TMI Blog2021 (9) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... annot accept the reason for reopening with regard to the entries regarding these five entities. As regards the penny stock tangible material upon the basis of which the Assessing Officer comes to the reason to believe that income chargeable to tax has escaped assessment can come to him from any source, however, reasons for the reopening has to be only of the AO issuing the notice. No such tangible material is disclosed in the reasons for reopening. AO simply says Kolkata Investigation Wing have analyzed the trade data of identified 84 penny stocks and concluded that most of the purchases in penny stocks on abnormally higher rate are being done by these paper companies and one of those penny stock is Shreenath in which petitioner was found to be involved in trading. This is far too general. We have to agree with petitioner that there is no tangible material for the reopening as stated in the reasons for reopening. AO was aware of the fact that the script of Shreenath was allegedly a penny stock company as it is clear from the annual information report given by the Assessing Officer himself to petitioner alongwith the first notice. Therefore, there is no question of any furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econciliation of AIR information (Copy enclosed) along with supporting evidence, thereof and reconciliation of TDS claimed as per certificates and the income offered in the P L account. 5. By its Chartered Accountant s letter dated 8th August 2016 petitioner gave details regarding all unsecured loans that is pertaining to item 6 quoted above. The list contained 58 entries and it gave the names of the entities from which the loan was taken alongwith its PAN number, address, opening balance, amount accepted, amount repaid, closing balance as on 31st March 2014, interest accrued/paid and TDS on interest. Petitioner has also annexed copies of the income tax returns filed by all those 58 entities. Ofcourse in the petition only certain specimen income tax returns have been annexed. Subsequently, petitioner, by its Chartered Accountant s letter dated 14th December 2016, gave details/reply regarding item 12 quoted above, i.e., annual information report of Shreenath, which for ease of reference is referred to as penny stock company. Thereafter, an assessment order dated 20th December 2016 was passed by which respondent no.1 held that petitioner had taken accommodation entries of fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2012-2013 and Assessment Year 20132014 where it is observed that petitioner had done everything in its power to prove the satisfactory nature of the loan transactions by providing PAN details of creditors, constitution and address of the creditors, particulars of income tax returns filed by the creditors, confirmatory letters given by the creditors, audited financial accounts (including balance sheet) of the creditors, relevant bank statements of the creditors, details of interest paid to the creditors and details of TDS deducted and paid. The CIT (Appeals) had held that the onus thereafter shifted to the Assessing Officer and if the Assessing Officer was still not satisfied, he had the option of making inquiries from the alleged lenders by summoning them. But as seen from the assessment order, nothing of that kind was done. The CIT (Appeals) also had held that if the Assessing Officer was not satisfied with what had been given to him by petitioner, he was duty bound to specify what more material he wanted petitioner to furnish, which was never asked. The CIT (Appeals) held that no cogent material was adduced to show that those loans were unexplained and the loans regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. In the reasons for reopening, respondent no.1 after mentioning about the loan taken by petitioner from the 13 entities mentioned in paragraph 5 above simply says : In addition to the above loans, there are certain other loans taken by M/s. Jainam Investment from the concerns owned by Shri Rajesh Jain and Shri Manish Jain (the sons of Shri Bhanwarlal Jain) which are controlled directly or indirectly by Shri Bhanwarlal Jain. The details of such concerns that have provided said bogus loans to M/s. Jainam Investments are as under : Sr.No. Name of the entities Amount (in Rs.) 1 Manav Diamonds Pvt. Ltd. 49,00,000 2 Rama Exports 1,50,00,000 3 Smata Exports 1,20,00,000 4 Saroj Diamonds 1,00,00,000 5 Yash Exports 51,00,000 Total 4,70,00,000 Respondent no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us loan transactions, Mr. Agrawal submitted (a) it is settled law that reassessment proposed merely on account of change of opinion is not permissible; (b) review in the garb of reassessment is absolutely prohibited and the Courts have consistently held that reassessment cannot be allowed in such situation of change of opinion; and (c) presence of fresh tangible material is a sine-qua-non for a valid reassessment. According to Mr. Agrawal, the statement of Mr. Bhawarlal Jain is the sole basis for the proposed addition that was recorded on 11th October 2013. The statement of Mr. Hemal Jhaveri recorded in survey proceedings, post the search on Bhanwarlal Jain group was also recorded on 16th October 2014 and 18th October 2014. The original assessment, after considering all these material, was completed on 20th December 2016 and therefore, it is clear that all the material, which are being considered now, were also considered at the stage of original assessment and there is absolutely no fresh tangible material available with the department which can lead to a different conclusion. Mr. Agrawal submitted that alongwith the annual returns, details of the loans taken by these five compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Agrawal further submitted that in the reason for reopening, in the first paragraph itself, it is mentioned that previous assessment was completed on 20th December 2016 and if only the Additional CIT had read that, he would not have signed the form seeking his approval. Therefore, even the approval has been granted without application of mind, which is one more ground to set aside the reassessment notice and the rejection of the objections raised by petitioner. 11. Mr. Suresh Kumar in response submitted that it was not a change of opinion but new material was obtained. Mr. Suresh Kumar read out the reasons for reopening to submit that fresh material was obtained. Mr. Suresh Kumar also submitted that five entities from whom loans were taken by petitioner are owned by Shri Rajesh Jain and Shri Manish Jain (the sons of Shri Bhanwarlal Jain) and therefore, they are different from the 13 entities mentioned above. Mr. Suresh Kumar submitted that it was the duty of petitioner to disclose fully and truly all material facts and they did not disclose that they have taken bogus entry loans from these five entities. Mr. Suresh Kumar relied upon a judgment of the Apex Court in Phool Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to s. 147 of the act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in s. 147 of the Act. However, on receipt of representations from the companies against omission of the words reason to believe , Parliament re-introduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the AO . In the case at hand, the assessment is sought to be opened within a period of four years and hence, the proviso to Section 147 of the Act is not applicable. 13. It is also trite that the Assessing Officer cannot reopen an assessment even within a period of four years merely on the basis of a change of opinion. The Assessing Officer has no power to review an assessment which has been concluded. Certainly where he has tangible material to come to the conclusion that there is an escapement of income from assessment, the power to reopen can be exercised. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount of loan taken 2 2010-11 Money Diam 2,00,00,000 Total 2,00,00,000 1 2011-12 Manav Diamonds Pvt. Ltd. 1,00,00,000 2 2011-12 Money Diam 50,00,000 3 2011-12 Royal Diamond 1,00,00,000 Total 2,50,00,000 1 2012-13 Money Diam 80,00,000 2 2012-13 Royal Diamond 3,30,00,000 Total 4,10,00,000 2 2013-14 Manav Diamonds Pvt. Ltd. 49,00,000 4 2013-14 Rama Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason for reopening with regard to the entries regarding these five entities. 15. As regards the penny stock, in the reason for reopening, it is stated that the Kolkata Investigation Wing have analyzed the trade data and there are 13 penny stocks in which it was conclusively ascertained that petitioner is found to be involved in trading of these scripts and is a beneficiary to gain the bogus short term capital loss and for the Assessment Year 2014-2015 the name of the script Shrenth (it should be Shreenath). In the first show cause notice, respondent no.1 has called upon petitioner to provide information related to penny stocks and gave the name of Shreenath. In its reply dated 14th December 2016, petitioner has provided all details including submission of transactions recorded in the annual information report in the script of Shreenath. The assessment order does not deal with these submissions nor the first assessment order referred to any penny stock. In the reasons for reopening, it is not respondents case that in the original assessment order it was missed out. The reasons for reopening of assessment, as held in Aroni Commercials Ltd. (Supra), has to be tested/examined only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same issue being treated as information so as to justify the reopening of the assessment. The expression reason to believe in Section 147 of the Act has been held to mean a cause or justification. It is also the position that at the stage when the Assessing Officer reopens an assessment, it is not necessary that the material before the Court should conclusively prove or establish that income has escaped assessment. But that does not mean that the Assessing Officer will not even mention enough details of tangible material that he has received for him to reopen the assessment. A general and bald statement, as stated in the reasons for reopening that Kolkata Investigation Wing have analyzed the trade data of identified 84 penny stocks and there are 13 penny stocks in which petitioner is found to be involved, has been made, is not enough. The Assessing Officer should have atleast indicated the details of the material that he had received and when he received. 17. In the circumstances, we have to hold that the impugned notice dated 11th October 2018 [ITBA/AST/S/148/2018-19/ 1012962880(1)] and impugned order dated 28th September 2019 [ITBA/AST/F/17/2019-20/1018438264(1)] require ..... X X X X Extracts X X X X X X X X Extracts X X X X
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