TMI Blog2021 (3) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... scaped assessment. Assessing Officer has acted on specific information and after collecting the available material as referred to above has opened his mind through reasons and formed a belief that, the income has escaped assessment. It is settled law that, at the stage of Section 148 of the Act, what is required is reason to believe , but not the established fact of escapement of income. Thus it cannot be said that there was no material before the assessing Officer to reopen the assessment and he proceeded mechanically based on the information received from the Income Tax Department, Ahmedabad. The information of Smt. Bhavnaben Gosai has some relevance with the transactions reflected in the bank account of the assessee. Therefore, it cannot be said that, the Assessing Officer has mechanically relied on the third party information and the proceedings being initiated for verification and inquiry. Proceeding has been initiated after four years and the sanction accorded by the authority as contemplated under Section 151 of the Act is not legal and valid - The sanction order has n ot been placed on record by the assessee. The intimation letter cannot be termed as approval gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information from the ITO, Ward 6(1), Ahmedabad, vide letter dated 11.04.2014, that during the scrutiny assessment under Section 143(1) for the A.Y. 2011-12 in the case of Smt. Harshaben Rasikbhai Gosai, who is the proprietor of Mahavir Enterprise, it was found that, there was a high value financial transaction in her bank account and in connivance with one Mr. Kundan Mudaliar, whose statement was recorded on oath under Section 131(1A) of the Act, they are alleged to have provided accommodation entries through bogus billing activities to many business concerns and the assessee company was also one of the beneficiaries. Smt.Harshaben Gosai, Mr.Kundan Mudaliar and Mr.Rasikbhai Gosai and other entities like P M Co. R.S Enterprise, and J.K Enterprise provided accommodation entries to the business concerns without any business activities. 2.3 After receiving the information, the Assessing Officer verified the return of the assessee and other details. The Assessing Officer had verified the bank statements of three main entities namely R.S Enterprise, P M Co and J.K Enterprise and found that, without any actual sale or purchase, the assessee company had received ₹ 14,82,79,492 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt. Harshaben Rashikbhai Gosai [Prop. of Mahavir Enterprise] that these companies provided accommodation entry to the assessee company through bogus billing. The assessee company i.e. Cemach Machineries Limited has received ₹ 3,13,25,643/- from R S Enterprise ₹ 7,07,10,072/- from P M Company and ₹ 4,64,43,777/- from J K enterprise. Thereby aggregating a total sum of ₹ 14,82,79,492/- which is received through fraudulent means [i.e. by way of bogus billings] which has escaped assessment. 3. Findings : It is observed from the table as mentioned in para 4 above, that high value financial transactions were made through various concern. Also, whatever the amount is received on a date is simply transferred/NEFT to Cemach Machineries Ltd. On the very date itself. This very facts establishes the authenticity of the statement made by Shri Kundan Mudaliar which he confessed under oath u/s. 131 (1A) of the Income Tax Act, 1961, during the assessment proceedings of Smt. Harshaben Rashikbhai Gosai. 4. From the discussion made above, it is apparently clear that the asessee company I.e Cemach Machineries Ltd has made bogus sale amounting to ₹ 14,82,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h exercise at the end of the respondent, it is evident that, the assessment has been reopened merely based on the borrowed satisfaction. (b) It was further pointed out that, the Assessing Officer has recorded the reasons for re-opening only for investigation and verification purpose. Therefore, on the basis of suspicion as to escapement of income chargeable to tax, the Assessing Officer has recorded the reasons for further verification of the issues, which cannot be permissible. In this regard, it was pointed out that, all the transactions were made through the cheques and necessary entries had been mentioned in the sales and ledger accounts. Therefore, for further scrutiny, re-opening of the assessment without any tangible material in the hands of the Assessing Officer cannot be sufficient reason for re-opening the assessment. (c) It was further pointed out that, there is a discrepancy in the figure mentioned in the reasons for reassessment. The amount of ₹ 14,82,79,492/- determined by the Assessing Officer is factually incorrect. In this regard, it was pointed out that, there was no sale transaction with the J.K Enterprise as the company had made the payment to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income has escaped the assessment. She was pointed out that, after receiving the information in relation to the assessee with regard to accommodation entries through the bogus billing, the Assessing Officer had verified the details of the assessee with regard to sales and purchase made during the year under consideration and also made scrutiny about the bank statements of three entities and prima facie of the view that, the assessee had received the amount of ₹ 14,82,79,492/- by way of bogus sales through fake bills/vouchers and on that basis, after making independent inquiry and application of mind, he has reason to believe that, the income for the year under consideration has escaped assessment within the meaning of Section 147 of the Act. 9. In view of the above contentions, the learned counsel appearing for the Revenue urged that, the writ application may not be entertained. 10. We have carefully considered the rival submissions and also perused the materials on record. 11. After perusal of the records, it appears that, return of income for the year under consideration was filed on 29.09.2012 declaring total income as Rs. Nil and claimed total loss of ₹ 10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -3, Vs. Gokul Ceramics, (2016) 241 taxmann 341 (Guj.), wherein, this Court has observed thus: 9. It can thus be seen that the entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was alongwith report and show cause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the reopening could not and should not have been declared as invalid, on the ground that he proceeded on the show cause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment. The question, therefore, arose whether the information contained in the letter of Directorate of Investigation could be said to be definite information and the Assessing Officer could act upon such information for taking action under Section 147(b) of the Act. In such background, the Supreme Court observed as under: 12. Ms. Gauri Rastogi, the learned counsel appearing for the respondents, has urged that the letter of Shri Bagai was received by the Income tax Officer on March 26, 1974 and on the very next day, that is, on March 27, 1974, he issued the impugned notice under Section 147(b) of the Act and that he did not have conducted any inquiry or investigation into the information sent by Shri Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri Bagai does not mean that the Income Tax Officer did not apply his mind to the information contained in the said letter of Shri Bagai. On the basis of the said facts and information contained in the said letter, the Income Tax officer, without any further investigation, could have formed the opinion that there was reason to believe that the income of the assessee chargeable to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 issuance of notice was invalid. Inasmuch as, as a result of our order, the reassessment proceedings have not to go on we don not and we ought not to express any opinion on the merits. 13. In case of AGR Investment Ltd. vs. Additional Commissioner of Income Tax (Supra), Division Bench of Delhi High Court considered the validity of reopening of assessment where the notice was based on information received from Directorate of investigation that the assessee was beneficiary of bogus accommodation entries. The Court while upholding the validity of reopening observed that sufficiency of reason cannot be considered in a writ petition. It was observed as under : 23. The present factual canvas has to be scrutinized on the touchstone of the aforesaid enunciation of law. It is worth noting that the learned counsel for the petitioner has submitted with immense vehemence that the petitioner had entered into correspondence to have the documents but the assessing officer treated them as objections and made a communication. However, on a scrutiny of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies was not disputed and the companies had bank accounts and payments were made to the assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score. 13. Learned Single Judge of Madras High Court in case of Sterlite Industries (India) Ltd. vs. Assistant Commissioner of Income Tax reported in [2008] 302 ITR 275 (Mad) upheld the notice for reopening which was based on information from enforcement directorate showing possible inflation of purchases made by the assessee. (iv) In Inductotherm (India) Pvt. Ltd. vs. M. Gopalan, Deputy Commissioner of Income Tax, reported in (2013) 356 ITR 481 , wherein, it was held as under: even in case of reopening of an assessment which was previously accepted under Section 143(1) of the Act without scrutiny, the Assessing Officer would have the power to reopen the assessment provided, he had some tangible material, on the basis of which he could form a reason to believe that the income chargeable to tax had escaped assessment. (v) In Assistant Commissioner of Income tax Vs. Rajesh Jhaveri Stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e necessary for the assessing officer to show that, there was failure to disclose fully and truly the material facts necessary for the assessment by the assessee. The record indicates that, notice under Section 142(1) of the Act was served upon the assessee and he was asked to furnish necessary details for the verification, however, the assessee failed to submit necessary details. 14. We have examined the reasons for re-opening in details, more particularly paras 2 to 7 as referred to above. The reasons are self-explanatory. The Assessing Officer has observed that, the information with regard to one Smt. Harshaben Rasikbhai Gosai, Prop. Of Mahavir Enterprise and her companion Mr. Kundan Mudaliar, it was found that their main business was to provide accommodation entries by way of bogus sales and purchase through fake bills/vouchers without any actual business activities and the fact reveals from the statement of Mr. Kundan Mudaliar, 53 business companies including the assessee, who were beneficiaries. The Assessing Officer has further observed that, after receiving the information, had verified the return of income and other details of the assessee and from the bank statements o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri (2008) 14 SCC 208 , wherein, the Apex Court has observed that, 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 and whether the material would conclusively prove the escapement is not the concern at that stage . 18. In view of the aforesaid discussions made hereinabove and considering the facts and circumstances of the case, it cannot be siad that there was no material before the assessing Officer to reopen the assessment and he proceeded mechanically based on the information received from the Income Tax Department, Ahmedabad. The information of Smt. Bhavnaben Gosai has some relevance with the transactions reflected in the bank account of the assessee. Therefore, it cannot be said that, the Assessing Officer has mechanically relied on the third party information and the proceedings being initiated for verification and inquiry. 19. The second contention raised is that, the proceeding has been initiated after four years and the sanction accorded by the authority as contemplated under Section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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