Reopening on ground that returned income is lower in comparison to income offered by others is invalid

Rajender Goud Chepur Vs. ITO (Andhra Pradesh And Telangana High Court)

Under section 147(1), the assessing officer is entitled to reopen assessment, if he has reason to believe that any income chargeable to tax has escaped assessment for the assessment year. Two conditions ought to be satisfied for the invocation of the power under section 147. They are: (1) the existence of a reason to believe and (2) the escapement of any income chargeable to tax from assessment. The reason to believe on the part of the assessing officer, should arise out of concrete facts which could at least form the foundation for reopening. Without any concrete facts, reopening cannot be ordered merely on the presumption that the returned income is very shockingly lower than the total gross receipts. Therefore, we are of the considered view that the assessing officers completely erred in reopening assessments on the basis of either a suspicion that there is suppression of income or on the basis that persons in the same line of business are returning a higher income. Without even mentioning the comparables, no initiation of proceedings under section 147 can be made.

FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:-

The petitioners in all these writ petitions are engaged in the business of retail vending of Indian-made foreign liquors purchased by them from the Andhra Pradesh State Beverages Corporation. The petitioners are aggrieved by the reopening of assessment sought to be made by the assessing officers under section 147 of the Income Tax Act, 1961.

2. Heard Mr. K. Vasantkumar, learned counsel for the petitioners and Mr. B. Narasimha Sarma, learned Standing Counsel appearing for the respondents.

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