2019 (6) TMI 999 - HC - Income Tax

Reopening of assessment u/s 147 - there is an order of the Settlement Commission u/s 245D(4) in relation to the assessment year in respect of which the assessment is sought to be reopened - HELD THAT - A perusal of the appraisal report, on which reliance has been placed by the AO, reveals that there was sufficient material for the AO to form the belief that income chargeable to tax has escaped assessment. The material also refers to the petitioner so as to establish a link between the relied upon materials and the petitioner. Considering the nature of material available with the Revenue, it is not possible to state that on the reasons recorded, the AO could not have formed the belief that income chargeable to tax has escaped assessment. In the facts of the present case, since the Settlement Commission has passed an order u/s 245D(4) in respect of the assessment year in relation to which the assessment is sought to be reopened, the AO has no jurisdiction to invoke the provisions of section 147 of the Act and reopen an assessment, which has become conclusive. Such concluded assessment can only be reopened in case of fraud or misrepresentation of facts, as contemplated under subsection (6) of section 245D. The assumption of jurisdiction on the part of the Assessing Officer u/s 147 of the Act by issuing the impugned notice u/s 148 of the Act is, therefore, invalid and without authority of law. Thus, though on the reasons recorded for reopening the assessment, the AO could have formed the belief that income chargeable to tax has escaped assessment, in this case, as discussed earlier, since there is an order of the Settlement Commission u/s 245D(4) in relation to the assessment year in respect of which the assessment is sought to be reopened, the AO has no jurisdiction to reopen the assessment. The impugned notice u/s 148 , therefore, cannot be sustained. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned notice dated 31.03.2018 issued by the respondent u/s 148 is hereby quashed and set aside. It is, however, open for the respondent/Revenue to move the Settlement Commission for appropriate relief of declaration that the previous order u/s 245D(4) is void, setting out the relevant facts and circumstances. - Decided in favour of assessee.

Issues Involved:
1. Validity of the reopening of assessment under Section 147 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer to reopen an assessment concluded by the Settlement Commission under Section 245D(4) of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Validity of the Reopening of Assessment under Section 147 of the Income Tax Act, 1961

Petitioner's Arguments:
- The petitioner challenged the notice dated 31.03.2018 issued under Section 148 of the Income Tax Act, 1961, proposing to reopen the assessment for the assessment year 2011-12.
- The petitioner contended that the reasons recorded for reopening the assessment suffer from various infirmities, are vague, and do not reveal any income having escaped assessment.
- It was argued that the reasons recorded show borrowed satisfaction without any independent application of mind by the Assessing Officer.
- The petitioner also argued that the reopening is beyond four years from the end of the relevant assessment year, with no indication of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.

Respondent's Arguments:
- The respondent asserted that the reasons recorded for reopening the assessment are clear and reflect proper application of mind by the Assessing Officer.
- The petitioner is a beneficiary of accommodation entries through certain individuals, and the Assessing Officer’s action is within jurisdiction.

Court's Analysis:
- The court reviewed the reasons recorded by the Assessing Officer, which included evidence found during a search and an appraisal report indicating that the petitioner received accommodation entries rather than genuine sale consideration.
- The court noted that while the reasons recorded should reflect the basis for forming the opinion that income chargeable to tax has escaped assessment, they can be elaborated in the affidavit-in-reply.
- The court found that the reasons recorded, along with the appraisal report, provided sufficient material for the Assessing Officer to form the belief that income chargeable to tax has escaped assessment.

Issue 2: Jurisdiction of the Assessing Officer to Reopen an Assessment Concluded by the Settlement Commission under Section 245D(4) of the Income Tax Act, 1961

Petitioner's Arguments:
- The petitioner argued that once the Settlement Commission has passed an order under Section 245D(4), the assessment for that year stands concluded and cannot be reopened by the Assessing Officer.
- It was contended that the reopening of assessment in such a case is without authority of law, as the order of the Settlement Commission is conclusive and final.

Respondent's Arguments:
- The respondent argued that the order of the Settlement Commission is conclusive only as to the matters stated therein and does not preclude reopening of matters not considered by the Settlement Commission.
- It was submitted that the material on which the assessment is sought to be reopened was not brought before the Settlement Commission.

Court's Analysis:
- The court referred to various judicial precedents, including the Supreme Court's decision in Brij Lal v. Commissioner of Income Tax, which clarified that an order under Section 245D(4) is not an order of regular assessment and is conclusive as to the matters stated therein.
- The court held that once an order is passed by the Settlement Commission under Section 245D(4), the assessment for that year stands concluded, and the Assessing Officer has no jurisdiction to reopen the assessment under Section 147.
- The only ground for reopening such an assessment is if the order of the Settlement Commission is found to be obtained by fraud or misrepresentation, as provided under Section 245D(6).

Conclusion:
- The court concluded that the Assessing Officer has no jurisdiction to reopen an assessment concluded by the Settlement Commission under Section 245D(4).
- The impugned notice under Section 148 of the Income Tax Act was quashed and set aside.
- The respondent/Revenue was given the option to approach the Settlement Commission for appropriate relief if they believe the order was obtained by fraud or misrepresentation.

Judgment:
The petition was allowed, and the impugned notice dated 31.03.2018 was quashed. The Revenue was permitted to seek relief from the Settlement Commission if necessary.

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