2021 (7) TMI 959 - HC - Income Tax

Reopening of assessment u/s 147 - Reopening beyond period of four year - HELD THAT - Scope of Section 147 under the Act is wider enough to cover various circumstances under which reopening of assessment shall be done by the authority competent. As rightly pointed out by the petitioner, within four years and beyond four years, there is a distinction. Within four years, the Assessing Officer, if has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, can reopen the assessment. Beyond the period of four years, certain conditions are to be fulfilled In the present case, the learned Senior Standing Counsel relied on the fact that new informations were gathered and the genuinity of business transactions are also questioned by the AO. AO has reason to believe that the assessee failed to disclose fully and truly all material facts necessary for his assessment. The very intention of the provision is to ensure that even in cases where there was an omission or commission or by mistake certain particulars or details were not given by the assessee at the time of original assessment, after reopening of the assessment, the assessee shall produce all those documents, which were omitted, left out as well as the informations. Thus, the provision do not doubt about the integrity of an assessee u/s147 unless a contrary is established by the AO. This Court is of the opinion that assessment/re-assessment is to be completed by following the procedures contemplated. The scope of judicial review under Article 226 of the Constitute of India is to scrutinise the processes through which the decision is taken by the competent authority by following the procedures as contemplated under law, but not the decision itself. In the present case, the directives issued in the case of GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT have been followed and the assessee was given opportunity to submit their objections and the petitioner had rightly availed the opportunity and the said objections were also considered and disposed of by the authorities. The reasons furnished for reopening of assessment as well as the findings made in the order disposing of the objections are in the opinion of this Court is candid and convincing and therefore, there is no other reason to interfere with the order impugned in this writ petition and consequently, the writ petition fails and stands dismissed.

Summary

Issues Involved:
1. Validity of reopening proceedings under Section 147 of the Income Tax Act, 1961, beyond the period of four years.
2. Adequacy of tangible material for reopening the assessment.
3. Alleged failure of the assessee to fully and truly disclose material facts.
4. Compliance with procedural requirements and opportunity to the assessee to defend.

Detailed Analysis:

1. Validity of Reopening Proceedings under Section 147 Beyond Four Years:
The petitioner challenged the reopening of assessment proceedings initiated under Section 147 of the Income Tax Act, 1961, beyond the statutory period of four years. The petitioner argued that the reopening was unsustainable due to the absence of any tangible material indicating suppression or failure to disclose income fully and truly, as mandated by the proviso to Section 147. The court acknowledged the distinction in the conditions for reopening assessments within and beyond four years. Beyond four years, specific conditions, such as failure to file returns or disclose material facts, must be met. The court found that new information gathered by the Assessing Officer (AO) about the genuineness of the business transactions justified the reopening.

2. Adequacy of Tangible Material for Reopening the Assessment:
The petitioner contended that the details relied upon for reopening were the same as those furnished during the original scrutiny assessment, implying a mere change of opinion. However, the respondents argued that the AO had gathered new information indicating that the entities involved were not genuinely engaged in the business of software sales, which constituted new tangible material. The court held that the new information gathered by the AO provided a valid reason to believe that income had escaped assessment, thus justifying the reopening.

3. Alleged Failure of the Assessee to Fully and Truly Disclose Material Facts:
The AO argued that the petitioner had failed to disclose fully and truly all material facts necessary for the assessment, as new information revealed that the entities involved were bogus. The court noted that the AO had obtained reliable information about the parties with whom the petitioner had financial transactions, and the petitioner had not disclosed these details during the original assessment. The court emphasized that the provision under Section 147 allows reopening if there is a failure to disclose material facts fully and truly, even if the same books of accounts were produced earlier.

4. Compliance with Procedural Requirements and Opportunity to the Assessee to Defend:
The petitioner argued that there was a denial of opportunity to defend the case, as the details sought were not provided. The court observed that the AO had followed the directives of the Supreme Court in GKN Driveshafts (India) Ltd. v. Income-tax Officer, where reasons for reopening were furnished, and the petitioner was given the opportunity to submit objections. The court found that the AO had considered and disposed of the objections raised by the petitioner, thus complying with procedural requirements. The court emphasized that the scope of judicial review under Article 226 is limited to scrutinizing the process, not the decision itself.

Conclusion:
The court concluded that the reopening of assessment was justified based on new tangible material indicating that income had escaped assessment. The AO had followed the required procedures, and the petitioner was given an opportunity to defend. Therefore, the court dismissed the writ petition, upholding the validity of the reopening proceedings under Section 147 of the Income Tax Act, 1961.