2021 (12) TMI 769 - HC - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - Addition u/s 69A - Notice issued after expiry of four years from the end of the relevant assessment year - HELD THAT - The test to be applied is whether there was reason to believe that income had escaped assessment and whether the AO has tangible material before him for the formation of that belief. Once tangible basis has been disclosed for re-opening the assessment, it would not be appropriate for this court to prevent an enquiry whatsoever by the AO. In this case, the reasons indeed disclose what is that tangible material. We find that the petitioners have filed detailed information called for by the AO under Section 142(1) and 143(2) of the Act and thus participated in the assessment proceedings. This having been done, it is not open for the petitioners to now contend that this Court should exercise its extra-ordinary jurisdiction and prohibit the Authorities from proceeding further with the impugned notice. This is particularly so as the question of jurisdiction has been raised by the petitioners before the AO during the assessment proceedings under the Act. In the present facts, the petitioners have participated in the proceedings before the AO. The objections to the reasons recorded by the AO in support of the impugned notice during the assessment proceedings is to point out to him the reassessment proceedings are bad as the requirement of Sections 147 and 148 are not satisfied. It would be completely different scenario where the petitioners have not participated in the proceedings before the AO and object to exercise of jurisdiction by the Assessing Officer at the very threshold and not while participating in the reassessment proceedings. In such cases, it is not a case of a party seeking identical relief by two parallel modes. The orders passed by the Assessing Officer are subject to effective, efficacious alternative remedy under the Act. Therefore, we see no reason to exercise our extra-ordinary jurisdiction in the facts of this case.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Whether the reasons provided for reopening the assessment were adequate.
3. Application of mind by the sanctioning authority.
4. Participation in assessment proceedings and subsequent challenge to the notice.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 31st March 2019, issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year (A.Y.) 2012-13, arguing that it was not validly issued and was without jurisdiction. The court noted that the petitioner had filed objections which were rejected, and the petitioner had participated in the assessment proceedings before filing this petition. The court highlighted that the notice was issued after more than four years but less than six years from the end of the relevant assessment year, and prior approval of the Pr. Commissioner of Income Tax, Range-20, Mumbai, was obtained as required under Section 151(1) of the Act.

2. Adequacy of Reasons Provided for Reopening the Assessment:
The petitioner argued that the reasons for reopening did not indicate the amount of income that had escaped assessment and questioned the timing and adequacy of the information received by the respondents. The court referenced the Supreme Court's judgment in Commissioner of Income Tax vs. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC), which states that the power to reopen must be based on "tangible material" and not merely a "change of opinion." The court found that the reasons provided did disclose tangible material and a live link with the formation of the belief that income had escaped assessment.

3. Application of Mind by the Sanctioning Authority:
The petitioner contended that the sanctioning authority did not apply its mind to the proposal for reopening the assessment, citing the timing of the information received and the issuance of the notice. The court referred to the judgment in German Remedies Ltd. vs. Deputy Commissioner of Income-Tax [2006] 287 ITR 494 (Bom), emphasizing that the commissioner must apply his mind and not exercise power casually. However, the court concluded that there was no indication of non-application of mind in this case, as the approval was granted after due consideration.

4. Participation in Assessment Proceedings and Subsequent Challenge to the Notice:
The respondents argued that the petitioner, having participated in the assessment proceedings, could not challenge the notice at this stage. The court agreed, referencing Amaya Infrastructure (P.) Ltd. vs. Income Tax Officer Ward 12(1)(1) [2017] 79 taxmann.com 345 (Bombay), which held that a petitioner who has participated in assessment proceedings cannot later contend that the court should exercise its extraordinary jurisdiction to prohibit further proceedings. The court found that the petitioner had indeed participated in the proceedings and had only challenged the notice after receiving a show-cause notice regarding the addition of ?3,13,00,000 to the income under Section 69A of the Act.

Conclusion:
The court dismissed the petition, stating that there was no reason to exercise its extraordinary jurisdiction under Article 226 of the Constitution of India to prohibit the authority from proceeding further in the matter. The petition was dismissed with no order as to costs.

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