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Sheth Multi Link Pvt Ltd Versus Income Tax Officer - Ward - 4 (1) (3)

2016 (9) TMI 118 - GUJARAT HIGH COURT

Reopening of assessment - Held that:- Reason to strike down the notice for reopening. As noted, the Assessing Officer has recorded specific reasons for forming a belief that income chargeable to tax has escaped assessment. There was material before him suggesting that M/s. Bhumidev Credit Corporation Ltd had given bogus accommodation entries worth ₹ 75 lacs to M/s. Kutch Ginning and Spinning Pvt. Ltd. in form of share application money. This was confirmed by the Director of M/s. Bhumidev C .....

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to form a belief that income chargeable to tax has escaped assessment. Counsel for the petitioner, however, vehemently contended that the material before the Assessing Officer was insufficient. He submitted that unless and until there was a specific reference to the assesseecompany in the statement of the Director, an automatic presumption would not arise that the investment made by the M/s. Bhumidev Credit Corporation Ltd in the petitionercompany was also bogus. However, we must remind ourselv .....

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nourable Mr. Justice Akil Kureshi ) 1. The petitioner has challenged a notice dated 30.03.2016 issued by the respondent-Assessing Officer seeking to reopen the petitioner's assessment for the assessment year 2009-10. 2. Brief facts are as under: The petitioner is a company registered under the Companies Act. For the assessment year 2009-10, the petitioner had filed return of income disclosing income of ₹ 2.94 lacs. Such return was accepted without scrutiny under Section 143(1) of the I .....

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ADIT (Inv.)-I, Rajkot vide letter No. RJT/ADIT(Inv.)-I/Bhoomidev Beneficiaries/2015-16/4799 dated 22/03/2016 whereby it was intimated that during the assessment proceedings of M/s. Kutch Ginning and Spinning P Ltd., Gandhidham it was found that it had received Share Application Money/premium of ₹ 75.00 Lacs from a non-descript company namely- M/s. Bhoomidev Credit Corporation Ltd. which was after conduct of enquiry through DDIT (Inv.), Ahmedabad found to be non-genuine. During enquiry sta .....

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uch accommodation entry in the form of share application money against equivalent cash. I have therefore reason to believe that the income chargeable to tax to the extent not less than ₹ 1,00,000/- has escaped assessment for the AY 2009-10 due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Thus, it is a fit case to be reopened for reassessment of the total income and for issuance of notice u/s. 148 of the I.T.Act, 1961. As th .....

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-discript company, M/s. Bhumidev Credit Corporation Ltd. Upon inquiry, it was found that such company was non-genuine. During such inquiry, statement of Director of M/s. Bhumidev Credit Corporation Ltd. was also recorded, who accepted that the company was indulging in issuance of cheque on receiving equivalent cash amounts. Said M/s. Bhumidev Credit Corporation Ltd had also invested ₹ 10 lacs in the assesseecompany as share application money vide two cheques dated 13.02.2009 and 14.02.2009 .....

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h wider. The question of change of opinion would not apply since in absence of any scrutiny assessment, the Assessing Officer cannot be stated to have formed any opinion. It is equally well settled that at the stage of reopening of the assessment, what is required is the reason to believe that income chargeable to tax has escaped assessment and no proof, that additions will invariably, be made is necessary. These aspects were discussed at length by the Supreme Court in case of Assistant Commissi .....

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t taken away. Between the period from April 1, 1989 to March 31, 1998, the second proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent to the assessee notwithstanding that no tax or refund was due from him after making such adjustments. With effect from April 1, 1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till June 1, 1999. The requirement .....

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ent, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity .....

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tion sent to the assessee under section 143(1)(a) was deemed to be an order for the purposes of section 246 between June 1, 1994, to May 31, 1999, and under section 264 between October 1, 1991, and May 31, 1999. It is to be noted that the expressions intimation and assessment order have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes the computation of income .....

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ssment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D. K. Jain J) in Ap .....

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y ministerial staff. Can it be said that any assessment is done by them? The reply is an emphatic no . The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section .....

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eve that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR 662], for initiation of action under section 147(a) (as the .....

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onclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)] ; Raymond Woollen Mills Ltd. v. ITO [ 1999 (236) ITR 34 (SC)]. 17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood pr .....

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that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a) But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer fo .....

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on 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. 5. The decision in case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd .(supra) was followed in later decision in case of Deputy Commissioner of Income Tax and anr vs. Zuari Estate Development and Investment Company Ltd. reported in 373 ITR 661 from which following observations may be noted: After going through .....

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We find that this aspect is squarely covered by the judgement of this Court in Asst. CIT v. Rajesh Jhaveri Stock Brokers Private Ltd. [2008] (14) SCC 208 in the following manner: … … … … … 6. In case of Inductotherm (India) P. Ltd vs. M.Gopalan, Deputy Commissioner of Income Tax reported in 356 ITR 481, this Court taking note of the decision of Supreme Court in case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. and other judge .....

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