2004 (7) TMI 33 - HC - Income Tax

Court dismisses appeals challenging Income-tax Act reassessments. Emphasizes need for valid reasons in reopening assessments.

Commissioner of Income-Tax Versus Smt. Sulochana.

The court dismissed the appeals challenging the reassessments for various assessment years under section 147 of the Income-tax Act. It held that the ... Reassessments - reason to believe - 'Whether Tribunal was right in holding that the reassessments were completed by the Assessing Officer without reason to believe that income has escaped assessment and therefore the reassessments are liable to be set aside?' - Assessing Officer relied upon the confession alleged to have been made by the assessee obtained on the date of search to the effect that she had failed to disclose certain income and jewellery at the time of search. However, the Tribunal, without relying upon the confession statement, took cognizance of the explanation offered to that, viz., that the jewellery and precious stones were presented as gift on the occasion of the marriage of the assessee's daughters and the amounts of Rs. 7,000 and Rs. 1,500 per year were the personal drawings and the commission on purchase and sale of semi-precious and precious stones respectively. - Since the issue whether there were materials for the appellant/Revenue to invoke section 147 are sufficient, bona fide, definite, relevant and reliable is purely a matter of fact, finding no substantial question of law, the appeals are dismissed. Issues:Reopening of assessments for various assessment years based on section 147 of the Income-tax Act without sufficient reason to believe that income had escaped assessment.Analysis:The judgment pertains to an appeal against the order of the Income-tax Appellate Tribunal, Madras Bench, regarding the reassessments for the assessment years 1972-73, 1973-74, 1974-75, and 1977-78. The Assessing Officer sought to reopen the original assessments based on a search conducted in 1980. The appellant/Revenue challenged the Tribunal's decision, arguing that the confession made by the assessee during the search supported the reason to believe for reopening the assessments.The Tribunal held that the Assessing Officer failed to establish valid reasons for reopening the assessments. The appellant contended that the sufficiency of material for reopening is not crucial, as long as some material exists. Reference was made to legal precedents, including the case of Phool Chand Bajrang Lal v. ITO, emphasizing the importance of prima facie materials for reopening assessments under section 147 of the Income-tax Act.The judgment highlighted the distinction between reason to believe and reason to suspect. It emphasized that the information forming the basis for reopening assessments must be specific, relevant, and reliable, establishing a rational connection for the reason to believe. The court cited the case of ITO v. Lakhmani Mewal Das, which outlined the necessity of a direct nexus between the material and the belief of income escapement.In this case, the Assessing Officer relied on the confession statement made by the assessee during the search. However, the Tribunal considered the explanation provided by the assessee regarding the undisclosed income and jewelry. Ultimately, the court concluded that the materials for invoking section 147 should be definite, specific, relevant, and reliable. As the issue was factual and no substantial question of law arose, the appeals were dismissed, affirming the Tribunal's decision.