2020 (1) TMI 786 - HC - Income Tax

Court upholds validity of Income Tax Act reassessment, cites adequate reasons & prior approval. Assessee denied concealing capital gains.

Deepak Gupta Versus Assistant Commissioner Income Tax And 2 Others

Deepak Gupta Versus Assistant Commissioner Income Tax And 2 Others - [2020] 422 ITR 92 (All) Issues Involved:1. Validity of the reassessment proceedings initiated under the Income Tax Act, 1961.2. Adequacy of the 'reasons to believe' recorded for income escapement.3. Compliance with the mandatory prior approval under Section 151 of the I.T. Act, 1961.4. Right of the assessee to receive a copy of the approval under Section 151.5. Refusal to allow cross-examination of witnesses.Issue-wise Detailed Analysis:1. Validity of the Reassessment Proceedings:The petitioner-assessee challenged the reassessment proceedings initiated by the Revenue for the Assessment Year 2012-13 under the relevant provisions of the Income Tax Act, 1961. The petitioner contended that the proceedings were invalid due to the absence of mandatory prior approval from the Principal Commissioner of Income Tax, Noida, as required under Section 151 of the I.T. Act, 1961.2. Adequacy of the 'Reasons to Believe':The petitioner also disputed the 'reasons to believe' recorded by the assessing officer on 22.03.2019, which formed the basis for the reassessment. The assessing officer had detailed the reasons, citing credible information about tax fraud involving M/s DLS Exports Pvt. Ltd. and related beneficiaries, including the petitioner. Statements from various individuals, such as Devesh Upadhyay and Ashok Kumar Kayan, were recorded, revealing the modus operandi of providing bogus share capital/premium and long-term capital gains (LTCG). The Deputy Commissioner of Income Tax, Circle-1, Noida, concluded that the petitioner had concealed capital gains of Rs. 49,10,240, which had escaped assessment.3. Compliance with Section 151 of the I.T. Act, 1961:The petitioner argued that the reassessment proceedings lacked jurisdiction as the mandatory prior approval under Section 151 was not obtained. However, the assessing authority's orders dated 28.10.2019 and 26.11.2019 confirmed that the notice under Section 148 was issued after obtaining the requisite approval from the Principal Commissioner of Income Tax, Noida. The court found no reason to doubt the correctness of these findings, and the argument was rejected.4. Right to Receive a Copy of the Approval:The court addressed the issue of whether the assessee was entitled to receive a copy of the approval under Section 151. The Revenue authority had denied providing the copy, citing it as an internal matter. However, the court held that the approval under Section 151 is a jurisdictional prerequisite, and the assessee is entitled to a copy of the order. The refusal to provide the copy was deemed unsustainable in law.5. Refusal to Allow Cross-Examination:The petitioner requested to cross-examine witnesses, such as Ashok Kumar Kayan, whose statements were part of the material used for reassessment. The Deputy Commissioner of Income Tax, Circle-5(1)(1), Gautam Buddh Nagar, refused the request, stating that the witnesses were not within 200 km of the office and that the Income Tax Act, 1961, did not empower the authority to enforce such cross-examination. The court found no provision compelling a differing view from the authority's decision.Conclusion:The court concluded that the reassessment proceedings were valid and complied with the legal requirements under the I.T. Act, 1961. The 'reasons to believe' were adequately recorded, and the mandatory prior approval under Section 151 was obtained. The petitioner was entitled to a copy of the approval order, and the refusal to provide it was incorrect. The court found no infirmity in the reassessment proceedings and disposed of the writ petition accordingly.