2016 (3) TMI 971 - HC - Income Tax

Validity of reopening of assessment - accommodation entries - Held that - We find that the reasons in support of the impugned notice indicates that the Assessing Officer has received definite information that one Mr. Praveen Kumar Jain and the companies controlled by him was in the business of providing accommodation entries. On receipt of the aforesaid information, the Assessing Officer called for the necessary information in regard to the accommodation entries made in respect of the assessees in his jurisdiction. Consequent thereto, the Assessing Officer found that the information received indicated that the eight companies mentioned in the reasons belonged to Mr. Praveen Kumar Jain group and formed the basis of his reasonable belief. At this stage the Assessing Officer has merely to establish that there is justification for him to form a reasonable belief that income chargeable to tax had escaped assessment and not conclusively prove the same In these facts, we see no reason to exercise our extraordinary writ jurisdiction and interdict the Revenue from proceeding further with the reassessment proceedings. Needless to state that during the reassessment proceedings, the petitioner would have occasion to establish that the loans taken from the eight entities referred to in the reasons were genuine loans before the Assessing Officer and also before the appellate authorities under the Act. - Decided against assessee

Issues Involved:
1. Jurisdiction of the Assessing Officer to issue the notice under Section 148 of the Income Tax Act, 1961.
2. Validity of the reasons for reopening the assessment.
3. Allegation of change of opinion by the Assessing Officer.
4. Relevance of the statement of Mr. Praveen Kumar Jain in forming the belief that income chargeable to tax had escaped assessment.
5. Petitioner's objection to the reopening notice and the subsequent rejection by the Assessing Officer.
6. Petitioner's reliance on previous court decisions and documents to challenge the reopening notice.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The petitioner challenged the notice issued under Section 148 of the Income Tax Act, 1961, arguing that it was without jurisdiction. The court emphasized that while considering such a challenge, it must ensure that a settled position in law is not disturbed without justification. The court will interfere if the reopening is based on a change of opinion or if it is done only on suspicion or for investigation purposes.

2. Validity of the Reasons for Reopening:
The reasons for reopening the assessment were based on information received from the DGIT (Investigation) II, Mumbai, indicating that the petitioner had received loans and advances from entities operated by Mr. Praveen Kumar Jain, who was involved in providing accommodation entries. The court noted that the Assessing Officer had received definite information about the accommodation entries and had formed a reasonable belief that income chargeable to tax had escaped assessment. The court held that at this stage, the Assessing Officer only needed to establish a reasonable belief, not conclusive proof.

3. Allegation of Change of Opinion:
The petitioner argued that the reopening was a mere change of opinion since the same issues were examined during the original assessment proceedings. The court found that the basis for the reopening notice was the statement of Mr. Praveen Kumar Jain, which prima facie negated the petitioner's stand during the original assessment. The court held that this constituted tangible material for the Assessing Officer to form a reasonable belief that income had escaped assessment.

4. Relevance of Mr. Praveen Kumar Jain's Statement:
The court considered the statement of Mr. Praveen Kumar Jain as relevant tangible material for the Assessing Officer to form a reasonable belief that income chargeable to tax had escaped assessment. The court distinguished the present case from previous cases cited by the petitioner, noting that the material in the current case was not vague or indefinite.

5. Petitioner's Objection and Rejection by the Assessing Officer:
The petitioner had filed objections to the reasons recorded in support of the reopening notice, which were rejected by the Assessing Officer. The court noted that the Assessing Officer had relied on the decisions of the Apex Court to justify the reopening notice, emphasizing that the requirement was a reasonable belief, not conclusive evidence.

6. Petitioner's Reliance on Previous Court Decisions and Documents:
The petitioner relied on various court decisions and a document (Exhibit 'O') to challenge the reopening notice. The court found that the document was not specifically mentioned in the petition and was not part of the objections filed before the Assessing Officer. The court held that new objections could not be raised for the first time before the court unless the notice was ex-facie without jurisdiction.

Conclusion:
The court dismissed the petition, finding no reason to exercise its extraordinary writ jurisdiction to interfere with the reassessment proceedings. The petitioner was granted the opportunity to establish the genuineness of the loans during the reassessment proceedings and before the appellate authorities. The court also granted the petitioner's request for a continuation of the ad-interim stay for four weeks.

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