TMI Blog2021 (8) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... apement of income and therefore, looking 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 the assessment. AO has reason to believe that the income chargeable to tax has escaped assessment and the basis for formation of such belief is several inquiries and the investigation by the Investigation Wing. The reasons for 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 - Decided against assessee. - R/SPECIAL CIVIL APPLICATION NO. 19564 of 2019 - - - Dated:- 9-8-2021 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner company filed its RoI on 24.04.2019 and also requested to supply the reasons for reopening, which were supplied vide letter dated 15.08.2019. A perusal of the same revealed that the case of the petitioner was reopened on the count that the petitioner is the beneficiary of the accommodation entries to the tune of ₹ 1,06,16,632/-. The case of the respondent was that, cash was deposited in the bank account of M/s. Kiran Trading (a third party), which in turn, was followed by transfers to the account of M/s. Harsh Enterprise (also a third party) and subsequently, funds were transferred by M/s. Harsh Enterprise to various other parties. Accordingly, the department presumed that M/s. Harsh Enterprise was engaged in providing accommodation entries and since, the petitioner had received ₹ 1,06,16,632/- from M/s. Harsh Enterprise, the department presumed the said transaction to be accommodation entries and hence, the department had reason to believe that such income at the hands of the petitioner company had escaped assessment. Against the reasons accorded, the petitioner, vide letter dated 20.09.2019, raised objections against reopening on various factual as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown in the RoI and the details have been fully and truly disclosed by the petitioner at the time of original assessment and accordingly, it cannot be said that there is reason to believe that the income chargeable to tax has escaped assessment and the petitioner cannot be re-taxed by the department. He submitted that thus, the department is not justified in proposing to reopen the case of the petitioner on such false pretext and and on borrowed satisfaction. 3.4 The learned senior advocate for the petitioner further submitted that the reopening is based on mere change of opinion of the Assessing Officer inasmuch as the notice under section 148 of the Act can be issued only if an Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment and for such formation of belief, there should be some tangible material and act, which are lacking in the case on hand. He submitted that the case of the petitioner was selected for scrutiny assessment and the issue on hand was examined threadbare at the original assessment and accordingly, merely because the Assessing Officer happens to change his opinion, action under section 147 of the Act cannot be tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xports Overseas Ltd., passed in Tax Appeal Nos. 2471 of 2009 and Others (Gujarat); (ix) CIT v. Kailash Jewellary House, ITA 613/2010 (Delhi) (x) Kantibhai Dharamshibhai Narola v. ACIT, [2021] 125 Taxmann.com 348 (Gujarat). 4. Per contra, learned senior standing counsel Mrs. Mauna M. Bhatt for the respondent authority, while opposing the present petition, drew our attention to the reasons recorded for reopening of assessment dated 15.08.2019, and submitted that the petition is not tenable in law as after due inquiry, it was found that M/s. Harsh Enterprise was engaged in providing accommodation entries by booking bogus purchases/sales to various beneficiaries as per its requirements, in connivance with M/s. Kiran Trading and others. Huge transactions were shown without any business relation between M/s. Harsh Enterprise and its associated concerns M/s. Kiran Trading , M/s. Shoryaraj Enterprise, M/s. Leela Trading Co., etc. It was further found on verification of the accounts that the petitioner had also received accommodation entries of ₹ 1,06,16,632/- and this issue was not dealt with in the scrutiny assessment. Thus, the petitioner being failed to fully and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate for the respondent submitted that the case of the petitioner is sought to be reopened on the basis of some tangible material available on record and all the relevant information available with the department at the time of recording the reasons for reopening have been duly discussed in the reasons. 4.4 So far as the contention of the petitioner that the case is reopened beyond a period of four years from the end of the relevant assessment year is concerned, the learned advocate for the respondent submitted that all the requirements under section 147 of the Act to initiate the proceedings are fulfilled. Further, the case of the petitioner was reopened on account of information received from the Investigation Wing and from the information disseminated by the Investigation Wing, it is evident that the assessee had failed to furnish fully and truly, all material facts necessary for the assessment before the Assessing Officer. 4.5 Making above submissions, it is urged that the Court may not interfere with 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 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faction. The Supreme Court in the case of Assistant Commissioner of Income Tax versus Rajesh Jhaveri Stock Brokers P. Ltd. reported in (2007) 291 ITR 500(SC), had an occasion to deal with the scope and effect of section 147 as substituted w.e.f. April 1st, 1989, in which the Court has observed as under : - Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it 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 act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34(SC), the Supreme Court observed that the Court has only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 10. It is very pertinent to note that in the case of Phool Chand Bajrang Lal versus Income-Tax Officer reported in 203 ITR 456 (SC), it was observed that the acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment, which went to expose the falsity of the statement made by the assessee at the time of original assessment was different from drawing fresh inference from the same facts and 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vocates for the parties, it may be noted that the words accommodation entries have not been defined anywhere in the Act, however, in catena of decisions, the Courts have dealt with the issue of accommodation entries . It cannot be gainsaid that the tax-evaders in order to bring back their unaccounted income to their books of accounts without paying any tax thereon, use numerous methods and techniques. For routing the unaccounted income, the taxevaders under the guise of loan entries or share capital entries or other camouflage entries create an appearance of legitimate transactions in their books of accounts. Such well recognized rackets are controlled and conducted by the persons known as accommodation entry providers , and the accommodation entries are provided by them to the persons who are the taxevaders. The entries on paper apparently may appear to be of routine nature, but the trail of money transited through the layers would be subsequently unearthed during the search and seizure operations conducted either at the assessee s premises or his associate s premises or at the premises of some third party, who may be an accommodation entry provider. Under the circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . 5.5 Further, in the case of Ess Kay Engineering Co. (P) Ltd. v. Commissioner of Income Tax, 247 ITR 818 (SC), also it has been observed that the Assessing Officer is not precluded from reopening the assessment of an earlier year on the basis of fresh material discovered subsequently during the course of assessment of next assessment year. 6. In the aforesaid backdrop, if the facts of the case are adverted to, as referred to herein above, it is the case of the petitioner that the petitioner received the amount of ₹ 1,06,16,632/- from M/s. Harsh Enterprise against sales made to the said party and such sales was duly credited to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred the cash deposited in its account to M/s. Harsh Enterprise. Thus, the case of the petitioner was reopened after due consideration of facts. 6.2 Indisputably, the petitioner has furnished E-TCS returns along with the transaction register during the regular assessment, however, case of the respondent that the same do not establish the genuineness of the transaction and delivery of actual material, appears to be flawless and that, it cannot be said that by such, the onus under section 68 of the Act is discharged by the assessee the petitioner. 6.3 The learned senior advocate for the petitioner has submitted that the sale transaction stood verified and accepted in the scrutiny assessment proceeding carried out under section 143(3) of the Act and the petitioner had submitted all the details relevant for the assessment and thus, discharged the onus under section 68 of the Act, however, it appears that the Assessing Officer has found that the petitioner company has not fully and truly disclosed all material facts necessary for assessment for the reason that the petitioner has concealed the facts to channelize the unaccounted funds into assessee company. Therefore, there is cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 additional information. We are of the opinion that the information which has been received is on 26.3.2015 from the DGIT, Investigation Branch, Ahmedabad, whereby it has been revealed that present petitioner is also the beneficiaries of those Kayan 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 fail. 6.8 In the case on hand also, the Assessing Officer has reason to believe that the income chargeable to tax has escaped assessment and the basis for formation of such belief is several inquiries and the investigation by the Investigation Wing. The reasons for 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales transactions are not genuine and hence, the aforesaid decision would not apply in the facts of the present case. 6.10.3 Further, in the decision in Krishna Metal Industries (supra), the Court has held that impugned notices could not have been issued after a period of four years from the end of relevant assessment year since condition for exercise of power beyond four years contemplated by proviso to section 147 did not exist. Here, in the present case, the Assessing Officer has, from the information available from the Investigation Wing, has come to a conclusion and consequently, formed a belief that the income chargeable to tax has escaped assessment and accordingly, in view of the provisions of section 147 of the Act, the said decision also would be of no help to the petitioner. 6.10.4 Further, the decision in L.B.M. World Trade Corpn. (supra), also is not applicable to the facts of the present case because, as said earlier, in the present case, the Assessing Officer has, from the information available from the Investigation Wing, has come to a conclusion and consequently, formed a belief that the income chargeable to tax has escaped assessment and accordingly, in vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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