2013 (5) TMI 47 - HC - Income Tax

High Court upholds validity of reassessment proceedings under Section 147 of Income Tax Act 1961

HITESH R SHAH Versus INCOME TAX OFFICER 25(2)(1)

The High Court upheld the validity of the reassessment proceedings under Section 147 of the Income Tax Act, 1961. The Court found that the fresh notice ... Notice U/s 148 of the Income Tax Act, 1961 - Escaped assessment U/s 147 - The assessee had not filed his return of income for A.Y. 2006-07 for which the time limit had expired - Has obtained accommodation entries - Held that:- The Assessing Officer stated that further he was in possession of information which suggested that the Petitioner had obtained accommodation entries from one Bhavesh Lakhani, proprietor of Pratik Sales Corporation - The appellate authority specifically referred to the extract from the reasons furnished to the assessee and stated that the Assessing Officer had proceeded on the basis that the assessee had not filed his return of income though he has taxable income. Consequently, the order of the CIT(A) (which in any event has not attained finality) did not bar fresh proceedings under Section 148 - Though the reopening has taken place beyond the period of four years, the reasons which have been indicated to the assessee have a sufficient nexus with the proviso to Section 147 so as to justify the reopening - This is not a case involving a change of opinion since the Assessing Officer has come in possession of material which would indicate that there has been an escapement of income - We do not find any reason to interfere in these proceedings under Article 226 of the Constitution - The Petition shall stand dismissed in favour of Revenue. Issues:1. Legality of notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for A.Y. 2006-07.2. Validity of reassessment proceedings.3. Reopening of assessment based on the same ground as the earlier notice.Analysis:1. The Petitioner challenged the legality of a notice issued under Section 148 of the Income Tax Act, 1961, dated 28 March 2012, seeking to reopen an assessment for A.Y. 2006-07. The initial notice was issued on 24 April 2008, alleging non-filing of the return of income and obtaining accommodation entries. The Assessing Officer determined the total income at Rs.40,11,390/-, which was appealed by the Petitioner. The CIT(A) allowed the appeal, emphasizing that the reassessment proceedings were based on incorrect reasons as the Petitioner had indeed filed the return. The Revenue appealed to the Tribunal, and a fresh notice was issued in 2012 based on similar grounds of accommodation entries and alleged income escapement.2. The CIT(A) canceled the reassessment proceedings due to the incorrect statement by the Assessing Officer, allowing the possibility of initiating reassessment again with proper reasons and adequate material. The Tribunal was yet to decide on the appeal. The Assessing Officer issued a fresh notice in 2012, justifying it based on substantial income escapement due to accommodation entries and false bills. The Petitioner objected to the reopening, arguing against issuing a fresh notice on the same ground. However, the High Court found the objection misconceived as the earlier notice was based on non-filing of the return, whereas the fresh notice was on income escapement due to material possession, justifying the reopening under Section 147.3. The High Court dismissed the Petition, stating that the CIT(A)'s order did not bar fresh proceedings under Section 148. The Court noted that the reasons provided for the reopening had a sufficient nexus with Section 147, indicating an escapement of income based on new material. The Court concluded that there was no interference warranted under Article 226 of the Constitution, upholding the validity of the reassessment proceedings. The Petition was dismissed with no order as to costs.