2022 (4) TMI 1082 - HC - Income Tax

Reopening of assessment u/s 147 - Petitioner had unsecured loans - HELD THAT - Re-opening proposed is purely based on change of opinion and the entire issue which is the subject matter of the reasons recorded has been raised during the assessment proceedings, response obtained from Petitioner and Petitioner s explanation has been accepted by the AO. AO also, we would say, was satisfied with the credit worthiness and details provided by third party lenders. Mr. Sharma submitted that in the Assessment Order this issue has not been discussed. That does not help the cause of Respondents because it is settled law that once query has been raised and answers have been given, even if the assessment order is silent, the Assessing Officer is supposed to have considered the issue and is deemed to have been satisfied with the explanation offered by the assessee. Moreover, in this case, notice under Section 133(6) of the Act has also been issued to third party lenders who have, as admitted in the Affidavit in reply, given confirmation about the transaction and credit worthiness. In these circumstances, we will have to note that notice issued under Section 148 of the Act dated 31st March, 2021 impugned in this Petition has to be set aside and consequently Order dated 22nd December, 2021 also has to go. If the confirmation alongwith credit worthiness and genuineness of transaction even if we assume have not been explained, certainly it would have been mentioned in the assessment order. We have to also note that in the Petition, there is an averment in paragraph 5(a) about how the loan was obtained, details of loan confirmation filed, independent inquiry made under Section 133(6) of the Act etc., none of which has been denied in the Affidavit in Reply. Therefore, we observe that statement in the Affidavit in Reply that the credit worthiness of the creditor and genuineness of transaction have not been explained is incorrect. Purely by way of indulgence, we are not issuing any notice for perjury against the officer who has filed the Affidavit in reply.

Summary

Issues:
1. Reopening of assessment for A.Y. 2014-2015 based on alleged escaped income.
2. Challenge to reopening by the Petitioner on grounds of change of opinion and satisfactory responses during assessment proceedings.

Analysis:
1. The Petitioner, a limited liability partnership firm in real estate business, filed a return for A.Y. 2014-2015 declaring total income as 'Nil'. The return was selected for scrutiny under CASS, leading to a series of notices and responses exchanged between the Petitioner and the tax authorities. Assessment for the year was completed under Section 143(3) of the Income-Tax Act, 1961, after considering responses to notices issued under Section 133(6) of the Act to various parties regarding loan transactions. Subsequently, a notice dated 31st March, 2021 alleged that the Petitioner's income for the year had escaped assessment due to unexplained loans received. The Petitioner objected to the reopening, citing detailed responses provided during assessment proceedings and the satisfaction of the Assessing Officer with the explanations offered.

2. The High Court analyzed the grounds for reopening the assessment and the Petitioner's objections. It noted that the reasons for reopening were based on the same issues raised and addressed during the assessment proceedings, including queries on loan transactions and responses from third-party lenders. The Court found that the Assessing Officer had accepted the Petitioner's explanations and was satisfied with the creditworthiness of the lenders. Emphasizing that once queries are raised and answered, the Assessing Officer is deemed to have considered the issue, the Court held that the reopening was merely a change of opinion and not permissible. The Court also highlighted discrepancies in the tax authority's statements regarding the creditworthiness of the lenders, noting that the confirmation received during assessment proceedings contradicted the later assertion of unexplained loans. Consequently, the Court set aside the notice for reopening and the order disposing of the objections.

3. The Court, in its final observations, pointed out inaccuracies in the tax authority's affidavit regarding the creditworthiness of the lenders and the genuineness of the transactions. It noted that the confirmation obtained under Section 133(6) of the Act during assessment proceedings contradicted the assertion of unexplained loans in the later stages. The Court refrained from initiating perjury proceedings against the officer filing the incorrect affidavit. Ultimately, the Court disposed of the petition, refraining from imposing costs on the Assessing Officer at the request of the Respondent's counsel.

This detailed analysis of the judgment outlines the sequence of events, the legal arguments presented, and the Court's reasoning in addressing the issues raised by the Petitioner regarding the reopening of the assessment for A.Y. 2014-2015.