2017 (8) TMI 961 - HC - Income Tax

Reopening of assessment - reasons to believe - bogus purchases - non-supply of documents on the ground of confidentiality - Held that - What is required is reason to believe but not the established fact of escapement of income. At the stage of issuance of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income was not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer. At this stage therefore, what we have on record and emerging from the reasons recorded is that there is strong prima facie material to suggest that the purchases shown to have been made by the assessee from M/s. Shiyon Enterprises were bogus. The fact that the assessee s sales and purchases came up for scrutiny during the original assessment would be of no consequence since now the Assessing Officer relies on material which was not part of the assessment proceedings and which material was provided by the investigation wing unearthed during the course of investigation in case of Shri Chandrakant Patel. - Decided against the assessee.

Issues:
Challenging a notice for reopening assessment for the assessment year 2008-2009 based on alleged bogus purchases from a specific entity.

Analysis:
1. The petitioner contested a notice issued by the Assessing Officer to reopen the assessment for the year 2008-2009, citing reasons related to alleged bogus purchases from a particular entity. The petitioner argued that the original assessment was thorough and no additions were made, questioning the validity of the notice issued beyond the prescribed time limit of four years from the relevant assessment year.

2. The department, represented by its advocate, opposed the petition stating that the Assessing Officer had tangible material to form a belief that income had escaped assessment due to the alleged bogus purchases. The department highlighted the importance of full and true disclosure by the assessee at all stages of assessment, emphasizing that the material now available was not part of the original assessment process.

3. The Court noted that the reasons recorded by the Assessing Officer for issuing the notice were based on information from the investigation wing, indicating that the petitioner and another individual were involved in providing accommodation entries and bogus bills. The Court emphasized that at the stage of assessing the validity of the notice, sufficiency of reasons was not to be evaluated, but rather the presence of relevant material supporting a reasonable belief of income escapement.

4. Referring to a previous judgment, the Court reiterated that the Assessing Officer had the jurisdiction to reopen an assessment based on specific and reliable information, even if such information was not available during the original assessment. The Court emphasized that the Assessing Officer's belief in income escapement, supported by valid information meeting the criteria under the law, justified the reassessment proceedings.

5. The Court dismissed the petition, emphasizing that the material now relied upon by the Assessing Officer was not part of the original assessment process and was obtained during separate investigations. The Court upheld the validity of the notice for reopening the assessment based on the new information provided, indicating a potential evasion of income through alleged bogus purchases.

6. The judgment highlighted the importance of the Assessing Officer's subjective satisfaction based on relevant material at hand, rather than conclusive proof of income escapement at the notice issuance stage. The Court concluded that the reassessment proceedings were justified given the new information and the belief of income escapement supported by tangible material.

7. The Court's decision was based on the principle that the Assessing Officer had valid reasons to believe in income escapement, supported by specific and reliable information obtained post the original assessment. The judgment underscored the Assessing Officer's authority to reassess based on new findings, even if not available during the initial assessment process.

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