2014 (2) TMI 660 - HC - Income Tax

Reopening of Assessment - Whether there was a reasonable belief on the part of the Assessing officer to come to a prima facie view that the income chargeable to tax has escaped assessment Held that - The notice dated 28 September 2012 seeks to reopen assessment beyond the period of 4 years i.e. beyond the period of four years from assessment year 2007-08 assessee contended that that the loan transaction has in fact been reflected in their financial statement as margin money which they had received from its directors and their family members while carrying on its business of share and stock broker - this contention is being made for the first time as in their objections to the reasons for reopening filed on 5 November 2012 the petitioner did not state that the loan amount mentioned in the reasons for reopening is nothing but margin money which stands reflected as margin deposits in Schedule 8 of the balance sheet. It is not open to the assessee to urge fresh objections before the Court which the Assessing Officer had no occasion to deal with, unless of course the notice to reopen is exfacie without jurisdiction not requiring consideration of any argument such as beyond limitation thus, there was substance in the contention of revenue that the Assessing Officer had tangible material to come to prima facie view that income chargeable to tax has escaped assessment thus, There was no reason to interfere with the notice issued to the petitioner under Section 148 of the Act Decided against Assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for assessment year 2007-08.

Analysis:
1. The petition challenges a notice dated 28 September 2012 issued under Section 148 of the Income Tax Act, seeking to reopen the assessment for assessment year 2007-08. The petitioner, engaged in the business of shares and stock brokers, had filed its return of income for the said assessment year, which was completed by the Assessing Officer on 30 November 2009. The notice for reopening was based on the belief that income chargeable to tax had escaped assessment.

2. The petitioner contended that the reopening of assessment was beyond the 4-year period and required satisfaction of two jurisdictional requirements: a reason to believe that income had escaped assessment and a failure to disclose all material facts. The petitioner argued that there was no failure to disclose necessary facts, particularly regarding loans and repayments, as they were correctly disclosed. The Assessing Officer rejected these objections, emphasizing the undisclosed amount received from directors and family members.

3. The petitioner's counsel argued that the undisclosed amount was actually margin money reflected in the financial statement. The revenue's stance was that the failure to report this amount constituted a lack of full disclosure. The Court noted that the petitioner's objection did not categorically state the nature of the amount in question as margin money in the financial statement.

4. The Court found that the petitioner's submission regarding the nature of the amount as margin money was raised for the first time during the Court proceedings, not in the objections to the reopening. It was emphasized that objections raised before the Assessing Officer must be maintained unless the notice to reopen is without jurisdiction. The Court concluded that the Assessing Officer had tangible material to believe that income had escaped assessment.

5. The Court acknowledged that the petitioner might clarify the nature of the amount during reassessment. However, at the current stage, the Court's focus was on the Assessing Officer's reasonable belief that income had escaped assessment. As the petitioner failed to provide a sufficient explanation in their objections, the Court found no reason to interfere with the notice under Section 148.

Conclusion:
The petition was dismissed, with no order as to costs, as the Court found no grounds to interfere with the notice issued under Section 148 of the Income Tax Act for reopening the assessment for assessment year 2007-08.