In ITA No. 67 /Rjt/2019 -ITAT- ‘Prima facie belief’ sufficient for initiating proceedings under Section 147 of the Income Tax Act, rules ITAT (Rajkot)
Members Waseem Ahmed (Accountant) & Siddhartha Nautiyal (Judicial) [30-06-2023]

Read Order: Rama Mepa Odedara v. The Income Tax Officer, Ward-2(4)

Chahat Varma

New Delhi, July 7, 2023: The Rajkot bench of the Income Tax Appellate Tribunal has ruled that the initiation of proceedings under Section 147 of the Income Tax Act requires the Assessing Officer to form only a prima facie belief that the income has escaped assessment.

The case involved a challenge by the assessee against the initiation of proceedings under Section 147 of the Income Tax Act.

The bench of Waseem Ahmed (Accountant) and Siddhartha Nautiyal (Judicial) referred to the case of Raymond Woollen Mills Limited v. Income Tax Officer and Others [LQ/SC/1997/1710], wherein the Supreme Court had emphasized that the court's role was to determine whether there was prima facie material on which the Department could reopen the case, and the sufficiency or correctness of the material was not a consideration at that stage.

The bench took note of the CIT (Appeals) observations in the appellate order regarding the fact that the assessee had not filed a return of income, despite substantial cash deposits amounting to Rs. 32,55,500 in the case. The CIT (Appeals) considered this as sufficient grounds for initiating proceedings under Section 147 of the Income Tax Act.

“We find no infirmity in the order of Ld. CIT(Appeals) when he held that proceedings under section 147 of the Act were validly initiated, looking into the facts of the instant case,” held the bench.

Further, partly allowing the appeal of the assessee, the bench recognized the established legal principle that only the profit component of receipts should be subject to taxation. Thus, the bench concluded that 10% of the total deposits would be considered as taxable income and would be taxed in the hands of the assessee.