2024 (6) TMI 472 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - whether satisfaction note issued by the respondent for reopening did not refer to incriminating material having direct correlation with the income of the assess for the relevant assessment year? - HELD THAT - On perusal of the reply filed by the petitioner in response to the notice u/s 142 (1), petitioner has raised the issue with regard to connection of incriminating material and the addition proposed by the AO. Petitioner also filed detailed reply on merits to the show-cause notice issued by the respondent for the proposed addition. AO after considering such reply on merits, has passed the impugned assessment order by considering the contentions raised by the petitioner and arrived at a finding that unaccounted cash transaction in case of the assessee was found pertaining to A.Y. 2013-14 to A.Y. 2018-19 in the form of tally ledger, physical and hand-written sheet and printed sheet and on the basis of the nature of the documentary evidence found and seized in the search action, addition was made accordingly. AO has considered in detail the merits of the seized material found during the course of search and thereafter has made addition. When the petitioner has not challenged the notice and permitted the AO to pass the assessment order raising the dispute on satisfaction note as well as on merits, it cannot be said that the controversy arising in this petition is purely legal one because it involves disputed question of facts as to whether the satisfaction note of the AO pertains to the incriminating material which has direct relation with the income escaped during the assessment year or not and for that documentary evidence is required to be appreciated. Considering case of M/s.Godrej Sara Lee Ltd. 2023 (2) TMI 64 - SUPREME COURT vis-a-vis facts of the present case, the notice u/s 148 issued by the AO has already been now become part of the assessment order passed u/s 147 wherein the AO has considered all the contentions raised by the petitioner on merits as well as decided the issue on merits after considering the reply and documentary evidence filed by the assessee on merit and therefore, it involves disputed question of facts with regard to veracity of the incriminating materials analysed by the AO. Petition is not entertained. Petitioner is relegated to avail alternative efficacious remedy of preferring appeal before CIT (A) challenging the impugned assessment order raising all the contentions which are raised in this petition.

Summary

Issues:
1. Challenge to notice under Section 148 of the Income Tax Act, 1961 and Assessment order for A.Y. 2016-17.
2. Legal validity of satisfaction note for reopening assessment.
3. Entertainability of writ petition under Article 226 of the Constitution of India.

Detailed Analysis:

Issue 1: The petitioner challenged the notice dated 24th March, 2023, issued under Section 148 of the Income Tax Act, 1961, and the Assessment order dated 24.3.2024 for A.Y. 2016-17. The Assessing Officer made an addition of Rs. 12,78,26,000 as unaccounted investment based on incriminating documents found during a search. The petitioner contended that the satisfaction note for reopening did not refer to incriminating material directly related to the income of the assessee. The petitioner sought relief from the High Court instead of appealing to the CIT (A) citing a similar issue pending before the Court.

Issue 2: The Assessing Officer considered the reply and detailed contentions raised by the petitioner before passing the assessment order. The petitioner disputed the connection of incriminating material with the proposed addition. The Assessing Officer found unaccounted cash transactions in various assessment years based on seized documentary evidence. The Court noted that the controversy involved disputed questions of fact regarding the connection of incriminating material with the income escaped during the assessment year.

Issue 3: The Court referred to the principles laid down by the Apex Court regarding the entertainability of writ petitions under Article 226 of the Constitution of India. The Court emphasized that where a controversy involves purely legal questions and not disputed facts, it should be decided by the High Court. However, in this case, since the Assessing Officer had considered all contentions on merits and the issue involved disputed questions of fact, the Court held that the petitioner should avail the alternative remedy of appealing to the CIT (A) instead of seeking relief through a writ petition.

In conclusion, the High Court dismissed the petition, directing the petitioner to pursue the alternative efficacious remedy of appealing before the CIT (A) while emphasizing the importance of distinguishing between purely legal issues and those involving disputed questions of fact in determining the entertainability of writ petitions.