2021 (6) TMI 641 - HC - Income Tax

Reopening of assessment u/s 147 - reopening on the basis of the material and the impounded documents recovered during the course of survey action undertaken by the Investigation Wing, Surat under Section 133A - disposing of objections of assessee - HELD THAT - In case of CIT Vs. M/s.Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT it has been held inter alia that the Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is an escapement of income from assessment and that reasons must have a live link with the formation of the belief. Our Court has also in similar case, in the case of Aaspas Multimedia Pvt. Ltd. 2017 (6) TMI 557 - GUJARAT HIGH COURT held that if on the basis of information supplied by/from the office of Principal Director of Income Tax (Investigation), the A.O., has found that the petitioner assessee was the beneficiary of accommodation entries provided by the other assessee, it could not be said that there was no tangible material available with the A.O., to prima facie form an opinion/belief that income of the petitioner chargeable to tax has escaped an assessment. As rightly submitted by the learned Sr. Standing Counsel Mr.Raval, what is required to reopen a case is reason to believe , the sufficiency or correctness of material cannot be considered at this juncture, as held by the Supreme Court in case of Raymond Woolen Mills Limited Vs. ITO 1997 (12) TMI 12 - SUPREME COURT In the instant case, the A. O. has disposed of the objections of the petitioner by passing a speaking order considering all legal and factual aspects, which are just and proper, and do not call for any interference by this Court, exercising the jurisdiction under Article 226 of the Constitution of India. - Decided against assessee.

Summary

Issues:
1. Validity of the Notice dated 26.3.2019 issued under Section 148 of the Income Tax Act.
2. Rejection of objections raised by the petitioner against the said Notice.
3. Jurisdiction of the respondent to reopen the assessment for the A.Y. 2012-13.
4. Sufficiency of reasons for forming the belief of income escaping assessment.
5. Application of legal precedents in challenging the respondent's action.
6. Examination of the legality and justification of action under Section 147/148 of the Income Tax Act.

Analysis:

1. The petition challenged the Notice dated 26.3.2019 issued by the respondent under Section 148 of the Income Tax Act, alleging that the income of the petitioner for the A.Y. 2012-13 had escaped assessment. The respondent also passed a preliminary order on 21.9.2019 disposing of the objections raised by the petitioner against the Notice.

2. The petitioner, a Private Limited Company, filed its return of income for the A.Y. 2012-13 on 29.9.2012. The respondent issued the impugned Notice based on the belief that the petitioner had suppressed income. The petitioner objected to the reasons recorded for reopening the assessment, which were rejected by the respondent.

3. The respondent contended that the petitioner had suppressed income for the concerned A.Y., justifying the reopening of the assessment under Section 147/148 of the Act. The respondent relied on tangible material linking the petitioner to entries of tax bills and accommodation loan entries, indicating income escapement.

4. The petitioner challenged the respondent's jurisdiction to reopen the assessment, arguing that there was no basis for such action. The petitioner emphasized the lack of transactions with specific entities and the absence of unsecured loans, questioning the validity of the reasons for reopening.

5. Legal arguments presented by both parties referenced relevant case laws to support their positions. The petitioner relied on judgments highlighting the requirement of specific, reliable, and relevant information for reopening assessments. The respondent cited precedents emphasizing the broad definition of "information" and the need for a prima facie link to justify reopening.

6. The Court analyzed the legal principles governing the initiation of action under Section 147/148 of the Income Tax Act. It emphasized the importance of tangible material and a live link between the reasons and belief of income escapement. The Court upheld the respondent's actions, dismissing the petition for lack of merit.

This comprehensive analysis covers the validity of the Notice, jurisdiction to reopen assessments, sufficiency of reasons, application of legal precedents, and the overall legality and justification of the respondent's actions under the Income Tax Act.