2017 (1) TMI 1148 - HC - Income Tax

Validity of reopening of assessment - receipt of on money - whether as the information received by the Assessing Officer required to be investigated and for that reason, the reopening notice was validly issued? - Held that - Admittedly the assessment order passed on 23rd December, 2009 was under Section 143(3) r/w 153A of the Act on the respondent assessee. This assessment was a result of the search on respondent assessee in March, 2008 inter alia in respect of suppression of sale consideration. In fact, the three buyers i.e. Mrs. Asha Katariya, Mr. Satish Parakh (Individual) and Mr. Satish Parekh (HUF) had all in their statements recorded on 10th March, 2008 u/s 131 had stated that they did not pay any consideration in excess of that recorded in the agreement. Therefore, this itself is evidence of the onmoney in respect of the three flats was subject to enquiry leading to order dated 23rd December, 2009. Further, we find that the Assessing Officer has proceeded on the basis of the documents obtained during the course of the search on third parties were documents to which the presumption under Section 132(4A) of the Act would apply to the assessment of respondent assessee. This cannot be as the documents were recovered during a search made on third party and not on the respondent assessee. Therefore, such a presumption can be applied only in respect of assessment of third party on whom the search was made. It cannot be the basis to form a reasonable belief that income chargeable to tax has escaped assessment in case of respondent assessee. Thus, in the above view the finding of the Tribunal that the Assessing Officer had no reason to believe that income chargeable to tax has escaped assessment is a possible view in the facts of the present case. - Decided in favour of assessee

Summary

Issues:
1. Validity of notice u/s 148 for reassessment
2. Deletion of addition of ?1,70,94,000

Analysis:

Issue 1: Validity of notice u/s 148 for reassessment
The appellant challenged the order of the Income Tax Appellate Tribunal (the Tribunal) dated 5th February, 2014, regarding the Assessment Year 2008-09. The Assessing Officer issued a notice under Section 148 to reopen the assessment based on information received from the Income Tax Department at Nashik after a search on a third party. The appellant objected to the reopening, but the Assessing Officer proceeded to pass an order under Section 147A of the Act. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's order. However, the Tribunal found that the reopening notice was issued solely on suspicion without a reasonable belief that income had escaped assessment. The Tribunal noted that the document supporting the reopening notice lacked essential details and the Assessing Officer failed to investigate adequately before issuing the notice. The Tribunal concluded that the reopening notice was without jurisdiction. The Revenue contended that further investigation was necessary, but the Tribunal's decision was upheld as the Assessing Officer had already examined the issue during the earlier assessment under Section 143(3) r/w Section 153A of the Act. The Tribunal's finding was considered a possible view in the present case, and the question did not raise any substantial legal issue.

Issue 2: Deletion of addition of ?1,70,94,000
The Tribunal's decision on the validity of the reopening notice rendered the question of the addition of ?1,70,94,000 academic, as the Revenue lacked jurisdiction to address the merits of the dispute. Therefore, the Tribunal did not entertain this question. Ultimately, the appeal was dismissed without any order as to costs.

This judgment highlights the importance of establishing a reasonable belief for reopening assessments and the significance of thorough investigation before issuing notices under Section 148 of the Income Tax Act, 1961.