Re Opening of Assessment under Income Tax is not allowable in absence of Valid Satisfaction on Income Escapement: Supreme Court dismisses SLP [Read Order]

The Supreme Court observed that re-opening of assessment under Income Tax is not allowable in the absence of valid satisfaction on income escapement and dismissed the Special Leave Petition ( SLP ).  The SLP arose out of the impugned final judgment and order dated  passed by the High Court Of Gujarat At Ahmedabad

The income Tax Officer filed an SLP against the respondent-assessee, Dhirajlal Gandalal Mehta. The respondent assessee challenged the reopening of the assessment before the High Court. Under the notice under section 148 of the Act, the petitioner uploaded an E-return of income declaring the total income of Rs. 33,911. 

The respondent issued a notice under section 142(1) of the Act and called for certain details to make an assessment.  A reply was filed by the petitioner on 10.6.2019. It appears that by communication the respondent provided reasons for reopening. The petitioner submitted its objections which were rejected by the order of the assessing officer of the same date.

The assessee pointed out that the transactions in question were like partners capital withdrawals. The transactions amounting to Rs. 1,40,00,000/- were debited to the account of Munjal B. Shah. It was stated that payment was received by the petitioner from M/s. Sarthak Enterprises was used to repay the outstanding loan taken by the petitioner from Munjal B. Shah and also for providing a loan to him. 

It was argued that to reopen the assessment made under section 143(3) of the Act, the following conditions have to be satisfied that there must be a tentative or prima facie opinion formed by the assessing officer; that the income has escaped assessment; that the assessing officer finds on prima facie belief based on subjective satisfaction and that the record must reflect that the belief was not mere a suspicion. 

The High Court observed that no satisfaction was recorded by the assessing officer that the income chargeable to tax has escaped assessment and set aside the re-opening of the assessment.

The two-judge bench comprising Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar refused to interfere with the impugned judgment passed by the High Court. The Court dismissed the Special Leave Petition

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