INCOME TAX ACT, 1961

Section 147 Section 143(3)

Reassessment - Validity - Non-disclosure of having bank account in foreign country - Reason to believe

Assessee, an elderly lady, now in her late eighties. The income-tax return filed by the assessee, in the meantime, was not subjected to any scrutiny at any stage. The assessment thus reached finality as such. On 31-10-2014, however, this assessment was reopened by issuance of notice under section 148. The reasons recorded, for so reopening of the assessment were that Information had been received in respect of her from the office of DIT (Inv.), Bangalore.' The information pertains to her having a bank account with HSBC Bank, Geneva. From the said bank statement, it was seen that she was having a peak balance of USD 3,97,38,122 in the said account during the period 2005-06. The records of this office show that this amount has not been considered by her in her return of income and this income, therefore, has escaped assessment. AO had reason to believe that the income to the extent of at least USD 3,97,38,122 had escaped assessment within the meaning of para (d) to the Explanation 2 below section 147. It was submitted by the assessee that assessee had not maintained any bank account with HSBC Bank in Geneva, hence information you have got was completely erroneous. The assessee was not the owner of the said bank account, hence there was no reason why the above case should be re-opened under section 148. Further, the residential status of the assessee during the assessment year was non-resident as defined in section 6(1). These objections, however, did not impress the AO. He rejected the objections taken by the assessee and proceeded to frame the assessment under section 143(3) read with section 147. CIT(A) upheld the validity of reassessment proceedings and declined to interfere in the matter. Held: The question was: whether the AO had reasons to believe income escaping the assessment, or not. It is also important to bear in mind the fact that at the stage of issuance of notice, the AO was to only form a prima facie view. The income-tax return filed by the assessee, which was available at the time of recording the reasons for reopening the assessment, did not show the status of non-resident. The recording of reasons cannot thus be faulted with. The present case was not a case in which some general and vague information was received about the assessee, which may or may not lead to an income escaping assessment in the hands of the assessee, and which was thus required to be examined on merits, but of a very specific cogent information regarding a bank account, with complete details that was good enough for holding at least the prima facie view that income had escaped in the assessment in the hands of the assessee. Whether the assessee was a resident in India in this year or not, the AO would have been perfectly justified in holding the 'prima facie' view that, de hors her new acquired non-resident status, the peak amount of US $ 3,97,38,122 'not being considered in her income tax return' shows tha'income has escaped assessment' in the hands of the assessee. Since the assessee did not disclose the status of 'non-resident in the income-tax return filed 'by the assessee anyway, and the reasons recorded for reopening the assessment can only be on the basis of material on record or the information coming in the possession of the AO which indicated that the assessee was a 'resident' in the relevant previous year, this aspect of the matter was wholly the sole and decisive factor leading to conclusion about correctness of the reasons recorded for reopening the assessment. The correctness of reopening of assessment, on the facts of this case and in the light of settled legal position, could not be faulted with. The action of the authorities below on this point was confirmed and interference in the matter was declined.

Relied:Multi Commodity Exchange of India Ltd v. DCIT ((2018) 91 Taxmann.com 265 (Bom) : 2018 TaxPub(DT) 1226 (Bom-HC)) [SLP (2019) 101 Taxmann.com 13 (SC) : 2018 TaxPub(DT) 8119 (SC)], Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 161 Taxman 316 (SC) : (2007) 291 ITR 500 (SC) : 2007 TaxPub(DT) 1257 (SC) and Multiscreen Media (P) Ltd v. CIT ((2010) 324 ITR 54 (Bom) : 2010 TaxPub(DT) 1542 (Bom-HC).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2006-07

INCOME TAX ACT, 1961

Section 5(2) Section 9

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