Income Tax re-assessment proceeding can be initiated if Bogus Purchase Bills are Revealed: Chattisgarh HC

Facts of case in brief are that petitioner submitted his return declaring his total income. His case was selected for compulsory scrutiny based on information received regarding three suspicious transaction reports. Upon examination, it revealed that petitioner obtained bogus purchase bills.

Mr. Ankit Singhal, learned counsel for petitioners in above writ petitions would submit that respondent Department had issued notice under Section 148 of the Act of 1961 without there being any reason to believe in terms of Section 147 of the Act of 1961 that income of assessees has escaped assessment.

Court Order:

11. I have heard learned counsel for the parties and perused the documents placed on record by respective parties.

12. So far as submission of learned counsel for petitioners that there was no proper sanction/approval on the date of issuance of notice under Section 148 of the Act of 1961 is concerned, provision under Section 151 of the Act of 1961 provides for “sanction for issuance of notice”. Authority prescribed for grant of sanction/approval within four years of relevant assessment year is the ‘Joint Commissioner of Income Tax’. Under Section 151 (2) of the Act of 1961 the Joint Commissioner is required to record his satisfaction on the reasons recorded by Assessing Officer. Respondents along with their additional reply have placed on record copy of screen shot of ITBA web portal in which there is mention of ‘print approval’ against name of respective petitioner with DIN number showing status to be generated with an option to view attachments. From the screen shot placed on record by respondents along with their additional return, accord of sanction/approval with DIN number of authority showing status to be generated on 31.3.2021, prima facie it cannot be said that there was no sanction/approval for issuance of notice under Section 148 of the Act of 1961. Along with additional return respondents have further placed on record approval/sanction granted under Section 151 dated 31.3.2021 which contains similar DIN Number as is mentioned in screen shot of ITBA web portal placed on record. Petitioners have also annexed approval/sanction granted under Section 151 of the Act of 1961 as Annexure P-6 to writ petition. DIN Number is mentioned in Annexure P-6. Nothing has been brought on record by petitioners to show that any objection was raised by them to the effect that DIN number is incorrect or it was not generated on 31.3.2021, except raising objection before this Court with respect to manner in which sanction/ approval is granted, as is appearing in sanction order. In view of aforementioned facts of case, submission of learned counsel for petitioners that notice under Section 148 of the Act of 1961 is issued without there being any sanction/approval from the competent authority is not sustainable and it is hereby repelled.

13. Ruling of the Bombay High Court in Svitzer Hazira’s case (supra) on which heavy reliance is placed by learned counsel for petitioners is of no help to petitioners being based on different facts. In that case, time of issuance of notice as also time of granting sanction is specifically mentioned in the document. Considering both the documents, the Court held that notice under Section 148 of the Act of 1961 was issued prior to grant of sanction/approval by competent authority. Time mentioned in sanction / approval is 15 minutes after the time of issuance of notice under Section 148 of the Act of 1961. In these circumstances, Division Bench of Bombay High Court has passed the order.

14. Another submission of learned counsel for petitioners is that there was no proper application of mind by authority granting approval/sanction. Section 151 of the Act of 1961 deals with sanction for issue of notice. Sub-section (2) of Section 151 requires that the authority granting sanction/approval must be satisfied on the reasons recorded by Assessing Officer that it is a fit case for issuance of such notice. In case at hand, on the basis of analysis of information collected/received and findings thereon, the Assessing Officer elaborately recorded reasons to believe in Annexure-A that income of petitioners escaped assessment and sought permission to proceed under Section 148 of the Act of 1961. Based on reasons to believe recorded by Assessing Officer in Annexure-A, the approving authority granted approval under Section 151 of the Act of 1961. At this stage, this Court is to consider whether notices under Section 148 of the Act of 1961 issued to petitioners are after following the procedure prescribed under the law or not. In the facts of the case, I do not find any substance in submission of learned counsel for petitioners that sanction/approval under Section 151 of the Act of 1961 is bad in law and it is hereby repelled.

15. The judgment in case of S. Goyanka Lime & Chemicals Ltd. (supra) relied upon by learned counsel for petitioners is concerned, in that case petitioner therein submitted objection which was rejected. Final assessment order under Section 143 (3) of the Act of 1961 was passed. Assessee aggrieved by assessment order filed appeal. Appellate authority considering entire record and material has held that the authority accorded sanction not applied his mind and it was done in mechanical manner. In case at hand that stage is still to come and petitioners will have the opportunity to raise grounds before appellate authority. Satisfaction recorded by sanctioning/ approving authority is to be considered based on facts of each case. In this proceeding where challenge is to the issuance of notice under Section 148 of the Act of 1961, sufficiency or correctness of material for reopening of assessment will not be the consideration. In the opinion of this Court the word ‘fit case’ mentioned in ‘sanction order / approval under Section 151 of the Act of 1961′ is to be tested along with the reasons’ recorded by the Assessing Officer and records of the proceedings.

16. Coming to next submission of learned counsel for petitioners that there was no tangible material available for re-opening of assessment. Perusal of reasons assigned prima facie shows that Assessing Officer based on information of suspicious transactions report from the Income Tax Officer (Investigation) has verified transactions. Notice under Section131A of the Act of 1961 was also issued and statements were recorded including of one Sushil Kumar Maurya. Based on statements, Assessing Officer recorded that petitioners obtained bogus purchase bills during relevant period. Hon’ble Supreme Court in case of M/s Phoolchand Bajrang Lal vs. Income Tax Officer reported in (1993) 4 SCC 77 has observed that Assessing Officer can start re-assessment proceeding when fresh facts come to light which were not previously disclosed. Relevant part of judgment is quoted below for ready reference:-

“From a combined review of the judgements of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under Section 147 (a) read with Section 148 of the Income Tax 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which where not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief..”

17. In case of Raymond Wollen Mills Ltd. vs. ITO Centre Excise XI, Range Bombay & ors reported in (2008) 14 SCC 218 Hon’ble Supreme Court while considering as to sufficiency of reasons to believe at the stage of issuance of notice under Section 148 of the Act of 1961 has held thus:-

“3. In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs.”

18. Hon’ble Supreme Court in above rulings has held that at the stage of issuance of notice for re-opening of assessment, the Court is only require to see whether there is prima facie material available on the basis of which department can reopen case and not sufficiency or correctness of material to be considered. Petitioners are having opportunity to reply to notice under Section 148 of the Act of 1961, participate in proceedings and raise all grounds available to them in accordance with law. At this stage, this Court is only required to see whether there is prima facie material before the Assessing Officer to initiate proceedings and other requirements under the law, pre- condition i.e. of taking approval/sanction under Section 151 of the Act of 1961, before issuance of notice under Section 148 of the Act of 1961 is followed or not.

19. Next submission of learned counsel for petitioners is that approval/sanction granted under Section 151 of the Act of 1961 has not been digitally signed and dated. In rebuttal, submission of learned counsel for respondents is that as per provisions of Section 282-A of the Act of 1961, mention of name of competent authority sanction/approval is sufficient. Relevant portion of Section 282A of the Act of 1961 is extracted below for ready reference:-

“282A.Authentication of notices and other documents.—(1) Where this Act requires a notice or other document to be issued by any income-tax authority, such notice or other document shall be signed and issued in paper form or communicated in electronic form by that authority in accordance with such procedure as may be prescribed.

(2) Every notice or other document to be issued, served or given for the purposes of this Act by any income-tax authority, shall be deemed to be authenticated if the name and office of a designated income-tax authority is printed, stamped or otherwise written thereon.

(3) For the purposes of this section, a designated income-tax authority shall mean any income-tax authority authorised by the Board to issue, serve or give such notice or other document after authentication in the manner as provided in sub- section (2).”

20. Perusal of Section 282-A of the Act of 1961 would show that this provision is brought into by way of amendment for the purpose of authentication of notice and other documents. Sub-section (2) of Section 282-A of the Act of 1961 envisages that every notice or other document to be issued, served or given for the purpose of this Act by any Income Tax authority shall be deemed to be authenticated if name and office of designated income tax authority is printed/stamped or otherwise written thereon. In view of specific provision under the Act of 1961, the document i.e. sanction/approval under Section 151 of the Act of 1961 issued by Competent Authority in case of petitioners will be deemed to be an authenticated document. In the ‘Note’ appended at the bottom of sanction/approval under Section 151 of the Act of 1961, it is mentioned that “if digitally signed”, the date of signature may be taken as date of document. Further submission of learned counsel for respondents in this regard is that approval is an inter-departmental correspondence; notices issued to petitioners are digitally signed by Assessing Officer.

Hence, in view of aforementioned provision of law as also submission of learned counsel for respondents based on the Notification No.4/2017 dated 03.04.2017 documents granting sanction/approval under Section 151 of the Act of 1961 cannot be said to be an unauthenticated document.

21. For the foregoing discussions, I do not find present to be a fit case to interfere with proceedings of re-assessment initiated by respondent Department against petitioners upon issuance of notice under Section 148 of the Act of 1961.