2023 (9) TMI 114 - HC - Income Tax

Reopening of assessment u/s 147 - reason to believe - whether there was true and full disclosure of all material facts on the part of the assessee at the time of filing of the return for relevant assessment year or whether the assessing officer had sufficient reason to believe that there was any escapement of income by reason of omission or failure on the part of the assessee to disclose all material facts? - HELD THAT - There was omission or failure on the part of the assessee to fully and truly disclose all material facts, the argument as raised by the petitioner was that the transaction of purchase of rice bran etc. from M/s NSE was duly reflected in its books of account which was produced at the time of original proceedings and, therefore, there could not be stated to be any concealment on his part. Though this argument appears to be quite attractive but is not acceptable due to the reason the proprietor of M/s NSE himself accepted that his firm was not involved in any actual business activity at all which prima facie proved that the transactions so reflected in books of account were bogus. Though a feeble argument had been raised to the effect that no opportunity to crossexamine the said Sh. Avinash had been given to the petitioner, however, there is nothing on record to suggest that any specific prayer had been made by the petitioner to allow him to cross-examine Sh. Avinash at the time when the proceedings on impugned notice were conducted Thus transaction of purchases being made by the petitioner from M/s NSE had been found to be bogus one on the basis of subsequent information, the mere disclosure of the same at the time of original assessment proceedings could not be considered to be disclosure of true and full facts and, therefore, in our opinion, the assessing officer certainly had jurisdiction to re-open the concluded assessment. Decided against assessee.

Issues Involved:
1. Quashing of notice under Section 148 of the Income Tax Act, 1961.
2. Validity of re-assessment proceedings initiated beyond the statutory period.
3. Alleged failure to disclose material facts by the petitioner.
4. Jurisdictional defect and principles of natural justice.

Summary:

Issue 1: Quashing of notice under Section 148 of the Income Tax Act, 1961
The petitioner, proprietor of Amit & Company, filed a petition under Article 226 of the Constitution to quash the notice dated 30.03.2021 issued under Section 148 of the Income Tax Act, 1961, and the subsequent order dated 24.11.2021 rejecting the objections raised by the petitioner. The notice was issued for re-assessment on the grounds that the expenses booked against purchases from M/s Natural Sales Enterprises (M/s NSE) were doubted, and purchases amounting to Rs.1,40,05,667/- were considered as escaped income. The petitioner contended that there was no statement by Sh. Avinash, proprietor of M/s NSE, implicating the petitioner's firm and that no tangible material was provided to support the re-assessment.

Issue 2: Validity of re-assessment proceedings initiated beyond the statutory period
The petitioner argued that the re-assessment proceedings were initiated after the expiry of five years from the relevant assessment year (A.Y. 2014-15) and were thus time-barred. The respondents countered that the notice was valid as it was based on new information obtained during the assessment of M/s NSE, which indicated that the petitioner had received accommodation entries from M/s NSE, a firm not engaged in actual business activity.

Issue 3: Alleged failure to disclose material facts by the petitioner
The court held that the petitioner had disclosed transactions with M/s NSE in its books of account, but subsequent information revealed that these transactions were bogus. The statement of Sh. Avinash and the bank records of M/s NSE supported the conclusion that the petitioner had availed of accommodation entries. Therefore, the court found that the petitioner failed to disclose fully and truly all material facts necessary for assessment.

Issue 4: Jurisdictional defect and principles of natural justice
The petitioner claimed that the re-assessment notice suffered from a jurisdictional defect and violated principles of natural justice as no opportunity was given to cross-examine Sh. Avinash. The court noted that the petitioner did not make a specific request for cross-examination during the proceedings. The court further observed that the assessing officer had prima facie material to believe that income had escaped assessment, and thus, the re-assessment proceedings were justified.

Conclusion:
The court dismissed the petition, holding that the assessing officer had sufficient reason to believe that income chargeable to tax had escaped assessment due to the petitioner's failure to disclose material facts fully and truly. The impugned notice and order were found to be within jurisdiction and not time-barred, and no violation of natural justice was established. Consequently, no interference was warranted under Article 226 of the Constitution.

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