TMI Blog2018 (7) TMI 1558X X X X Extracts X X X X X X X X Extracts X X X X ..... n the reasons recorded by the Assessing Officer, he was satisfied that it was a fit case for reopening the assessment under section 147 of the Act. Thus, the sanction for reassessment was granted on 31. 03. 2017 i. e. the date on which such notice was issued. The contention with respect to the borrowed satisfaction and fishing inquiry overlap - Assessing Officer has not even called for any information or document from the assessee or any other person in relation to the assessee's proposed assessments. He has, by all accounts, merely contacted the Investigation Wing of the Income Tax department at Kolkata and based on the process of shortlisting, has called for information with respect to dealings of such shortlisted companies. If on the basis of the information so collected, no further information, is made available to the Assessing Officer which would enable him to form a belief that income chargeable to tax had escaped assessment, he would not be justified in issuing notice for reopening. Only in cases, where on the basis of such information he could bona fide form a belief that income chargeable to tax had escaped assessment, he could exercise powers for reassessment. Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies based on the investigation conducted by the DDIT(Inv) Unit-3(1), Kolkata: Sr. No Name of the Investor Equity Shares Share Capital Share Premium 1 Achi Fin Mgt Consul Pvt. Ltd. , 6, Hanspukur Lane, 1st Floor, Room No. 106, Kolkata 21000 210000 8190000 2. Adbhut Sales Pvt. Ltd, 11, Anjangarth, Po. Shyamnagar, 24, Parganas, Kolkata 9750 97500 3802500 3. Bakra Pratishthan Limited, Room No. 103, 1st Floor, 7, Mangoelane, Kolkata 13500 135000 5265000 4. Chetna Suppliers Pvt. Ltd. 2, Digamber Jain Temple Road, 1st Floor, Kolkata 23000 230000 8970000 5. Confident Trade Link Pvt. Ltd. , 6, Hanspukur Lane, 1st Floor, Room No. 106, Kolkata 12250 122500 4777 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Floor, Room No. 106, Kolkata 9750 97500 3802500 19. Pratisthan Pvt. Ltd. 6, Hanspukur Lane, 1st Floor, Room No. 106, Kolkata 2500 25000 975000 20. Subhrekha Vyapar Pvt. Ltd. 6, Hanspukur Lane, 1st Floor, Room No. 106, Kolkata 17000 170000 6630000 21. Sumangal Investment Consul. Pvt. Ltd. , 6, Hanspukur Lane, 1st Floor, Room No. 106, Kolkata 5000 50000 1950000 22. Twinkle Merchants Pvt. Ltd. , 6, Hanspukur Lane, 1st Floor, Room No. 106, Kolkata 7500 75000 2925000 Total 304600 2988500 118794000 On verification of the materials available on record and facts and circumstances of the case, it is seen that the assesee has shown to have received share capital/share premium amounting to Rs . 12, 17, 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Investigation Wing of the Income Tax department. Instead, in the present case, the Assessing Officer contacted the Investigation Wing of the Income Tax department, Kolkata seeking out information with respect to the assessee-company. He had no basis for doing so. His action amounted to carrying out fishing inquiries which would not be permissible. 5. On the other hand, learned counsel for the department opposed the petition contending that the sanction was granted by the Commissioner prior to issuance of notice of reopening. In this respect, he relied on the original files of the department concerning the present case. On the basis of such original documents, he also contended that the Assessing Officer had sufficient material at his command to form a belief that income chargeable to tax had escaped assessment. Such information included the details of shell companies whose directors, in various statements recored during search, seizure and similar other actions, had admitted to have provided bogus accommodation entries. Counsel lastly contended that merely because such information was received by the Assessing Officer upon his queries breverseeing made with the Investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest here. 8. The contention with respect to the borrowed satisfaction and fishing inquiry overlap. We would address these contentions commonly. In the recent past, we have come across several cases where the assessing officer has sought to reopen the assessments, the common thread being the revenue's belief that several Surat based companies had received bogus share application or share premium money in disguise from Kolkata based shell companies. It appears that the Investigation Wing of the Income Tax Department at Kolkata had carried out detailed investigation. Stemming from recording of various statements of Directors of different companies pursuant to search and seizure and such other actions, the department claims that in many of these statements such Directors had admitted to be in control of various companies which were mere shell companies and had provided accommodation entries to range of companies. Such investigation reports based on the material collected by the Investigation Wing of the Income Tax department, Kolkata were supplied to the concerned Assessing Officers of beneficiary companies of such accommodation entries who happened to be stationed at Surat. La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s satisfaction that income chargeable to tax had escaped assessment. He recorded that he had reason to believe that share capital and share premium of ₹ 12, 17, 82, 500/- [Rs. 29, 85, 500/-+Rs. 11, 87, 94, 000] had escaped assessment. 10. It can thus be seen that the Assessing Officer had specific and definite information at his command to form a belief that income chargeable to tax had escaped assessment. He found that the assessee had received sizeable amount of share application and share premium monies from various companies which were found to be shell companies and whose Directors' statements were recorded confirming this aspect. This is, therefore, not a case where the Assessing Officer was proceeding on borrowed satisfaction or that it had dearth information at his command to enable him to form a belief that income chargeable to tax had escaped assessment. 11. Counsel for the petitioner, as noted earlier, had raised a somewhat different contention with respect to the exercise undertaken by the Assessing Officer. His view was that in the present case, the Assessing Officer initiated the inquiries at the Investigation Wing of the Income Tax department, Kolkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) and several other decisions, such reason to believe need not necessarily be a firm final decision of the Assessing Officer . 13. In this context, it is also equally well settled that term reason to believe is vitally different from reason to suspect. We may recall, for a brief while, section 147 of the Act contained the expression if the Assessing Officer for the reasons to be recorded by him in writing is of the opinion . However, it was soon realized that this expression is of the opinion would be too wide giving excessive powers to the Assessing Officer to resort to reopening of assessment. This expression was, therefore, quickly changed to bring back the expression if the Assessing Officer has reason to believe . This aspect was highlighted by the Supreme Court in case of Commissioner of Income Tax vs . Kelvinator of India Ltd . reported in 320 ITR 561 . In context of section 147 of the Act post its amendment w. e. f. 01. 04. 1989, the Supreme Court held that Section 147 does not vest arbitrary power in the Assessing Officer and held that even post amendment of 01. 04. 1989 in section 147, concept of change of opinion would apply. It was observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 31st October, 1989, which reads as follows: 7 . 2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe' in Section 147 . -- A number of representations were received against the omission of the words `reason to believe' from Section 147 and their substitution by the `opinion' of the Assessing Officer . It was pointed out that the meaning of the expression, `reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion . To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion' . Other provisions of the new section 147, however, remain the same . 14. This Court on number of occasions has held that reopening of assessment cannot be done for carrying out roving or fishing inquiries. In case of Bakulbhai Patel vs . Income Tax Officer reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly guarded by the courts . Interpreting such statutory provisions courts upon courts have held that an assessment previously framed cannot be reopened on a mere change of opinion . It is stated that power to reopening cannot be equated with review . 16. However, we see no fetters on an Assessing Officer carrying out preliminary inquiries even before issuance of notice of reopening in order to collect information on the basis of which, he may either form a belief that income chargeable to tax had escaped assessment or abandon any further inquiry, upon being satisfied that no such belief could be formed. We find no statutory backing to import the concept of impermissibility of a roving or a fishing inquiry at a stage prior to issuance of notice of reopening. In this context, reference may be made to section 133 of the Act. Chapter XIII of the Act pertains to Income Tax Authorities. Part A of Chapter XIII concerns appointment and control of the Income Tax Authorities, Part B to the Jurisdiction and Part C with their powers. Section 133 is included in Part C and reads as under: 133 . Power to call for information . - The [Assessing] Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistant Director: Provided further that the power in respect of an inquiry, in a case where no proceeding is pending, shall not be exercised by any income-tax authority below the rank of Principal Director or Director or [Principal Commissioner or] Commissioner [other than the Joint Director or Deputy Director or Assistant Director] without the prior approval of the [Principal Director or Director or, as the case may be, the Principal Commissioner or Commissioner: Provided also that for the purposes of an agreement referred to in section 90 or section 90A, an income-tax authority notified under sub-section (2) of section 131 may exercise all the powers conferred under this section, notwithstanding that no proceedings are pending before it or any other income-tax authority . 17. Under this section thus, the Assessing Officer, the Deputy Commissioner of Appeals, Joint Commissioner or the Commissioner (Appeals) for the purposes of the Act could require furnishing of various documents, informations and materials as specified therein. In particular, as per clause (6) of section 133, he may require any person including a banking company or any officer thereof to furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be made use of for checking evasion of tax effectively. The assessing authorities are now empowered to issue such notice calling for general information for the purpose of any enquiry in both cases:(a) where a proceeding is pending and b) where proceedings is not pending against the assessee. However, in the latter case, the assessing authority must obtain the prior approval of the Director or the Commissioner, as the case may be before issuance of such notice. The word enquiry would thus connote a request for information or questions to gather information either W. P. (C)Nos. 10334 OF 2014 connected cases before the initiation of proceedings or during the pendency of proceedings; such information being useful for or relevant to the proceedings under the Act. 19. The Court rejected the challenge making following observations: 28 . Coming to the case in hand, it is only the first stage of the action that is being pursued by the respondent Department, i . e . , as to the collection of data/material, before anybody is indicted . In so far as the said power is exercised to identify the culprits if any, it need not cause any headache to the petitioners . ..... X X X X Extracts X X X X X X X X Extracts X X X X
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