INCOME TAX ACT, 1961

Section 148

Reassessment - Notice under section 148 - Validity - Reopening based on investigation report -- Assessee pleaded no tangible material found so as to reopen assessment

Search assessment was finalized under section 143(3) read with section 153A. Thereafter, survey action under section 133A was conducted by Investigating Wing, in case of Bijal Ashok Shah, Proprietor of M/s. Swastik Corporation. During the coirse of survey statement of Bijal Ashok Shah was recorded on oath wherein he admitted that he was engaged in the business of providing accommodation entries to the beneficiaries in lieu of commission. Bijal Ashok Shah also disclosed modus operandi employed by him to provide the entries to the beneficiaries. Bijal Ashok Shah, in his statement, also named assessee as one of the recipients of accommodation entries. Accordingly, AO issued notice under section 148 so as to reopen assessment. Assessee challenged the notice by way of civil application contending that reopening was beyond a period of four years and there was no failure on part of assessee to fully and truly disclose its income. The statement of Shri Ashok Shah which was sought to be relied upon could be said to be of a tainted person and did not constitute tangible material so as to arrive at the conclusion that income in the hands of assessee had escaped assessment. And reopening was nothing but a roving or a fishing inquiry. Held: All the facts were not before AO at the time of finalization of search assessment. It is a settled position of law that adequacy of the reasons provided by AO fall outside the review powers and remains within the domain of AO at the stage of proceedings where only a preliminary finding under section 147/148 has been made. At the stage of the validity of the notice under section 148/147 inquiry that was required was only to see whether there were reasonable grounds for AO to believe, and not whether omission/failure and escapement of income was established. Having regard to the materials on record it could not be said that there was a total non-application of mind on part of AO while recording reasons for reopening of assessment. It also could not be said that his conclusion was merely based on the observations and information received from Investigation Wing. AO could be said to have applied his mind to the same. AO could not be said to have merely concluded without verifying the facts that it was the case of reopening of assessment. There was no merit in the vociferous submission of the assessee that the contents of reasons recorded by AO for reopening of assessment were merely an introduction about the investigations conducted by Investigation Wing, the modus operandi of the entry provided, the summing up of inquiry of the Investigation Wing, the information received from Investigation Wing, etc. The case was not one where it could be argued that AO on absolutely vague or unspecific information, initiated proceedings of reassessment witout taking the pains to form his own belief in respect of such materials. Therefore, writ application was rejected.

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