2016 (7) TMI 706 - HC - Income Tax

Reopening of assessment - reason to believe that income chargeable to tax had escaped assessment - whether material collected by the Department and relied upon, namely the entries/notings made as indicated in the loose slip has no nexus to the petitioner and therefore, the entire proceeding should be quashed.? - Held that - When we analyse the material available on record, we find that it is a case where the enquiry into the matter by the Income-tax Department is still in progress and considering the fact that the Revenue has indicated that the petitioner was a key person having control over the decision making process, it is not appropriate for this court to hold that material produced are not sufficient enough or reliable enough to proceed in the matter. On the contrary, when the law says that sufficiency or correctness of the material is not to be looked into at this stage by a writ court, this court has to leave everything to the Assessing Officer, who, after considering each and every aspect of the matter including the judgments relied upon by the petitioner and the objections to be raised to decide the matter. It is indicated by the Revenue that the petitioner played a key role in controlling the decision making process which ultimately led in eliminating all other companies, shortlisting the two companies in question and it has been held that by acting as intermediate between Nagar Nigam and Commissioner of Urban Administration and Development, the petitioner was indicated in various steps pertaining to award of contract. Therefore, merely, because it is said that the petitioner had gone on deputation he cannot be exonerated of the charges levelled. That being the reason which weighed with the Revenue authorities to proceed further in the matter, therefore, it is not appropriate for a writ court exercising limited jurisdiction in a petition under article 226 of the Constitution at this stage to interfere as enquiry into various aspects of the matter which was the prime consideration which weighed with the Revenue for proceeding in the matter may be required. The Revenue on a just and proper consideration has taken the decision and therefore, we are not inclined to accept this contention advanced by Shri Kishore Shrivastava. In the present set of circumstances we are not inclined to interfere into the matter because for interfering into the matter we will be required to assess the material available on record and say that they are not sufficient enough to proceed in the matter and we find that when the assessment proceedings are still on discharging this function at this stage by this court in a petition under article 226 of the Constitution is not warranted. - Decided against assessee.

Issues Involved:
1. Validity of notice under Section 148 of the Income-tax Act, 1961.
2. Legality of reopening assessment under Section 147 of the Income-tax Act, 1961.
3. Sufficiency of material for "reasons to believe" under Section 147.
4. Jurisdiction of the High Court under Article 226 of the Constitution to interfere in ongoing assessment proceedings.
5. Availability of alternate remedies under the Income-tax Act.

Detailed Analysis:

1. Validity of Notice under Section 148:
The petitioner-assessee challenged the notice issued under Section 148 of the Income-tax Act, 1961, dated July 23, 2014, for reopening the assessment for the assessment year 2009-10. The petitioner argued that the notice lacked a valid basis, as the reasons provided for reopening were not sufficient to constitute "reasons to believe" that income had escaped assessment.

2. Legality of Reopening Assessment under Section 147:
The petitioner contended that the reopening of the assessment was based on vague and insufficient material. It was argued that the reasons provided, which included documents seized during a search operation and statements from third parties, did not establish a direct nexus with the petitioner. The petitioner emphasized that he was not in a position to influence the awarding of contracts during the relevant period as he was on deputation to the Government of India.

3. Sufficiency of Material for "Reasons to Believe":
The petitioner argued that the material available with the Assessing Officer did not fulfill the requirement of "reasons to believe" under Section 147. The court examined various judgments to determine the sufficiency of the material for forming such a belief. The court noted that the material should be cogent and substantial, showing a clear nexus with the assessee. The court referred to the Supreme Court's judgment in Rajesh Jhaveri Stock Brokers, which stated that at the stage of issuing notice, the final outcome of the proceedings is not relevant, and the sufficiency of the material should not be scrutinized by the court.

4. Jurisdiction of the High Court under Article 226:
The court considered whether it was appropriate to interfere in the ongoing assessment proceedings under Article 226 of the Constitution. The Revenue argued that the assessment proceedings were still in progress and that the petitioner had alternate remedies available under the Income-tax Act. The court agreed, emphasizing that the sufficiency and correctness of the material should be examined by the Assessing Officer, not by the High Court at this stage.

5. Availability of Alternate Remedies:
The court highlighted that the petitioner had statutory remedies available, including the right to appeal and revision under the Income-tax Act. The court referred to the Supreme Court's judgment in Vijaybhai N. Chandrani, which held that the High Court should not entertain a writ petition at the first instance without exhausting alternate remedies.

Conclusion:
The High Court dismissed the writ petition, holding that it was not appropriate to interfere in the ongoing assessment proceedings. The court emphasized that the petitioner should raise all objections before the Assessing Officer, who would then examine the material and take a decision in accordance with the law. If the petitioner was aggrieved by the final assessment order, he could challenge it through the statutory remedies available under the Income-tax Act.

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