Reopening of case us 147 is justified when fresh information has been found during investigation

THE RELEVANT TEXT OF JUDGMENT AS FOLLOWS :

Analysis and reasons

40. To begin with, this Court underscores the difference in the two sets of cases on the aspect of „change of opinion‟. As far as the case of Mr. Nitin Sabharwal is concerned, as already highlighted, his returns for the two AYs in question were accepted as such and intimation was sent to him under Section 143 (1) of the Act. Consequently, there was no occasion for the AO to form any opinion in the first place. Therefore, there was no question of change of opinion in his cases as far as the notice under Section 147/148 of the Act is concerned. His position has been sufficiently explained in the decision in CIT v. Rajesh Jhaveri Stock Brokers (supra) which is followed in DCIT v. Zuari Estate Development & Investment Company. This has also been highlighted by this Court in Indu Lata Rangwala v. CIT (2016)384 ITR 337.

41. As far as the case of Mr. Chetan Sabharwal is concerned, the original assessment orders for both AYs under Section 143(3) of the Act do not give any indication on the AO having formed any opinion whatsoever on the basis of which the reopening has been ordered. In this context the following observations in Income Tax Officer Ward No. 16 (2) v. Techspan India Pvt. Ltd. are relevant.

“18. Before interfering with the proposed reopening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address, itself to a given aspect sought to be examined in the reassessment proceedings.”

42. Consequently, even in the cases of Mr. Chetan Sabharwal in view of the fact that the original assessment orders are totally silent on this aspect of the matter, it cannot be said that the reason to believe constitutes a „change of opinion‟.

43. At this juncture it must be stated that on a perusal of the report of the investigation which was produced before this Court, it appears prima facie that there was sufficient material to justify the reopening of the assessment in both sets of cases. Further, upon reading the reasons to believe as a whole the „live link‟ between the material in the form of the investigation report and the formation of belief that income that has escaped assessment is prima facie The Court hastens to add that this is a prima facie view which is all that is necessary at this stage.

44. The Court in this context would like to refer to the following observations of the Supreme Court in ITO v. Selected Dalurband Coal Limited (supra) where it was considering the effect of a letter of the Chief Mining Officer which emerged after the conclusion of the assessments:

“After hearing the learned Counsel for the parties at length, we are of the opinion that we cannot say that the letter aforesaid does not constitute relevant material or that on that basis, the Income-tax officer could not have reasonably formed the requisite belief. The letter shows that a joint inspection was conducted in the colliery of the respondent on January 9, 1967 by the officers of the Mining Department in the presence of the representatives of the assessee and according to the opinion of officers of the Mining Department; there was under reporting of the raising figure to the extend indicated in the said letter. The report is made by Government Department and that too after conducting a Joint inspection. It gives a reasonably specific estimate of the excessive coal mining said to have been done by the respondent over and above the figure disclosed by it in its returns. Whether the facts stated in the letter  are true or not is not the concern at this stage. It may well be that the assessee may be able to establish that the fact stated in the said letter are not true but that conclusion can be arrived at only after making the necessary enquiry. At the stage of the issuance of the notice, the only question is whether there was relevant material, as stated above, on which a reasonable person could have formed the requisite belief. Since, we are unable to say that the said letter could not have constituted the basis for forming such a belief, it cannot be said that the issuance of notice was invalid. Inasmuch as, as a result of our order, the reassessment proceedings have now to go on we do not and we ought not to express any opinion on merits.”

45. Unlike in other writ petitions where a similar challenge is made to the reopening of assessments by issuing notice under Section 148 of the Act, where the Court invariably directs as an interim measure that the re-assessment proceedings may go on but no final order should be passed during the pendency of the petition, in the present case the Court ordered a total stay of further proceedings pursuant to the impugned notices dated 31^st March 2015. This in effect meant that the re-assessment proceedings before the AO did not progress.

46. With the Court disinclined to interfere at this stage for the reasons explained above, it would be open to the two Petitioners to advance all the arguments made by them in these petitions, except the point that the reopening constitutes a change of opinion, before the AO. This would include the point urged by Mr. Chetan Sabharwal that the reopening is bad in law because the reasons do not expressly state that there was a failure on his part to disclose fully and truly all material facts in relation to his assessment.

47. Consequently, this Court would not like to further dwell on the other points urged before this Court on behalf of the Petitioners or express a view one way or the other on them except to hold that at this stage the Court, prima facie, finds no merit in the contention that there is no live nexus between the material relied upon and the reasons to believe that income has escaped assessment in both sets of cases.

48. The writ petitions are accordingly dismissed. The interim orders are vacated.

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Tags : Judgement, High Court