2022 (11) TMI 979 - HC - Income Tax

Reopening of assessment u/s 147 - reason to believe at the stage of re-opening - high volume/value transaction of scrip - necessity of application of mind while granting the approval under Section 151 - whether there was reason to believe that income had escaped assessment and whether the Assessing Officer has tangible material before him for the formation of that belief? - HELD THAT - In view of the settled proposition of law, the submissions of Petitioner that in the reasons to believe it is stated that Odyssey Securities Private Ltd. is a scrip on which Petitioner has done high volume/value transaction, Odyssey Securities Private Ltd. was a broker and a Private Limited Company over which SEBI will have no jurisdiction and therefore, reliance of SEBI s order shows non-application of mind and on such reasons when approval has been granted that also indicates non-application of mind by the approving authority etc. will not hold water. We are not willing to accept the submissions of petitioner - We are satisfied, in the facts and circumstances of the case, that there has been application of mind while granting the approval under Section 151 of the Act. In the circumstances, Petition dismissed.

Summary

Issues:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961 for the assessment year 2015-16.
2. Requirement of tangible material for reopening assessment.
3. Application of mind by the approving authority for granting approval under Section 151 of the Act.

Analysis:
1. The petitioner challenged a notice dated 31st March, 2021 issued under Section 148 of the Income Tax Act, 1961, alleging that income chargeable to tax for the assessment year 2015-16 had escaped assessment. The reasons for reopening the assessment were provided upon the petitioner's request. Despite the lapse of more than four years from the relevant assessment year, the assessing officer can exercise the power to reopen if there is tangible material indicating income escapement. The court cited the case law of Export Credit Guarantee Corporation of India Ltd. vs. Additional Commissioner of Income-Tax, emphasizing that a reason to believe in the reopening stage is crucial, not the conclusive proof of income escapement. The test is whether there is tangible material supporting the belief, not an established fact of escapement.

2. The court dismissed the petitioner's argument that the reliance on SEBI's order regarding a company's transactions showed non-application of mind by the approving authority under Section 151 of the Act. The court held that there was indeed an application of mind in granting approval. The court concluded that the petitioner's submissions did not hold water and that there was sufficient application of mind in the circumstances of the case. Consequently, the petition was dismissed.

3. The court highlighted that during the assessment proceedings, the petitioner could raise all grounds before the Assessing Officer, who would pass orders according to the law. If dissatisfied with the order, the petitioner could avail the remedy of filing an appeal under the provisions of the Income Tax Act, 1961. This emphasized the importance of following due process and exhausting available legal remedies in case of dissatisfaction with assessment outcomes.