2019 (11) TMI 100 - HC - Income Tax

Reopening of assessment u/s 147 - return of income was processed under section 143(1) by way of intimation. - HELD THAT - Requirement at the stage of issuing reopening notice is only with a prima facie view that income chargeable to tax has escaped assessment. This is not a final view and is subject to further consideration during the assessment proceedings. In the present facts we find that though paragraph 5 of the reasons recorded in support of the impugned notice for reopening of the assessment is vague in as much as the Assessing Officer is not even certain whether the Petitioner made profits or loss or even the entities/persons dealt with, would make the reasons bad in law. However, the reasons as conclusion that above in para 5 thereof is not the only reason in support of the impugned notice. The other reason in support of the impugned notice is recorded in Para 2 to 4 thereof viz. that income of ₹ 33.59 lakhs chargeable to tax has escaped assessment on the basis of the tangible material and information received from the Deputy Director of Income Tax (Investigation) Kolkata by misuse of National Multi-commodity Exchange platform. This is the very income chargeable to tax which has escaped assessment at ₹ 33.59 lakhs. This is as mentioned in the reasons with regard to the Petitioner purchasing and selling shares through Star Commodities i.e. Broker during the previous year relevant to the Assessment Year by misusing the National Multi-commodity Exchange platform. No reason to entertain this Petition.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer to issue a notice under Section 148 of the Income Tax Act, 1961.
2. Validity of reopening assessment based on information received from the Deputy Director of Income Tax (Investigation).
3. Sufficiency of reasons to believe that income has escaped assessment.
4. Applicability of judicial precedents cited by the petitioner.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer to issue a notice under Section 148:
The Petition challenged the notice dated 30 March 2019, issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for Assessment Year 2012-13. The return of income for the Assessment Year 2012-13 was processed only by intimation under Section 143(1) of the Act, and no scrutiny assessment under Section 143(3) was done. As per the judgment, the Supreme Court in the case of Asst. Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers (P) Ltd., 291 ITR 500 (SC), clarified that the Assessing Officer is authorized to reassess income if he has reason to believe that income has escaped assessment. The term "reason to believe" implies a cause or justification, not necessarily a final conclusion based on legal evidence.

2. Validity of reopening assessment based on information received:
The reasons recorded for reopening the assessment included information from the Deputy Director of Income Tax (Investigation), Kolkata, regarding systematic tax evasion by misuse of the NMCE platform. The Petitioner was found to have engaged in substantial transactions resulting in unexplained profits/losses through broker Star Commodities. The judgment noted that the reasons recorded in paragraphs 2 to 4 of the notice indicated that income of ?33.59 lakhs chargeable to tax had escaped assessment based on tangible material and information received. This justified the reopening of the assessment under Section 147.

3. Sufficiency of reasons to believe that income has escaped assessment:
The Court emphasized that at the stage of issuing a reopening notice, the requirement is only to have a prima facie view that income chargeable to tax has escaped assessment, not a final determination. The reasons recorded in paragraph 5 were deemed vague, but paragraphs 2 to 4 provided sufficient grounds for the Assessing Officer's belief that income had escaped assessment. The Court cited the Supreme Court's observation that the formation of belief by the Assessing Officer is within the realm of subjective satisfaction, and the sufficiency of material to conclusively prove escapement is not a test at the initiation stage.

4. Applicability of judicial precedents cited by the petitioner:
The petitioner relied on several judicial precedents to argue that the reopening notice was without jurisdiction:
- Nu Power Renewables (P.) Ltd. Vs. Deputy Commissioner of Income-tax: The Court distinguished this case as it dealt with reopening an assessment completed under Section 143(3), unlike the present case where the return was processed under Section 143(1).
- Principal Commissioner of Income-tax-6 Vs. Meenakshi Overseas (P.) Ltd.: The Court noted that this decision was rendered in an appeal under Section 260A and involved a different context where the Tribunal found no reason to believe that income had escaped assessment.
- Bakulbhai Ramanlal Patel Vs Income Tax Officer: The Court found this precedent inapplicable as it involved a reopening notice issued for detailed investigation, which was not the case here.

Conclusion:
The Court concluded that there was no reason to entertain the Petition, as the Assessing Officer had sufficient grounds to believe that income chargeable to tax had escaped assessment. The Petition was dismissed.