TaxTMI 
TaxTMI 
2021 (3) TMI 55
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....claimed loss of Rs. 10,57,484/-. The same was processed without any scrutiny by the Revenue under Section 143(1) of the Act. 2.2 The Assessing Officer has issued notice under Section 148 of the Act based on the reasons recorded dated 06.03.2019. In response to the said notice, the assessee requested the Department to treat the original return under Section 139(1) of the Act filed on 29.09.2012 as the return of income. Notice under Section 142(1) of the Act was issued calling for the necessary particulars. As per the case of the Revenue, the Assessing Officer had received information from the ITO, Ward 6(1), Ahmedabad, vide letter dated 11.04.2014, that during the scrutiny assessment under Section 143(1) for the A.Y. 2011-12 in the case of Smt. Harshaben Rasikbhai Gosai, who is the proprietor of Mahavir Enterprise, it was found that, there was a high value financial transaction in her bank account and in connivance with one Mr. Kundan Mudaliar, whose statement was recorded on oath under Section 131(1A) of the Act, they are alleged to have provided accommodation entries through bogus billing activities to many business concerns and the assessee company was also one of the benefici....
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....ee company has filed returned income at Nil and shown profit from business or profession amounting to Rs. 1,49,207/-. Gross purchase during the year is Rs. 27,95,31,686/-, which is 126.3% of immediate previous year and sales amounting to Rs. 30,02,13,272/- is approximately 114% of previous assessment year i.e. 2011-12. Opening stock is Rs. 7,75,32,193/-. From the bank statement of R S Enterprise, P M & Company and J K Enterprise, it is seen that the assessee had made transaction with these concerns. It has 'been established during the assessment proceedings of Smt. Harshaben Rashikbhai Gosai [Prop. of Mahavir Enterprise] that these companies provided accommodation entry to the assessee company through bogus billing. The assessee company i.e. Cemach Machineries Limited has received Rs. 3,13,25,643/- from R S Enterprise Rs. 7,07,10,072/- from P M & Company and Rs. 4,64,43,777/- from J K enterprise. Thereby aggregating a total sum of Rs. 14,82,79,492/- which is received through fraudulent means [i.e. by way of bogus billings] which has escaped assessment. 3. Findings : It is observed from the table as mentioned in para 4 above, that high value financial transactions were made....
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....tisfaction of the officer must be recorded with regard to income chargeable to tax has escaped assessment. On the facts of the case, it was pointed out that, the respondent has merely relied upon the information received from the concerned ward of the Income Tax office for the purpose of re-opening of the assessment. Referring to the reasons for re-opening, Mr. Shah submitted that, the Assessing Officer has not at all applied his mind independently, so as to reach a conclusion that any income has escaped assessment. Therefore, in absence of any such exercise at the end of the respondent, it is evident that, the assessment has been reopened merely based on the borrowed satisfaction. (b) It was further pointed out that, the Assessing Officer has recorded the reasons for re-opening only for investigation and verification purpose. Therefore, on the basis of suspicion as to escapement of income chargeable to tax, the Assessing Officer has recorded the reasons for further verification of the issues, which cannot be permissible. In this regard, it was pointed out that, all the transactions were made through the cheques and necessary entries had been mentioned in the sales and led....
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....om 468 (SC) (vi) New Kaiser Hind Spg. Mill, 107 ITR 760 (Bom.) (vii) NU Power Renewable Energy, 2018 94 taxmann 29 (Bom.) 7. In view of the above submissions and contentions, Mr.K.M.Shah, learned counsel appearing for the writ applicant prays that, present writ application may be allowed. 8. Mrs. Mauna Bhatt, learned Sr. Standing Counsel appearing for the Revenue would submit that, the authority is justified in reopening of the assessment as they had having enough material to substantiate the re-opening and for forming a reasonable belief that, the income has escaped the assessment. She was pointed out that, after receiving the information in relation to the assessee with regard to accommodation entries through the bogus billing, the Assessing Officer had verified the details of the assessee with regard to sales and purchase made during the year under consideration and also made scrutiny about the bank statements of three entities and prima facie of the view that, the assessee had received the amount of Rs. 14,82,79,492/- by way of bogus sales through fake bills/vouchers and on that basis, after making independent inquiry and application of mind, he has reas....
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....) In Ganga Saran & Sons Pvt. Ltd. Calcutta, Vs. Income Tax Officer (1981) 3 SCC 143, wherein, the Apex Court has observed thus : ".....The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income-tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147 (a). (iii) In Principal Commissioner of Income Tax, Rajkot -3, Vs. Gokul Ceramics, (2016) 241 taxmann 341 (Guj.), wherein, this Court has observed thus: "9. It can thus be seen that the entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was alongwith report and show cause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped asse....
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....ection 147(a) of the Act was satisfied." 11. In case of Income Tax Officer vs. Purushottam Das Bangur (Supra) after completion of assessment in case of the assessee, the Assessing Officer received letter from Directorate of Investigation giving detailed particulars collected from Bombay Stock Exchange which revealed earning of share and price of share increased during period in question and quotation appearing at Calcutta Stock Exchange was as a result of manipulated transaction. On the basis of such information, the Assessing Officer issued notice for reopening of the assessment. The question, therefore, arose whether the information contained in the letter of Directorate of Investigation could be said to be definite information and the Assessing Officer could act upon such information for taking action under Section 147(b) of the Act. In such background, the Supreme Court observed as under: "12. Ms. Gauri Rastogi, the learned counsel appearing for the respondents, has urged that the letter of Shri Bagai was received by the Income tax Officer on March 26, 1974 and on the very next day, that is, on March 27, 1974, he issued the impugned notice under Section 147(b)....
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....excessive coal mining said to have been done by the respondent over and above the figure disclosed by it in its returns. Whether the facts stated in the letter are true or not is not the concern at this stage. It may be well be that the assessee may be able to establish that the facts stated in the said letter are not true but that conclusion can be arrived at only after making the necessary enquiry. At the stage of the issuance of the notice, the only question is whether there was relevant material, as stated above, on which a reasonable person could have formed the requisite belief. Since we are unable to say that the said letter could not have constituted the basis for forming such a belief, it cannot be said that the issuance of notice was invalid. Inasmuch as, as a result of our order, the reassessment proceedings have not to go on we don not and we ought not to express any opinion on the merits." 13. In case of AGR Investment Ltd. vs. Additional Commissioner of Income Tax & (Supra), Division Bench of Delhi High Court considered the validity of reopening of assessment where the notice was based on information received from Directorate of investigation that the assesse....
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....e him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities Co. Pvt. Ltd. (supra), the Division Bench had noted that certain companies were used as conduits but the assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transactions and the assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments were made to the assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score." 13. Learned Single Judge of Madras High Court in case of Sterlite Industries (India) Ltd. vs. Assistant Commissioner of Income Tax reported in [2008] 302 ITR 275 (Mad) upheld the notice for reopening which was based on information from enforcement directorate showing possible inflation of purchases made by....
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.... the assessee had received share application money from several entities which were only engaged in the business of providing bogus accommodation entries to the beneficiary concerns, the reassessment on the basis of said information was justified". 13. It is an undisputed fact that, the return of income of the assessee was processed under Section 143(1) of the Act and was accepted without any scrutiny and no assessment stipulated under Section 2(40) of the Act was made. In this background, the proviso to Section 147 of the Act will not apply and therefore, though the reopening initiated after expiry of four years, it would not be necessary for the assessing officer to show that, there was failure to disclose fully and truly the material facts necessary for the assessment by the assessee. The record indicates that, notice under Section 142(1) of the Act was served upon the assessee and he was asked to furnish necessary details for the verification, however, the assessee failed to submit necessary details. 14. We have examined the reasons for re-opening in details, more particularly paras 2 to 7 as referred to above. The reasons are self-explanatory. The Assessing Officer has o....
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....e was live link or direct nexus between the material which suggested the escapement of income and information on the basis of which, it could be said that, the income has escaped assessment. Therefore, the Assessing Officer has acted on specific information and after collecting the available material as referred to above has opened his mind through reasons and formed a belief that, the income has escaped assessment. 17. It is settled law that, at the stage of Section 148 of the Act, what is required is "reason to believe", but not the established fact of escapement of income. This aspect has been considered by the Apex Court in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri (2008) 14 SCC 208, wherein, the Apex Court has observed that, "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 and whether the material would conclusively prove the escapement is not the concern at that stage". 18. In view of the aforesaid discussions made hereinabove and considering the facts and circumstances of the case, it cannot be siad that there was no material before the ....