TMI Blog2018 (2) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions. That, on the basis of such materials on record that he formed a belief that the assessee had not made true and full disclosures and the income chargeable to tax as therefore escaped assessment. The reasons thus recorded do not proceed only on the information supplied by the Investigating Wing. The Assessing Officer having applied his mind and processed such information, formed his belief that the income chargeable to tax has escaped assessment. Neither the application of mind, nor the formation of belief that income chargeable to tax has escaped assessment on the basis of information available at the disposal of Assessing Officer, have to be expressed in any rigid format in the reasons recorded. Hence, as these two essential requirements can be gathered from the reasons recored, the notice for reopening cannot fail on such basis The opinion would be formed on the basis of disclosures. When disclosures are found to be prima facie untrue, the opinion formed earlier would not prevent Assessing Officer from examining the issue. In the present case, as noted, Assessing Officer received additional information after the original assessment was over, on the basis of wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee from M/s. East West Finvest India Limited is bogus loan. In view of this fact, as per information available, M/s. East West Finvest India Limited is paper concern, claim of the loan repayment of ₹ 1,49,78,421/= by you to M/s. East West Finvest India Limited in FY 2009-10 is a bogus transaction. As M/s. East West Finvest India Limited is paper concern, all the transactions made by you with M/s. East West Finvest India Limited is sham transactions. In view of the above facts and information and keeping in view that you have intentionally mentioned incorrect details in return of income did not made truthful and full disclosure and this being failure on your part, I have therefore, reason to believe that the transaction of ₹ 11,75,28,421/= made with M/s. East West Finvest India Limited by you is sham transaction, which has escaped assessment, for which your case for A.Y 2010-11 has been reopened under Section 147 of the Income-tax Act. 2.2 The assessee raised objections to the notice of reopening under a communication dated 4th September 2017. Such objections were however rejected by the Assessing Officer by an Order dated 8th September 2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may recall, assessment in the present case was framed after scrutiny, during which time, the advances made by M/s. East West Finvest India Limited to the assessee came up under consideration. The notice has been issued beyond the period of four years from the end of relevant assessment year. The question of change of opinion as well as failure on the part of the assessee to disclose truly and fully all material facts would therefore be relevant. 6. The reasons recored show that the Assessing Officer had received information from the Investigating Wing in connection with advances of ₹ 10.25 Crores [rounded off] received by the assessee from M/s. East West Finvest India Limited during the FY 2009-10 which is relevant to AY 2010-11. Upon verification, it was found that the said M/s. East West Finvest India Limited was an entry operator and had received bogus share application money/premium from paper companies of Kolkata and thereafter advanced loans to certain entities and companies. M/s. East West Finvest India Limited works as an entry operator and earns bogus funds to provide advances to various persons. Out of the loan of ₹ 10.25 Crores received by the assessee fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of the assessment year; [iii] such reasons must be recorded and if the reasons recorded by the Assessing Officer do not disclose satisfaction of these two conditions, reopening notice must fail; [iv] there is no set format in which such reasons must be recorded. It is not the language but the contents of such recorded reasons which assumes importance. In other words, a mere statement that the Assessing Officer had reason to believe that certain income has escaped assessment and such escapement of income was on account of non filing of the return by the assessee or failure on his part of disclose fully and truly all material facts necessary for assessment would not be conclusive. Nor absence of any such statement would be fatal, if on the basis of reasons recorded, it can be culled out that there were sufficient grounds for the Assessing Officer to hold such beliefs.. 7.1 We may also refer to the judgment of Division Bench of this Court in the case of Principal Commissioner of Income-tax, Rajkot v. Gokul Ceramics , reported in [2016] 241 Taxmann.com 341 [Gujarat], wherein, the following observations were made:- 9. It can thus be seen that the entire material colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be binding upon the income tax authorities but it can be a valid reason to believe that the chargeable income has been under assessed. The final outcome of the proceedings is not relevant. What is relevant is the existence of reasons to make the Income Tax Officer believe that there has been under assessment of the assessee's income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income Tax Officer under Section 147(a) of the Act was satisfied. 11. In case of Income Tax Officer vs. Purushottam Das Bangur (Supra) after completion of assessment in case of the assessee, the Assessing Officer received letter from Directorate of Investigation giving detailed particulars collected from Bombay Stock Exchange which revealed earning of share and price of share increased during period in question and quotation appearing at Calcutta Stock Exchange was as a result of manipulated transaction. On the basis of such information, the Assessing Officer issued notice for reopening of the assessment. The question, therefore, arose whether the information contained in the letter of Directorate of Investigation could be said to be defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted in the colliery of the respondent on January 9, 1967, by the officers of the Mining Department in the presence of the representatives of the assessee and according to the opinion of the officers of the Mining Department, there was under reporting of the raising figure to the extent indicated in the said letter. The report is made by a Government Department and that too after conducting a joint inspection. It gives a reasonably specific estimate of the excessive coal mining said to have been done by the respondent over and above the figure disclosed by it in its returns. Whether the facts stated in the letter are true or not is not the concern at this stage. It may be well be that the assessee may be able to establish that the facts stated in the said letter are not true but that conclusion can be arrived at only after making the necessary enquiry. At the stage of the issuance of the notice, the only question is whether there was relevant material, as stated above, on which a reasonable person could have formed the requisite belief. Since we are unable to say that the said letter could not have constituted the basis for forming such a belief, it cannot be said that the issuan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Saharia (supra), the Court, in exercise of jurisdiction under Article 226 of the Constitution of India pertaining to sufficiency of reasons for formation of the belief, cannot interfere. The same is not to be judged at that stage. In SFIL Stock Broking Ltd. (supra), the bench has interfered as it was not discernible whether the assessing officer had applied his mind to the information and independently arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities Co. Pvt. Ltd. (supra), the Division Bench had noted that certain companies were used as conduits but the assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transactions and the assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments were made to the assessee company through the banking cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n drawing our attention to the judgment of this Court in the case of Yogendrakumar Gupta [Supra] in which, in somewhat similar background, the question of change of opinion and failure on the part of the assessee to disclose true and full facts came up for consideration. It is undoubtedly true that every case of reopening may have slightly varying facts, giving slightly different colour shade to each situation, nevertheless, the observations made by the Court in the case of Yogendrakumar Gupta [Supra] need to be noted. It was the case in which the notice for reopening was based on information made available to the Assessing Officer who formed opinion suggesting that the assessee had obtained accommodation entries in the form of loans and advances from one business marketing company, a Calcutta based company. Relevant observations made by the Bench in paras 18, 19 20 read thus- 18. As mentioned hereinabove, we had called for the original file, which had revealed new, valid and tangible information supporting Assessing Officer's opinion received from DCIT, Kolkata, based on the material found during the search by the CBI, where Basant Marketing Pvt. Ltd. is said to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no belief or that the belief is not at all a bona fide one or based on vague, irrelevant and nonspecific information. To that limited extent, the Court may look at the view taken by the Income-tax Officer and can examine whether any material is available on record from which the requisite belief could be formed by the Assessing Officer and whether that material has any rational connection or a live link with the formation of the requisite belief. It is also immaterial that at the time of making original assessment, the Assessing Officer could have found by further inquiry or investigation as to whether the transactions were genuine or not. If on the basis of subsequent valid information, the Assessing Officer forms a reason to believe on satisfying twin conditions prescribed under section 147 of the Act that no full and true disclosure of facts was made by the assessee at the time of original assessment and, therefore, the income chargeable to tax had escaped assessment, his belief and the notice of reassessment based on such belief/ opinion needs no interference. In the present case, since both the necessary conditions have been duly fulfilled, sufficiency of the reasons is not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahmedabad. Further revelation of investigation as could be noticed from the record examined (file) deserves no reflection in this petition. Insistence on the part of the petitioner to provide any further material forming the part of investigation carried out against Dalmias also needs to meet with negation, as the law requires supply of information on which Assessing Officer recorded her satisfaction, without necessitating supply of any specific documents. The proceedings initiated under section 147 of the Act would not be rendered void on nonsupply of such document for which confidentiality is claimed at this stage, following the decision of the Delhi High Court in case of Acorus Unitech Wireless (P.) Ltd. (supra). Assumption of jurisdiction on the part of the Assessing Officer is since based on fresh information, specific and reliable and otherwise sustainable under the law, challenge to reassessment proceedings warrant no interference. 10. Before concluding, we may note that all other observations made are in the context of petitioner's challenge to the notice of reopening. While rejecting the petition, only the question of validity of notice gets concluded. All conten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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