TaxTMI 
TaxTMI 
2021 (4) TMI 92
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....er Section 143 (1) of the Act. The case was selected for scrutiny assessment and under Section 143 (2) of the Act, the notice was issued on 06.08.2013. The notice under Section 142 (1) of the Act along with questionnaire was issued on 17.10.2013 and 30.10.2014 and in response to the notices, the assessee company submitted its details. After perusing the details furnished by the assessee, the assessing officer raised the issues i.e. (1) Disallowance of cash payment under Section 40A (3) of the Act, (2) Employee's contribution towards P.F & ESIC (3) Disallowance under Section 195 of the Act and finally, the additions were made under the issue raised and the scrutiny assessment framed vide order dated 04.03.2015. 2.2 Thereafter, the assessing officer reopened the assessment under Section 147 of the Act by issuing impugned notice dated 01.03.2018 under Section 148 of the Act. 2.3 At the request, the reasons recorded have been furnished to the assessee, which reads as under:- "Brief details of the assessee The assessee company is engaged in the business manufacturing of Pharmaceuticals Intermediates. The assessee filed its e-return of income on 27.09.2012 dec....
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....ACAREATEPP8150D8D W PHARMA TRADEAAWPW0421A9KINGSY PHARMAABRPW5450E10NAVPAD CHEMAGKPM6888Q11SOMIL ENTERPRISE PVT LTDAAKCS9160L12SWASTIK PHARMACEUTICALSAADPS3220M13YASH CHEMAODPM1361D Furthermore, summons issued to the assessee at F-15, Saibaba Nagar, Boriwali (W), Mumbai was returned unserved. An inspector was deputed to trace out the assessee. Inspector submitted his report, wherein it has been stated that the above mentioned subject party is not traceable at the given address. In view of the above facts that the assessee is a non filer, there are huge credits and almost equal debits in the bank in the bank accounts of the assessee, name of the assessee is operating in the hawala dealer list for F.Y. 2009-10 & 2010-11; the names of many parties who have credited/debited amounts to /from the accounts of the assessee are also reflecting in such list either as Hawala Dealer or as beneficiaries; it is established that the assessee is merely a entry provider having not genuine business. Therefore, all the parties who/which have credits or to whom money is debited are alleged beneficiaries of accommodation entries provided by the assessee in the form of either ....
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....for showing bogus purchase in assessee's books. Besides, it is also to be considered that as per the information M/s. Brown Pharmaceuticals & Chemicals is amongst the concerns which are declared as suspicious parties by Maharashtra State VAT Department. The assessee assessed under the jurisdiction of this office is also one of the beneficiaries of the accommodation entries provided in the form of purchase/sale by M/s. Brown Pharmaceuticals & Chemicals, Transactions with a merely entry provider entry which has not genuine is enough to formulate the reason to believe that the amount of Rs. 1,40,78,914/- has not been taxed and has escaped assessment. Basis of formation of reason to believe : The following facts emerging from information/data available with this office make strong reason to believe that the amount of Rs. 1,40,78,914/- is assessee's bogus purchase and it was to be added in assessee's income. Thus, this income chargeable to tax has escaped assessment and this is a fit case for the proceedings u/s. 147 of the I.T.Act, 1961. Shri Yogesh D Waghela (Prop. Of M/s. Brown Pharmaceuticals & Chemicals, PAN AAWPW7911Q) has not filed return of....
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....ceding paragraphs. I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the assessment proceedings and have noted that the assessee has not fully and truly disclosed the material facts necessary for his assessment for the year under consideration. It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening u/s. 147 of the Act. It is true that the assessee has filed a copy of annual report and audited P & L A/c. and balance sheet along with return of income where various information / material were disclosed. However, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above, It is pertained to mention here that even though the assessee has produced books of accounts. Annual report, audited P & L A/c and balance sheet or other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence co....
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....cant has raised the following contentions : (a) The impugned notice is patently bad, illegal and contrary to law; (b) The learned counsel for the writ applicant vehemently argued that, there was no failure on the part of the assessee to disclose necessary materials at the time of original assessment and now in the absence of any tangible material in the hands of the Assessing officer, reopening is impermissible in law. In this regard, the learned counsel submitted that, at the time of previous assessment, various details were called for including purchase and sales register, stock register, monthly quantitative and value wise details of purchases and after examining the details, conscious decision being taken by the assessing officer not to make any addition in respect of purchases while framing the assessment under Section 143 of the Act. Therefore, the amount paid to M/s. Brown Pharmaceuticals at the instance of Aroma Impex to discharge the dues having reflected in the ledger of said entities as well as in the audited books of accounts, which had already been examined at the time of scrutiny assessment. In this background of the facts, the learned counsel submit....
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.... facts, the learned counsel for the revenue submitted that, the whole transactions reflected in the books of account of the assessee is nothing, but an accommodation entry for which the assessing officer has rightly come to the conclusion that the income has escaped assessment. 8. Having heard the learned counsel for the respective parties and having gone through the materials on record, the only question that falls for our consideration is whether the impugned notice of reopening should be quashed ? It is an admitted fact that, the assessee Ami Organics ltd. entered into financial transactions to the tune of Rs. 1,40,78,914/- with M/s. Brown Pharmaceuticals for the year under consideration. According to the case of the assessee, it made total purchases of Rs. 25,68,35,509/- during the year under consideration which were duly reflected in the audited annual accounts. The total purchases included the purchases of Rs. 2,56,18,486/- made from Aroma Impex and certain payments were directly made to Aroma Impex, however, as regard the payment to the tune of Rs. 1,40,78,914/- due to the Aroma Impex, the party i.e. Aroma Impex had requested the assessee to make payment to that extent i.....
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....e specific and definite information, the assessing officer after being duly satisfied reached to the conclusion that, the assessee failed to disclose true facts with regard to the transactions made with M/s. Brown Pharmaceuticals, which provides a link between his conclusion and materials gathered during the enquiries. 12. In view of the aforesaid discussions, it could be said that after framing of the assessment made under Section 143(3) of the Act, some tangible material came into the hands of the assessing officer through the investigation wing and upon perusal of the same, he made independent enquiries and applied his mind and upon due satisfaction, he formed an opinion that, the income has escaped assessment. 13. The learned counsel for the writ applicant vehemently contended that, it is a case of mere change of opinion and the proceedings could be said to have been initiated mechanically on the basis of the third party information. This Court in the case of Aaradhna Estate Pvt. Ltd. Vs. Deputy Commissioner of Income Tax [(2018) 91 taxmann.com 119], after referring to various other decisions of this Court as well as of the Apex Court observed in paras 11, 12, 13, 14, 15 ....
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.... company obtained accommodation entry in the form of loans and advances from Basant Marketing Pvt. Ltd. and, therefore, the Assessing Officer based his reason to believe that the income chargeable to tax had escaped the assessment. Xxx 17. In the post notice correspondence dated March 05, 2014, it has been stated by the Assessing Officer that Basant Marketing Pvt. Ltd. provided accommodation entry to various companies, where assessee company is one of them. Basant Marketing Pvt. Ltd. is a dummy company of one Shri Arun Dalmia and substantial material is found to base such reasons recorded during the search by CBI, Mumbai and, therefore, the Assessing Officer issued a notice to show cause as to why the said amount of Rs. 8.71 crore received from Basant Marketing Pvt. Ltd. should not be treated as cash credit under section 68 of the Act. 21. 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. ....
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....nal assessment had examined the transactions. However, such examination would necessarily be on the basis of disclosures made by the assessee in the return filed and during the scrutiny assessment. If the Assessing Officer has information to form a reasonable opinion that prima facie the entire transaction itself was sham and bogus, as reference to such transaction during the original assessment and raising certain queries in this respect would not prevent him from reopening the assessment on the principle of change of opinion. As noted, the opinion would be formed on the basis of disclosures. When disclosures are found to be prima facie untrue, the opinion formed earlier would not prevent Assessing Officer from examining the issue. In the present case, as noted, Assessing Officer received additional information after the original assessment was over, on the basis of which he formed a belief that the entire transaction was a sham transaction. At this stage, where the Court is examining the validity of notice of reopening, it is not necessary that the Assessing Officer must have conclusive evidence to hold that invariably additions would be made in the income of the assesse....
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....of the Assessing Officer, satisfactory, the sum so credited maybe charged to incometax as the income of the assessee of that previous year. That the share application money received by the assessee from abovenoted companies was only by nature of accommodation entries and in reality, it was the funds of the assessee which was being rerouted. Undoubtedly. Section 68 of the Act would have applicability. Proviso added by the Finance Act 2012 with effect from 1.4.2013, does not change this position. Proviso reads as under : "68.... Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assesseecompany shall be deemed to be not satisfactory, unless ( a) the person being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found t....
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....income chargeable to tax had also escaped assessment. When thus the Assessing officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the reopening could not and should not have been declared as invalid, on the ground that he proceeded on the showcause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue. 10. In case of Central Provinces Manganese Ore Co. Ltd.vs. Income Tax Officer, Nagpur ((supra)) the Supreme Court noted that in case of the assessee which had an office in London, this Customs authority had come to know that the assessee had declared very low price in respect of the consignment of Manganese exported by them out of India. After due inquiries and investigations, the Customs authorities found that the assessee was systematical....
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.... 1974, he issued the impugned notice under Section 147(b) of the Act and that he did not have conducted any inquiry or investigation into the information sent by Shri Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri Bagai does not mean that the Income Tax Officer did not apply his mind to the information contained in the said letter of Shri Bagai. On the basis of the said facts and information contained in the said letter, the Income Tax officer, without any further investigation, could have formed the opinion that there was reason to believe that the income of the assessee chargeable to tax had escaped assessment. The High Court, in our opinion, was in error in proceeding on the basis that it could not be said that the Income Tax Officer had in his possession information on the basis of which he could have reasons to believe that income of the assessee chargeable to tax had escaped assessment for the relevant assessment years. For the reasons aforementioned, we are unable to uphold the impugned judgment of the High Court. The appeal is, therefore, allowed, the impugned judgment of the High Court is set aside and the Wr....
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.... on information received from Directorate of investigation that the assessee was beneficiary of bogus accommodation entries. The Court while upholding the validity of reopening observed that sufficiency of reason cannot be considered in a writ petition. It was observed as under: "23 The present factual canvas has to be scrutinized on the touchstone of the aforesaid enunciation of law. It is worth noting that the learned counsel for the petitioner has submitted with immense vehemence that the petitioner had entered into correspondence to have the documents but the assessing officer treated them as objections and made a communication. However, on a scrutiny of the order, it is perceivable that the authority has passed the order dealing with the objections in a very careful and studied manner. He has taken note of the fact that transactions involving Rs. 27 lakhs mentioned in the table in Annexure P2 constitute fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income. The assessing officer has referred to the subsequent information and adverted to the concept of true and full disclosure of facts. ....