2019 (4) TMI 1038 - HC - Income Tax

Reopening of assessment - validity of the notice of reopening issued beyond the period of four years from the end of relevant assessment year - validity of reasons to believe - undisclosed cash on hand - addition as per seized documents as found during the search - HELD THAT - Once the Department i.e. the Assessing Officer had certain information, material, or document before him during the assessment proceeding, irrespective of the source of such information, material, or document, the Assessee cannot be blamed for non disclosure thereof. once the Department i.e. the Assessing Officer had certain information, material, or document before him during the assessment proceeding, irrespective of the source of such information, material, or document, the Assessee cannot be blamed for non disclosure thereof. As production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the first proviso to Section 147. Here is not a case where the Assessee is seeking to rely on a disclosure which the Revenue can seek to bring within the fold of the said Explanation. Here is a case where the Department already had collected certain documents and materials which were before the Assessing Officer at the time of framing assessment. If the Assessing Officer did not, for some reason, advert to such material or did not utilize the same, he surely cannot allege that the Assessee failed to disclose truly and fully all material facts. In view of the above discussion, the impugned notice is set aside. - Decided in favour of assessee

Summary

Issues:
1. Validity of notice dated 02/05/2017 challenging assessment under Section 153A read with 143(3) of the Income Tax Act, 1961.
2. Reopening of assessment based on undisclosed income as per seized documents.
3. Objections raised by the Assessee regarding lack of true and full disclosure.
4. Assessing Officer's rejection of objections and reasons for reopening assessment.
5. Interpretation of Explanation 1 to Section 147 regarding disclosure of material facts.

Analysis:

Issue 1: The Petitioner challenged a notice dated 02/05/2017 issued by the Deputy Commissioner of Income Tax, reopening the assessment under Section 153A read with 143(3) of the Income Tax Act, 1961. The notice was based on undisclosed income as per seized documents obtained during a search and seizure action on the Sterling Group of cases.

Issue 2: The Assessing Officer issued the impugned notice to reopen the assessment, citing specific entries in the seized documents indicating undisclosed income. The notice mentioned cash transactions and payments made to the Assessee, which were not reflected in the original return of income, leading to a belief of income escapement under Section 147 of the Income Tax Act.

Issue 3: The Assessee raised objections to the notice, arguing that the documents relied upon were already available with the Assessing Officer during the original assessment. The objections highlighted that the reassessment was not warranted and amounted to a change in view rather than new evidence being presented.

Issue 4: The Assessing Officer rejected the objections, emphasizing that he did not form an opinion on the seized documents during the original assessment. The rejection was based on the belief that the Assessee had failed to disclose fully and truly all material facts, justifying the reopening of the assessment.

Issue 5: The High Court analyzed the interpretation of Explanation 1 to Section 147, which deals with the disclosure of material facts. The Court held that the Assessee cannot be blamed for non-disclosure if the Assessing Officer had access to the information, material, or documents during the original assessment, regardless of the source. The Court also clarified that the production of account books or evidence does not necessarily constitute disclosure under the law.

In conclusion, the High Court set aside the impugned notice, ruling in favor of the Petitioner and allowing the petition challenging the reopening of the assessment. The judgment emphasized the importance of true and full disclosure of material facts by the Assessee and clarified the application of relevant legal provisions in assessing the validity of reopening assessments.