Notice U/s 147, Income Tax

[Saurav Dugar]

Please answer the Query with Case law if any

X pvt ltd purchase from Mr. Y.Search & Seizure was Carried out on Mr. Y.A statement U/s 131(1) of Mr.Y was recorded wherein he had admitted that he has engaged in providing accommodation entries through his bougus Concern. X pvt ltd is also one of the beneficiaries assesed by Department.AO has Reason to believe that X pvt ltd has received bogus enteries from Mr.Y and has escaped assessement u/s 147.

My query wether the case was fit for re-opening u/s 147 base on search carried on third party from that A.O has Reason to believe that X pvt ltd has Escaped income is A.O tenable to open a case U/s 147. if not please provide remedy for that with supporting Case law..Thank U..

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[ombir panwar]

Notice for assessment or reassessment U/S 148 of the Income Tax Act, 1961The power of assessment or reassessment of any income chargeable to tax that have escaped assessment has been provided under section 147 r w s 148 of Income Tax Act of 1961. If the assessing officer has the reason to believe that any income chargeable to tax has escaped assessment then the assessing officer may subject to the provisions of section 147 to 153 assess or reassess such income.Before issuing any notice U/S 148 the assessing officer must have reason to believe that any income chargeable to tax has escaped assessment. Reason to believe can not be a reason to suspect merely. There must be a direct nexus between the material coming to the notice of the assessing officer and the formation of the belief that there has been escapement of income of the assessee from assessment in a particular year. The assessing officer must record reasons in writing before issuing notice u/s 148.To constitute a valid reason to believe there must be some new material coming into light with the assessing officer, merely a change of opinion cannot constitute a reason to believe. If the assessee has disclosed basic and all the true facts during the course of assessment and the assessment is completed. Later on notice u/s 148 can not be issued merely because there is another inference possible from the same documents and the facts placed before the assessing officer during the course of assessment.But if the assessee has suppressed some relevant facts which leads to concealment of income and later those facts come before the assessing officer the notice u/s 147/48 can be issued validly.Section 151(1) provides that in a case where an assessment under sub-section (3) of section 143 or 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice] :Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.In a case other than a case falling under sub-section (1) of section 151, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. Section 149 provides that notice u/s 148 can be issued within 4 years from the end of relevant assessment year if the income escaped does not exceed one lac Rs. If the income escaped is Rs. one lac or more the notice u/s 148 can be issued within 6 years from the end of relevant assessment year subject to the provisions of section 151.Further first proviso to section 147 provides that if the assessment has been completed u/s 143(3) no action can be taken u/s 147 after the expiry of 4 years from the end of relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or  section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.when a notice u/s 148 is received the assessee is asked to file a return of the relevant assessment year. After filling the return the assessee should ask for the copy of reasons recorded for issue of notice u/s 148 and can file objection to the issuance of notice. The assessee should ask specifically assessing officer to pass a speaking order by disposing off the objections giving reference of the Judgment of Honorable Supreme Court in GKN Driveshafts (India) Ltd vs ITO (2003) 259 ITR 19 (SC) = 2002 (11) TMI 7 - SUPREME Court. The objections should be filled giving reasons for challenging the legality of the notice u/s 148. the assessee can also file writ petition before the respective High court challenging the legality of the notice u/s 148 before the assessment is completed.Even if the assessment order has been passed and the matter is in appeal the assessee can still file writ petition in the high court challenging the legality of notice u/s 148 . if above procedure is not followed.