INCOME TAX ACT, 1961

Section 148

Reassessment - Notice under section 148 - Reason to believe - Assessee pleading borrowed satisfaction on AO's part to information received from DRI and no independent application of mind by AO

Directorate of Revenue Intelligence (DRI) noticed that certain group of persons was involved in diverting imported rags clothes materials in open market in contravention to provisions of Notification Bearing No. 7/2001 issued under Custom Act. Accordingly, DRI seized goods imported by group of 8 persons worth of Rs. 15 lakhs which were diverted in open market. further, Mr.s 'S' a person of the group paid Rs. 10 lakhs to compensate loss of import duty on goods diverted in open market. AO received information from DRI about activity carried on by said group. Accordingly, AO treated impugned group of 8 persons as Association of Persons (AOP) and issued notice under section 148 individually believing that income had escaped assessment as discussed above. Assessee's case was that AO had acquired satisfaction about escapement of income solely on the basis of information received from DRI. As such, AO had not applied his mind independently before issuance of notice under section 148. Therefore, notice issued under section 148 was invalid.Held: At the stage of issuance of notice under section 148, AO has to form a prima facie opinion that income has escaped assessment based on tangible documentary evidence. As there is actual escapement of income. In the instant case, goods were admittedly imported which were cleared without payment of import duty in contravention to the Notification Bearing Number No. 7/2001. Accordingly one of the parties out of such group had paid import duty amounting to Rs. 10 lakhs. Thus, information received from DRI was sufficient enough for AO to acquire satisfaction that income had escaped assessment. Thus in such case, prima facie opinion was based on tangible material which was sufficient to initiate proceedings under section 147 was upheld. In view of above, initiation of proceedings under section 147 was upheld and accordingly, notice issued under section 148 was valid.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2002-03

INCOME TAX ACT, 1961

Section 147

SUBSCRIBE FOR FULL CONTENT