TMI Blog2018 (5) TMI 1732X X X X Extracts X X X X X X X X Extracts X X X X ..... PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) Petitioner has challenged a notice dated 31st March 2017 issued by the respondent-Assessing Officer seeking to reopen the petitioner s assessment for assessment year 2010-2011. Brief facts of the case are as under : Petitioner is a private limited company and is engaged in the business of dying of cloth on job-work basis. In the AY 2010-2011, the petitioner had filed return of income on 28th March 2011 declaring total income of ₹ 6.92 lacs [rounded off]. Such return was taken in scrutiny. The Assessing Officer passed an order of assessment under Section 143 [3] of the Income-tax Act, 1961 [ the Act for short] on 19th March 2013. To reopen such assessment, impugned notice came to be issued. In order to do so, the Assessing Officer had recorded the following reasons :- Reasons for issuing notice u/s. 148 of the Income Tax Act, 1961 . 1. The assessee has filed return declaring income at ₹ 6,92,580/= on 28.03.2011 and scrutiny assessment was completed under Section 143 [3] at the total income of ₹ 8,47,350/=. 2. Information of accommodation entries received from investigation wing, Kolkata : The DDI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs from the various Kolkata based paper companies to convert its black money into white. Hence, report of Inspector and information received from the Investigation Wing, Kolkata were co-related to each other. Consequently, above investment are not genuine. From the above discussion, it is proved that the assessee did not disclose fully and truly material facts to the Department which is necessary assessment. In the light of above discussion, it is clear that the assessee has concealed income of ₹ 51,15,000/= during the year. Therefore, I have reason to believe that the assessee has concealed income to the extent of ₹ 51,15,000/= which is an escaped assessment within the meaning of section 147 of the Income Tax, 1961. Hence, I am satisfied that it is a fit case for issuing notice under Section 148. The petitioner raised objections to the notice of reopening under a letter dated 18th December 2017. Such objections were however rejected by the Assessing Officer by an Order dated 19th December 2017 whereby the present petition has been filed. Counsel for the petitioner raised the following contentions in support of the petition : [i] The reasons are based on alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation Wing, it was found that the assessee company had received accommodation entires in the form of share capital and share premium from five different companies amounting ₹ 51,15,000/=. He recorded that these Kolkata based companies were paper companies and were not having any business activities. The sole purpose of creating these companies were to provide accommodation entires to the beneficiary parties. It was on the basis of such material, he concluded that the source of investment in the assessee company were unexplained, as investing companies have no creditworthiness to make such investment. Three things immediately emerge from the reasons recorded by the Assessing Officer viz., [i] that the issue whether these investments were genuine or not, and whether investing companies had wherewithal to make investment or not is the central question presently, which was not an issue during the original assessment proceeding. [ii] the question of true and full disclosure and the scrutinized issue in fact in the present case closely overlap and [iii] the present is not a case where the Assessing Officer has acted mechanically without any mental input on his part or acted o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anese exported by them out of India. After due inquiries and investigations, the Customs authorities found that the assessee was systematically undervoicing the value of Manganese as compared with the prevailing market price. The Income Tax Officer on coming to know about the proceedings before the Customs Collector in this respect issued notice for reopening of the assessment. In the reasons that the Assessing Officer relied on the facts as found by the Customs Authorities that the assessee had under-voiced goods during export. Under such circumstances, upholding the validity of the notice for reopening, the Supreme Court held and observed as under: So far as the first condition is concerned, the Income Tax Officer, in his recorded reasons, has relied upon the fact as found by the Customs Authorities that the appellant had under invoiced the goods it exported. It is not doubt correct that the said finding may 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of the High Court. The appeal is, therefore, allowed, the impugned judgment of the High Court is set aside and the Writ Petitions filed by the respondents are dismissed. No order as to costs. 12. In case of Income Tax Officer vs Selected Dalurband Coal Co. Pvt. Ltd.(supra), the assessment was reopened on the basis of the information contained in letter from Chief Mining Officer that the colliery of the assessee had been inspected and there had been under reporting of coal raised. Upholding the validity of re-opening of assessment, the Supreme Court held and observed as under: After hearing the learned counsel for the parties at length, we are of the opinion that we cannot say that the letter aforesaid does not constitute relevant material or that on that basis, the Income Tax Officer could not have reasonably formed the requisite belief. The letter shows that a joint inspection was conducted 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng officer has referred to the subsequent information and adverted to the concept of true and full disclosure of facts. It is also noticeable that there was specific information received from the office of the DIT (INV-V) as regards the transactions entered into by the assessee company with number of concerns which had made accommodation entries and they were not genuine transactions. As we perceive, it is neither a change of opinion nor does it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and sought to be done in a different manner in the proceeding under Section 147 of the Act. The reason to believe has been appropriately understood by the assessing officer and there is material on the basis of which the notice was issued. As has been held in Phool Chand Bajrang Lal (supra), Bombay Pharma Products (supra) and Anant Kumar 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 inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order to ascertain whether the company was indulging in such illegal activities. The manner or method of such discreet inquiry is not revealed and therefore, we are not clear as to how exactly inquiry was made. However, the Assessing Officer seems to be suggesting that the Inspector deputed by him on the basis of unrecorded statements appears to have made such a report. Whether on the basis of unrecorded or even on the basis of statements of unrelated persons which may have been recorded, we have doubt about the efficacy thereof. Proper information at the command of the Assessing Officer can come only through reliable sources. Statements of those who ought to know may be one such source. At any rate, the Assessing Officer cannot bank on unrecorded statements or statements from the sources which can at best be described as relying on rumours or gossips. Had this been the foundational reason we would have been prompted to quash the notice. However, this clearly is separate and severable part of the reasons and at the best can be seen as an over enthusiastic approach on the part of the Assessing officer to buttress an already arrived at conclusion that income chargeable to tax ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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