2022 (1) TMI 490 - HC - Income Tax

Reopening of assessment u/s 147 - Undisclosed interest income - information received from Investigation Wing about a particular entity entering into suspicious transaction - scope of change of opinion - HELD THAT - In the computation of income, Petitioner has disclosed interest received of ₹ 1,41,18,920/- and payment of ₹ 1,43,43,518/- restricted to ₹ 1,42,05,185/-. Even in the capital account there is disclosure of interest receipt of ₹ 1,41,18,920/- and interest payment of ₹ 1,43,43,518/-. Therefore these details have been made available before the assessment was completed under section 143(3) of the Act. Just because some information has been received from the Investigation Wing, does not entitle Respondents to reopen assessment based on change of opinion. Merely, deposit of money into the bank account by way of cheque itself is not a ground for escapement of income. Mere high value deposit in the bank account cannot be a reason for reopening under section 148 - The reasons as made available to Petitioner merely indicates information received from Investigation Wing about a particular entity entering into suspicious transaction. That material is not further linked to the conclusion that Petitioner has indulged in any activity which can give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped assessment. It does appear that the Assessing Officer has merely issued a reopening notice on the basis of intimation received from the Investigation Wing and consequent to change of opinion - thus quash, cancel and set aside the impugned notice - Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment under section 148 of the Income Tax Act, 1961 based on large non-cash transactions in the petitioner's bank account.
2. Allegations of undisclosed interest income and mismatched income transactions.
3. Challenge to the legality of the notice and order issued by the Assessing Officer.
4. Petitioner's objection to the reopening of assessment and the subsequent rejection.

Analysis:
1. The petitioner challenged the notice dated 31st March, 2019, issued under section 148 of the Income Tax Act, 1961, and the rejection of the objection to the reopening of assessment. The reasons for reopening included large non-cash transactions in the petitioner's bank account during a specific period. The petitioner contended that the entire amount received had been paid out, questioning the existence of any income that could have escaped assessment.

2. Additionally, the petitioner was alleged to have undisclosed interest income and mismatched income transactions. The assessing officer believed that income chargeable to tax amounting to ?744 lacs had escaped assessment. However, discrepancies were noted in the reasons provided for reopening, as certain details were already disclosed by the petitioner during the assessment process under section 143(3) of the Act.

3. The court noted that the reasons provided for reopening the assessment seemed to rely on information from the Investigation Wing without establishing a direct link to the petitioner's alleged tax evasion. Merely depositing money into a bank account was not considered sufficient grounds for income escapement. The court highlighted that high-value deposits alone could not justify reopening under section 148 of the Act, emphasizing the need for a valid reason to believe that taxable income had escaped assessment.

4. Ultimately, the court allowed the petition and quashed the notice dated 31st March, 2019, and the order dated 15th November, 2019. The court's decision was based on the lack of substantial evidence linking the petitioner's activities to income escapement, indicating that the assessing officer's decision may have been influenced by a change of opinion rather than concrete grounds for reassessment.

This comprehensive analysis of the judgment highlights the key issues addressed by the court regarding the legality of the notice and the grounds for reopening the assessment under the Income Tax Act, 1961.