2023 (6) TMI 1524 - HC - Income Tax

Reopening of tax assessment: production of legible documents supporting reasons to believe, including Settlement Commission order.

Validity of reopening of assessment focused on adequacy and accessibility of documents relied upon to form 'reasons to believe'; HC directed respondent to ... Validity of reopening of assessment - Eligibility of documents supporting reasons to believe - assessee argued as not providing all the documents on which reliance has been placed to form reasons to believe HELD THAT:- Having gone through the Petitions and the documents annexed thereto, we also feel that the grievance raised by Petitioner is not unjustified. The documents are not readable and it is not clear whether the portion which don’t appear on the page, are redacted portion or poor photo copies. Therefore, we dispose the Petitions with the liberty as prayed for, with the following directions:- (i) Respondent No.1 shall provide a legible copy of the documents relied upon for his conclusion that there were reasons to believe tax has escaped assessment including a copy of the order passed by the Settlement Commission which is referred to in the reasons to believe. The portion that does not pertain to Petitioner could be redacted by drawing a dark line over those portions; (ii) Those documents shall be provided to Petitioner within two weeks of receiving a request from Petitioner/ Petitioner’s Advocate/ Chartered Accountant, providing the list of documents required. Issues: (i) Whether, before reopening assessment under Section 147 of the Income-tax Act, 1961, the Assessing Officer must provide legible copies of the documents relied upon to form reasons to believe and permit the assessee an opportunity to file submissions and receive personal hearing.Analysis: The petition challenged the adequacy and legibility of documents said to constitute reasons to believe that income had escaped assessment for the relevant assessment years. The material filed was not clearly legible and it was unclear whether missing portions were redactions or poor photocopies. The procedural fairness of a reopening under Section 147 is examined in the context of whether the assessee has been provided the materials on which the reasons to believe are founded, and whether opportunity is given to respond before a reasoned assessment order is passed. The remedial measures directed include provision of legible copies (with permissible redaction), a mechanism for the assessee to request specific documents, an obligation to disclose any additional material intended to be relied upon, a timeframe for the assessee to file further submissions, provision of personal hearing with advance notice, disclosure of judgments intended to be relied upon at hearing, and requirement of a reasoned assessment order addressing submissions.Conclusion: The relief directing provision of legible copies of documents relied upon for reasons to believe, allowing the assessee time to make further submissions, granting personal hearing with advance notice, requiring disclosure of any additional material and judgments to be relied upon, and directing that a reasoned assessment order be passed within specified timelines is granted in favour of the assessee.