TaxTMI 
TaxTMI 
2017 (6) TMI 557
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich the AO has sought to reopen the assessment for AY 201112 on the ground that the income chargeable to tax for the AY 201112 has escaped assessment within the meaning of Section 147 of the IT Act. Special Civil Application No.21087/2016 [2.1] By way of this petition under Article 226 of the Constitution of India, the petitioner - assessee has prayed for an appropriate writ, direction and order to quash and set aside the impugned notice under Section 148 of the IT Act by which the AO has sought to reopen the assessment for AY 201213 on the ground that the income chargeable to tax for the AY 201213 has escaped assessment within the meaning of Section 147 of the IT Act. Special Civil Application No.21052/2016 [3.0] Facts leading to the Special Civil Application No.21052/2016 are as under: [3.1] That the petitioner assessee filed the return of income for AY 201112 on 30.09.2011 declaring total income of Rs. 33,03,230/. The same was processed under Section 143(1) of the IT Act. That thereafter the case was selected for scrutiny and the notice under Section 143(2) of the IT Act was issued. The questionnaire was issued and duly served on the assessee. That the assessee fu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3] That on receipt of the reasons recorded for reopening the assessment for AY 201112, the petitioner assessee submitted its objections. It was submitted that no reliance can be placed and cognizance cannot be taken from the material found from the third party premises. It was further submitted that all the parties to share application money is received is duly registered with ROC and they even possess PAN. It was further submitted that at the time of scrutiny assessment assessee furnished full particulars with respect to the details of share application money and the source and therefore, the subsequent reopening is nothing but a change of opinion of the subsequent AO. That thereafter vide order dated 14.10.2016, the AO has disposed of the objections referring to the information received from the Investigating Wing and the objections raised by the petitioner are not accepted by the AO and the AO has rejected the same in totality. Hence, the petitioner assessee has preferred the Special Civil Application No.21052/2016 challenging the impugned notice under Section 148 of the IT Act by which the AO has sought to reopen the assessment for AY 201112. Special Civil Application No.210....
X X X X Extracts X X X X
X X X X Extracts X X X X
....operated by Shri Pravin Kumar Jain as mentioned below. 1. Kush Hindustan Ent. Ltd. 2. Duke Business P. Ltd. 3. Nakshatra Business P. Ltd. 4. Olive Overseas P. Ltd. 5. Triangular Infocom Ltd. 6. Vanguard Jewels Ltd. 7. Yash V Jewels Ltd. On the basis of above mentioned fact, I have reason to believe that there is an escapement of income more than Rs. 1.00 lac in the case of the above assessee and the case is therefore, requried to be reopened u/s.147 of the IT Act by way of issuing notice u/s.148 of the IT Act." [4.3] That on receipt of the reasons recorded for reopening the assessment for AY 201213, the petitioner assessee submitted its objections. It was submitted that no reliance can be placed and cognizance cannot be taken from the material found from the third party premises. It was further submitted that all the parties to share application money is received is duly registered with ROC and they even possess PAN. It was further submitted that at the time of scrutiny assessment assessee furnished full particulars with respect to the details of share application money and the source and therefore, the subs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the parties to themselves confirmation letters and the concerned parties submitted the same. It is submitted that thereafter the AO accepted the transactions to be genuine and did not make any addition in the assessment orders. It is submitted that therefore the subsequent reopening is nothing but change of opinion of the subsequent AO and therefore, the reopening of the assessments on mere change of opinion by the subsequent AO deserve to be quashed and set aside. In support of his above submissions, Shri Soparkar, learned Advocate appearing on behalf of the petitioner has relied upon the following decisions of the Hon'ble Supreme Court, this Court and the Delhi High Court. 1. Lakhmani Mewal Das (1976) 103 ITR 437 (SC) 2. JSRS Udyog Ltd. (2009) 313 ITR 321 (Delhi) 3. Replika Press (P.) Ltd. (2013) 218 Taxman 399 (Delhi) 4. Delhi CIT vs. Usha International Ltd. (2012) 348 ITR 485 (Delhi) 5. Sarla Rakumar Varma (2015) 231 Taxman 889 (Gujarat) [5.4] It is further submitted by Shri Soparkar, learned Advocate appearing on behalf of the petitioner that from the reasons recorded and the affidavit in reply it appears that the statement of one Shri Pravin Kumar Jain recor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h Bhatt, learned Counsel appearing on behalf of the Revenue. [6.1] It is submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that in the present case the AO is justified in issuing the impugned notice under Section 148 of the IT Act to reopen the assessment for AYs 201112 and 201213 as he has formed an opinion that the income chargeable to tax has escaped assessment. [6.2] It is submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that after the assessment orders were passed by the AO, thereafter the AO received a specific information from the Principal Director of Income Tax (Investigation), Ahmedabad and forwarded information that a search under Section 132 of the IT Act was conducted in the case of one Shri Pravin Kumar Jain and the search action has resulted in collection of evidence and other findings which conclusively prove that Shri Pravin Kumar Jain is engaged in providing accommodation entries of various natures like unsecured loans, bogus share application / capital and bogus sales and purchases to the beneficiaries spread throughout India. The Assessing Officer further received the information that the present assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hare application from various bogus companies operated by Shri Pravin Kumar Jain. It is submitted that the said material along with the information was sent to the AO and thereafter the AO has formed an opinion considering the material on record which was furnished by the Principal Director of Income Tax (Investigation), Ahmedabad that the income chargeable to tax has escaped assessment during the year under consideration. [6.5] It is further submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that even otherwise the evidentiary value of the statement of Shri Pravin Kumar Jain which was recorded during the search conducted which he is reported to have been retracted subsequently is required to be considered at the time of reassessment proceedings. It is submitted that at this stage what is required to be considered is whether the AO is justified in reopening the assessment on the basis of the material / information supplied by the Principal Director of Income Tax (Investigation), Ahmedabad more particularly with respect to share application transactions or not. [6.6] It is further submitted by Shri Bhatt, learned Counsel appearing on behalf of the Reve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id Shri Pravin Kumar Jain was engaged in providing accommodation entries of various natures like unsecured loans, bogus share application / capital and bogus sales and purchases to the beneficiaries spread throughout India. From the information received and the material received from the Office of Principal Director of Income Tax (Investigation), Ahmedabad, it is found that the assessee is one of the beneficiaries of bogus share application from various bogus companies operated by the said Shri Pravin Kumar Jain. Thus, the information received from the Office of Principal Director of Income Tax (Investigation), Ahmedabad along with the evidence collected during the search action in case of said Shri Pravin Kumar Jain, the AO has reopened the assessments for AYs 201112 and 201213. Therefore, it cannot be said that there was no tangible material available with the AO to form an opinion that the income chargeable to tax has escaped assessment for the years under consideration. [7.3] Additionally, we may notice that the expression reason to believe came up for consideration before the Supreme Court in case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....argeable to tax has escaped assessment, it is required to be noted that on the basis of the information supplied by / from the office of Principal Director of Income Tax (Investigation), Ahmedabad, the AO has found that the petitioner - assessee is the beneficiary of accommodation entries provided by one Shri Pravin Kumar Jain. The AO was having with him findings of the Investigating Team based on the material recovered during the search conducted of Shri Pravin Kumar Jain Group. Under the circumstances, it cannot be said that there was no tangible material available with the AO to prima facie form an opinion / belief that the income chargeable to tax has escaped assessment. The transactions of the assessee are required to be verified in detail on the basis of the material / evidence collected during the search of Shri Pravin Kumar Jain Group. The petitioner - assessee is alleged to be the beneficiary of accommodation entries given by Shri Pravin Kumar Jain Group concerns, therefore, the same are required to be verified in detail. Under the circumstances and in the facts and circumstances of the case, it cannot be said that there is nonapplication of mind on the part of the AO that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt proceedings as fresh facts revealed the nondisclosure full and true. Such facts were not previously disclosed or it can be said that if previously disclosed, they expose untruthfulness of facts revealed. [7.6.1] The Apex Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) has held that at the stage of issuance of notice of reopening, the Assessing Officer must have a reason to believe and not the established fact of escapement of income in the following manner (headnote); "The expression reason to believe in section 147 would mean cause or justification. If the Assessing Officer has cause or 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. What is required is reason to believe but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....adopted and whether initial onus stands discharged would depend upon facts and circumstances of each case. In case of private limited companies, generally persons known to directors or shareholders, directly or indirectly, buy or subscribe to shares. Upon receipt of money, the share subscribers do not lose touch and become incommunicado. Call money, dividends, warrants, etc. have to be sent and the relationship remains a continuing one. Therefore, an assessee cannot simply furnish some details and remain quiet when summons issued to shareholders remain unserved and uncomplied. As a general proposition, it would be improper to universally hold that the assessee cannot plead that they had received money, but could do nothing more and it was for the Assessing Officer to enforce shareholders attendance in spite of the fact that the shareholders were missing and not available. Their reluctance and hiding may reflect on the genuineness of the transaction and creditworthiness of the creditor. It would be also incorrect to universally state that an Inspector must be sent to verify the shareholders/subscribers at the available addresses, though this might be required in some cases.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tice of reassessment under section 147 of the IT Act must fail. At this stage, para 20 of the decision in the case of Yogendrakumar Gupta (supra) is required to be referred to, which reads as under: "20. This Court has examined the belief of the Assessing Officer to a limited extent to inquiry as to whether there was sufficient material available on record for the Assessing Officer to form a requisite belief whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. This does not appear to be the case where the Assessing Officer on vague or unspecific information initiated the proceedings of reassessment, without bothering to form his own belief in respect of such material. We need to notice that the Joint Director, CBI, Mumbai, intimated to the DIT (Investigation), Mumbai. A case is registered against Mr.Arun Dalmia, Harsh Dalmia and during the search at their residence and office premises, the substantial material indicated that 20 dummy companies of Mr.Arun Dalmia were engaged in money laundering and the incometax evasion. The said entities included Basant Marketing Pvt. Ltd. also. From the analysis of detai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acted. From the reasons recorded it appears that the office of the Principal Director of Income Tax (Investigation), Ahmedabad sent the material / evidence collected during the search of Shri Pravin Kumar Jain and after considering and verifying the same and having been found that the petitioner - assessee is the beneficiary of the accommodation entries by way of share application from various bogus companies operated by Shri Pravin Kumar Jain, only thereafter the impugned notices under Section 148 of the IT Act are issued and the assessments for the AYs 201112 and 201213 are reopened. Even otherwise what will be the effect of the retracted statement of Shri Pravin Kumar Jain is required to be decided and/or considered at the time of reassessment proceedings. [7.11] Now, so far as the reliance placed upon the decision of the Delhi High Court in the case of Signature Workers (P) Ltd. (Supra) by the learned Counsel appearing on behalf of the assessee is concerned, on considering the facts in the said decision, we are of the opinion that the said decision shall not be applicable to the facts of the case on hand. In the present case on the basis of the information received from t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....modation entries through its concerns like Anchal Properties P. Ltd., Ansh Merchandise P. Ltd., Olive Overseas P. Ltd., Vanguard Jewels Ltd. etc. It was found that there are bogus transactions to / from account of Anchal Properties P. Ltd., Ansh Merchandise P. Ltd., Olive Overseas P. Ltd., Vanguard Jewels Ltd., to the account of the assessee company. On basis of corroborative evidence and systematic investigation, Investigation Wing has given a finding that all such transactions of accommodation entry given by certain Pravin Kumar Jain group concerns such as Anchal Properties P. Ltd., Ansh Merchandise P. Ltd., Olive Overseas P. Ltd., Vanguard Jewels Ltd. are accompanied with bogus transactions by the corresponding other party or the beneficiary i.e. Aaspaas Multimedia Ltd. in the present case. At this stage, information collected by Investigation Wing as a consequence of search u/s.132 of the Act constituted sufficient material for reopening. In CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 161 Taxman 316 (SC), it has been held that "if the Assessing Officer has cause or jurisdiction to know or suppose that income has escaped assessment, it can be said to have "reaso....