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2024 (3) TMI 737 - BOMBAY HIGH COURTReopening of assessment - non-application of mind by AO - reopening after the expiry of four years - Borrowed satisfaction - Reliance on investigation initiated by Directorate General of Goods and Services Tax (“DG GST”) - as per AO Assessee had made transaction with two concerns [concerns did not have any assets or inventories or were indulging in sales and purchases that appeared to be fraudulent and bogus] - HELD THAT:- Entire basis on which the AO has formed a belief that income chargeable to tax has escaped assessment is that an investigation was initiated by Directorate General of Goods and Services Tax (“DG GST”), Mumbai on M/s. Meher and M/s. Nyles Sales Agencies Pvt. Ltd. (“Nyles”) in the month of September 2019. During the course of investigation it was found both these entities did not have any assets or inventories or were indulging in sales and purchases that appeared to be fraudulent and bogus. Reasons state that on analysis of available bank statements of Nyles it has been noticed that amounts were debited in the bank accounts immediately after credit entries. Assessee company was one of the beneficiary entities who made transaction of Rs. 3,39,00,000/- with Nyles. The fact is Assessee did have financial transactions with Nyles but Assessee had taken a loan from Nyles and not made any payment to Nyles or supplied any goods to Nyles. In the order disposing objections, the AO simply says that Assessee had made transaction with Nyles and that was enough to issue the notice for reassessment. The least that was expected of the AO is, on receipt of information, examine the same in the context of the facts of this case and satisfy himself whether the information received does prima facie lead to a reasonable belief that income chargeable to tax has escaped assessment. If the AO had only bothered to examine the records, he would have certainly found that in the annexure to the Form No. 3CD filed under Rule 6G(2)-statement of particulars required to be furnished under Section 44AB of the Act, Petitioner has disclosed that it had taken from Nyles an amount as loan. Even the PAN number of Nyles is recorded. Even the balance sheet as on 31st March 2015 indicates under the head ‘Long Term Borrowings-Unsecured Loans against Nyles. Therefore, it clearly shows that the AO has acted on the satisfaction of the DG GST, Mumbai that income chargeable to tax has escaped assessment. It must also be borne in mind that a notice has been issued more than four years after the expiry of relevant assessment year and this was a case where assessment under Section 143(3) of the Act has been completed. Therefore, the AO was obliged to examine the information received in the context of the facts on record. If such an exercise were to be done, it is likely that the AO would have come to the conclusion that there was no failure to disclose truly and fully all material facts necessary for assessment. The entire proceedings in this case would also be hit by proviso to Section 147 of the Act which bars any reopening after the expiry of four years where assessment u/s 143(3) of the Act has been completed unless there was failure to truly and fully disclose material facts. The impugned notice is bad in law as it has not been issued by the AO on his satisfaction that there is reason to believe that income chargeable to tax has escaped assessment. Further, there has been total non-application of mind by the AO, the Range Head and the PCIT. Decided in favour of assessee.
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