TaxTMI 
TaxTMI 
2018 (7) TMI 1558
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....e assessment u/s 143[3] of the Act was completed on 11/12/2012 and income was determined at Rs. 2, 44, 81, 670/-. In the case of the assessee, information have been received from the DDIT [Inv] Unit-3(1), Kolkata in reference to sharing of information of shell companies which have given accommodation entries for share premium in Surat based companies. Vide the referred communication, the DDIT [Inv] Unit 3-(1), Kolkata has provided list of 114 Kolkata based shell companies which have given accommodation entries in Surat based companies. It has also been stated by the DDIT [Inv] that master data of paper/shell companies maintained by the Kolkata Directorate which has been prepared/complied on the basis of statement of many entry operators/dummy directors recorded during various search & seizure operation/survey operations/investigations/inquiries was checked. On perusal of data so provided by the DDIT[Inv] Unit 3(1) Kolkata, it is noticed that during the period under consideration, the assessee company has accepted share capital/share premium from the following entries/parties which have been proved to be shell companies based on the investigation conducted by the D....
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....hrekha Vyapar Pvt. Ltd. 6, Hanspukur Lane, 1st Floor, Room No. 106, Kolkata 17000 170000 6630000 21. Sumangal Investment Consul. Pvt. Ltd. , 6, Hanspukur Lane, 1st Floor, Room No. 106, Kolkata 5000 50000 1950000 22. Twinkle Merchants Pvt. Ltd. , 6, Hanspukur Lane, 1st Floor, Room No. 106, Kolkata 7500 75000 2925000 Total 304600 2988500 118794000 On verification of the materials available on record and facts and circumstances of the case, it is seen that the assesee has shown to have received share capital/share premium amounting to Rs. 12, 17, 82, 500/-. Since, the investor companies have been proved to be shell companies indulged in providing accommodation entries, the share capital/share premium claimed to have been received, from such companies by the assessee company is not genuine. Therefore, this amount is nothing but assessee company's own money introduced in the grab of share capital/share premium from the shell company and as such liable for taxation under the provisions of section 68 of the I. T. Act. In view of the above facts, since the above companies are proved to be bogus/paper compani....
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....basis of such original documents, he also contended that the Assessing Officer had sufficient material at his command to form a belief that income chargeable to tax had escaped assessment. Such information included the details of shell companies whose directors, in various statements recored during search, seizure and similar other actions, had admitted to have provided bogus accommodation entries. Counsel lastly contended that merely because such information was received by the Assessing Officer upon his queries breverseeing made with the Investigation Wing rather than the sequence being reverse would not vitiate the notice of reopening. The concept of impermissibility of roving or fishing inquiry cannot be attached to the stage prior to issuance of notice of reopening. In this context, he referred to section 133 of the Income Tax Act which vests the Assessing Officer with certain powers even when the assessment is not pending. 6. We have perused materials on record including the original files of the department with special focus on the four contentions raised by the counsel for the petitioner. One of them is possible of summary disposal. None of the alleged inaccuracies or th....
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....ent companies pursuant to search and seizure and such other actions, the department claims that in many of these statements such Directors had admitted to be in control of various companies which were mere shell companies and had provided accommodation entries to range of companies. Such investigation reports based on the material collected by the Investigation Wing of the Income Tax department, Kolkata were supplied to the concerned Assessing Officers of beneficiary companies of such accommodation entries who happened to be stationed at Surat. Large number of reassessment notices were issued. Many of them were challenged before us. On the basis of multiple factual and legal aspects emerging, we have given our judgements in different cases from time to time. 9. The present is, however, a peculiar case where, instead of Investigation Wing of the Income Tax department at Kolkata providing any report or information, it was the Surat Unit of the Income Tax Department which apparently contacted the Investigation Wing at Kolkata and sought information whether there was any material to link the assessee companies at Surat with such bogus accommodation entry transactions. The modality f....
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....is is, therefore, not a case where the Assessing Officer was proceeding on borrowed satisfaction or that it had dearth information at his command to enable him to form a belief that income chargeable to tax had escaped assessment. 11. Counsel for the petitioner, as noted earlier, had raised a somewhat different contention with respect to the exercise undertaken by the Assessing Officer. His view was that in the present case, the Assessing Officer initiated the inquiries at the Investigation Wing of the Income Tax department, Kolkata. He had no sound basis or reason to initiate such inquiry. According to the counsel therefore, the exercise undertaken by the Assessing Officer was vitiated on two grounds: (i) on initiating a roving inquiry and; (ii) asking for information wholly arbitrarily without having reason to believe that the assessee company had received bogus share application money. 12. It is by now well settled that for reopening of the assessment by issuing notice under section 148 of the Act, even in a case where previously no scrutiny assessment was carried out, the Assessing Officer must have reasons to believe that income chargeable to tax had es....
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....on "if the Assessing Officer has reason to believe". This aspect was highlighted by the Supreme Court in case of Commissioner of Income Tax vs. Kelvinator of India Ltd. reported in 320 ITR 561. In context of section 147 of the Act post its amendment w. e. f. 01. 04. 1989, the Supreme Court held that Section 147 does not vest arbitrary power in the Assessing Officer and held that even post amendment of 01. 04. 1989 in section 147, concept of change of opinion would apply. It was observed as under: "6. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz. , that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schemati....
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....on `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same. " 14. This Court on number of occasions has held that reopening of assessment cannot be done for carrying out roving or fishing inquiries. In case of Bakulbhai Patel vs. Income Tax Officer reported in 2011 56 DDR (Guj) 212 Division Bench of this Court finding that the reasons recorded by the Assessing Officer for reopening of the assessment only provided that the Assessing Officer desiring to carry out a detailed investigation or verification to bring the assessee in the tax net held that notice of reopening of assessment was not valid. 15. The principle, that the notice of reopening can be issued only upon the Assessing Officer bona fide forming a belief that income chargeable to tax had escaped assessment is thus, well settled. Reassessment cannot be resorted to on mere suspicion or for carrying out fishing or roving inquiries. This is so for many reasons. Reopening of a completed assessment is a serious issue. Once an assessment is reopened on a certain ground, entire assessment at the....
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.... XIII of the Act pertains to Income Tax Authorities. Part A of Chapter XIII concerns appointment and control of the Income Tax Authorities, Part B to the Jurisdiction and Part C with their powers. Section 133 is included in Part C and reads as under: "133. Power to call for information. - The [Assessing] Officer, the [Deputy Commissioner (Appeals)], [the Joint Commissioner] or the Commissioner (Appeals)] may, for the purposes of this Act, - (1) require any firm to furnish him with a return of the names and addresses of the partners of the firm and their respective shares ; (2) require any Hindu undivided family to furnish him with a return of the names and addresses of the manager and the members of the family ; (3) require any person whom he has reason to believe to be a trustee, guardian or agent, to furnish him with a return of the names of the persons for or of whom he is trustee, guardian or agent, and of their addresses ; (4) require any assessee to furnish a statement of the names and addresses of all persons to whom he has paid in any previous year rent, interest, commission, royalty or brokerage, or any annuity, not being any an....
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....Commissioner of Appeals, Joint Commissioner or the Commissioner (Appeals) for the purposes of the Act could require furnishing of various documents, informations and materials as specified therein. In particular, as per clause (6) of section 133, he may require any person including a banking company or any officer thereof to furnish information in relation to such points or matters or to furnish statements of accounts and affairs verified in the specified manner in relation to such points or matters as in the opinion of the said authority will be useful or relevant to any inquiry or proceeding under the Act. The powers of the said specified authority under section 133 of the Act are thus quite wide. Such information and material can be called for, for the purpose of the Act. Pendency of an assessment is not a precondition for exercise of such powers. Even in absence of any pending assessment, such information or material may be summoned, not only from the assessee, being an individual HUF or a firm but also from any other person including a banking company or an officer thereof. Of course, these powers are not unguided or uncanalized and cannot be exercised at the whims of the asse....
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.... is only the first stage of the action that is being pursued by the respondent Department, i. e. , as to the collection of data/material, before anybody is indicted. In so far as the said power is exercised to identify the culprits if any, it need not cause any headache to the petitioners. W. P. (C)Nos. 10334 OF 2014 & connected cases That apart, the information being collected by the Income Tax Department cannot be made use of by them, for any other purpose and the statute itself takes care of such situation, by virtue of the mandate under Section 138 of the Income Tax Act. The said provision reads as follows:" 20. The said judgement was challenged before the Division Bench of Kerala High Court. Division Bench in case of Pittambi Service Co-operative Bank Ltd & ors vs. Union of India and ors reported in 387 ITR 299 dismissed the appeal. 21. In case of Karnataka Bank Ltd vs. Secretary, Government of India and ors reported in [2002] 255 ITR 508 the Supreme Court held and observed that it is not necessary that inquiry should have commenced with the issuance of notice or otherwise before section 133(6) could be invoked. It is with a view to collect information that power is give....