2020 (1) TMI 300 - HC - Income Tax

Reopening of assessment u/s 147 - Validity of reasons to believe - HELD THAT - The phrase Reasons to Believe does not mean that the AO should have ascertained the facts by legal evidence. All that is required is that, the AO should prima facie have some material on the basis of which there should be reasons to believe of certain incomes chargeable to tax escaping assessment. There need not be any concrete evidence or proof available for coming to a final conclusion. It is only an initiation of proceedings of reassessment where the assessee gets a chance to put forth their defence, explanation and justification which would further be scrutinized by the AO while reaching to the final conclusion. One should not loose sight of the fact that the final assessment on the conclusion of a proceedings under Section 147 is also an appealable order wherein also the assessee has a right to agitate or challenge the order passed by the AO on a proceeding under Section 147 of the Act. If we look into the proceedings under challenge, it would clearly reveal that there are sufficient reasons given by the Assessing Officer, which according to him is Reasons to believe of an income of more than ₹ 87 Lakhs, which are chargeable to tax has escaped assessment and which has come to the notice of Department at a later stage in the course of scrutiny. Given the said facts and circumstances of the case, this Court has no hesitation to reach to the conclusion that there was sufficient material available before the authority concerned for initiating a proceeding under Section 147 of the I.T. Act and the same cannot be held to be bad in law as the proceedings drawn by the Assessing Officer seems to be with sufficient material in record showing income, which otherwise is chargeable to tax having escaped assessment.

Issues:
1. Challenge to the notice issued under Section 148 of the Income Tax Act, 1961.
2. Allegation of reassessment being barred by limitation.
3. Claim of full disclosure by the petitioner during the original assessment.
4. Validity of reasons to believe recorded by the Assessing Officer (AO).
5. Allegation of reassessment proceedings being based on vague and ambiguous reasons.
6. Reliance on legal precedents by both petitioner and respondents.
7. Interpretation of Section 147 of the Income Tax Act regarding reassessment.

Issue-wise Detailed Analysis:

1. Challenge to the notice issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 06.05.2019 issued by the Respondent No.3, initiating reassessment proceedings under Section 147 of the Income Tax Act, 1961. The notice was based on findings from a survey conducted under Section 133(A) of the Act, which revealed incriminating materials and documents, leading to an assessed income significantly higher than the returned income.

2. Allegation of reassessment being barred by limitation:
The petitioner argued that the reassessment notice was barred by limitation, asserting that there was no suppression of material facts during the original assessment. The petitioner contended that all relevant documents were already available with the department at the time of the original assessment, and thus, the reassessment proceedings were illegal.

3. Claim of full disclosure by the petitioner during the original assessment:
The petitioner maintained that there was no failure on their part to make full and true disclosure of material facts necessary for assessment. They argued that since the documents used for reassessment were already in the department's possession, there was no new material justifying the reassessment.

4. Validity of reasons to believe recorded by the Assessing Officer (AO):
The petitioner contended that the reasons to believe recorded by the AO were baseless, vague, and ambiguous. They argued that there was no objective finding or tangible material supporting the reasons to believe that income had escaped assessment. The petitioner cited several legal precedents to support their claim that mere change of opinion does not justify reassessment.

5. Allegation of reassessment proceedings being based on vague and ambiguous reasons:
The petitioner argued that the reasons provided by the department were vague and lacked a concrete basis. They claimed that there was no specific finding of suppression of material facts during the original assessment, and the reasons to believe were not substantiated by tangible evidence.

6. Reliance on legal precedents by both petitioner and respondents:
The petitioner relied on various judgments, including those from the Supreme Court and High Courts, to argue that reassessment based on previously available material was not permissible. The respondents, on the other hand, cited judgments supporting the validity of reassessment proceedings based on new information or material discovered during scrutiny.

7. Interpretation of Section 147 of the Income Tax Act regarding reassessment:
The court interpreted Section 147 of the Income Tax Act, emphasizing that the requirement for reopening assessment is the AO's belief that income chargeable to tax has escaped assessment. The court noted that this belief must be based on subjective satisfaction and does not require new material not previously disclosed. The court highlighted that the AO has wide powers to reassess income if there are sufficient reasons to believe that income has escaped assessment, even if the material was previously disclosed.

Conclusion:
The court concluded that there was sufficient material available to the AO to initiate reassessment proceedings under Section 147 of the Income Tax Act. The court dismissed the writ petition, holding that the reassessment proceedings were legally valid and supported by adequate reasons to believe that income had escaped assessment. The court emphasized that the AO's subjective satisfaction, based on tangible material discovered during scrutiny, justified the initiation of reassessment proceedings.

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