2016 (5) TMI 289 - HC - Income Tax

Court upholds assessment under Section 147 for escaped income, emphasizing natural justice principles.

The court dismissed the appeal, affirming that the income of the assessee had escaped assessment based on material evidence found during the search ... Reopening of assessment - addition of peak credit as per the loose sheet - Held that:- The loose sheet marked KS-19 is the information on the basis of which the Assessing Officer has framed an opinion that income of the assessee has escaped assessment. Such information formed a reasonable basis for the authorities to believe that income chargeable has escaped assessment. Thus, the order as affirmed by the Tribunal is based upon correct appreciation of law and facts. In view of the findings that the income of the assessee has escaped assessment, therefore, the aforestated substantial questions of law are not involved in the appeal and further we find no merit in the appeal. - Decided against assessee Issues Involved:1. Presumption under Section 132(4A) of the Income-tax Act, 1961.2. Applicability of presumption against the person from whose possession documents are recovered.3. Governing procedures for liability fastened due to search operations versus regular assessment procedures.Detailed Analysis:Issue 1: Presumption under Section 132(4A) of the Income-tax Act, 1961The appellant argued that the presumption under Section 132(4A) can only be raised against the person whose premises were searched and the documents seized. The court found that the assessment was framed under Section 147 of the Act due to the income escaping assessment, not merely on the presumption under Section 132(4A). The court emphasized that the expression 'the presumption u/s 132(4A) is also on the assessee' used by the Assessing Officer was surplusage and did not change the nature of the order. The court referenced the case of Dhakeswari Cotton Mills Ltd. v. Commissioner of Income Tax, West Bengal, which stated that the Income Tax Officer is not bound by technical rules of evidence and can act on material not necessarily accepted in a court of law.Issue 2: Applicability of Presumption Against the Person from Whose Possession Documents are RecoveredThe appellant contended that since the document marked KS-19 was found from his father's premises, no presumption could be raised against him. The court clarified that the assessment was based on the material found during the search, which was relevant for framing an opinion of escaped income. The court dismissed the reliance on P. R. Metrani v. Commissioner of Income-Tax and Miss Lata Mangeshkar cases, as they did not apply to the present case of escaped assessment. The court also mentioned the Union of India v. T. R. Verma case, highlighting that the Evidence Act does not apply to inquiries under the Income-tax Act, and the principles of natural justice were complied with.Issue 3: Governing Procedures for Liability Fastened Due to Search Operations versus Regular Assessment ProceduresThe court noted that the assessment was framed under Section 147 of the Act, which deals with income escaping assessment. The court explained that the loose sheet marked KS-19 provided reasonable grounds for the Assessing Officer to believe that the income had escaped assessment. The court reiterated that the principles of natural justice were followed, as the appellant was given an opportunity to explain the entries but failed to do so. The court concluded that the order passed by the Assessing Officer was based on a correct appreciation of law and facts.Conclusion:The court found no substantial questions of law arising for consideration. The appeal was dismissed, affirming that the income of the assessee had escaped assessment based on the material evidence found during the search operation. The court emphasized that the assessment was framed correctly under Section 147 of the Act, and the principles of natural justice were duly followed.