2017 (1) TMI 900 - HC - Income Tax

Validity of reopening of assessment - reasons to believe - The allegation is of bogus loss from brokers by client code modification being booked in the accounts. - Held that - The insistence on behalf of the petitioner that the Assessing Officer did not have any material to invoke Section 148, gave reasons for such invocation, and has proceeded to reassess without disposing of the objection raised in respect of such invocation and, therefore, all steps of the Assessing Officer ought to be set aside, is without any basis, in the facts of the present case. AO had received credible information as to income escaping assessment for the relevant assessment year. He had applied his mind to it and had informed the petitioner of his intention to invoke Section 148. He had given his reasons for doing so. AO had reasons to believe that, there was under assessment and that he has reasons to believe that, such under assessment had resulted from non disclosure of materials facts. Both of these two essential conditions are present in this case. The allegation is of bogus loss from brokers by client code modification being booked in the accounts. The reasons supplied by the Assessing Officer as noted above, allows one to infer that, the Assessing Officer had addressed its mind to such issue. The petitioner has not demonstrated any material to substantiate that, such loss was placed before the Assessing Officer for consideration and that, the Assessing Officer had taken a view after production of the material facts by the assessee, before it. - Decided against assessee

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 based on lack of material for forming opinion, non-disposal of objections, and validity of re-assessment order.

Analysis:
The petitioner contested the notice under Section 148, arguing that the Assessing Officer did not have sufficient material to form an opinion for reopening the assessment. The petitioner claimed that the notice was issued routinely without independent consideration. Additionally, the petitioner raised objections immediately upon receiving the notice, which remained unresolved. The petitioner relied on legal precedents to support the contention that an invalid notice renders subsequent actions invalid as well.

The Department, on the other hand, defended the notice, highlighting the petitioner's participation in the reassessment proceedings. They argued that the reasons provided for invoking Section 148 were sufficient, as the Assessing Officer had applied his mind based on received information. The Department emphasized that the petitioner cooperated in the proceedings, accepted the reasons given, and did not challenge the reopening at the relevant time.

Upon reviewing the contentions and evidence, the Court noted that the Assessing Officer had credible information about income escaping assessment, applied his mind, and informed the petitioner of the intention to invoke Section 148. Despite the petitioner's objections, they allowed the reassessment to proceed without pressing the objections. The Court inferred that the petitioner either waived their objections or withdrew them, based on their conduct during the proceedings.

The Court found that the essential conditions for invoking Section 148 were satisfied in this case, as there was a reason to believe in under-assessment due to non-disclosure of material facts. The Court dismissed the petitioner's arguments regarding lack of material before the Assessing Officer and upheld the validity of the reassessment order. The Court also noted that reliance on interim orders from other cases was not appropriate without the final outcome being presented.

In conclusion, the Court dismissed the writ petition, finding no merit in the petitioner's contentions. WP No. 1156 of 2016 was dismissed with no order as to costs.