TMI Blog2021 (8) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... ein above, which prima facie substantiates the case of the respondent - we are of the considered opinion that formation of belief by the AO that the income chargeable to tax has escaped assessment, based upon material derived during inquiry/investigation, appears to be justified. A perusal of the same revealed that they are mainly based on the aspects of change of opinion and reason to believe. There cannot be any dispute with regard to the ratio laid down in the same, however, as discussed herein above, the petition has failed so far as such aspects are concerned and accordingly, we deem it proper not to delve deep into them as would be of no avail to the petitioner. - R/SPECIAL CIVIL APPLICATION NO. 18325 of 2019 - - - Dated:- 23-8-2021 - HONOURABLE MS. JUSTICE BELA M. TRIVEDI and HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI DARSHAN R PATEL(8486) FOR THE PETITIONER(S) NO. 1 MRS MAUNA M BHATT(174) FOR THE RESPONDENT(S) NO. 1 JUDGMENT (PER : HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI) 1. This petition, under Articles 226 and 227 of the Constitution of India, is filed by petitioner - Geetaben Dineshchandra Gupta challenging the notice dated 27.03.2019, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petition is filed at a pre-mature stage inasmuch as, it is the notice under section 148 r/w. section 147 of the Act only. It is further contended that the petitioner, in the proprietorship concern of Subhalaxmi Trading Company, carried out huge transactions of purchases and sales. It had come on record that the petitioner accepted that she had made purchases and sales without taking delivery of good. Further, Shri Nikhil Gupta - power of attorney holder of the petitioner, in his statement, has categorically admitted that his mother is a housewife and that, she had not carried out any business activities at any point of time in her life. It is further contended that mere accommodation entries were provided without there being any physical transportation of goods. Further, such statement has also been recorded under section 131 of the Act. The inquiry conducted further revealed that for providing such accommodation entries, entry providers normally earn commission ranging from 0.5% to 1%. Therefore, despite the petitioner earning such commission for providing accommodation entries, had not shown such commission in the return and therefore, based on such tangible material and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was ever brought on record during the assessment proceedings by the assessee. Hence, the assessee s contention that she had made full and true disclosure at the time of filing of return of income and during the assessment proceedings, is completely devoid of any merits. 3.2 It is further contended in the affidavit-in-reply filed by the respondent that so far as the contention of the petitioner that in the reasons recorded by the Assessing Officer, there was no allegation against the petitioner as to non-disclosure of material facts at the time of scrutiny assessment, is concerned, it is stated to be baseless and denied by the respondent for the reason that while recording reasons for reopening, the Assessing Officer was in possession of credible information, received from the Investigation Wing that the assessee had been involved in providing accommodation entries to Anil Group. It is observed that such information was not in possession of the Assessing Officer during the assessment proceedings under Section 143(3) of the Act. It is further contended that however, the assessee intentionally chose not to disclose the same, neither at the time of filing of return of income nor dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20) 424 ITR 92 (Guj); iv) Special Civil Application No. 17756 of 2018 in Priti Paras Savla v. ITO, Ward (3)(2)(4) and; v) CIT vs. Ranchhod Jivabhai Nakhava, (2012) 21 Taxmann.com 159 (Guj). 4.3 The learned advocate for the petitioner has heavily placed reliance upon the latest decision of the Apex Court in New Delhi Television Ltd. (supra), wherein it was held that during original assessment assessee has made disclosure about having agreed to stand guarantee for transaction by NNPLC and it had also disclosed factum of issuance of convertible bonds and their redemption, there being no failure on part of assessee to disclose all material facts, notice issued to assessee after a period of 4 years was to be quashed and set aside and eventually, it was decided in favour of the assessee. 4.4 It is further contended by the learned advocate for the petitioner that in the present case also the petitioner had fully and truly disclosed all material facts at the time of scrutiny assessment and hence, as such there is no reason to believe and therefore, impugned notice under section 148 of the Act deserves to be quashed and set aside. 5. Per contra, learned senior standin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a housewife and she had not carried out any business activities at any point of time in her life till date. Further, he clearly stated that as a young boy of his family he had seen one person, who is the accountant of Anil Group had in-fact contacted their family for accommodation trading activities in-lieu of financial help. Further, Shri Nikhil D Gupta also stated that there was no physical transportation of goods against such sale / purchase bills. During the recording of statement u/s. 131 of the I.T. Act, vide Qus no. 5 Shri Nikhil Dineshbhai Gupta, son and authority holder of Smt. Geetaben D. Gupta requested to offer his comments on submission dated 14/09/2018 wherein it is submitted that We have made purchase and sales without taking delivery of goods. It was at godown delivery only hence no transportation is involved. It is also observed that, In reply that Shri Nikhil D. Gupta, son and authority holder of Smt. Geetaben D. Gupta stated that they were provided accommodation transaction bills for turnover / sales to Anil Group of companies and there was no actual delivery of goods. He further stated that all the transactions were only paper transactions which were prepare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19,91,87,419/- 4,48,78,936/- 37,44,92,835/- Anil Tradecom 0 0 75,82,46,217/- 6.3 It is also observed therein that, As the Anil Mines Minerals Ltd has inflated it purchases for the F.Y. 2011-12, 2012- 13 and 2013-14 respectively by an amount of ₹ 19,91,87,419/-, ₹ 4,48,78,936/- and ₹ 37,44,92,835/-. Similarly, Anil Tradecom has also inflated its purchase for the F.Y. 2013-14 by an amount of ₹ 75,82,46,217/- by showing purchases from Subhalaxmi Trading Company. The AO may take necessary action to disallow the above bogus purchases from Subhalaxmi Trading Company in the audited account of Anil Mines Minerals Ltd and Anil Tradecom . It is further concluded that, considering the market rate of commission, the income earned by the subject comes to ₹ 18,08,118/- being 0.75% of total turnover of disclosed. Applying the same analogy the income earned by the subject is as under: F.Y. 2011-12 2012-13 2013-14 Turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassess 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 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited 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 formation of his 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. 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 . 6.7 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... look into the surrounding circumstances to find out the reality, and the matter has to be considered by applying the test of human probabilities. 7. Thus, considering the totality of facts and the circumstances of the case on hand as narrated herein above in the preceding paragraphs vis-a-vis. considering the settled legal position, it appears that there is direct nexus / live link between the material coming to the notice of the Assessing Officer and that, for formation of his belief that 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 as from the inquiry/investigation by the Investigation Wing of the respondent, some tangible material was found to substantiate the fact that the assessee was the provider of accommodation entries and that, the income from commission, ranging from 0.5% to 1% was not disclosed and thereby, the income chargeable to tax has escaped assessment for the year under consideration. As emerges from the record, the petitioner has filed RoI for the A.Y. 2012-13 disclosing income of ₹ 1,42,694/- despite showing a huge turnove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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