2024 (2) TMI 162 - HC - Income Tax

Reopening of assessment u/s 147 - reason to believe - reassessment the strength of cogent material and evidence discovered during a survey proceeding against a third party M/s Bait-Al-Tamurat, Mumbai - HELD THAT - A bonafide satisfaction reached as to escapement of income made suffice the test of valid assumption of jurisdiction. Seen in that light, specific allegation was made against the petitioner of having made cash purchases in excess of Rs. 20,000/-. The reply that was furnished by the petitioner does not establish that either the purchases made by the petitioner from third party during the financial year 2015-16 valued were paid through banking channel or that no purchases were made by the petitioner from such seller. What may have been the total quantum of purchases made by the petitioner from third party and what part of it may have been accounted against the payment made through banking channel may remain to be verified at the stage of reassessment. For the purposes of assumption of jurisdiction, all that is required to be seen is, if the satisfaction is bonafide. To that end, there is no dispute that the authority had conducted a survey against third party. In that information was revealed that cash purchases made by the petitioner were valued - In absence of any objection as to existence of such information and there being no material available to reach further satisfaction that such payments were made through banking channel, all other pleas being raised by learned counsel for the petitioner may remain to be examined, on merits, in the face of reassessment proceedings that are still pending.

Summary

Issues involved:
The issues involved in the judgment are the challenge to reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2016-17, focusing on the delay in filing the petition and the satisfaction reached for initiating reassessment based on material discovered during a survey against a third party.

Challenge to Reassessment Proceedings:
The petitioner challenged the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2016-17, citing a notice dated 19.04.2023. The petitioner denied allegations of cash purchases exceeding Rs. 20,000/- from a specific seller, which were proposed to be disallowed under Section 40A(3) of the Act. However, a new ground of purchases made outside the books of accounts was raised at a later stage, leading to objections by the petitioner regarding the lack of cogent material to proceed against them.

Jurisdiction and Bonafide Satisfaction:
Under the amended law, the Assessing Authority is no longer obligated to record a "reason to believe" before reassessing an assessee. A bonafide satisfaction regarding income escapement is deemed sufficient for valid assumption of jurisdiction. In this case, specific allegations were made against the petitioner for cash purchases exceeding Rs. 20,000/-. The petitioner's reply did not establish the nature of these purchases, leading to the need for further verification during reassessment.

Verification of Purchases and Opportunity for Objections:
The total quantum of purchases made by the petitioner from the seller and the portion accounted for through banking channels need to be verified during reassessment. The authority had conducted a survey against the seller, revealing information about cash purchases by the petitioner. The judgment leaves it open for the petitioner to raise objections and obligates revenue authorities to address them during reassessment proceedings, ensuring a fair opportunity for the petitioner without prejudice.

Conclusion:
The High Court dismissed the writ petition, allowing the reassessment proceedings to continue. The petitioner can raise objections during the process, with revenue authorities mandated to address them on merits and provide a fair hearing. The judgment emphasizes the importance of bonafide satisfaction for assuming jurisdiction and the need for thorough verification during reassessment procedures.