9911796707
TMI Blog2021 (8) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... Company incorporated under the Companies Act, 1956 and engaged in the business of ship breaking. During the Financial Year 2011-12, relevant to Assessment Year 2012-13 (i.e. the year under consideration), the petitioner made total sales of Rs. 26,266.19 lakh, which included the sales made to M/s. Harsh Enterprise also for which, the entire sales proceeds were received during the year under consideration. The same was duly reflected in the Audited Annual Accounts. The case of the petitioner for the year under consideration was selected for scrutiny assessment and various details were called by the then Assessing Officer, which were furnished by the petitioner. The then Assessing Officer also called for various details pertaining to TCS vide notice dated 07.03.2014, against which the petitioner, vide communication dated 23.08.2014 supplied the details including acknowledgment of E-TCS quarter-wise returns along with transaction register which duly included details as to sales made to M/s. Harsh Enterprise during the year under consideration. That, while framing assessment under section 143(3) of the Act vide order dated 05.03.2015, though after due examination, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availed any benefit from M/s. Harsh Enterprise. Not only that, but all the receipts, sales, purchases, profit etc. were shown to the Assessing Officer while framing assessment under section 143(3) of the Act and all the details necessary for the assessment had been truly and fully disclosed by the petitioner and hence, there is neither question of forming belief that the income chargeable to tax has escaped assessment nor there is a question of reopening of assessment for the year under consideration. 3.2 The learned senior advocate for the petitioner further urged that the sales of Rs. 1,06,16,632/- made to M/s. Harsh Enterprise was duly reflected in the Audited Annual Accounts. Further, the petitioner, vide letter dated 23.08.2014, furnished various details including the acknowledgment of E-TCS returns (quarter-wise) along with transaction register which included details as to sales made to M/s. Harsh Enterprise and after threadbare examination, the Assessing Officer consciously chose not to disturb the sales declared by the petitioner while framing assessment under section 143(3) of the Act and hence, the impugned notice being nothing but a mere change of opinion, requires to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner or Chief Commissioner or Principal Commissioner or Commissioner, and such a sanction should not be mechanical in nature and the Commissioner concerned must record his satisfaction in detail. However, in the present case, there appears no proper application of mind by the Commissioner concerned while sanctioning the issuance of notice under section 148 of the Act. 3.6 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. 3.7 In support of his submissions, the learned senior advocate for the petitioner has relied upon following decisions: (i) Alliance Filaments Ltd. v. The Assistant Commissioner of Income Tax, passed in Special Civil Application No. 16586 of 2019 dated 19.02.2021; (ii) Prashant S. Joshi v. Income-Tax Officer, Ward 19(2) (4), [2010] 189 Taxman 1 (Bombay); (iii) Gujarat Lease Financing Ltd. v. Deputy Commissioner of Income-Tax, Circle-4, Ahmedabad, [2013] 36 Taxmann.com 359 (Gujarat); (iv) Krishna Metal Industries v. H. M. Algotar, [1997] 225 ITR 853 (Guj.); (v) N. D. Bhatt, Inspecting Assistant Commissioner of Income-Tax v. L.B.M. Worl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aries of such entries by M/s. Harsh Enterprise. Thus, the case was reopened after due consideration. 4.2 So far as the filing of E-TCS returns along with transaction register by the petitioner is concerned, the learned senior standing counsel for the respondent submitted that perusal of the same could justify the transactions were carried out by M/s. Harsh Enterprise but the genuineness of the same and delivery of material could not be established from the same and therefore, there is no change of opinion at end of the Assessing Officer. Further, the impugned notice under section 148 of the Act was issued after prior and proper approval of the competent authority i.e. Principal Commissioner of Income-Tax and therefore, the petitioner's contention that the assessment was reopened merely on the basis of borrowed satisfaction is not tenable in law. It is further submitted that there is no procedural lapse and/or deviation from procedure prescribed in reopening and the reasons recorded do not lack validity as all the procedures, laid down under the Act, have been duly followed and necessary approvals from the competent authority are received. 4.3 So far as the contention of the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions 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 to note that as held by the Supreme Court in cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 that both the conditions must be fulfilled if the case f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 At this juncture, it would also be worthwhile to refer to the observations made by us in the CAV Judgment dated 06.08.2021 Special Civil Application No. 22613 of 2019, which read as under: "7. As stated hereinabove, the often posed question as to whether the Assessing Officer could have assumed the jurisdiction under Section 147/148 of the said Act on the basis of the information / material received from the investigating wings unearthing the bogus transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the 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 from the some material / information, etc. leading him to reopen the assessment. 5.4 The ambit and import of the term "reason to believe" has been examined in numerous cases, notably in ITO v. Lakhmani Mewal Das [(1976) 103 ITR 437: 1976 (3) SCC 757]. The Apex Court held that, "the reason must be held in good faith. It cannot be merely a pretence. It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the Income Tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a Court of law. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the format ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct facts. It was found that M/s. Harsh Enterprise was engaged in providing accommodation entries by booking bogus sales/purchases to various beneficiaries. The sale of Rs. 1,06,16,632/- disclosed by assessee M/s. Harsh Enterprise was not genuine but merely the accommodation entries and the petitioner was the beneficiary of such entry. Since, the income offered pertained to the accommodation entries and not the genuine business transactions, the sales quantum was also believed to untrue. 6.1 It has further come on record that after due verification of the information received from the Investigation Wing after inquiry under section 131 of the Act and the case record available with the respondent, reasons for reopening of assessment had been recorded. It is submitted that during investigation, due opportunity was given to M/s. Harsh Enterprise to prove the genuineness of its business transactions, however, it failed to furnish the requisite documents. It was noticed that the cash was routed through various proprietorship firms to M/s. Harsh Enterprise and thereby, many entities. Further, the proprietor of other proprietorship had admitted in his statement under section 131 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the said additional material available on hand a reasonable belief is formed by the Assessing Authority that income of the petitioner has escaped assessment and therefore, once the reasonable belief is formulated by the Authority on the basis of cogent tangible material, the Authority is not expected to conclude at this stage the issue finally or to ascertain the fact by evidence or conclusion, we are of the opinion that function of the assessing authority at this stage is to administer the statute and what is required at this stage is a reason to believe and not establish fact of escapement 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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. 6.7 Further, in the decision in Aaspas Multimedia Ltd. v. Deputy Commissioner of Income Tax, Circle 1(1), [2017] 83 Taxmann.com 82 (Gujarat), it is observed as under: "...In the present case the reassessment proceedings have been initiated by the Assessing Officer on the basis of material provided by the Principal Director (Investigation). 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 jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer and genuineness of sale transaction is in doubt and hence, the aforesaid decision would be of no help to the petitioner. 6.10.1 Next is the decision in Prashant S. Joshi (supra), wherein, it is held by the Court that the sufficiency of the evidence or material is not open to scrutiny by the Court but the existence of the belief is the sine qua non for a valid exercise of power. In the case on hand, from the reasons recorded, it appears that the formation of belief by the Assessing Officer is on the cogent and tangible material and hence, it prima facie appears that the income chargeable to tax has escaped assessment and accordingly, the above decision is not applicable to the facts of the present case. 6.10.2 So far as the decision in Gujarat Lease Financing Ltd. (supra) is concerned, it is held by the Court that since no new material had come on record nor it was the case of the Assessing Officer that facts reveled before him were not primary or material facts, notice for reassessment lacked validity. In the instant case, the Assessing Officer, from the information received from the Investigation Wing has got the new information that the petitioner is the benefic ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
