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2021 (8) TMI 725 - HC - Income TaxReopening of assessment u/s 147 - Reason to believe - HELD THAT - In the present case, admittedly, the reopening is made within a period of four years. Thus, the reasons furnished for reopening, if satisfied, would be sufficient for continuance of reassessment proceedings and for its conclusion. Perusal of the reasons furnished as well as the objections raised and the disposal of such objections, as discussed would reveal that the petitioner has not substantiated the grounds raised for the purpose of setting aside the impugned order and therefore, this Court has no hesitation in arriving a conclusion that the reopening of assessment is made in consonance with the provisions of 147 of the Act and there is no infirmity or perversity as such. As far as the judgments relied on by the petitioners are concerned, the principles laid down by the Apex Court in RAYMOND WOOLLEN MILLS LIMITED VERSUS INCOME-TAX OFFICER AND OTHERS 1997 (12) TMI 12 - SUPREME COURT are not in dispute. Application of principles with reference to the facts and circumstances of the case are of paramount importance. Even the respondents have not seriously disputed on the principles relied upon, but perusal of the reasons furnished, objections raised and the disposal of objections by the authority competent are sufficient enough to meet out the mandatory requirements as contemplated under Section 147 of the Act and thus, the reassessment proceedings are to be allowed and the said proceedings are to be concluded as expeditiously as possible. WP dismissed.
Issues Involved:
1. Legal validity of the notice issued under Section 148 of the Income Tax Act, 1961. 2. Application of mind by the Assessing Authority in initiating reopening proceedings under Section 147. 3. Whether the reopening of assessment was based on a change of opinion. 4. The role of audit objections in the reopening of assessment. 5. Compliance with the mandatory requirements under Section 147 of the Act. Detailed Analysis: 1. Legal Validity of the Notice under Section 148 of the Income Tax Act, 1961: The petitioner challenged the notice issued under Section 148 and the subsequent order disposing of the objections. The court examined the reasons provided for reopening the assessment, which included discrepancies related to deductions under Section 10AA and the treatment of SEZ unit expenses and revenues. The court found that the reasons furnished were sufficient to establish a "reason to believe" that income had escaped assessment, thus upholding the legal validity of the notice. 2. Application of Mind by the Assessing Authority: The petitioner argued that there was no application of mind by the Assessing Authority, as the reopening was based on audit objections verbatim. The court, however, observed that the Assessing Officer had independently considered the information and formed a belief that income had escaped assessment. The court noted that the reasons for reopening included independent findings and the effect and consequences of the income escaping assessment, which demonstrated the application of mind. 3. Change of Opinion: The petitioner contended that the reopening was based on a change of opinion, which is impermissible. The court referred to previous judgments, including the Supreme Court's decision in Techspan India Private Limited, which clarified that reassessment is not permissible merely due to a change of opinion. The court found that the original assessment did not form any opinion on the issue leading to reassessment, and thus, it was not a case of change of opinion. 4. Role of Audit Objections in Reopening of Assessment: The petitioner argued that audit objections alone cannot be the basis for reopening an assessment. The court acknowledged that while audit objections can be a source of information, the Assessing Officer must independently form a "reason to believe." The court cited the Supreme Court's decision in PVS Beedies P Ltd, which allowed reopening based on factual errors pointed out by the audit party. The court concluded that the reopening in this case was based on factual information and independent assessment by the Assessing Officer. 5. Compliance with Mandatory Requirements under Section 147: The court examined whether the mandatory requirements under Section 147 were met. It found that the reasons for reopening were duly recorded and communicated to the petitioner. The court emphasized that the sufficiency of reasons need not be scrutinized at the reopening stage, as long as there is a prima facie "reason to believe" that income has escaped assessment. The court held that the reopening was in consonance with the provisions of Section 147 and dismissed the petition. Conclusion: The court dismissed the writ petition, finding that the reopening of assessment was valid, based on independent reasons and not merely on audit objections, and that the mandatory requirements under Section 147 were met. The reassessment proceedings were allowed to continue, and the court emphasized the need for the petitioner to cooperate with the reassessment process.
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