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TMI Blog2021 (8) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Companies Act, 1956. During the Financial Year 2010-11, relevant to Assessment Year 2011-12, the petitioner entered into certain commodities transactions through broker namely "AA Plus Shares Brokers Pvt. Ltd." (herein after referred to as "the broker company") in which, the petitioner incurred loss and eventually, an amount of Rs. 2,07,92,029/- became payable to the broker company, which remained outstanding even on 31.03.2011 and was reflected in Schedule-9: Sundry Creditors forming part of the Audited Annual Accounts. Such amount was repaid by the petitioner company during the Financial Year 2011-12, relevant to the Assessment Year 2012-13 i.e. the year under consideration, in various installments through banking channel, as is evident from the ledger of the broker company. Thereafter, the petitioner filed its Return of Income (RoI) for the year under consideration on 24.09.2012, declaring total income of Rs. 1,18,22,690/-. However, the respondent authority issued notice dated 30.03.2019 under section 148 of the IT Act seeking to reopen the case of the petitioner for the year under consideration. In response to the said notice, the petitioner company filed its RoI on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olled by Shri Jignesh Shah and from the details of accommodation entries provided by the shell/paper companies controlled by Shri Jignesh Shah, it is seen that the petitioner company has taken accommodation entries from shell/paper company - M/s. Aa Plus Share Brokers Pvt. Ltd. (the broker company). The learned senior advocate for the petitioner further submitted that on the basis of such information received from Shri Jignesh Shah, it is recorded that it is proved that M/s. Anderson Biomed Pvt. Ltd. (the petitioner company) has taken accommodation entries to the tune of Rs. 2,07,92,029/- from the shell/paper company namely M/s. Aa Plus Share Brokers Pvt. Ltd. (the broker company) during the Financial Year 2011-12, relevant to Assessment Year 2012-13. The learned senior advocate for the petitioner, with all vehemence at command, submitted that reopening has been made for wrong assessment year as the transactions with the broker company have been made in the previous year i.e. in the Assessment Year 2011-12 (Financial Year 2010-11) and no amount has been received from them in the year under consideration. He further submitted that, in fact, payment has been made to the broker compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party premises, on borrowed information and therefore, the subsequent reopening is nothing but a change of opinion of the subsequent Assessing Officer and it cannot be said that the income chargeable to tax has escaped assessment. 3.4 Making above submissions, it is urged by the learned senior advocate for the petitioner to allow the present petition and to quash and set aside the impugned notice. 4. Per contra, learned advocate Mr. Nikunt Raval for the respondent authority, while opposing the present petition, drew our attention to the affidavit-in-reply filed on behalf of the respondent authority and submitted that upon tangible material found against the present petitioner, impugned notice under section 148 of the IT Act has been issued. He submitted that one of the Directors of the broker company namely Mrs. Shaluben Nikeshbhai Shah, in her affidavit dated 19.10.2018 has made declaration that the said company is engaged in the business of arranging / facilitating / providing accommodation entries to various parties and the transactions are carried out under the advice and consultation of Shri Jignesh Shah. He submitted that the petitioner company has taken accommodation entri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions, it is urged that the Court may not interfere in the impugned notice and requested to dismiss the petition. 5. Having regard to the submissions advanced by the learned advocates for the respective parties and having perused the material placed on record, it appears to us that the learned senior advocate for the petitioner has challenged the impugned notice mainly on the ground that when jurisdictional facts are not established, the department cannot assume the jurisdiction and reopen the assessment. The basis for such submission is that, according to the learned senior advocate for the petitioner, the petitioner has taken the accommodation entries in question in the previous year i.e. Assessment Year 2011-12 (Financial Year 2010-11) and not in the year under consideration i.e. Assessment Year 2012-13. His further contention is that there is no tangible material with the respondent authority for recording satisfaction and reopening the assessment for the year under consideration and accordingly, he submitted that the petitioner is not before the Court for sufficiency of reasons but for the absence of reasons for reopening the assessment. 5.1 At this juncture, it would be apt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d material which was available with the Income-Tax Officer at the time of the original assessment proceedings. Where the transaction itself on the basis of the subsequent information was found to be a bogus transaction, the mere disclosure of that transaction at the time of original proceedings could not be said to be disclosure of the true and full facts, and the Officer would have the jurisdiction to reopen the concluded assessment in such a case. The precise observation made by the Supreme Court in the said case may be reproduced as under : - "In the present case as already noticed, the Income- Tax Officer, Azamgarh, subsequent to the completion of the original assessment proceedings, on making an enquiry from the jurisdictional Income-Tax Officer at Calcutta, learnt that the Calcutta company from whom the assessee claimed to have borrowed the loan of Rs. 50,000/- in cash had not really lent any money but only its name to cover up a bogus transaction and, after recording his satisfaction as required by the provisions of section 147 of the Act, proposed to reopen the assessment proceedings. The present is thus not a case where the Income-Tax Officer sought to draw any fresh in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income Tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. 6. Adverting to the facts of the case on hand, as referred to herein above, it is the case of the petitioner that the accommodation entries upon which the respondent authority is relying are pertaining to the previous year and not of the year under consideration. It is also the case of the petitioner that there is no tangible material, even otherwise in the hands of the respondent to substantiate that the income chargeable to tax has escaped assessment qua the assessee. The department, in the affidavit-in-reply filed by it, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there has been escapement of the income of the assessee from assessment in the year under consideration because of his failure to disclose fully and truly all material facts. 6.1 So far as the contention of learned senior advocate for the petitioner as regards borrowed satisfaction is concerned, it is submitted in reply by the respondent that the case of the petitioner is reopened on account of the information and tangible material received from the Investigation Wing, Ahmedabad in the case of Shri Jignesh Shah. Further, it is averred that in the case of the petitioner, no scrutiny assessment was held for the year under consideration. Further, prior to initiating the proceedings under section 147 of the IT Act, the Assessing Officer has verified the case record and accordingly, has drawn satisfaction that income to the tune of Rs. 2,07,92,029/- has escaped assessment. 6.2 Further, as it emerges from the record, the search and seizure under section 132 of the IT Act was carried out on 11.09.2018 in the case of Shri Jignesh Shah and during the investigation, it was found that Shri Jignesh Shah was managing and controlling multiple companies and concerns which were not carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oking to the scope of Section 147 as also Sections 148 to 152 of the Act, even if scrutiny assessment has been undertaken, if substantial new material is found in the form of information on the basis of which the assessing authority can form a belief that the income of the petitioner has escaped assessment, it is always open for the assessing authority to reopen assessment. From the reasons which are recorded, it clearly emerges that the petitioner is the beneficiary of those entries by Kayan brothers, who are well known entry operators across the country and this fact has been unearthed on account of the information received by DGIT Investigation Branch and therefore, it cannot be said in any way that even if four years have been passed, it is not open for the Authority to reopen the assessment. In the present case, there was independent application of mind on behalf of the assessing authority in arriving at the conclusion that income had escaped assessment and therefore, the contentions raised by the petitioner are devoid of merits. Dealing with the contentions of the petitioner that the information received from DGIT, Investigation Branch, Ahmedabad, can never be said to be addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation). It is also required to be noted that the genuineness of the various companies who made share applications are doubted. The assessee is alleged to have been engaged in bogus share applications from various bogus concerns operated by PKJ. The assessee is the beneficiary of the said transactions of share application by those bogus concerns. In the wake of information received by the Assessing Officer, when the Assessing Officer formed a belief that the investment made from the funding of such companies which are bogus, the Assessing Officer has rightly assumed jurisdiction of initiating the reassessment proceedings. The Assessing Officer, on the basis of information subsequently having come to his knowledge, recognized untruthfulness of the facts furnished earlier. In the present case, since both the necessary conditions to reopen the assessment have been duly fulfilled, sufficiency of the reasons is not to be gone into by this Court. Information furnished at the time of original assessment, when by subsequent information received from the Principal Director (Investigation), itself found to be controverted, the objection to the notice of reassessment under section 147 must fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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