2023 (7) TMI 34 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - failure on the part of the Petitioner to furnish bank account statements pertaining to Avash Logistic bearing Account with M/s YES Bank Ltd., in which transactions were made reflecting payments made to Mr. Vasudev Thacker and his son which according to the assessing officer had resulted in under assessment of the Petitioner's taxable income - HELD THAT - It cannot be said that there was any failure on the part of the Petitioner to disclose fully and truly the material facts during the regular assessment. Even otherwise, we are of the opinion that the assessing officer would have no reason for the formation of his belief that income had escaped assessment inasmuch as payments were made by the joint venture companies to Mr. Vasudev Thacker and to Mr. Nishant Thacker and reopening if at all ought to have been considered in those cases. There was no tangible material with the assessing officer, which would form a basis for the assessing officer for his 'reason to believe' that payments made to Mr. Vasudev Thacker as also to his son Mr. Nishant Thacker resulted in generation of cash, which ultimately found its way to the Petitioner. In the absence of any such specific information, which ought to have been reflected in the reasons recorded, it can be said that the jurisdictional requirements have not been fulfilled in the present case. While it may be true that as against the alleged payment of Rs. 153 crores paid to Mr. Vasudev Thacker, he admitted to have received only amount of Rs. 130 crores, which led to a disclosure by the Petitioner to the extent of Rs. 23 crores, yet the same cannot be made a basis for reopening. It needs to be pointed out that it is not the case of the Respondent-revenue that the entire amount, which had been received by Mr. Vasudev Thacker as also Mr. Nishant Thacker was never used for purchase of parcels of land for establishing the project, for which Special Purpose Vehicle companies were created. If that is so, one fails to understand as to why only four entries recorded in the reasons recorded, were picked up by the AO. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act, 1961.
2. Jurisdictional conditions for invoking Section 147 of the Act.
3. Failure to disclose fully and truly the material facts necessary for assessment.

Summary:

1. Validity of the notice under Section 148:
The Petitioner challenges the notice under Section 148 dated 1 July 2014, which seeks to reopen the assessment for the year 2009-10. The Petitioner also contests the Order dated 25 November 2015, which rejected the objections to the reopening.

2. Jurisdictional conditions for invoking Section 147:
The Petitioner argues that the notice under Section 148 does not satisfy the jurisdictional conditions for invoking Section 147. Since the reopening is after four years from the end of the relevant assessment year, the assessing officer must demonstrate both "reason to believe" and a failure by the assessee to disclose fully and truly the material facts necessary for the assessment. The Petitioner contends that Avash Logistic, a separate legal entity, was independently assessed, and there was no obligation on the Petitioner to furnish its bank statements. The transactions mentioned were already scrutinized during the assessment proceedings of Avash Logistic, and the same assessing officer handled both cases.

3. Failure to disclose fully and truly the material facts:
The Court found that the basis for reopening the assessment was the alleged failure to furnish bank account statements of Avash Logistic, which is a separate entity. The Court observed that the bank statements were scrutinized during the assessment of Avash Logistic, and the same assessing officer handled both assessments. There was no failure on the part of the Petitioner to disclose material facts, and the assessing officer had no valid reason to believe that income had escaped assessment. The Court also noted that there was no tangible material to support the belief that payments to Mr. Vasudev Thacker and his son resulted in cash generation that ultimately reached the Petitioner.

Conclusion:
The Court allowed the Petition, setting aside the notice under Section 148 dated 1 July 2014 and the Order dated 24 November 2015, rejecting the objections. The reopening of the assessment was deemed invalid due to the lack of jurisdictional conditions and failure to disclose material facts.