TMI Blog2019 (1) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... ticipate in the reassessment proceedings and to put forth its stand in detail to satisfy the Assessing Officer that no escapement of income has taken place. At this stage, this Court does not find any reason to interfere with the notice as well as with the order passed by the respondents. No case for interference is made out in the matter. - deided against assessee - Writ Petition No. 28177/2018 - - - Dated:- 19-12-2018 - MR S.C. SHARMA AND MR MR VIRENDER SINGH, JJ. For The Petitioner : Shri P.M. Choudhary, learned senior counsel along with Shri Anand Prabhawalkar, learned counsel For The Respondents : Ms. Veena Mandlik, learned counsel ORDER Per : S.C. Sharma, Justice: The petitioner before this Court, which is a company registered under the Companies Act, 1956, has filed this present petition being aggrieved by the notice dated 31.03.2018 and order dated 22.11.2018 passed by the Income Tax Officer 2(2), Indore. 2. The petitioner's contention is that the petitioner/company is a limited company and was earlier known as 'M/s Quality Automation Limited', it was incorporated in the year 1995. In the year 2000, the name of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner in response to the notice under Section 148 of the Income Tax Act, 1961 and the reasons recorded for initiation of proceedings be communicated to the petitioner. 8. The petitioner/company has further stated that in spite of the request to supply the reason for reopening of the assessment, the notice was issued under Section 142 (1) of the Income Tax Act, 1961 and the petitioner/company again wrote a letter on 11.07.2018 to supply the reasons and to keep the proceedings in abeyance. The petitioner has further stated that respondent No.1 finally supplied the reasons recorded by him for issuance of notice under Section 148 of the Income Tax Act, 1961 along with his notice dated 13.07.2018. The petitioner's contention is that the reason, so supplied, reflected that the proceedings have been initiated against the petitioner on the basis of some pre and post search investigation consequent upon a search conducted by the Income Tax Department at the premises of 'M/s Shreeji Polymers (India) Limited' and on the basis of a vague allegation that the petitioner company is a dummy concern of Shri Anand Bangur, who allegedly uses dummy companies for routing his unaccou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year, which can be assessed for the assessment year concerned in the hands of the assessee. The escapement of any income chargeable to tax is thus an essential condition for assumption of jurisdiction for assessing such escaped income and for valid initiation of proceedings for such assessments. 14. It has further been contended that the respondents failed to see that for valid assumption of jurisdiction for making assessment of the escaped income, the condition precedent is existence of reasons and formation of believe about escapement of income from tax and without which no action u/s 147 can be taken nor any notice u/s 148 can be issued. 15. It has further been stated that that the respondents also failed to see that the existence of reason for formation of the requisite belief is thus essential for invoking the provisions of section 147 and the belief required to be formed is about the fact that any income chargeable to tax has escaped assessment of any assessment year, which is required to be assessed in the concerned assessment year. 16. It has further been stated that the respondents also failed to see that the income sought to be assessed u/s 147 as escaped incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hargeable to tax has escaped assessment, in respect of which the proceedings u/s 147 read with section 148 are sought to be initiated is referable to the relevant assessment year in which the income is to be taxed and cannot mean any assessment whatsoever. 22. It has further been contended that the respondents also failed to see that it is not only the existence of reason on the basis of which the belief has to be formed but the reason on the basis of which the belief as contemplated u/s 147 is formed must have rational connection or relevant bearing on the formation of belief i.e. there must be a direct nexus or live link between the material coming into the notice of AO and the formation of belief about the escapement of income. 23. It has further been contended that the existence of material in the shape of reasons on the basis of which the requisite belief is to be formed for purpose of section 147 is also necessary. In the instant case there is neither any material nor any reason on the basis of which the belief about escapement of income from tax in the present assessment year could be formed. 24. It has further been contended that the alleged material in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in (2004) 268 ITR 48 (Gujarat) , Commissioner of Income Tax v/s Foramer France* reported in (2003) 264 ITR 566 (SC) , JSRG Udyog Ltd. v/s Income Tax Officer reported in (2009) 313 ITR 321 (Delhi) , Tiwari Kanhaiya Lal v/s Commissioner of Income Tax reported in (1985) 154 ITR 109 (Rajasthan) , Ghanshyam K. Khabrani v/s Assistant Commissioner of Income Tax Circle-1 reported in (2012) 346 ITR 443 (Bombay) , Commissioner of Income Tax Delhi-IV v/s Gupta Abhushan (P.) Ltd reported in (2009) 312 ITR 166 (Delhi) , SKY View Consultants (P.) Ltd. v/s Income Tax Officer, Ward 23(4) reported in (2017) 397 ITR 673 (Delhi) , Income Tax Officer v/s Lakhamani Mewal Das reported in (1976) 103 ITR 437 (SC) , Ganga Saran Sons (P.) Ltd. v/s Income Tax Officer reported in (1981) 130 ITR 1 (SC) , Amar Jewellers Ltd v/s Deputy Commissioner of Income Tax reported in (2018) 405 ITR 561 (Gujrat) , Ardent Steel Ltd. v/s Assistant Commissioner of Income Tax (Central)-2, Raipur reported in (2018) 405 ITR 422 (Chhatishgarh) , Commissioner of Income Tax, Delhi v/s Kelvinator of India Ltd. reported in (2010) 320 ITR 561 (SC) , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaped assessment within the meaning of Section 147 of the Act, and therefore, he has rightly issued the notice under Section 148 of the Income Tax Act, 1961 and there is no legal requirement to communicate the reason to believe. It is communicated in due course and the same was also done by the department. The respondents have also stated that the petitioner's contention regarding pre and post search investigation are baseless. The department conducted a very detailed and thorough investigation, evidence was gathered, large number of persons were examined, huge amount of hard and soft data were looked into and after investigating hundreds of man-hours, the department has arrived at a conclusion that opportunity to defend himself shall be available to the petitioner during the assessment proceedings, which are taking place. 36. The respondents have also stated that the petitioner has not shown any business activity for the relevant year and has not filed any audited account before the Income Tax Department, at least till the time of initiation of the proceedings under Section 147 of the Income Tax Act, 1961 and has filed only its Income Tax Return. The respondents have als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e escaping assessment. - If the 77[Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year80, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure80 on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.] [ Provided that in a case - ( a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and ( b) subsequently a notice has been served under subsection (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expirty of the time limit for making the assessment, reassessment for recomputatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16-17 but he ahs not cooperated with the department. Hence DDIT (inv)-II, Indore has fetched the details of investments made by these shell companies from the return of income filed by such companies and passed on the information to concerned AOs to take the necessary action in respect of share application/share premium, Investment, Loan Advances introduced/made by these shell companies. 3. On perusal of income tax return for A.Y. 2011-12 it is found that assessee company has shown share capital at ₹ 26,378,500/-. 4. The DDIT (Inv)-II, Indore reported that information scouted out from seized/impounded material in the case of SPIL Group of Ujjain described the facts in respect of M/s Patni Industries Limited as under: 5. The company is having its registered address at 244, Apollo Tower, M.G. Road, Indore 452001. As per ROC data, its directors are Shri Avinash Parashram Mupuskar, Shri Kailash Garg, Smt. Chhaya Parmar and Shri Vinod Agrawal. 6. During the course of action, it was proposed to cover the office premises of M/s Etiam Emedia Ltd and a team was moved with authorization on the above address. The team reported that no office in the name M/s E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) , has dealt with all important judgments on the subject. Paragraphs-9 to 21 of the aforesaid judgment reads as under:- 9. The High Court of Gujarat in Praful Chunilal Patel v. Assistant Commission of Income Tax, [1999] 236 ITR 832 has opined that in terms of the provision contained in Section 147, the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment. The word reason‟ in the phrase reason to believe‟ would mean cause or justification. If the assessing officer has a cause or justification to think or suppose that income has escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words reason to believe‟ cannot mean that the assessing officer should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination he makes and if he likes from any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he had reason to believe that such income had escaped assessment. The justification for his belief is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn as invalid. 11. In Birla VXL Ltd. v. Assistant Commissioner of Income Tax, [1996] 217 ITR 1 (Guj.), a Division Bench of the Gujarat High Court has opined thus: Explanation 2 to Section 147 of the Act, as appended to newly substituted section 147 makes certain provisions, where in certain circumstances, the income is deemed to have escaped assessment giving jurisdiction to the Assessing Officer to act under the said provision. Another requirement which is necessary for assuming jurisdiction is that the Assessing Officer shall record his reasons for issuing notice. This requirement necessarily postulates that before the Assessing Officer is satisfied to act under the aforesaid provisions, he must put in writing as to why in his opinion or why he holds belief that income has escaped assessment. Why for holding such belief must be reflected from the record of reasons made by the Assessing Officer. In a case where Assessing Officer holds the opinion that because of excessive loss or depreciation allowance income has escaped assessment, the reasons recorded by the Assessing Officer must disclose that by what process of reasoning he holds such a belief that excessive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be examined and scrutinised on such evidence as may be available in the proceedings for reassessment. The Division Bench held that there must be some grounds for the reasonable belief that there has been a nondisclosure or omission to file a true or correct return by the assessee resulting in escapement of assessment or in underassessment. Such belief must be in good faith, and should not be a mere pretence or change of opinion on inferential facts or facts extraneous or irrelevant to the issue and the material on which the belief is based must have a rational connection or live link or relevant bearing on the formation of the belief. 17. In N.D. Bhatt, Inspecting Assistant Commissioner, Income Tax Another. v. I.B.M. World Trade Corporation, [1995] 216 ITR 811(Bombay), it has been held thus: It is also well-settled that the reasons for reopening are required to be recorded by the assessing authority before issuing any notice under section 148 by virtue of the provisions of section 148(2) at the relevant time. Only the reason so recorded can be looked at for sustaining or setting aside a notice issued under section 148. 18. In Hindustan Lever Ltd. v. R.B. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained 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 Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO, [1991] 191 ITR 662, for initiation of action under Section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively 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. [ Emphasis supplied ] In this context, we may refer with profit to a Division Bench decision of this Court in SFIL Stock Broking Ltd. (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts (India) Ltd. v. Income Tax Officer and Others, (2003) 179 C54 (SC) 11 wherein their Lordships of the Apex Court have held thus:- 5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. In Sarthak Securities Co. Pvt. Ltd. v. ITO, Writ Petition No.6087/2010, decided on 18th October, 2010, a Division Bench of this Court, after reproducing Section 147 of the Act and relying on certain decisions in the field, expressed the view as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g ₹ 27 lakhs mentioned in the table in Annexure P-2 constitute fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income. The assessing 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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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