2018 (10) TMI 872 - HC - Income Tax

Reopening of assessment u/s 148 - Change of opinion - completed assessments are sought to be reopened after a lapse of six years - receipt of share capital with share premium - high value of share premium - sufficiency of the reasons and the modus operandi of the investigation - Held that - The writ petitioner, being a Company , is duty bound to respond to the notice to prove their innocence or otherwise. This Court is of an undoubted opinion that if the AO has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. It is however, to be noted that the conditions stipulated in the Act must be fulfilled if the case falls within the ambit of Section 147. There are some materials on record and the informations with the Department of Income Tax, the reopening of the assessment in the writ petition with reference to Sections 147 to 153 of the Act, is in accordance with law and there is no infirmity, as such. Writ petitioner is bound to respond to the AO for the purpose of arriving a conclusion and for taking a decision. In the event of passing an order of assessment or reassessment, then the writ petitioner is entitled to prefer an appeal contemplated under the provisions of the Act. Based on the preliminary informations gathered by the AO, the notice issued for the purpose of reopening of the assessment would not provide a cause of action for filing of the present writ petition and this Court has no hesitation in holding that the writ petition is not only premature, even on merits the writ petitioner has failed to establish any acceptable reason to grant the relief, as such, sought for. This being the principles to be followed, the writ petitioner has miserably failed to establish any legally acceptable ground for the purpose of interfering with the actions initiated by the respondent by invoking the provisions of the Income Tax Act, 1961. Thus, there is no infirmity as such, in respect of the initiation of the proceedings for reopening of the assessment under the Act and the writ petition is devoid of merits. The respondent is empowered to proceed further in accordance with law. Accordingly, the writ petition stands dismissed.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Alleged failure to disclose material facts necessary for assessment.
3. Accusation of "change of opinion" by the Assessing Officer.
4. Applicability of the limitation period for issuing the notice.
5. Maintainability of the writ petition in the presence of alternate statutory remedies.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice issued by the respondent under Section 148 of the Income Tax Act, 1961, for the assessment year 2009-2010. The notice was issued to reopen the assessment, which had already been scrutinized under Section 143(3) of the Act. The petitioner argued that the notice was issued without any new basis or reasons, merely constituting a "change of opinion." The court held that the issuance of the notice under Section 148 is an initiation of proceedings for reopening the assessment and does not constitute a final order. The court emphasized that the reasons for reopening must be recorded by the Assessing Officer, but these reasons need not be communicated along with the notice. The court found that the reasons were communicated to the petitioner upon request, satisfying the procedural requirements.

2. Alleged Failure to Disclose Material Facts Necessary for Assessment:
The petitioner contended that all necessary details were disclosed during the original assessment, including the receipt of share application money from South Asia Entertainment Holdings Limited. The petitioner argued that the transaction was a capital receipt and not income. The court noted that the Assessing Officer had reasons to believe that there was a failure to disclose fully and truly all material facts necessary for assessment. The court held that the reopening of the assessment was justified as the reasons cited by the Assessing Officer indicated a potential suppression of material facts.

3. Accusation of "Change of Opinion" by the Assessing Officer:
The petitioner argued that the reopening of the assessment was based on a mere "change of opinion" by the Assessing Officer, which is impermissible under the Act. The court held that the opinion formed by the Assessing Officer was based on new material facts and not merely a change of opinion. The court emphasized that the reasons for reopening were related to the receipt of a high value of share premium, which was not fully disclosed in the return of income. The court concluded that the reopening was based on tangible material and not a mere change of opinion.

4. Applicability of the Limitation Period for Issuing the Notice:
The petitioner argued that the notice was barred by the limitation period prescribed under the Act. The court noted that the notice was issued within the six-year period stipulated under Section 149(1)(b) of the Act. The court held that the date of communication of the reasons for reopening does not affect the limitation period. The court found that the notice was issued within the prescribed time limit and was therefore valid.

5. Maintainability of the Writ Petition in the Presence of Alternate Statutory Remedies:
The respondent argued that the writ petition was not maintainable as the petitioner had alternate statutory remedies available under the Income Tax Act. The court held that the availability of an alternate remedy is not an absolute bar to the entertainment of a writ petition, especially in cases where the action is wholly without jurisdiction or results in the infringement of any fundamental right. However, the court emphasized that the petitioner must first exhaust the statutory remedies before resorting to writ jurisdiction. The court concluded that the writ petition was premature and maintainable only after the petitioner had exhausted the available statutory remedies.

Conclusion:
The court dismissed the writ petition, holding that the notice issued under Section 148 of the Income Tax Act was valid and justified. The court found that the reopening of the assessment was based on tangible material and not a mere change of opinion. The court also held that the notice was issued within the prescribed limitation period and that the petitioner must exhaust the available statutory remedies before seeking relief through a writ petition. The court emphasized the importance of allowing the Assessing Officer to investigate and scrutinize the assessment based on new material facts.

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