2018 (5) TMI 1440 - HC - Income Tax

Reopening of assessment u/s 147 - As per AO share application has been received by the assessee - Held that - In absence of any evidence on records merely on the basis of hearsay information - AO can not derive satisfaction to reopen the assessment - this being a disputed question of fact - Decided in favor of assessee.

Summary

Issues:
1. Challenge to notice dated 27.03.2017 for reopening assessment for the assessment year 2010-11.
2. Objections raised by petitioner regarding factual background and rejection by Assessing Officer.
3. Analysis of the reasons recorded by Assessing Officer for reopening assessment.
4. Failure of Assessing Officer to address specific factual contention of petitioner.
5. Examination of jurisdiction of Assessing Officer to reopen assessment.
6. Duty of Assessing Officer to consider and address factual grounds raised by petitioner in objections.
7. Callous attitude of Assessing Officer in disposing of objections and petition.
8. Assessment of material evidence regarding investment from five companies as per department's records.
9. Disposal of petition with observations and direction to petitioner to raise grounds during assessment process.

Detailed Analysis:

1. The petitioner challenged the notice dated 27.03.2017 issued by the Assessing Officer to reopen the assessment for the assessment year 2010-11. The petitioner contended that the reasons proceeded on an erroneous factual background, specifically regarding the share application money of ?30 lakhs received by the assessee company from five different companies. The petitioner raised objections to the notice, highlighting the discrepancy in the information provided by the Assessing Officer and the actual transactions carried out by the company during the relevant period.

2. The Assessing Officer, in the reasons recorded for reopening the assessment, cited information from the investigation wing regarding bogus accommodation entries provided by certain companies connected to the petitioner. The reasons indicated that the petitioner had received ?30 lakhs as accommodation entries from five dubious companies, leading to an alleged escapement of income for the assessment year 2010-11. The petitioner disputed these claims and sought evidence to support the Assessing Officer's assertions.

3. The Assessing Officer rejected the objections raised by the petitioner without addressing the specific factual contention regarding the receipt of ?30 lakhs from the mentioned companies. The petitioner then filed a petition challenging the rejection of objections and the validity of the notice for reopening the assessment.

4. The High Court analyzed the jurisdiction of the Assessing Officer to reopen the assessment, emphasizing the need for a valid reason to believe that income has escaped assessment. While the reasons recorded by the Assessing Officer seemed prima facie valid, the court noted the petitioner's consistent denial of receiving ?30 lakhs from the specified companies during the relevant period.

5. The court criticized the Assessing Officer's approach in disposing of the objections, highlighting the lack of proper consideration given to the factual grounds raised by the petitioner. The court observed that the Assessing Officer exhibited callousness in addressing the specific contentions of the petitioner, leading to a flawed decision-making process.

6. Upon examining the material evidence presented by the department's records, showing an investment of ?30 lakhs from the mentioned companies, the court decided not to entertain the petition further. However, the court clarified that it did not conclusively reject the petitioner's challenge to the notice of reopening, allowing the petitioner to raise the disputed grounds during the assessment process and pursue legal recourse if necessary.

7. The court disposed of the petition with specific observations regarding the Assessing Officer's handling of the objections and directed the petitioner to address the raised grounds during the assessment proceedings, maintaining the option to appeal any adverse decisions made by the Assessing Officer.

This detailed analysis provides a comprehensive overview of the issues involved in the legal judgment, highlighting the key arguments, decisions, and observations made by the High Court in response to the petitioner's challenge to the notice for reopening the assessment.