2022 (4) TMI 640 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - independent application of mind by AO - assessing authority has proceeded on the basis of certain information received from the Investigating Wing - cash purchases of shops - HELD THAT - From the reason recorded by the assessing authority, it is evident that the assessing authority was having some information from the DDT (Inv.)-1(3), Ghaziabad. He independently verified the information received from the return of income of the assessee and also perused the statement recorded on oath and then he came to an independent conclusion that the assessee had made huge cash for purchase of units/shop etc. in Red Mall to M/s Celebrations City Projects (P) Ltd. during the Financial Year 2015-16. The reason to believe recorded by the assessing authority is not on the basis of any books of account or document seized by Income Tax Authorities in the search conducted on M/s Celebrations City Projects (P) Ltd. Even if it is presumed that copies of certain statements on oath recorded during the course of search by the Investigating Wing, were forwarded to the respondent no.1 alongwith the report, it cannot be said to be either the books of account or document seized so as to fall it within the ambit of clause (b) of sub-section (1) of Section 153C of the Act, 1961. Perusal of the reason recorded by the assessing authority as aforequoted reveals that the assessing authority has proceeded on the basis of certain information received from the Investigating Wing and after independent verification, he came to the conclusion that the assessee had made huge cash of ₹ 1,18,84,000/-, which caused him to issue notice to the petitioner under Section 148 of the Act, 1961. It is also admitted case of the petitioner that no assessment was made by the assessing authority for the Assessment Year 2016-17. As per Explanation 2(b) appended to Section 147 of the Act, 1961, if a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the assessing officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; then it shall be deemed to be a case where income chargeable to tax has escaped assessment. We find that neither the impugned notice issued by the respondent no.1 under Section 148 of the Act, 1961 suffers from any illegality nor the impugned order rejecting the objection of the petitioner suffers from any infirmity, which, under the circumstances, cannot be interfered with. - Decided in favour of revenue.

Summary

Issues:
Challenge to order rejecting objection to reopening of assessment for A.Y. 2016-17 under Section 147/148 of Income Tax Act.

Analysis:

Issue 1: Reopening of Assessment
The petitioner challenged the notice dated 30.03.2021 under Section 148 of the Income Tax Act, 1961, based on information from a search conducted at M/s Celebrations City Projects (P) Ltd. The petitioner argued that proceedings should be initiated under Section 153C of the Act. The assessing authority justified the reopening based on cash payments made by the petitioner for purchase of units/shops in Red Mall, Ghaziabad. The authority believed there was escapement of income and issued the notice under Section 148. The court noted that no assessment was made for A.Y. 2016-17 and held that the notice and order were legal as per Explanation 2(b) of Section 147.

Issue 2: Legality of Notice and Order
The court examined the reasons recorded by the assessing authority, emphasizing the importance of tangible material for reopening assessments. The authority's decision was based on information from the Investigation Wing, and the court cited relevant case laws supporting the use of such information for issuing notice under Section 148. The court also analyzed Section 153C(1) of the Act, emphasizing that the reason to believe recorded by the assessing authority was not based on seized books or documents.

Conclusion:
The court found no illegality in the notice issued under Section 148 or in the order rejecting the petitioner's objection. The court dismissed the writ petition, allowing the assessing authority to proceed with reassessment in accordance with the law. The judgment highlighted the importance of tangible material for reopening assessments and upheld the legality of the notice and order based on the information available from the Investigation Wing.