2019 (10) TMI 298 - HC - Income Tax

Reopening of assessment u/s 147 - non disclosure of investment in the ITR - borrowed satisfaction - Assessee submitted the, the Form ITR2, at the relevant point of time, did not include any column for the disclosure of investment - the assessee had salary income from other sources and capital gains. In such circumstances, the assessee was required to file the ITR 2 - HELD THAT - Following the decision of HC in the case of SARALA DEVI BIRLA 1989 (8) TMI 6 - CALCUTTA HIGH COURT , the impugned notice for reopening of the assessment is not sustainable in law. We hold that the reasons recorded by the Assessing Officer to form the belief that the income chargeable to tax had escaped assessment lack validity. The impugned notice is therefore, set aside. The writ-application is accordingly allowed and is disposed of.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Whether the assessee was under any legal obligation to disclose investments in the return of income.
3. Whether the Assessing Officer's reasons for reopening the assessment were valid and based on tangible material.
4. Whether the reopening of assessment was justified based on the information received from the ITO (I&CI).

Issue-wise Detailed Analysis:

Issue 1: Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
The writ-applicant challenged the notice issued by the respondent under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the Assessment Year (A.Y.) 2011-12. The primary contention was that the notice was issued without proper justification and was based on the unexplained investment of ?50,00,000 in LIC pension policies. The respondent argued that the notice was valid as it was issued following the prescribed procedure and based on tangible material indicating escapement of income.

Issue 2: Whether the assessee was under any legal obligation to disclose investments in the return of income.
The assessee contended that there was no obligation to disclose the investment of ?50,00,000 in the LIC policies in the return of income for A.Y. 2011-12, as the form ITR 2, which was required to be filed, did not have a specific column for such disclosure. The court referred to the Supreme Court's decision in CIT Vs. Smt. P.K. Kochammu Amma, which held that an assessee is not bound to disclose income under Section 64 if the return form does not provide a specific column for such disclosure. Therefore, the court concluded that the assessee was not legally obligated to disclose the investment in the return.

Issue 3: Whether the Assessing Officer's reasons for reopening the assessment were valid and based on tangible material.
The court emphasized that the validity of the reopening of the assessment must be determined based on the reasons recorded for reopening. The reasons must demonstrate a link between the information received and the formation of the belief that income had escaped assessment. The court found that the reasons recorded by the Assessing Officer lacked validity and did not establish a direct nexus between the information and the belief that income had escaped assessment. The court cited various legal principles, including the necessity for the Assessing Officer to form a prima facie opinion based on tangible material and not merely on suspicion or borrowed satisfaction.

Issue 4: Whether the reopening of assessment was justified based on the information received from the ITO (I&CI).
The court noted that the information from the ITO (I&CI) was received on 27/03/2018, while the reasons for reopening were recorded on 15/03/2018, indicating a typographical error. However, the court found that the reopening was not justified as it was based on unexplained investments without a proper cause-and-effect relationship between the reasons recorded and the alleged escapement of income. The court reiterated that reopening should not be based on roving or fishing inquiries and must be supported by specific findings indicating escapement of income.

Conclusion:
The court concluded that the impugned notice for reopening the assessment lacked validity and was not sustainable in law. The writ-application was allowed, and the notice under Section 148 was set aside. The court emphasized the principles governing the reopening of assessments, including the necessity for the Assessing Officer to form a bona fide belief based on tangible material and not merely on suspicion or borrowed satisfaction.

← Previous Next →