The Reopening of assessment is an entirely independent and vastly different jurisdiction and cannot be confused with the revisional powers of the higher authority – Bombay High Court

The Bombay High Court in its recent judgement in the case of Saurabh Suryakant Mehta WRIT PETITION NO.3495 OF 2018 stated that “the reopening of assessment is an entirely independent and vastly different jurisdiction and cannot be confused with the revisional powers of the higher authority.” 

Facts of the Case: 

1. The petitioner is an individual and the dealer of iron and steel.
2. For Assessment Year 2011-­12 the petitioner had filed the return of income, which was taken in scrutiny by the Assessing Officer by issuing notice under Section 148 of the Act.
3. He had recorded reasons for issuing the notice which suggested that he had received information from the Sales Tax Department that the assessee had indulged in Havala entries and had not carried out actual trading activities with respect to certain sales.
4. Pursuant to this notice, the Assessing Officer passed an order of assessment under Section 143(3) r/w Section 147 of the Act on 28th March 2016 making additions of mere 2.25% of the total bogus purchase to the assessee’s declared income.
5. In the meantime, the Supreme Court of India held in a certain case that in case of bogus purchases, restricting the addition to a certain percentage goes against the principles of Section 68 and 69C of the Income Tax Act, 1961.
6. On receipt of such judgement, the Assessing Officer reopens the assessee’s case and provides the above as the reason for the reassessment and issued the impugned order.

Discussion:

During the previous assessment proceedings, the Assessing Officer examined the alleged bogus sales of the assessee, taxed 2.25% of the sales, was an error and instead the entire amount should have been added to the assessee’s income.  This would be a mere change of opinion.

Instead, the Act recognises that in case the assessment order is erroneous and prejudicial to the interest of the Revenue, the Commissioner can exercise revisional powers.

Held:

On the basis of the above, the High Court held the following, “This would be a mere change of opinion. The Act recognizes the revisional powers of the Commissioner to be exercised in a case where the assessment order is erroneous and prejudicial to the interest of the Revenue. However, the reopening of assessment is an entirely independent and vastly different jurisdiction and cannot be confused with the revisional powers of the higher authority. Under the circumstances, the impugned notice is quashed. 

To Download the complete order, Saurabh Suryakant Mehta Writ Petition No.3495 OF 2018 (Bombay High Court) dated 17.01.19