2024 (10) TMI 189 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - credible reasons for issuing the impugned notice or not? - sales advances assessment year - as submitted no reason to believe that income of the petitioner had escaped assessment as all material, on the basis of which the assessment is sought to be reopened, was examined in assessment proceedings for the previous assessment year Assessment Year 2010-11. HELD THAT -. During the search and seizure proceedings and thereafter, statements of certain persons connected with the M/s Spaze Group were recorded u/s 131 (1A) of the Act. The same also included statement of one Mr. Anand Singh who was ostensibly the proprietor of M/s JMD International. He stated that he was an electrician and received a remuneration of ₹6,000/- per month. He made statements to the effect that he had signed blank cheques in his capacity of proprietor of M/s JMD International and he was not in control of the said concern. He had stated that he had no knowledge of any godown or office of the said concern (M/s JMD International). According to his statement, one Sh. Kishori Sharan Goyal was the person who was controlling the said concern for providing Bogus Billing to various entities . The record of M/s JMD International indicated that it had made payment to the petitioner. This provided the AO the reason to believe that the petitioner s income chargeable to tax had escaped assessment. The contention that there are no credible reasons for issuing the impugned notice for reopening the assessment for the Assessment Year 2011-12 is thus insubstantial. The contention that all receipts have been taxed during the previous assessment year Assessment Year 2010-11 is also erroneous. Copy of the ledger account maintained by the petitioner indicates that certain amounts were received from M/s JMD International in the financial year 2010-11 (relevant to Assessment Year 2011-12). According to the learned counsel for the petitioner only a sum of ₹5,00,000/- was received during the said financial year. It is not necessary for this Court to examine the quantum of receipts during the previous year 2010-11 (relevant to AY 2011-12) in these proceedings. Suffice it is to state that, prima facie, all receipts received from M/s JMD International Ltd. were not taxed in Assessment Year 2010-11. Thus, notwithstanding that the petitioner s income chargeable to tax was assessed in Assessment Year 2010-11, prima facie, certain amounts, which were received in the financial year 2010-11 were not brought to tax in the Assessment Year 2011-12. The petitioner s explanation that its books of accounts were available with the AO prior to its assessment for the AY 2011-12 also does not carry the petitioner s case any further. This is for the reason that the AO had not assessed the petitioner s income for the Assessment year 2011-12 under Section 143 (3) of the Act. Contention that all material including explanation of the petitioner was available with the Assessing Officer at the time of framing of the assessment for the Assessment Year 2011-12 and the impugned notice is occasioned by a change in opinion, is unmerited. The assessment of tax under Section 143 (1) of the Act is a self-assessment and in a strict sense cannot be stated as assessment framed by the AO. The petition is unmerited and accordingly dismissed.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for Assessment Year 2011-12.

Analysis:
The petitioner contested the notice under two main arguments. Firstly, it was argued that all relevant material for the assessment had been examined in the previous year's assessment, and there was no reason to believe that income had escaped assessment for the current year. The petitioner had already shown sales advances in the previous year, which were taxed, so the sales reflected in the books should not be taxed again. Secondly, it was claimed that the Assessing Officer had all necessary information for the current assessment based on the explanations provided by the petitioner in connection with the previous year's assessment. As no additions were made in the current assessment, the information available prior to that assessment should not be a ground for reopening.

The reasons for reopening the assessment were based on information obtained during search and seizure operations related to another entity. The statement of an individual connected to that entity indicated possible tax evasion through accommodation entries. The Assessing Officer believed that the petitioner's income had escaped assessment based on these findings. The court found the reasons for reopening to be credible and substantial, rejecting the petitioner's argument that all receipts had been taxed in the previous year.

The court also addressed the argument that since the Assessing Officer had all relevant information before the current assessment, the notice for reopening was unjustified. Referring to a previous case, it was clarified that assessments under Section 143(1) of the Act are not final assessments, and the Assessing Officer can form an opinion for reopening based on new information. Therefore, the contention that the notice was issued due to a change in opinion was deemed invalid.

Ultimately, the court dismissed the petition, clarifying that the decision did not imply an opinion on the merits of the assessment to be conducted. The order focused on the validity of the notice issued under Section 148 and its compliance with the requirement of having a reason to believe that income had escaped assessment.