Reopening on the allegation of non disclosure of illegal mining was quashed as Apex Court did not declare it illegal till the date of its decision
In a recent judgment Hon’ble Supreme Court dismissed the SLP of the Revenue against the order of the High Court quashing reopening notices on the allegation of non disclosure of alleged illegal mining when Apex Court did not declare that the mining activities carried on by the leaseholders till the date of its decision were to be considered as illegal
ABCAUS Case Law Citation:
4739 (2025) (09) abcaus.in SC
Important Case Laws relied upon by Parties:
In the instant case, the Petitioner(s) challenged the notice under Section 148 of the Income Tax Act (the Act) before the Hon’ble High Court on the ground that there is reason to believe that the income of the Petitioner chargeable to tax for relevant Assessment Year had escaped assessment.
The first reason to believe was under invoicing of export wherein it was claimed that some new facts came to the light regarding illegal extraction and export of iron ore and under invoicing and export of iron order extracted in the mines in Goa, in view of Justice M.B. Shah Commission’s Inquiry Report.
The second reason was that the income arising from illegal activities is to be assessed as income from other sources in light of observation of the Apex Court holding that the mining leases in Goa expired on 22.11.2007 and consequently, activities beyond 22.11.2007 were illegal.
The third ground was that the income had escaped assessment on failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment.
The Hon’ble High Court observed that to confer jurisdiction under clause (a) of Section 147 of re-opening assessment beyond the period of four years but within the period of eight years from the end of relevant year, two conditions are required to be fulfilled. The first is that the Income Tax Officer must have reason to believe that the income, profits or gains chargeable to tax had been under-assessed or escaped assessment and the second is that he must have reason to believe that such escapement or under-assessment was occasioned by reason of the assessee’s failure to disclose fully and truly all material facts necessary for the assessment of that year. Both these conditions are conditions precedent to be satisfied.
The Hon’ble High Court further observed that as held by Calcutta High Court the assessee must be aware of those facts which are not disclosed before it, can be said that there is any omission or failure on his part to disclose the same. Also, the Bombay High Court held that the assessee cannot be said to have failed to disclose the facts in question when he had no knowledge of those facts, at the time of filing returns.
The Hon’ble High Court noted that the reason for re-opening given by the Revenue only referred to the information received from the Directorate of Revenue Intelligence (DRI). Thus, the reasons to believe was recorded only on the borrowed information. There was absolutely no reasoning as to how such information is having a live link or considered as a tangible material for the purpose of opening of the Assessment. The Assessing Officer failed to record his own independent opinion and more specifically as to how, under invoicing and payment of agent’s charges affected the actual income shown by the assessee in the original returns. These reason clearly demonstrated that simply the material was borrowed from the Directorate of Revenue Intelligence (DRI), Mumbai authorities and pasted in the reasons without any further reasoning.
The Hon’ble High Court noted that the other reasons basically dealt with the report from Justice M.B. Shah Commission as well as the observations of the Apex Court holding that the mining leases beyond 22.11.2007 in Goa, were illegal.
The Hon’ble High Court observed that the Co-ordinate Bench had held that the third report of Justice M.B. Shah Commission contains merely the expression of its opinion and it lacks finality as well as authoritativeness. Only on the basis of expression of such opinion by the commission, there cannot be any prima facie belief which could be recorded by the Assessing Officer, without any independent material for the purpose of reopening.
The Hon’ble High Court also noted that it was also claimed that the assessee failed to disclose fully and truly the material findings that beyond 22.11.2007, the mining activities were illegally continued. In all these matters, the returns were filed somewhere in the year 2009-10, even though, there was no such decision passed by the Apex Court holding that mining leases beyond 2007 were illegal.
The Hon’ble High Court observed that it is a fact that for making disclosure truly and fully the assessee must have the knowledge of it. It is necessary to note here that the case was decided by the Apex Court in 2014. While deciding the said petition, the Supreme Court observed that the mining leases in Goa expired in the year 1997 and thereafter, renewal could have been granted only for 20 years upto 2007. However, the Apex Court no where expressed that till the date of such decision i.e. 21.04.2014, the mining activities carried on by the leaseholders were considered to be illegal. The illegality of the lease is one thing and carrying out business activities on assuming that such leases exists is another thing.
The Hon’ble High Court further noted that the lease-holders paid royalty, customs duty, other charges to the Government till such activities were stopped. Extraction of Iron Ore including export and payment of remaining charges to the concerned department till 2014 were not declared as illegal. Even this fact, that the mining leases beyond 2007 were not legal, was even not known to the Assessing Officer himself, till such declaration came from the Apex Court in the year 2014.
Accordingly, the Hon’ble High Court held that notices issued for re-opening and assessment in all these matters failed to satisfy win conditions. The Assessing Officer, therefore, could not have exercised jurisdiction for re-opening of assessment which were concluded way back.
Accordingly, the Hon’ble High Court quashed and set aside the impugned reopening notices and the orders passed rejecting the objection.
Not satisfied with the order of the Hon’ble High Court, the Income Tax Department challenged it before the Hon’ble Supreme Court by filing a Special Leave Petition (SLP).
However, the Special Leave Petition (SLP) was dismissed with observations that there were gross delays in filing the Special Leave Petitions which had not been satisfactorily explained. Even otherwise, there was no reason to interfere with the impugned order passed by the High Court. The Special Leave Petition were, therefore, dismissed on the ground of delay as well as merits.
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