TaxTMI 
TaxTMI 
2017 (6) TMI 557
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....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 furnished the details of increasing share capital, details of source of income, details of....
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....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.21087/2016 [4.0] Facts leading to the Special Civil Application No.21052/2016 are as under: [4.1] That the petitioner assessee filed the return of income for AY ....
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.... 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 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 pe....
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....sequent 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 recorded during the search of his premises is the basis for reopening of the assessments in case of assessee for AY 201112 and 201213. It is submitted that however even before the impugned notices, the said Shri Pravin Kumar Jain retracted from his statement which is the basis for r....
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....112 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 assessee is also one of the beneficiary of such accommodation entry and is engaged in bogus share application money from various bogus concerns operated by Shri Pravin Kumar Jain. It is submitted that thereafter on the basis of such material and the information received the Assessing Officer after formin....
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....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 Revenue that the impugned notices are issued and the assessments are sought to be reopened on the basis of the information / material supplied from the office of DIT (Investigation), which is in the nature of tangible material, subsequent reopening cannot be said to be on a mere change of opinion by the subse....
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....r 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. Ltd. in which, it was held that such expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The term reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income ha....
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....n. 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 while issuing the impugned notices under Section 148 of the IT Act. [7.5] Now, so far as the submission on behalf of the petitioner that as the transactions with respect to share applications by 4 companies / shareholders named in the reasons recorded are concerned, the same were verified by the AO at the time of framing th....
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....f 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 belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief is within the realm of subjective satisfaction of the Assessing Officer. [7.6.2] In the case of Raymond Woolen Mills Ltd. v. Incometax Officer and others, reported in 236 ITR 34, the Court held th....
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....ends, 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. Similarly, it would be incorrect to state that the Assessing Officer should ascertain and get addresses from the Registrar of Companies website or search for the addresses of shareholders themselves. Creditworthiness is not proved by showing issue and receipt of a cheque or by furnishing a copy of statement of bank account, when circumstances requires that th....
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....ssing 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 details furnished and the beneficiaries reflected, which are spread across the country, the CIT, Koklata, suspected the accommodation entry related to the assessment year 200607 as well, this information has been provided to Director General of Incometax, Kolkata, who in turn, communicated to the Chief Commissioner of Incometax, Ahmedabad. Further revelation of investigation as could be n....
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....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 the office of Principal Director of Income Tax (Investigation), Ahmedabad along with the evidence collected during the search and other findings, the AO has considered the same and after verifying and considering the material on record it has been found by the AO that the present assessee is the beneficiary of the accommodation entries / bogus share application from various bogus companies o....
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....atic 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 "reasons to believe" that an income has escaped assessment. The said expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or inclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayer". In view of these facts, it is most humbly submitted tha....