2022 (9) TMI 1368 - AT - Income Tax

Reopening of assessment u/s 147 - Unexplained gift receipt - reason to suspect or reasons to believe - assessee declared the gift received from his real brother in the statement - HELD THAT - With respectful observation of the apex court that the vague reason should not be accepted. But the reason recorded by the ld. AO is not factually incorrect. The recent judgment of LaljibhaiKanjibhaiMandalia 2022 (7) TMI 639 - SUPREME COURT held that formation of opinion and the reasons to believe recorded is not a judicial or quasi-judicial function but administrative in character.The information must be in possession of the authorised official on the basis of the material and that the formation of opinion must be honest and bona fide. It cannot be merely pretence. Consideration of any extraneous or irrelevant material would vitiate the belief/satisfaction. The authority must have information in its possession on the basis of which a reasonable belief can be founded that the person concerned has omitted or failed to produce books of accounts or other documents for production of which summons or notice had been issued, or such person will not produce such books of account or other documents even if summons or notice is issued to him - Reasons forming part of the satisfaction note are to satisfy the judicial consciousness of the Court and any part of such satisfaction note is not to be made part of the order. The question as to whether such reasons are adequate or not is not a matter for the Court to review in a writ petition. The sufficiency of the grounds which induced the competent authority to act is not a justiciable issue. The relevance of the reasons for the formation of the belief is to be tested by the judicial restraint as in administrative action as the Court does not sit as a Court of appeal but merely reviews the manner in which the decision was made. The Court shall not examine the sufficiency or adequacy thereof. Thus we find that no infirmity in the processing of reopening u/s 148 and in the order of the ld. AO u/s 147 of the Act. The issue was properly discussed by the ld. CIT(A) in his order. We find no infirmity in the order of the ld. CIT(A). The Ground No.1, of the assessee rejected.

Summary

Issues:
1. Challenge of the initiation of proceedings u/s 147 of the Income Tax Act, 1961.
2. Jurisdictional challenge related to the notice u/s 148 and assessment u/s 147 of the Act.
3. Validity of the reasons recorded for initiating proceedings u/s 147.

Issue 1: Challenge of the initiation of proceedings u/s 147:
The appeal was filed against the order of the ld. Commissioner of Income Tax(Appeals) regarding the initiation of proceedings u/s 147 of the Income Tax Act, 1961. The appellant contested the initiation of proceedings based on various grounds, including the issuance of summons despite no pending proceedings, failure to prove the identity and capacity of donors, and the reasons for initiating reassessment being reasons to suspect rather than reasons to believe. The appellant argued that the reopening u/s 148 was arbitrary and illegal.

Issue 2: Jurisdictional challenge related to notice u/s 148 and assessment u/s 147:
The jurisdictional challenge revolved around the notice u/s 148 and assessment u/s 147 of the Act. The appellant received a gift from his real brother, which led to the reopening of the assessment by the ld. AO. The appellant's legal counsel argued that the reopening was arbitrary and illegal, emphasizing that the recorded reason was a "reason to suspect" and not a "reason to believe." The appellant's contention was supported by legal precedents emphasizing the importance of honest and bona fide formation of opinion and the need for relevant evidence to sustain the belief.

Issue 3: Validity of the reasons recorded for initiating proceedings u/s 147:
The reasons recorded for initiating proceedings u/s 147 were scrutinized for their validity. The ld. AO's reasons were based on the appellant's income declaration, a survey conducted at a business premises, unexplained investments in property purchase and construction, and the belief that income had escaped assessment. The Tribunal observed legal principles emphasizing the need for the authority to have honest and bona fide information to form a reasonable belief. The Tribunal found no infirmity in the reopening process and upheld the order of the ld. AO and CIT(A), dismissing the appellant's challenge.

In conclusion, the Tribunal dismissed the appellant's appeal challenging the initiation of proceedings u/s 147, jurisdictional issues related to notice u/s 148 and assessment u/s 147, and the validity of the reasons recorded for initiating proceedings u/s 147. The Tribunal found no infirmity in the reopening process and upheld the orders of the ld. AO and CIT(A) in this regard.