2012 (12) TMI 293 - HC - Income Tax

Validity of Reassessment Proceedings - Escapement of Income - concealment of income and tax evasion - reason to believe - jurisdiction to reopen the petitioner s assessment - petitioner did not disclose expenditure incurred by her in her foreign travels during the relevant previous year - no documentary evidence was available to show the inclusion of the expenditure involved in the foreign travels in the taxable income of the petitioner s husband, who was also assessed to tax by the ACIT, Circle 48(1), New Delhi - notice u/s 148 was issued on 28.3.2012 after a period of 4 years from the end of the assessment year - held that - no documents were submitted along with the petitioner s return of income to show that the expenditure incurred on foreign travels along with her family was part of the salary package of her spouse, Abhisar Sharma - failure of petitioner to furnish fully and truly all primary and material facts relating to her assessment - In absence of any document or evidence filed along with her return of income explaining the expenditure incurred by her on her foreign travels during the relevant previous year, the Assessing Officer was justified in invoking the first proviso to Section 147 and in coming to the prima facie belief that there was escapement of income on account of the assessee s failure to satisfy the requirements of Explanation 1 below Section 147 - notice issued on 28.3.2012 u/s 148 of the Act for the assessment year 2005-06 was within the jurisdiction of the Assessing Officer - AO is directed to dispose of the objections filed by the petitioner within a reasonable time and at any date not later than 30 November, 2012, if not already disposed of.

Issues Involved:
1. Validity of reassessment proceedings under Section 148 of the Income Tax Act, 1961.
2. Allegation of malafide intent in reopening the assessment.
3. Jurisdiction of the Assessing Officer to reopen the assessment.
4. Compliance with the first proviso to Section 147 of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Reassessment Proceedings Under Section 148:
The petitioner challenged the reassessment proceedings initiated by a notice issued under Section 148 of the Income Tax Act, 1961, on 28.3.2012, for the assessment year 2005-06. The petitioner argued that the reasons for reopening the assessment were not provided initially, and upon receiving them, contested the jurisdiction of the Assessing Officer to reopen the assessment. The court examined the reasons recorded for reopening, which included non-disclosure of expenditure on foreign travels and the lack of documentary evidence supporting the claim that such expenditures were part of the salary package of the petitioner's spouse. The court held that the reasons recorded provided a prima facie belief of income escapement, thus validating the reassessment proceedings.

2. Allegation of Malafide Intent:
The petitioner contended that the reassessment was initiated at the behest of respondent No.4, who allegedly bore enmity towards the petitioner due to their career interactions within the IRS. The petitioner claimed that the Assessing Officer did not apply his mind independently and was influenced by respondent No.4's tax evasion petition. The court, however, focused on whether there was a "reason to believe" that income had escaped assessment, rather than the alleged malafide intent. The court found that the reasons recorded were based on credible material and not mere suspicion or gossip, thereby dismissing the allegation of malafide intent.

3. Jurisdiction of the Assessing Officer:
The court emphasized that the reasons recorded under Section 148(2) should be based on credible material with a live link to the belief of income escapement. The court found that the Assessing Officer had a prima facie belief, based on the non-disclosure of foreign travel expenditures and lack of supporting documents, which justified the reopening of the assessment. The court held that the Assessing Officer did not erroneously assume jurisdiction, as the reasons recorded were sufficient to form a tentative opinion of income escapement.

4. Compliance with the First Proviso to Section 147:
Since the notice under Section 148 was issued after four years from the end of the assessment year 2005-06, the first proviso to Section 147 was applicable. The court noted that the Assessing Officer had to demonstrate that the income escapement was due to the assessee's failure to fully and truly disclose all material facts. The court found that the petitioner did not provide any documents explaining the foreign travel expenditures in her return of income, thus justifying the invocation of the first proviso to Section 147. The court concluded that the conditions for reopening the assessment were satisfied.

Conclusion:
The court dismissed the writ petition, holding that the reassessment proceedings initiated under Section 148 were within the jurisdiction of the Assessing Officer. The court directed the Assessing Officer to dispose of the petitioner's objections within a reasonable time. The court refrained from expressing any opinion on the personal allegations exchanged between the petitioner and respondent No.4, focusing solely on the material before the Assessing Officer.

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