2022 (2) TMI 531 - HC - Income Tax

Court emphasizes substantiated reasons for assessment reopening under Income Tax Act Sections 147 & 148

The Court found that the reasons supplied for reopening the assessment under Sections 147 and 148 of the Income Tax Act were lacking in material and ... Reopening of assessment u/s 147 - reopening has been issued four years after the expiry of the relevant assessment year - HELD THAT:- If the factum of failure to disclose can be culled from the reasons in support of the notice seeking to reopen assessment, that will certainly not be fatal to the assumption of jurisdiction under Sections 147 and 148 of the Act. The Court in Crompton Greaves Ltd. [2014 (12) TMI 936 - BOMBAY HIGH COURT] held “However, if from the reasons, no case of failure to disclose is made out, then certainly the assumption of jurisdiction under Sections 147 and 148 of the Act would be ultra vires, being in excess of the jurisdictional restraints imposed by the first proviso to Section 147 of the Act”. Having seen the reasons, no case of failure to disclose is made out. The factum of failure to disclose cannot be culled from the reasons in support of the notice seeking to reopen the assessment. Therefore, certainly it will be fatal to the assumption of jurisdiction under Sections 147 and 148 of the Act.- Decided in favour of assessee. Issues:1. Reopening of assessment for Assessment Year 2013-2014 based on Section 148 notice.2. Validity of reasons supplied for reopening assessment.3. Objections raised by the petitioner against reopening.4. Rejection of objections by the assessing officer.5. Application of jurisdiction under Sections 147 and 148 of the Income Tax Act.6. Granting of prayer clause (a) based on failure to disclose material facts.7. Lack of material or information in the reasons recorded for reopening.8. Non-application of mind in granting approval under Section 151.Analysis:The petitioner, a stockbroking firm, had its assessment for Assessment Year 2013-2014 completed under Section 143(3) of the Income Tax Act, 1961. Subsequently, the assessment was reopened under Section 147 based on information about large value cash transactions. The petitioner objected to the reopening on various grounds, including the lack of failure to disclose material facts and the vagueness of the reasons provided. The objections were rejected without addressing the factual aspects by the assessing officer, leading to the impugned order dated 13th January 2022.The Court emphasized that for jurisdiction under Sections 147 and 148 to be valid, there must be a clear indication of failure to disclose material facts in the reasons supplied for reopening. In this case, the reasons provided were deemed bereft of material and failed to establish any income escaping assessment. The Court found that the reasons did not support the assumption of jurisdiction under the Act, leading to the granting of the prayer clause (a) based on the failure to disclose material facts necessary for assessment.Furthermore, the Court criticized the lack of substance in the reasons recorded for reopening and the non-application of mind in granting approval under Section 151. The Court urged the respondents' officers to provide better reasons for reopening assessments in the future and emphasized the importance of sincere consideration before granting approval. Ultimately, the petition was disposed of with no order as to costs, highlighting the critical importance of providing substantive reasons and ensuring the proper application of jurisdiction in assessment proceedings.