2016 (4) TMI 257 - HC - Income Tax

Reopening of assessment - reasons to believe - Held that - Assessing Officer has come to a reasonable belief that the revenue expenses of ₹ 40 lakhs were non genuine resulting in income chargeable to tax escaping assessment. Thus the recorded reasons do indicate the Assessing Officer due application of mind to the information received from him to form a reasonable belief that income chargeable to tax has escaped assessment. Moreover, we do not find that reasons recorded proceed on mere suspicion. It is a settled position in law that the reasons recorded at the time of issuing the impugned notice are only reasons to believe that the income chargeable to tax has escaped assessment and not an irrefutable conclusion that it is so. The material which has been received by the Assessing Officer as mentioned in the reasons recorded in the context of the claim made by the Petitioner would indicate that a reasonable person is likely to have a reasonable belief that the income chargeable to tax has escaped assessment. At the stage of a challenge to a reopening notice issued under Section 148 of the Act, this Court is not concerned with the sufficiency of the reasons nor the correctness of the reasons (Raymond Woollen Mills V/s. ITO - 1997 (12) TMI 12 - SUPREME Court). However, we find that reasons do indicate a basis for the Assessing Officer to come to a reasonable belief on the basis of the information received that income chargeable to tax has escaped assessment. Thus we see no reason to exercise extra ordinary writ jurisdiction in the present facts. - Decided against assessee

Summary

Issues:
Challenge to Notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for A.Y. 2011-12.

Analysis:
The Petition challenges a Notice issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the assessment year 2011-12. The reasons for the impugned notice state that subsequent information revealed a claim of expenses amounting to Rs. 40,00,00,000 by the assessee, related to a transaction with another entity involving share issuance and subsequent sale at a significantly lower price. The Assessing Officer formed a reasonable belief that this expense was non-genuine, leading to income chargeable to tax escaping assessment. The Petitioner raised two grievances: first, alleging non-application of mind by the Assessing Officer, and second, claiming that the reasons were based on suspicion rather than a reasonable belief of tax evasion.

Upon examining the reasons recorded, the Court found that the Assessing Officer had applied due diligence in considering the post-assessment information, leading to a reasonable belief that the claimed expenses were non-genuine and income had escaped assessment. The Court clarified that the reasons recorded are meant to establish a belief, not a conclusive determination of tax evasion. The material received by the Assessing Officer provided a basis for a reasonable person to believe that tax had escaped assessment. The Court emphasized that at the stage of challenging a reopening notice, the sufficiency or correctness of reasons is not the concern. The Petitioner was granted the opportunity to challenge the reasons before the relevant authority under the Act. Ultimately, the Court dismissed the Petition, stating there was no reason to intervene and left all contentions open for further challenge.