TMI Blog2021 (8) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... ction with or relevant bearing on the formation of belief that there 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. Accordingly, no interference is called for at the hands of this Court in this petition under Article 226 of the Constitution of India. The learned senior advocate for the petitioner has relied upon the decision in GKN Driveshafts (India) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT] . There cannot be any other view than what is taken in the said decision, however, in the case on hand, when the department has not considered the objections raised by the petitioner for the reason that the petitioner company has failed to disclose fully and truly all the material facts necessary for his assessment for the year under consideration and when the AO has reason to believe that income chargeable to tax has escaped assessment, we are of the view that the above decision would be of no avail to the petitioner. - R/SPECIAL CIVIL APPLICATION NO. 21716 of 2019 - - - Dated:- 31-7-2021 - HONOURABLE MS. JUSTICE BELA M. TRIVEDI And HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner has taken accommodation entries to the tune of ₹ 2,07,92,029/- and the respondent authority has reason to believe that the petitioner has escaped assessment. Against the reasons accorded, the petitioner, vide letter dated 02.10.2019, raised objections against reopening on factual as well as the legal grounds, however, the respondent authority disposed of the said objections raised by the petitioner holding that the reopening is justified. Being aggrieved, the petitioner is before this Court by way of this petition. 3. We have heard, learned senior advocate Mr. Tushar Hemani for learned advocate Ms. Vaibhavi Parikh for the petitioner and learned advocate Mr. Nikunt Raval for learned advocate Mrs. Kalpana Raval for the respondent. 3.1 The learned senior advocate for the petitioner, inviting attention to the reasons recorded, submitted that as is emerging from the reasons recorded, an inquiry was carried by the Deputy Director of Income Tax (Inv.), Unit-1(3), Ahmedabad in the case of various bogus concerns of Shri Jignesh Sudhirbhai Shah, who is engaged in the business of providing the accommodation entries. That, search under section 132 of the IT Act cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the year 2011 only. 3.2 The learned senior advocate for the petitioner submitted that, thus, two glaring mistakes are there in the reasons recorded viz. firstly the petitioner company has carried out transactions with the broker company in the previous year i.e. Assessment Year 2011-12 and no transaction has been carried out in the year under consideration i.e. Assessment Year 2012-13 and only the outstanding liability of the previous year stood cleared in the year under consideration. He submitted that in the Audit Report of the petitioner company for the previous year i.e. Assessment Year 2011-12, in Schedule-9: Sundry Creditors, the subject amount of ₹ 2,07,92,029/- has been shown as payable as on 31.03.2011 to the broker company, which fact proves that the amount in question pertains to the previous year and not for the year under consideration. Secondly, he submitted that in the reasons recorded, it has been alleged that the amounts shown in the table totalling to ₹ 2,07,92,029/- of different dates, are the accommodation entries received by the petitioner company from the broker company, however, in fact, the said amount is not received by the petitioner co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led that Shri Jignesh Shah is managing and controlling multiple companies and concerns which are not carrying out any genuine business activity. It is also revealed that the then Director of the broker company was just a dummy director (Mrs. Shaluben Nikeshbhai Shah) and said company (broker company) was providing and arranging for the accommodation entries. The learned advocate for the respondent submitted that thorough investigation was carried out and it was found that no genuine transaction was carried out by the broker company in the commodity exchange in the name of the petitioner company. The learned advocate for the respondent further submitted that in order to further verify the claim of the assessee, the financial details of the broker company were obtained from the RoC database and on perusal of its balance sheet, there appeared no liability as on 31.03.2011 and therefore, the contention of the petitioner that the payments were made to settle the outstanding liability pertaining to previous year, is incorrect and misguiding. He submitted that upon inquiry made by the Assessing Officer, the say of the petitioner that the transactions in question are related to previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat as per the settled legal position, two conditions have to be satisfied before the Assessing Officer invokes his jurisdiction to reopen the assessment under section 147 of the said Act after the expiry of four years from the end of the relevant assessment year firstly, that the Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment for the concerned assessment year, and secondly, such escapement of assessment was by reason of failure on the part of the assessee to make the 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 truly all the material facts necessary for his assessment for that assessment year. So far as the case of the present petitioner is concerned, the assessment for the A.Y. 2012-13 is sought to be reopened by the Assessing Officer under section 147/148 of the said Act, on his having arrived at a satisfaction that the income for the said assessment year had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. 8. It is pertinent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied : firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific in nature and reliable in character, relating to the concluded assessment, which goes to expose the falsity of the statement made by the assessee at the time of the original assessment is different from drawing fresh inference from the same facts and material which were available with the Income-Tax Officer at the time of the original assessment proceedings. The two situations are distinct and different. Thus, where the transaction itself, on the basis of subsequent information, is found to be a bogus transaction, the mere disclosure of that transaction at the time of original assessment proceedings cannot be said to be a disclosure of the true and full facts in the case and the Income-Tax Officer would have the jurisdiction to reopen the concluded assessment in such a case. 5.2 Further, the term reason to believe , however, is not defined in the Act but it can be gathered from the available information, leading the Assessing Officer to reopen the assessment. The term itself is suggestive of its prima facie characteristics and not established or conclusive facts or information. Meaning thereby, it is the Assessing Officer s prima facie belief, of course, derived fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us Commodity Broking Pvt. Ltd. [Previously known as AA Plus Share Brokers Pvt. Ltd.] i.e. the broker company. Further, the financial details of M/s. AA Plus Commodity Broking Pvt. Ltd. [Previously known as AA Plus Share Brokers Pvt. Ltd.] were obtained from the Registrar of Companies database and no such outstanding liability, as claimed by the petitioner, has been found on perusal of the balance sheet for the Financial Year 2010-11. So, the payments are not in the nature of clearing the outstanding dues as claimed by the assessee company as there was no outstanding liability on the part of the assessee company of any previous year but these transactions are only in the nature of the accommodation entries, which have escaped assessment and hence, there is escapement of income chargeable to tax. It is further averred that in the speaking order dated 21.11.2019 disposing of the objections raised by petitioner, it was informed to the petitioner that during the course of reassessment proceedings, a notice under section 133(6) of the Act was issued to M/s. Multi Commodity Exchange of India Ltd. And the response received was in negative. It stated that no such transactions were carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Director of the broker company was found to be just a dummy Director (Ms. Shaluben Nikeshbhai Shah), who, in her affidavit dated 19.10.2018 had made declaration that the said company was engaged in the business of arranging / facilitating / providing accommodation entries to various parties. 6.3 The gist of assailing by the learned senior advocate for the petitioner is the absenteeism of reasons and no tangible material with the department for reopening the assessment, however, considering the aforesaid facts and circumstances of the case, we are of the considered view that it cannot be said that there was no reason to believe for the Assessing Officer that the income chargeable to tax had escaped assessment, because such exercise of reopening has been made only after due inquiries and recording of statements of concerned persons, as referred to herein above, and on having found prima facie material, impugned notice is issued to the petitioner. 6.4 The learned advocate for the respondent has relied upon the decision of this Court in Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income Tax, [2016] 76 Taxmann.com 106 (Gujarat), relevant of which is extracted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayan brothers, who are in the activity of entry operation throughout the country and therefore, it cannot be said that this is not justifiable material to form a reason to belief by the Authority and therefore, this being a case, the Authority is justified in issuing notice under Section 148 of the Act to reopen the assessment and therefore, the challenge contained in the petition being devoid of merits, same deserves to be dismissed. As we found that for the exercise of power of reopening of assessment after a period of 4 years, a proper procedure is observed by the Authority, specific approval has been obtained from the competent Authority and upon perusal of original file, we have satisfied ourselves that the approval has been accorded in a proper manner by the competent Authority and since the notice is issued based upon substantial compliance of statutory provision, the Authority has acted well within the bounds of his powers and the Authority has issued notice. We found that the order which has been passed of rejecting the objections raised by the petitioner is also a well reasoned order passed after due exercise of jurisdiction and therefore, same is not, therefore, required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the formation of the belief by the Assessing Officer in the instant case, appear to have a rational connection with or relevant bearing on the formation of belief that there 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. Accordingly, no interference is called for at the hands of this Court in this petition under Article 226 of the Constitution of India. 6.8 The learned senior advocate for the petitioner has relied upon the decision of the Apex Court in GKN Driveshafts (India) Ltd. (supra). There cannot be any other view than what is taken in the said decision, however, in the case on hand, when the department has not considered the objections raised by the petitioner for the reason that the petitioner company has failed to disclose fully and truly all the material facts necessary for his assessment for the year under consideration and when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment, we are of the view that the above decision would be of no avail to the petitioner. 7. In the backdrop as aforesaid, present petit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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