Reopening for verification of purchases from hawala dealer-Supreme Court dismisses SLP of the Department challenging dismissal of appeal by High Court
ABCAUS Case Law Citation:
ABCAUS 2745 (2019) (01) SC
The Hon’ble Supreme Court has dismissed the Special Leave Petition (SLP) of the Income Tax Department against the decision of the High Court holding that notice for reopening issued u/s 148 of the Income Tax Act, 1961 (the Act) for verification of information was invalid.
The assessee was an individual and was a proprietor of a trading firm. For the relevant assessment year, the return filed by the assessee was accepted without scrutiny. Subsequently, on the basis of information received by the VAT Department regarding bogus purchases from Hawala Billers, the Assessing Officer (AO) issued a notice u/s 148 for reopening the case.
The AO stated that the information received needed deep verification. This was followed by the recording of the reason to believe that the income chargeable to tax escaped assessment due to the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.
The Tribunal held that the notice was invalid, against which the Revenue preferred an appeal to the High Court.
The High Court observed that
(a) It is well settled that even in case where the original assessment is made without scrutiny, the requirement of the Assessing Officer forming the belief that income chargeable to tax has escaped assessment, would apply.
(b) It is equally well settled that the notice of reopening can be supported on the basis of reasons recorded by the Assessing Officer which cannot be supplemented.
(c) It is equally well settled that reopening of the assessment not permitted for making a fishing or a roving inquiry.
The High Court noted that the information received from the VAT Authorities contained list of alleged bogus purchases made by various beneficiaries from Hawala dealers. The assessee was one of them. However, according to the AO, this information ‘needed deep verification‘.
The High Court while dismissing the appeal, opined that in plain terms, the AO issued the notice for verification and his later recitation of the mandatory words that he believed that income chargeable to tax had escaped assessment, would not cure this fundamental defect.