TaxTMI 
TaxTMI 
2016 (7) TMI 929
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....sing Officer. He passed order of assessment under section 143(3) of the Income Tax Act, 1961 ('the Act' for short) on 16.12.2010, making certain additions to the income of the assessee. To reopen such assessment, the Assessing Officer issued the impugned notice. He had recorded following reasons for issuing the notice for reopening. "During the course of search proceedings backup of the computers and server installed at the main factory premise of HVK International Pvt. Ltd. was taken in the hard disks and were seized as per Annexure A50 to A53. From the backup of the PC of Shri Dharmesh R. Lad, accountant of the HVK, a list of Labour Contractor in excel sheet form have been found along with the amount of work done in the period of last several years. The predecided limit of the expenses to be booked in account of each labour contractor in last several years was found in these excel sheets. Wherein the details of limit fixed against the name of each impugned labour contractor and actual amount debited from books of HVK was given. It meant that it was predecided that the expense to be claimed in the case so called labour contractor should not exceed the prefixed limit for t....
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....or reopening, which as can be seen, was issued beyond a period of four years from the end of relevant assessment year. 4. Counsel for the petitioner raised the following contentions. I. There was no failure on part of the assessee to disclose truly and fully all material facts. Notice of reopening beyond a period of four years from the end of relevant assessment year was therefore, issued without authority. II. During the scrutiny assessment, the issue of labour charges was examined by the Assessing Officer in detail and any attempt of reopening on his part on this ground would be based on change of opinion. III. The reasons do not disclose any material on the basis of which, a belief can be formed that income chargeable to tax has escaped assessment. In any case, the Assessing Officer has relied solely on the report of the investigation wing of the department without applying his mind to such material. In short, it is his borrowed satisfaction and not his own satisfaction which has been recorded in the reasons. 5. On the other hand, learned counsel Shri Sudhir Mehta for the department opposed the petition, contending that there is primafacie material suggesting that bogus lab....
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....y premises or were not working at all. During the investigation, almost all the labour contractors, accepted such facts. On the basis of such materials placed by the investigation wing before the Assessing Officer, he recorded that "Hence, from the above explanation it clearly indicates that the claims of the expenses in the case of these bogus labour contractors are not genuine and are also fabricated. Thus, it appears that there are sufficient grounds/reasons to believe that income has escaped." 8. The reasons can be analyzed. In short, the case of the department is that the assessee had claimed bogus labour contract charges paid to these contractors to inflate the expenses and thereby deflate the profit. Reference to the data collected from the backup and server of the computer regarding preset limit of such expenditure, must be seen in light of the entire reasons recorded and cannot be seen in isolation. This first part which has reference to the preset limit for claiming expenditure, which also matched with the actual booking of expenditure for labour charge paid to these contractors, does not, when seen in light of later portion of the reasons recorded suggest that in fact....
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....relies heavily on the material collected by the investigation wing pursuant to the search operation. This material primafacie suggests that labour contractors were paid sizable amount of labour charges without such labour work having been taken by the assessee. Surely, these aspects were not at large before the Assessing Officer during the original assessment proceedings. Any examination by the Assessing Officer of the assessee's claim of labour expenses would be confined to the declarations made by the assessee and the material produced by the assessee in response to the queries raised by the Assessing Officer. When later on, fresh material has come on record, which would primafacie suggest claim of bogus labour charges, examination by the Assessing Officer at the time of scrutiny assessment, would not permit the petitioner to argue that such issue cannot be gone into again by reopening the assessment. The question of true and full disclosure and the issue having been examined during the original assessment proceedings substantially overlap in the present case. 11. Coming to the last contention of the petitioner, we have already perused the reasons recorded, which in our opin....
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....erials, was alongwith report and showcause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the reopening could not and should not have been declared as invalid, on the ground that he proceeded on the showcause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue. 10. In case of Central Provinces Manganese Ore Co. Ltd. vs. Income Tax Officer, Nagpur (supra) the Supreme Court noted that in case of the assesse....
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.... In such background, the Supreme Court observed as under: "12. Ms. Gauri Rastogi, the learned counsel appearing for the respondents, has urged that the letter of Shri Bagai was received by the Income tax Officer on March 26, 1974 and on the very next day, that is, on March 27, 1974, he issued the impugned notice under Section 147(b) of the Act and that he did not have conducted any inquiry or investigation into the information sent by Shri Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri Bagai does not mean that the Income Tax Officer did not apply his mind to the information contained in the said letter of Shri Bagai. On the basis of the said facts and information contained in the said letter, the Income Tax officer, without any further investigation, could have formed the opinion that there was reason to believe that the income of the assessee chargeable to tax had escaped assessment. The High Court, in our opinion, was in error in proceeding on the basis that it could not be said that the Income Tax Officer had in his possession information on the basis of which he could have reasons to believe that income of the assessee ....
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....express any opinion on the merits." 13. In case of AGR Investment Ltd. vs. Additional Commissioner of Income Tax and anr (supra), a Division Bench of Delhi High Court considered the validity of reopening of assessment where the notice was based on information received from Directorate of investigation that the assessee was beneficiary of bogus accommodation entries. The Court while upholding the validity of reopening observed that sufficiency of reason cannot be considered in a writ petition. It was observed as under: "23 The present factual canvas has to be scrutinized on the touchstone of the aforesaid enunciation of law. It is worth noting that the learned counsel for the petitioner has submitted with immense vehemence that the petitioner had entered into correspondence to have the documents but the assessing officer treated them as objections and made a communication. However, on a scrutiny of the order, it is perceivable that the authority has passed the order dealing with the objections in a very careful and studied manner. He has taken note of the fact that transactions involving Rs. 27 lakhs mentioned in the table in Annexure P2 constitute fresh information in respect ....