2020 (4) TMI 860 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to suspect OR reasons to believe - HELD THAT - As noticed that the AO had reopened the case without any evidence and that too after the block assessment was over and even the regular assessment u/s 143(3) was also completed. There was no evidence found during the course of search that there was undisclosed production - no information was available with the Revenue that there was unaccounted production. Tribunal concurred with the view of CIT(A) and in this view of the matter, dismissed the appeal of the Revenue holding that it was not a case for suppressed production as per the process of manufacturing which is applied in production of Beer. As noticed that even the Kerala State Excise Mannual which was applied by the AO in the case of the assessee who was operating in State of Madhya Pradesh, was of no help to the reasoning given by the Assessing Officer, as it was a case of pretence and reasons to suspect only. Power u/s 147 cannot be exercised merely on reason of suspicion but there should be reason to believe. Therefore, keeping in view the findings recorded by the CIT(A) which have been affirmed by the learned Tribunal and considering the same on the touchstone and anvil of the arguments advanced by the learned counsel for the appellant-Revenue, we find no reason to differ, as no illegality or perversity has been pointed out by learned counsel for the Revenue in the aforesaid findings of fact, which may warrant interference by this Court. - Decided in favour of assessee.

Summary

Issues:
1. Justification of upholding the quashing of reassessment proceedings based on reasons to suspect rather than reasons to believe.
2. Validity of not upholding the addition of suppressed sales based on the norms prescribed by the Technical Excise Manual of the Excise Department.

Issue 1:
The High Court analyzed the appeal under Section 260-A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal (ITA) regarding reassessment proceedings for the Assessment Year 2000-01. The primary issue revolved around whether the reasons for escapement of income were reasons to suspect or reasons to believe. The appellant-Revenue contended that the Assessing Officer had valid grounds for reopening the case based on technical excise manual guidelines, indicating suppressed production and undisclosed sales. However, the Court, after thorough examination, upheld the decisions of the CIT(A) and ITA, emphasizing that the power under Section 147 of the Act must be exercised based on reasons to believe, not mere suspicion. The Court found no illegality in the findings of the lower authorities and dismissed the appeal.

Issue 2:
The second substantial question of law in the appeal pertained to the addition of ?1,62,42,450 on account of suppressed sales, as per the norms of the Technical Excise Manual of the Excise Department. The appellant-Revenue argued that the Assessing Officer correctly applied the manual guidelines to determine the undisclosed production and sales, justifying the addition. Conversely, the respondent-assessee supported the decisions of the lower authorities, contending that there was no suppressed production as per the manufacturing process explained. The Court noted that the CIT(A) and ITA had thoroughly examined the matter and concluded that there was no case for suppressed production, especially considering the specific circumstances of the case. The Court concurred with the lower authorities' findings and dismissed the appeal, ruling in favor of the assessee.

In conclusion, the High Court, comprising Hon'ble Shri Justice Ajay Kumar Mittal and Hon'ble Shri Justice Vijay Kumar Shukla, dismissed the appeal filed by the Revenue, as it found no merit in challenging the decisions of the lower authorities. The judgment emphasized the importance of having valid reasons to believe, rather than mere suspicion, for initiating reassessment proceedings under the Income Tax Act. The detailed analysis provided clarity on the issues raised and highlighted the significance of adhering to legal procedures and evidence in tax matters.