2023 (8) TMI 822 - AT - Income Tax

Reopening of assessment u/s 147 - Reason to believe - basis of information received from the investigation wing - HELD THAT - It is evident from the record that the Assessing Officer received the information from DGIT (Investigation) Wing, Mumbai about having vital information initially received from the Sales Tax Department of Maharashtra indicating that the assessee is a beneficiary of accommodation entries by way of bogus sales/purchase bills. On the basis of the aforesaid information, AO initiated proceedings u/s 147 of the Act and issued a notice u/s 148 correctly. If there is relevant material on the basis of which a reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings u/s 147 of the Act can be validly initiated. In the present case, on the basis of information received from the investigation wing, reassessment proceedings in the case of the assessee were initiated. It is also well settled that sufficiency or correctness of the material is not a thing to be considered at the stage of recording of reasons. As a result, we find no infirmity in the reassessment proceedings initiated by the AO u/s 147 of the Act and upheld by the CIT(A). Thus, the grounds raised by the assessee challenging the reopening of the assessment are dismissed.

Summary

Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Validity of reassessment proceedings based on information from the Sales Tax Department regarding bogus sales/purchase bills.

Summary:

Reopening of assessment under section 147 of the Income Tax Act, 1961:
The assessee challenged the order dated 05/02/2018, passed under section 250 of the Income Tax Act, 1961 by the learned Commissioner of Income Tax (Appeals)-30, Mumbai, for the assessment year 2009-10. The appeal was listed for hearing following a recall order limited to the issue of reopening raised in the assessee's appeal. Despite several notices, the assessee did not appear or file for adjournment. The Tribunal noted that the pendency of a writ petition before the Hon'ble Bombay High Court would not affect the adjudication of the reopening issue. The Tribunal proceeded to decide the issue of reopening as restored by the coordinate bench.

Validity of reassessment proceedings based on information from the Sales Tax Department regarding bogus sales/purchase bills:
The assessee filed its return of income on 25/08/2009. Information from the DGIT (Investigation) Wing, Mumbai, indicated that the assessee was a beneficiary of bogus sales/purchase bills. Consequently, proceedings under section 147 were initiated, and notice under section 148 was issued on 08/03/2014. The Assessing Officer determined the total income of the assessee at Rs. 34,12,080, after making an addition of Rs. 29,60,308, being 12.5% of the total non-genuine purchases of Rs. 2,36,82,482.

The learned CIT(A) dismissed the grounds challenging the reassessment proceedings, stating that the Assessing Officer had 'reason to believe' that income had escaped assessment based on specific and credible information. The Tribunal upheld this view, citing the Supreme Court's observation in ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd, that at the initiation stage, what is required is "reason to believe," not the established fact of escapement of income. The Tribunal found no infirmity in the reassessment proceedings initiated by the AO under section 147 and upheld by the learned CIT(A).

Conclusion:
The appeal by the assessee was dismissed, and the Tribunal found no infirmity in the reassessment proceedings under section 147 of the Act. The order was pronounced in the open Court on 14/08/2023.