2016 (9) TMI 118 - HC - Income Tax

Reopening of assessment - Held that - Reason to strike down the notice for reopening. As noted, the Assessing Officer has recorded specific reasons for forming a belief that income chargeable to tax has escaped assessment. There was material before him suggesting that M/s. Bhumidev Credit Corporation Ltd had given bogus accommodation entries worth ₹ 75 lacs to M/s. Kutch Ginning and Spinning Pvt. Ltd. in form of share application money. This was confirmed by the Director of M/s. Bhumidev Credit Corporation Ltd, who, in his statement, accepted that the company was indulging in issuance of cheques on receiving equivalent cash amounts. It was found that the petitioner had also received ₹ 10 lacs from M/s. Bhumidev Credit Corporation Ltd. in form of share application money. Particularly, looking to the fact that during the original assessment none of these aspects came up for consideration before the Assessing Officer, in our opinion, these were sufficient reasons to enable him to form a belief that income chargeable to tax has escaped assessment. Counsel for the petitioner, however, vehemently contended that the material before the Assessing Officer was insufficient. He submitted that unless and until there was a specific reference to the assesseecompany in the statement of the Director, an automatic presumption would not arise that the investment made by the M/s. Bhumidev Credit Corporation Ltd in the petitionercompany was also bogus. However, we must remind ourselves that, at this stage, what is required for the Assessing Officer is to form a reason to believe that income chargeable to tax has escaped assessment. Whether such additions would be sustained or not is not a relevant consideration. In exercise of writ jurisdiction, therefore, we would not hamper further progress in the assessment.

Summary

Issues Involved:
1. Validity of the notice for reopening the assessment for the assessment year 2009-10.
2. Sufficiency of the reasons recorded by the Assessing Officer for reopening the assessment.
3. Applicability of the principle of "change of opinion" in the context of reopening assessments processed under Section 143(1) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of the notice for reopening the assessment for the assessment year 2009-10:
The petitioner challenged the notice issued on 30.03.2016 by the Assessing Officer seeking to reopen the assessment for the assessment year 2009-10. The assessment was initially accepted without scrutiny under Section 143(1) of the Income Tax Act, 1961. The Assessing Officer received information from the investigation wing indicating that the petitioner had received share application money of ?10 lacs from M/s. Bhumidev Credit Corporation Ltd, a non-genuine company. The Director of M/s. Bhumidev Credit Corporation Ltd admitted that the company was involved in issuing cheques against equivalent cash. Based on this information, the Assessing Officer formed a belief that the income chargeable to tax had escaped assessment.

2. Sufficiency of the reasons recorded by the Assessing Officer for reopening the assessment:
The court observed that the Assessing Officer had specific reasons to believe that income chargeable to tax had escaped assessment. The information received suggested that M/s. Bhumidev Credit Corporation Ltd had given bogus accommodation entries worth ?75 lacs to M/s. Kutch Ginning and Spinning Pvt. Ltd. in the form of share application money. The Director's statement confirmed the company's involvement in issuing cheques against equivalent cash amounts. The petitioner had also received ?10 lacs from M/s. Bhumidev Credit Corporation Ltd. The court held that these reasons were sufficient for the Assessing Officer to form a belief that income had escaped assessment.

3. Applicability of the principle of "change of opinion" in the context of reopening assessments processed under Section 143(1) of the Income Tax Act, 1961:
The court emphasized that the scope for reopening an assessment not framed after scrutiny is much wider. The principle of "change of opinion" does not apply in cases where the assessment was processed under Section 143(1) without scrutiny. The Supreme Court in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. clarified that an intimation under Section 143(1)(a) is not an assessment order, and thus, the question of change of opinion does not arise. The court reiterated that at the stage of reopening, what is required is a reason to believe that income has escaped assessment, not conclusive proof.

Conclusion:
The court dismissed the petition, holding that the Assessing Officer had sufficient reasons to believe that income chargeable to tax had escaped assessment. The notice for reopening the assessment was valid. The court also noted that the petitioner could raise all legal contentions before the Assessing Officer during the reassessment proceedings.