INCOME TAX ACT, 1961

Section 147

Reassessment - Reason to believe - Scope of -

For the assessment year, 2013-14, the petitioner had submitted their return electronically. However, subsequently, it is said that some survey was conducted as per section 133A of the Income Tax Act. In the course of survey, the respondents found that there were many incriminating materials and documents which were impounded. In the course of scrutiny, the assessing officer (in short, AO) assessed the total income of the petitioner at Rs. 10,71,67,261 as against the returned income of Rs. 5,19,81,710. It is for this reason that notice under section 148 of the Act was served upon the petitioner. Thereafter, the petitioner sought reasons from the respondents in respect of the 'reasons to believe that some income of the assessee has escaped assessment'. The Department later on provided the petitioner with the reasons. The petitioner primarily challenges the order on the ground that notice under section 148 of the Act initiating reassessment is barred by limitation and therefore, proceedings drawn is per se illegal. The proviso to section 147 of the Act clearly provides that no action of reassessment can be initiated after the expiry of four years from the end of the relevant assessment year. There was nothing which has been suppressed by the petitioner at the time of the assessment. There was nothing which the petitioner had not made available to the Department at the time of submission of their return. Moreover, the documents which are said to have been used for the purpose of reassessment of the income were already available with the Department, therefore, it cannot be said that there was failure on the part of the petitioner in making full and true disclosure. Since there was no suppression nor was there any fresh material obtained by Department and entire documents being already in possession of Department, requirement under section 151 was not made out and reassessment proceedings deserved to be held as barred by limitation. Held: The phrase 'reasons to believe' does not mean that the AO should have ascertained the facts by legal evidence. All that is required is that, the AO should prima facie have some material on the basis of which there should be reason to believe of certain incomes chargeable to tax escaping assessment. There need not be any concrete evidence or proof available for coming to a final conclusion. It is only an initiation of proceedings of reassessment where the assessee gets a chance to put forth their defence, explanation and justification which would further be scrutinized by the AO while reaching the final conclusion. One should not lose sight of the fact that the final assessment on the conclusion of proceedings under section 147 of the Act is also an appealable order wherein also the assessee has a right to agitate or challenge the order passed by the AO on a proceeding under section 147 of the Act. In view of the aforesaid provisions of law, if we look into the proceedings under challenge, it would clearly reveal that there were sufficient reasons given by AO, which according to him was 'reason to believe' of an income of more than Rs. 2 crores, which was chargeable to tax had escaped assessment and which had come to notice of Department at a later stage in the course of scrutiny.

Supported by:Jawand Sons v. CIT (Appeals) (2010) 326 ITR 39 (P&H) ; (2010) 195 Taxman 144 (P&H) : 2010 TaxPub(DT) 1017 (P&H-HC), Phool Chand Bajrang Lal v. ITO 1993 4 SCC 77 : (1993) 203 ITR 456 (SC) : 1993 TaxPub(DT) 1453 (SC), ITO v. Selected Dalurband Coal Co. (P) Ltd. (1996) 217 ITR 597 (SC) ; 1997 10 SCC 68 : 1996 TaxPub(DT) 233 (SC), W. P. T. No. 234 of 2018, Precision Engineering v. Asst. CIT (No. 1) (2020) 427 ITR 198 (Chhattisgarh) : 2020 TaxPub(DT) 4021 (Chhattisgarh-HC), W. A. No. 336 of 2019 and the Division Bench on 29-7-2019 and Precision Engineering v. Asst. CIT (No. 2) (2020) 427 ITR 258 (Chhattisgarh) : 2020 TaxPub(DT) 4310 (Chhattisgarh-HC).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2013-14

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