2018 (5) TMI 1387 - HC - Income Tax

Court validates assessment reopening under Income-tax Act, emphasizing reason-to-believe standard.

The court upheld the validity of reopening the assessment under Section 148 of the Income-tax Act, 1961, dismissing the writ petitions. It found that the ... Reopening of assessment - original return filed by the assessee was accepted without scrutiny - Held that:- AO had analyzed the voluminous material collected by the Revenue during the search operations in connection with Venus Group. This material prima facie suggested huge cash transactions in connection with sale of lands against the total declared sale consideration of ₹ 8.21 Crores [rounded off]. The material prima facie suggests that the total cash transactions of ₹ 33.24 Crores had taken place. The Revenue argues that the entires in Summary-sheet and Vouchers carried dates which were deliberately put 10 years backward to disguise and the figures were recorded by deleting two zeroes from the actual to avoid detection and co-relation. We are concerned with re-opening of the assessment that too in a case where the original return filed by the assessee was accepted without scrutiny, the material at the command of the AO is sufficient to permit the process of reopening. As held by the Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Limited [2007 (5) TMI 197 - SUPREME COURT] and Raymond Woolen Mills Limited [1997 (12) TMI 12 - SUPREME COURT] reason to believe cannot be equated with finally established fact that the income chargeable to tax having escaped assessment additions will invariably be made and further, sufficiency of reasons enabling the Assessing Officer to form such a belief would not be gone into. Decided against the assessee. Issues Involved:1. Validity of reopening the assessment under Section 148 of the Income-tax Act, 1961.2. Sufficiency of material for forming a belief that income chargeable to tax has escaped assessment.3. Principle of change of opinion in the context of reopening assessments.Issue-wise Detailed Analysis:1. Validity of Reopening the Assessment under Section 148 of the Income-tax Act, 1961:The petitioner filed a return of income for the Assessment Year 2010-2011, which was accepted without scrutiny under Section 143(1) of the Income-tax Act, 1961. The Assessing Officer issued a notice dated 31st March 2017 to reopen the assessment based on reasons recorded, including findings from a search conducted on the Venus Group. The search revealed unaccounted cash transactions recorded in cash vouchers and day cash books, indicating undisclosed income. The petitioner objected to the reopening, but the objections were rejected, leading to the filing of the petition.2. Sufficiency of Material for Forming a Belief that Income Chargeable to Tax has Escaped Assessment:The Assessing Officer based the reopening on substantial material collected during the search operations on the Venus Group. The documents seized included cash vouchers, daily cash books, and summary sheets, which indicated unaccounted cash transactions related to land dealings. The material suggested that the petitioner was involved in land transactions with the Venus Group and had made unaccounted investments. The court held that the material at the command of the Assessing Officer was sufficient to permit the process of reopening, emphasizing that reason to believe does not equate to finally established facts but rather a cause or justification to suppose that income had escaped assessment.3. Principle of Change of Opinion in the Context of Reopening Assessments:The court reiterated that in cases where the return is accepted under Section 143(1) without scrutiny, the principle of change of opinion does not apply as the Assessing Officer had not formed any opinion initially. The court cited the Supreme Court judgments in Assistant Commissioner of Income-Tax v. Rajesh Jhaveri Stock Brokers Private Limited and Deputy Commissioner of Income-Tax & Anr. vs. Zuari Estate Development & Investment Company Limited, which clarified that reopening is permissible even if the original return was accepted without scrutiny, provided there is tangible material to form a reason to believe that income has escaped assessment.Conclusion:The court dismissed the writ petitions, upholding the validity of the reopening of assessments. It concluded that the Assessing Officer had sufficient material to form a reasonable belief that income chargeable to tax had escaped assessment, and the principle of change of opinion did not apply in this context. The court emphasized that the sufficiency or correctness of the material is not to be considered at the stage of reopening but rather whether there was relevant material on which a reasonable person could have formed the requisite belief.