2022 (10) TMI 128 - HC - Income Tax

Reopening of assessment u/s 147 - order passed under Section 148A(d) based on material available on record or not? - in response to the notice the petitioner-assessee has filed its revised return in Form ITR-6 - HELD THAT - As in the instant case, the petitioner has not furnished objection to the notice issued under Section 148A of the IT Act. Therefore, this Court finds that no case is made out by the petitioner for interfering with the issue of notice under Section 148 by the Adjudicating Authority after taking decision to initiate proceeding on passing order under Section 148A(d) of said Act. Assessing Officer reached the conclusion reason to believe and approval was accorded by the learned Principal Commissioner of Income-tax for reopening of assessment thereby giving the assesse an opportunity to rebut and meet the points that the documents/materials based on which such a conclusion is reached is not in fact correct - In this respect it would be apt to say that the petitioner is required to participate in the assessment proceeding and produce materials and documents like books of account, vouchers, invoices, etc. maintained in terms of statutory requirement before the Assessing Authority so as to rule out manipulation. Since the petitioner has already filed revised return for the Assessment Year 2018-19 in compliance of the terms of notice under Section 148, the Assessing Officer is required to verify the books of account of the relevant year and examine any other evidence adduced by the petitioner with reference to the materials available in record. While doing so, he will confront the adverse material, if any, he wishes to utilize against the assessee-petitioner and record a preliminary statement with regard to such verification. He may also record statement whether the alleged transactions are incorporated in the regular books of account/statements on the basis of which returns have already been filed. After such verification, if he comes to the conclusion that the petitioner is liable to be levied with tax, he shall allow the petitioner to take copy of such materials which he wants to utilize against the petitioner. Needless to say that the petitioner shall be allowed reasonable opportunity for stating its case, which shall be considered by the Assessing Officer in the order of assessment. The petitioner for the purpose of assessment may participate in the proceeding initiated under Section 148 of the IT Act and no unnecessary adjournment shall be granted.

Issues Involved:
1. Non-consideration of the petitioner's application.
2. Validity of the notice issued under Section 148 of the Income-tax Act, 1961.
3. Adequacy of the time provided to the petitioner for response.
4. Sufficiency of the grounds for reopening the assessment.
5. Requirement of providing material evidence to the petitioner.

Detailed Analysis:

1. Non-consideration of the petitioner's application:
The petitioner alleged that their application dated 18th May 2022, submitted in response to the notice under Section 148A of the Income-tax Act, 1961, was not considered. The petitioner sought to quash the notice dated 26.03.2022 issued under Section 148 of the IT Act.

2. Validity of the notice issued under Section 148 of the Income-tax Act, 1961:
The notice under Section 148 was issued based on information suggesting that income chargeable to tax for the Assessment Year 2018-19 had escaped assessment. The petitioner was accused of inflating expenses by showing bogus purchases from M/s. Mideast Integrated Steel Pvt. Ltd., amounting to Rs.31,64,58,088/-. The petitioner did not respond to the notice within the stipulated time, leading the Assessing Officer to believe that the income had escaped assessment, thus justifying the issuance of the notice under Section 148.

3. Adequacy of the time provided to the petitioner for response:
The petitioner argued that the seven-day period provided to respond to the notice dated 15.03.2022 was inadequate. However, the court found that the petitioner did not seek an extension of time within the stipulated period. The court held that the time granted was in compliance with Section 148A(b), which mandates a minimum of seven days and a maximum of thirty days for response.

4. Sufficiency of the grounds for reopening the assessment:
The court emphasized that the sufficiency of the grounds for reopening an assessment is not justiciable. The existence of the belief that income had escaped assessment was sufficient for the Assessing Authority to take action under Section 148. The court found that the Assessing Officer had valid reasons to believe that income had escaped assessment based on the information available.

5. Requirement of providing material evidence to the petitioner:
The petitioner contended that they should be provided with the documents and materials based on which the Assessing Officer reached the conclusion to reopen the assessment. The court held that the petitioner is required to participate in the assessment proceedings and produce relevant documents and evidence. The Assessing Officer is obligated to confront the petitioner with any adverse material intended to be used against them and allow an opportunity for rebuttal.

Conclusion:
The court dismissed the writ petition, upholding the validity of the notice issued under Section 148 and the subsequent proceedings. The petitioner was directed to participate in the assessment proceedings, where they would be given an opportunity to contest the evidence and present their case. The court emphasized that interference at this stage was not warranted, and the petitioner should address their grievances during the assessment process.

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