2023 (1) TMI 180 - HC - Income Tax

Re-opening of the assessment / re-assessment u/s 147 - Whether assessment proceedings could not be re-opened after 6 years and that too without any justification and sought for dropping of the proceedings? - HELD THAT - Information received from the Investigating Wing cannot be denied and they are prepared after conducting search and seizure operation, inquiry, recording of the statements and collection of evidence. The expression reason to believe occurring in Section 147 would mean and include justification for such re-opening and when the AO has cause or justification to know or suppose that income had escaped assessment, it can be safely inferred that he is said to have reason to believe that income had escaped assessment. Finality to the ascertainment cannot be attached at this stage. When there is relevant material on which a person of reasonable prudence would have formed the belief of such escapement, it would suffice and in the instant case, the above material is sufficient enough to arrive at such a conclusion. The sufficiency of the material would be good enough for the authority to clutch the jurisdiction for commencement of reassessment proceedings. However, the sufficiency or correctness of the material would not be in the realm of consideration at this stage. Where the AO has reason to believe and there is prima facie material for commencement of re-assessment proceeding, sufficiency or correctness of the material is not a thing to be considered at that stage and the correctness or otherwise of the reasoning recorded for re-opening of the assessment would not be in the realm of adjudication by going into merits of the said reasoning. If such reasons are not perverse and there being not mere change of opinion and there being sufficient material or reason to believe there is escapement of income to tax it would suffice for the authorities to proceed to re-open the assessment subject to other prescribed criteria also being satisfied. The borrowed opinion also being conspicuously absent in the instant case subsequent events also disclosing certain transactions attributable to the assessee having been unearthed during the course of search proceedings and the statement of the assessee himself disclosing the admission with regard to the said transaction, it cannot be gainsaid by the petitioner / assessee that such commencement of re-assessment proceeding is without jurisdiction or jurisdictional error having been committed by the authorities. We are of the clear opinion that this is not a case in which we may exercise extraordinary jurisdiction nor a case is made out by the petitioner for this Court to exercise such extraordinary jurisdiction. Hence, we refrain to do so. Yet, another reason for us not to exercise the discretion is that under the scheme of the Act, petitioner has very much the remedy by way efficacious redressal mechanism under various provisions of the Act available and as such when petitioner is not left remediless, at this stage of proceedings, to invoke extraordinary jurisdiction would not be just and proper. At various stages, petitioner is permitted to avail alternative statutory remedies after ultimate analysis or conclusion being arrived at by an authority. At this stage, we may not assume anything and petitioner being not remediless, we are not inclined to exercise extraordinary jurisdiction. The judgment which have been relied upon by learned counsel for the petitioner are no-doubt projecting the salutary principles, but the background of this peculiar facts and the material and discussion which we have made in earlier paragraphs of this very order, we are of the opinion that no decision may be applied as a straitjacket formula as it reflects distinguishable circumstance as well and as such, based upon the sound principle of law on the precedent, we are of the view that decisions cited by learned counsel are of no assistance to their propositions. We are of the view that decisions in the case of Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT , in the case of Ami Ashish Shah 2021 (3) TMI 1174 - GUJARAT HIGH COURT and decision 2017 (3) TMI 114 - GUJARAT HIGH COURT d ated 15.2.2017 delivered in Special Civil Application No.21691 of 2016 with Special Civil Application No.21741 of 2016 relied upon would not be applicable, since facts on hand and the detailed analysis by the competent authority altogether project a different fact situation. We are of the considered view that there is no merit in these petitions and they are liable to be dismissed for the reasons aforestated and accordingly, they stand dismissed. Rule is discharged.

Issues Involved:
1. Legality of the reopening of assessments.
2. Validity of the impugned notices and orders.
3. Justification for reopening assessments after six years.
4. Adequacy of reasons for reopening the assessments.
5. Examination of jurisdiction and procedural compliance by the authorities.

Detailed Analysis:

Issue 1: Legality of the Reopening of Assessments
The petitioner challenged the legality of reopening the assessments for the Assessment Years 2011-12, 2012-13, and 2013-14. The court examined whether the Assessing Officer had "reason to believe" that income had escaped assessment. The reopening was based on documents and statements obtained during search operations, revealing unaccounted cash transactions and investments by the petitioner. The court found that the Assessing Officer had sufficient material to justify the reopening, including admissions by the petitioner regarding unaccounted cash payments.

Issue 2: Validity of the Impugned Notices and Orders
The petitioner argued that the notices and orders for reopening the assessments were arbitrary and without proper justification. The court noted that the notices were issued after obtaining necessary sanctions from the Principal Commissioner of Income Tax, as required under Section 151(1) of the Income Tax Act. The court held that the notices and orders were valid and issued in accordance with the law, based on substantial material evidence.

Issue 3: Justification for Reopening Assessments After Six Years
The petitioner contended that the reopening of assessments after six years was unjustified. The court observed that the reopening was initiated based on new material evidence obtained during search operations, which was not available at the time of the original assessments. The court held that the Assessing Officer had the jurisdiction to reopen the assessments even after six years, provided there was tangible material indicating income escapement.

Issue 4: Adequacy of Reasons for Reopening the Assessments
The petitioner sought to challenge the adequacy of the reasons provided for reopening the assessments. The court examined the reasons recorded by the Assessing Officer, which included detailed analysis of the seized documents and statements from the petitioner and other involved parties. The court found that the reasons were adequate and based on substantial material, including unaccounted cash payments and unexplained investments.

Issue 5: Examination of Jurisdiction and Procedural Compliance by the Authorities
The petitioner questioned the jurisdiction and procedural compliance by the authorities in issuing the notices and orders. The court reviewed the procedural steps taken by the authorities, including the issuance of notices under Section 148 and the disposal of objections raised by the petitioner. The court concluded that the authorities had followed the due process of law and exercised their jurisdiction appropriately.

Conclusion:
The court dismissed the petitions, holding that the reopening of assessments was justified based on substantial material evidence indicating income escapement. The impugned notices and orders were found to be valid, having been issued after obtaining necessary sanctions and following due process. The court emphasized that the sufficiency of the material for reopening the assessments was not to be questioned at this stage, and the petitioner had adequate remedies available under the law to challenge the final assessment orders.

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