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2021 (8) TMI 445 - HC - Income TaxReopening of assessment u/s 147 - addition u/s 68 - failure on the part of the assessee to fully and truly disclose all the facts necessary for assessment proceeding under section 143(3) - HELD THAT:- AO has found that the petitioner company has not fully and truly disclosed all material facts necessary for assessment for the reason that the petitioner has concealed the fact that the investor companies are shell companies, to channelize the unaccounted funds into assessee company. As observed by the AO that the assessee has misreported his unaccounted income as capital receipt in the form of share application money to avoid instance of tax - there is clear failure on the part of the assessee to fully and truly disclose all the facts necessary for assessment proceeding under section 143(3) of the Act and that, there is no substance in the contention raised by the learned senior advocate for the petitioner with regard to the change of opinion by the AO. Incorrect facts have been recorded in the reasons recorded, the AO has commented that the identity of a company has to be seen in a holistic sense and mere existence of paper concern with Directors just for namesake, is not establishment of identity. The identity comprises of actual business of the investor and in the case on hand, Shri Narayan Patodia was unable to establish that he had carried out any actual business - a perusal of the record reveals that the investor companies are found to be shell/paper companies. In this regard, the report of the Commission under section 131 of the Act sent to Kolkata as well as physical entry done by the Inspector of this Range established that at the registered address of the company, no business was being carried out and in fact, the address of the company was a residential premises. Thus we are of the considered view that it cannot be said that there is no reason to believe that the income chargeable to tax has escaped assessment because such exercise of reopening has been made only after due inquiries and recording of statements of concerned persons, as referred to herein above, and on having found prima facie material, impugned notice is issued to the petitioner. AO has reason to believe that the investor companies are not in existence and basis for formation of such belief is several inquiries and the investigation by the Investigation Wing, Kolkata and report thereof. The reasons for the formation of the belief by the Assessing Officer in the instant case, appear to have a rational connection with or relevant bearing on the formation of belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. Accordingly, no interference is called for at the hands of this Court in this petition under Article 226 of the Constitution of India. The department has observed that a cash flow cited by the assessee is with regard to unsecured loan, not with regard to share application money. On unsecured loan, the borrower has to pay the interest and the lender receives substantial income from the loan advanced, however, in the case of the assessee, the investor receives no return on his investment and the money given by the investor is justlying unproductively with the assessee. Further, during subsequent investigation, the investor companies found to be the shell/paper companies. Accordingly, in the said facts and circumstances of the case on hand, the decision relied upon by the learned senior advocate for the petitioner would be of no help to petitioner. - Decided against assessee.
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