2025 (1) TMI 458 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - issues already examined - objections raised by the petitioner non addressed - validity of approval granted u/s 151 - HELD THAT - The first submission of petitioner that these issues were examined and, therefore, the proceedings are without jurisdiction is required to be rejected. The issue of alleged cash receipt was not examined during the course of the regular assessment proceedings since the information from Faridabad Officer was received after the conclusion of the assessment proceedings. The assessment proceedings were concluded on 30 November 2018 whereas the information of alleged cash receipt was received on 21 February 2022. From the questionnaire issued to examine issues in the regular assessment proceedings there is no query on credit card expenses or alleged cash receipt. Therefore, both issues do not appear to have been examined. The assessment order further records that the assessment was limited scrutiny assessment only for verification of deduction under Chapter VI. The Petitioner has not enclosed the submissions made during assessment proceedings in the present petition, and therefore, we cannot give any conclusive findings in the writ proceedings. Therefore, on these counts, the submissions made prima facie are required to be rejected. Non addressing of objections raised by the petitioner - Second submission that in the annexure to notice u/s 148A(b), it is stated that the return is not filed is incorrect since the return was, in fact filed and the same has not been disputed in the order rejecting the objections. In our view, the reopening has to be done based on information and the said information has been reproduced in the annexure to the notice under Section 148A(b). It is based on the said information that the present proceedings are initiated. Although the respondents in the said annexure to the notice have stated that the return has not been filed, but in our prima facie view, that is not the basis on which the reopening is sought. ' The reopening is based on the information in accordance with the Risk Management Strategy Formulated by the CBDT. The respondents in their replies have stated that the statement in the information annexed to the notice that the petitioner has not filed return of income is a typographical error. In our view, without going into the same, prima facie since the reopening is based on the information, this submission made by Ms Pawar is rejected and can better be examined in appellate proceedings. Submission concerning approval u/s 151 - Appelant submitted that the approval is without application of mind. We have perused the approval memo, which was annexed to the petition and we do not find prima facie that the approval is without application of mind. In the remarks column in Item 21 and 22 it is stated after going through the annexure, the authority has given its approval by referring to the material available on record and consideration of the same. This is not a case where in the approval column, the approving authority has only stated yes , but the approval records the perusal of the draft order submitted by the assessing officer, material available on record, consideration of the same and the information as per Risk Management Strategy. Therefore, prima facie we are not impressed with the submission of the petitioner on this count. No reason to interfere in the impugned proceedings to quash the notices challenged in the present petition. However, the petitioner is at liberty to raise the same in normal reassessment / appellate proceedings if and when the occasion arises.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the reopening of the assessment under Section 148 of the Income Tax Act, 1961, based on the information received post-assessment, is valid and within jurisdiction.
Whether the procedural requirements for reopening under Section 148, including the approval under Section 151, were duly complied with.
Whether the notice under Section 148 should have been issued under Section 153C instead, given the circumstances of the case.
Whether the objections raised by the petitioner were adequately addressed and whether the petitioner can raise new grounds not previously objected to.
Whether the approval granted under Section 151 was given with due application of mind.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Reopening under Section 148

Relevant Legal Framework and Precedents: The reopening of assessments is governed by Sections 147 and 148 of the Income Tax Act, which allow for reassessment if income has escaped assessment. The procedure involves issuing a notice under Section 148A(b) and obtaining approval under Section 151.
Court's Interpretation and Reasoning: The court noted that the information prompting the reopening was received after the original assessment was concluded. The court emphasized that the reopening is based on "information" as per the Risk Management Strategy of the CBDT, and not merely on the fact that the return was filed or not.
Key Evidence and Findings: The court found that the alleged cash receipt and credit card transactions were not examined during the original assessment, which was limited to verifying deductions under Chapter VI-A.
Application of Law to Facts: The court applied the principles of reopening under Sections 147 and 148, finding that the reopening was justified based on new information.
Treatment of Competing Arguments: The petitioner argued that the reopening was without jurisdiction as the issues were previously examined. The court rejected this, noting the absence of examination of the specific issues during the original assessment.
Conclusions: The court concluded that the reopening under Section 148 was valid and within jurisdiction.

Issue 2: Procedural Compliance and Approval under Section 151

Relevant Legal Framework and Precedents: Section 151 requires approval for reopening assessments, ensuring oversight and due diligence.
Court's Interpretation and Reasoning: The court examined the approval memo and found that it indicated a consideration of the material and information available, contrary to the petitioner's claim of lack of application of mind.
Key Evidence and Findings: The approval memo contained remarks indicating that the authority had reviewed the relevant materials and given informed approval.
Application of Law to Facts: The court found that the procedural requirements were met, and the approval was not merely a perfunctory exercise.
Treatment of Competing Arguments: The petitioner's claim of lack of application of mind was rejected based on the detailed remarks in the approval memo.
Conclusions: The court held that the approval under Section 151 was valid and complied with the necessary procedural requirements.

Issue 3: Applicability of Section 153C

Relevant Legal Framework and Precedents: Section 153C pertains to assessments related to search and seizure cases.
Court's Interpretation and Reasoning: The court noted that the information prompting the reopening was not solely related to the search but also included credit card transactions, thus not limiting the applicability to Section 153C.
Key Evidence and Findings: The information involved both alleged cash receipts and credit card transactions, broadening the scope beyond a mere search-related issue.
Application of Law to Facts: The court determined that Section 148 was appropriately applied given the broader scope of information.
Treatment of Competing Arguments: The petitioner's argument for applying Section 153C was rejected as the reopening was based on additional information not limited to the search.
Conclusions: The court concluded that Section 148 was applicable and the use of Section 153C was not warranted in this case.

Issue 4: Adequacy of Addressing Objections

Relevant Legal Framework and Precedents: The process of addressing objections is part of ensuring fair procedure in reassessment cases.
Court's Interpretation and Reasoning: The court noted that the petitioner did not raise certain arguments in the original objections, which were primarily on the merits of the case.
Key Evidence and Findings: The objections letter did not contain the arguments raised during the hearing, leading the court to limit its consideration to the objections originally raised.
Application of Law to Facts: The court applied the principle that new grounds not previously objected to cannot be raised at this stage.
Treatment of Competing Arguments: The petitioner's attempt to introduce new arguments was dismissed, with the court allowing for these to be raised in future proceedings if permitted by law.
Conclusions: The court held that the objections were adequately addressed based on what was originally submitted.

3. SIGNIFICANT HOLDINGS

The court held that the reopening of the assessment under Section 148 was valid, emphasizing that "the reopening is based on the information in accordance with the Risk Management Strategy Formulated by the CBDT."
The court found that the approval under Section 151 was given with due application of mind, noting that "the approval records the perusal of the draft order submitted by the assessing officer, material available on record, consideration of the same and the information as per Risk Management Strategy."
The court dismissed the petition, allowing the petitioner to raise issues in future reassessment or appellate proceedings, stating, "We have only expressed a prima facie view to decide whether to exercise our jurisdiction under Article 226 of the Constitution of India without considering the merits of the matter because such merits need to be examined by the assessing officer in the first instance."

Overall, the court dismissed the petition, finding no grounds for interference in the impugned proceedings and emphasizing the procedural correctness and jurisdictional validity of the reopening under Section 148.

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