2024 (7) TMI 1143 - HC - Income Tax

Validity of Reopening of assessment - legality of notice u/s 148 and the order rejecting objections - Revenue has sought to reopen the assessment on the sole basis that the profit being the difference between purchase and sale of commodities over national multi commodities exchange, though derived but not reflected in the return of income - HELD THAT - As per the undisputed fact that the petitioner has already submitted a contract note dated 01.10.2011 issued by Star Commodities with regard to the transaction in which it is alleged that the income has escaped assessment. Considering the ledger account of Star Commodities produced, the very income has already been reflected. Further, on perusal it has been found that the Bank Statement of the Union Bank of India for the period between 01.04.2011 to 31.03.2012 wherein the said amount has been reflected. Keeping in mind the aforesaid material on record, in our considered opinion, the entire base of reopening that income escaped assessment is not correct. The reasons so recorded and the notice u/s 148 is nothing but a sheer non application of mind by the Revenue. Thus, we therefor hold that a notice u/s 148 of the Act cannot be said to be legal in the eye of law. Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for the Assessment Year 2012-13.

Analysis:
1. The petitioner challenged a notice under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment for the Assessment Year 2012-13. The petitioner contended that the profit of Rs. 3,13,000/- was disclosed in the return of income and taxed accordingly, making the basis for reopening the assessment incorrect. The petitioner argued that the notice was based on borrowed satisfaction and involved fishing and roving enquiries, which are impermissible under the law. The petitioner relied on a case law to support their contentions (Kapadia Money Changers (P) Ltd. v. Assistant Commissioner of Income Tax).
2. The respondent opposed the petition, stating that the assessment was yet to take place and the petitioner had alternative statutory remedies through appeals. The respondent argued that the reassessment was based on tangible material in possession of the revenue, not a mere attempt to revisit or change opinion. The respondent contended that at this stage, only prima facie material should be considered, and the sufficiency and correctness of the material could not be evaluated.
3. The Court considered the reasons recorded by the Assessing Officer for reopening the assessment, which indicated that income had allegedly escaped assessment due to profits derived from trading in commodities not being reflected in the return of income. However, the Court found evidence provided by the petitioner, including a contract note and bank statement, showing that the income in question had already been disclosed and reflected in the records. The Court concluded that the basis for reopening the assessment was incorrect and amounted to a non-application of mind by the Revenue.
4. Consequently, the Court held that the notice under Section 148 of the Act and the order rejecting objections were not legal. The petition was allowed, and the impugned notice and order were quashed and set aside.