2022 (12) TMI 1167 - HC - Income Tax

Reopening of assessment - Validity of reasons to believe - Whether reasons to believe were based on some non-extent material or extraneous and irrelevant material? - HELD THAT - Firstly, the Petitioner did not bother to file any returns during Assessment Year 2015-16. Secondly, the Petitioner did not bother to file any response to the notice dated 27.03.2021 seeking to reopen the assessment within the time limit allowed to the Petitioner. The Petitioner filed returns only after eight months at the stage when the time limit for completing the reassessment proceedings was almost due to conclude. In these circumstances, the Assessing Officer rightly invoked the principle in Union of India V/s. Major General Madan Lal Yadav 1996 (3) TMI 472 - SUPREME COURT . Discretion apart, we find that this is a matter where the explanation (2) to Section 147 of the IT Act would apply. This explanation inter alia provides that where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded with a maximum amount which is not chargeable to income-tax, the same shall also be deemed to be a case where income chargeable to tax has escaped assessment. Petitioner has not explained the amount of ₹2,15,107/-. The Petitioner may have its own version about the receipt of the amount of ₹6.74 crores. However, these are matters which can be looked into at the stage of reassessment. Based on the material available with the respondents, we cannot say that they either had no reason to believe or that their reasons to believe were based on some non-extent material or extraneous and irrelevant material.

Summary

Issues involved:
1. Validity of the notice seeking to reopen the assessment for Assessment Year 2015-16.
2. Delay in filing returns and its impact on the reassessment proceedings.
3. Interpretation of Section 147 of the Income Tax Act regarding income escaping assessment.
4. Application of explanation (2) to Section 147 in the given case.

Analysis:

Issue 1: Validity of the notice seeking to reopen the assessment for Assessment Year 2015-16
The petitioner challenged the impugned notice dated 16.03.2022 seeking to reopen the assessment for Assessment Year 2015-16. The petitioner argued that the reasons for reopening, particularly the alleged receipt of a specific amount, were not supported by Form 26AS. The petitioner also contended that since they had incurred losses during the relevant year and had no intention of carrying forward such losses, there was no legal requirement to file a return. The respondent, on the other hand, argued that the petitioner's failure to file returns and respond to the initial notice justified the reopening under Section 147 of the IT Act. The court noted the conflicting contentions but ultimately upheld the validity of the notice based on the information available with the respondents.

Issue 2: Delay in filing returns and its impact on the reassessment proceedings
The petitioner delayed filing returns despite receiving notices and only did so after a significant period had elapsed. The respondent argued that this delay was an attempt to frustrate the time limits for completing the assessment. The court observed that the petitioner's delayed response and filing of returns raised questions about the intention behind the actions and the impact on the assessment process. The court considered this delay in the context of the Assessing Officer's discretion to proceed with reassessment under Section 147.

Issue 3: Interpretation of Section 147 of the Income Tax Act regarding income escaping assessment
The court analyzed the provisions of Section 147 of the IT Act in light of the petitioner's failure to file returns and respond to the initial notice within the prescribed period. The court noted that the explanation (2) to Section 147 deems cases where no return has been furnished despite assessable income exceeding the exempt limit as cases of income escaping assessment. The court applied this provision to the petitioner's case, emphasizing the importance of timely compliance with tax filing requirements.

Issue 4: Application of explanation (2) to Section 147 in the given case
The court specifically addressed the petitioner's failure to explain certain amounts and receipts, highlighting the need for a detailed examination during the reassessment process. The court emphasized that while the petitioner could present their version during reassessment, the existing material justified the reopening of the assessment. The court concluded that the petitioner's contentions could be considered during the reassessment but did not warrant interference with the impugned orders seeking to reassess the petitioner's income.

In conclusion, the court dismissed the petition, citing the petitioner's delayed responses, failure to file returns, and the application of Section 147 and its explanations to justify the reassessment process. The court found no grounds to interfere with the impugned orders and notices, emphasizing the importance of compliance with tax laws and procedures.