 - HC - Income Tax

Reopening of assessment u/s 147 - Whether the Tribunal was justified in law in holding that reopening of assessment under section 148 of the Act is valid and complies with all the mandatory conditions for reopening on the facts and circumstance of the case? - HELD THAT - As in the facts of the case, there was no regular assessment conducted under the provisions of Sub-section (3) of Section 143 of the Act, 1961 after scrutiny but the returned income was accepted under the provision of Section 143(1) -The assessee neither raised any objection to the notice issued under Section 148 at the relevant point of time nor raised such issue or objection even during the course of assessment and participated in the assessment proceedings by filing reply. Even before the CIT (Appeals), no ground is raised with regard to the reopening of the assessment. The assessee for the first time challenged the reopening before the Tribunal by raising the ground which the Tribunal decided after considering the material on record. As in the decision in case of G G Pharma India Ltd 2015 (10) TMI 754 - DELHI HIGH COURT there was a scrutiny assessment under Section 143(3) of the Act, 1961 and after relying upon the decision in case of ACIT Versus Dhariya Construction Company 2010 (2) TMI 612 - SC ORDER t held that the the issue of accommodation entry was processed under Section 143(3) of the Act, 1961 and without forming a prima-facie opinion on the basis of the material and without application of mind to the information, if any collected, it was not possible for the Assessing Officer to have concluded that the assessing company introduced its own unaccounted money in its Bank by way of accommodation entries. Whereas, in the facts of the case, the Assessing Officer has considered the material by applying his mind to the information collected from the Central Excise Department preferring to the return of income furnished by the assessee, wherein it was not possible to ascertain as to whether the assessee has taken the transaction which is disclosed during the course of search of M/s. Wonder Packaging Industries Limited or not, and therefore, has rightly come to the opinion that he has reason to believe that income chargeable to tax has escaped assessment. No substantial question of law.

Summary

Issues Involved:
1. Validity of Section 147 proceedings for Assessment Year 2009-10.
2. Justification of reopening of assessment under Section 148.
3. Validity of reasons recorded for initiating proceedings under Section 147.

Issue-wise Detailed Analysis:

1. Validity of Section 147 Proceedings for Assessment Year 2009-10:
The appellant-assessee challenged the order of the Tribunal which upheld the validity of proceedings under Section 147 of the Income Tax Act, 1961. The Tribunal found that the reasons recorded on 21.03.2016 justified the reopening, noting that R.K. Traders, the proprietary concern of the assessee, had business dealings with M/s. Wonder Packaging Industries and used its premises. The assessee's return did not disclose income from these transactions. The Tribunal concluded that the reopening was done with prior approval and proper satisfaction, making the notice under Section 148 valid.

2. Justification of Reopening of Assessment under Section 148:
The Assessing Officer issued a notice under Section 148 on 26th March 2016, based on two counts: verification of cash deposits in the appellant's savings account and transactions related to the search at M/s. Wonder Packaging Industries. The Assessing Officer believed that income of Rs.1,27,57,217/- had escaped assessment. The Tribunal upheld this, noting that the assessee did not object to the reopening during the assessment process and participated in the proceedings. The Tribunal found that the information received from the Central Excise Department and the non-disclosure of certain transactions in the return justified the reopening.

3. Validity of Reasons Recorded for Initiating Proceedings under Section 147:
The reasons recorded by the Assessing Officer included the non-compliance with verification letters regarding cash deposits and the unrecorded transactions with M/s. Wonder Packaging Industries. The Tribunal found these reasons sufficient, noting that the assessee's return did not reflect the income from these transactions. The Tribunal dismissed the appellant's reliance on the cases of Harikishan Sunderlal Virmani and G & G Pharma India Ltd., distinguishing them based on the facts that in the current case, there was no scrutiny assessment under Section 143(3) and the Assessing Officer had formed an independent opinion based on the information received.

Conclusion:
The High Court dismissed the appeal, finding no legal infirmity in the Tribunal's order. The Court held that the Tribunal correctly upheld the validity of the Section 147 proceedings and the reopening of the assessment under Section 148. The reasons recorded by the Assessing Officer were found to be sufficient and justified, and the appellant's arguments based on previous case law were distinguished based on the facts of the current case. The appeal was dismissed as no substantial question of law was found.