2016 (3) TMI 971 - HC - Income Tax

Court upholds Income Tax notice under Sec. 148, emphasizing grounds for reassessment. Petitioner granted time to prove loan genuineness.

The court dismissed the petition challenging the notice issued under Section 148 of the Income Tax Act, 1961, as it found the Assessing Officer had ... Reopening of assessment - reason to believe - prima facie view - change of opinion - accommodation entries / name-lending - material to form reasonable belief - objections to reasons for reopening - extraordinary writ jurisdiction under Article 226Reopening of assessment - reason to believe - material to form reasonable belief - Validity of the notice issued under Section 148 reopening assessment for AY 2012-13 on the basis of information about accommodation entries. - HELD THAT: - The Court applied the settled test that at the notice stage the Assessing Officer need not have conclusive proof but must have material enabling a reasonable belief that income chargeable to tax has escaped assessment. The reasons recorded show receipt of definite information and call for materials identifying certain investors as entities controlled by the same group engaged in providing accommodation entries; the Assessing Officer sought and obtained data from the investigation wing and formed a prima facie link between that material and the conclusion that the loans may be name-lending. That material - including the statement attributed to Mr. Praveen Kumar Jain - was held to constitute tangible material sufficient to justify a reasonable belief and thus to support the reopening notice. [Paras 6, 7]The reopening notice for AY 2012-13 is not without jurisdiction and is validly issued on the material before the Assessing Officer.Change of opinion - accommodation entries / name-lending - Whether the reassessment is a mere impermissible change of opinion because the eight loan providers were examined during the original scrutiny assessment. - HELD THAT: - The Court held that where an Assessing Officer obtains fresh material which directly contradicts the assessee's earlier stance, the reopening is not vitiated as a change of opinion. Although the eight lenders had been examined in the original 143(3) proceedings and loan confirmations produced, the subsequent statement of one counter-party (Mr. Praveen Kumar Jain) which prima facie negates the genuineness of those transactions constitutes new tangible material. That contradiction permits the Assessing Officer to form a reasonable belief and reopen the assessment; the Court invoked authorities recognising that reopening prevents an assessee from benefiting from a willful falsehood disclosed originally once that falsity comes to the Revenue's notice. [Paras 8]The reassessment is not barred as a mere change of opinion in the facts of this case.Objections to reasons for reopening - extraordinary writ jurisdiction under Article 226 - Whether the petitioner could rely before the High Court on Exhibit 'O' (material allegedly available earlier) when it was not specifically taken in objections to the reopening reasons. - HELD THAT: - The Court noted that a petitioner seeking relief under Article 226 must act with utmost good faith and that objections not raised before the Assessing Officer in reply to the reasons ordinarily cannot be first raised in writ proceedings, save where the notice is ex facie without jurisdiction. The petition did not show when Exhibit 'O' was received or that it had been pressed in the Assessing Officer's objections; on that basis and having found the notice not ex facie without jurisdiction, the Court declined to entertain that late raised objection and relied on precedent that procedural objections omitted before the AO are generally not permitted to be advanced first in the High Court. [Paras 9, 10]The petitioner cannot rely on Exhibit 'O' raised for the first time in these writ proceedings; no relief under Article 226 is warranted.Final Conclusion: The petition challenging the reopening notice dated 3 February 2015 (reassessment for AY 2012-13) is dismissed; the reopening was founded on tangible material giving the Assessing Officer a reasonable belief of escaped income and the petitioner is not entitled to writ relief, subject to its right to contest genuineness of the loans in the reassessment and appellate proceedings. Issues Involved:1. Jurisdiction of the Assessing Officer to issue the notice under Section 148 of the Income Tax Act, 1961.2. Validity of the reasons for reopening the assessment.3. Allegation of change of opinion by the Assessing Officer.4. Relevance of the statement of Mr. Praveen Kumar Jain in forming the belief that income chargeable to tax had escaped assessment.5. Petitioner's objection to the reopening notice and the subsequent rejection by the Assessing Officer.6. Petitioner's reliance on previous court decisions and documents to challenge the reopening notice.Detailed Analysis:1. Jurisdiction of the Assessing Officer:The petitioner challenged the notice issued under Section 148 of the Income Tax Act, 1961, arguing that it was without jurisdiction. The court emphasized that while considering such a challenge, it must ensure that a settled position in law is not disturbed without justification. The court will interfere if the reopening is based on a change of opinion or if it is done only on suspicion or for investigation purposes.2. Validity of the Reasons for Reopening:The reasons for reopening the assessment were based on information received from the DGIT (Investigation) II, Mumbai, indicating that the petitioner had received loans and advances from entities operated by Mr. Praveen Kumar Jain, who was involved in providing accommodation entries. The court noted that the Assessing Officer had received definite information about the accommodation entries and had formed a reasonable belief that income chargeable to tax had escaped assessment. The court held that at this stage, the Assessing Officer only needed to establish a reasonable belief, not conclusive proof.3. Allegation of Change of Opinion:The petitioner argued that the reopening was a mere change of opinion since the same issues were examined during the original assessment proceedings. The court found that the basis for the reopening notice was the statement of Mr. Praveen Kumar Jain, which prima facie negated the petitioner's stand during the original assessment. The court held that this constituted tangible material for the Assessing Officer to form a reasonable belief that income had escaped assessment.4. Relevance of Mr. Praveen Kumar Jain's Statement:The court considered the statement of Mr. Praveen Kumar Jain as relevant tangible material for the Assessing Officer to form a reasonable belief that income chargeable to tax had escaped assessment. The court distinguished the present case from previous cases cited by the petitioner, noting that the material in the current case was not vague or indefinite.5. Petitioner's Objection and Rejection by the Assessing Officer:The petitioner had filed objections to the reasons recorded in support of the reopening notice, which were rejected by the Assessing Officer. The court noted that the Assessing Officer had relied on the decisions of the Apex Court to justify the reopening notice, emphasizing that the requirement was a reasonable belief, not conclusive evidence.6. Petitioner's Reliance on Previous Court Decisions and Documents:The petitioner relied on various court decisions and a document (Exhibit 'O') to challenge the reopening notice. The court found that the document was not specifically mentioned in the petition and was not part of the objections filed before the Assessing Officer. The court held that new objections could not be raised for the first time before the court unless the notice was ex-facie without jurisdiction.Conclusion:The court dismissed the petition, finding no reason to exercise its extraordinary writ jurisdiction to interfere with the reassessment proceedings. The petitioner was granted the opportunity to establish the genuineness of the loans during the reassessment proceedings and before the appellate authorities. The court also granted the petitioner's request for a continuation of the ad-interim stay for four weeks.