TaxTMI 
TaxTMI 
2021 (8) TMI 620
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.... Assessment Year 2013-14 (i.e. the year under consideration), derived income from the house property, business income and income from other sources. During the year under consideration, the petitioner entered into Agreements to Sell in respect of the Offices owned by him being Office Nos. HG- 12 and HG-13, situated in International Trade Center, Majura Gate Crossing, Ring Road, Surat, with Babylon Trading and Investment Pvt. Ltd., dated 23.08.2012 for Rs. 70 lakh, and received part consideration of Rs. 35 lakh through RTGS and with Gyaneshwar Vyapar Pvt. Ltd. dated 25.09.2012 for Rs. 70 lakh and received part consideration of Rs. 50 lakh through RTGS. Since, the said offices were occupied by the tenant and the petitioner could not get the same vacated, the aforesaid agreements to sell came to be cancelled vide agreements dated 10.11.2012 and 01.12.2012 respectively. Accordingly, amounts of Rs. 36,40,384/- and Rs. 51,61,096/- (principal + interest) were returned to the Babylon Trading and Investment Pvt. Ltd. and Gyaneshwar Vyapar Pvt. Ltd. respectively, by cheque No. 401374, debited to the petitioner's account on 21.12.2012 and No. 401381, debited to the petitioner's account on 29.....
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....0,056) had escaped assessment. Hence, the case of the petitioner for the year under consideration was reopened. Against the reasons accorded, the petitioner, vide letter dated 19.09.2019, raised objections against reopening on factual as well as the legal grounds, however, the respondent authority disposed of the said objections raised by the petitioner vide order dated 11.10.2019 inter alia holding that the reopening is justified and valid in the eyes of law. Being aggrieved, the petitioner is before this Court by way of this petition. 3. We have heard, learned senior advocate Mr. Tushar Hemani for learned advocate Ms. Vaibhavi Parikh for the petitioner and learned advocate Mr. Nikunt Raval for learned advocate Mrs. Kalpana Raval for the respondent. 3.1 The learned senior advocate for the petitioner has vehemently submitted that the basis for reopening the assessment by the Assessing Officer is receipt of money by the petitioner from the aforesaid companies, however, in fact, the said money, received towards part consideration in respect of two agreements to sell of the offices owned by the petitioner, was returned, with interest, to the said companies by cheques as the agreemen....
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.... assessment and accordingly, merely because the Assessing Officer happens to change his opinion, action under section 147 of the Act cannot be taken. It is contended and argued by the learned senior advocate for the petitioner that the assessment for the year under consideration was found to be proper and the same was admitted by the Assessing Officer and therefore, if creditworthiness was found in the transactions, the impugned reopening, merely relying upon the information received from the DDIT (Inv.), Unit 1(3), Kolkata and DDIT (Inv.), Unit 4(2), Kolkata, sans any independent satisfaction of the Assessing Officer, only on borrowed satisfaction, is illegal and bad in law and it cannot be said that the petitioner has failed to disclose fully and truly all material facts relevant for the assessment. 3.4 The learned senior advocate for the petitioner further submitted that the petitioner has no connection, either with Mukesh Banka or Gopal Banka or Manoharlal Nanglia and the petitioner has never carried out any transaction with them. Further, there is no statement on record to show that the accommodation entry has been provided to the petitioner and only on the basis of generaliz....
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....anoharlal Nanglia and used for facilitating accommodation entries to the beneficiary companies. It was eventually found that the assessee i.e. the petitioner herein had received Rs. 35,00,056/- in the form of accommodation entry in the nature of unsecured loan or other forms, which clearly shows that the income chargeable to tax has escaped assessment. 4.2 It is further submitted by the learned advocate for the respondent that the petitioner had shown unsecured loan of Rs. 15,25,68,165/- under the head "Unsecured Loan from Others", which shows that the petitioner had received unsecured loan from the above two parties and hence, the contention of the petitioner that the petitioner had received advance against the agreements to sell, is nothing but an afterthought. It is submitted that the financial analysis of such paper/shell companies of Banka Group from which the petitioner had received unsecured loan, had been carried out by the Investigation Wing, Kolkata which revealed that, i) no profit accumulation in the company/ies across various financial year; ii) no actual business is done being "0" turnover; iii) most of the companies have shown income under the head of "other income"....
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....department at the time of recording the reasons for reopening have been duly discussed in the reasons. 4.6 So far as the contention of the petitioner that the case is reopened beyond a period of four years from the end of the relevant assessment year is concerned, the learned advocate for the respondent submitted that all the requirements under section 147 of the Act to initiate the proceedings are fulfilled. Further, the case of the petitioner was reopened on account of information received from the Investigation Wing, Kolkata, as referred to herein above and from the information disseminated by the Investigation Wing, Kolkata, it is evident that the assessee has failed to furnish fully and truly, all material facts before the Assessing Officer. 4.7 Making above submissions, it is urged that the Court may not interfere in the impugned notice and requested to dismiss the petition. 5. Having regard to the submissions advanced by the learned advocates for the respective parties and having perused the material placed on record, it appears to us that the learned senior advocate for the petitioner has challenged the impugned notice mainly on the ground that when jurisdictional facts ....
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....note that as held by the Supreme Court in catena of decisions, the formation of belief by the Assessing Officer at the stage of initiation of action under section 147 of the Act is within the realm of subjective satisfaction. The Supreme Court in the case of Assistant Commissioner of Income Tax versus Rajesh Jhaveri Stock Brokers P. Ltd. reported in (2007) 291 ITR 500(SC), had an occasion to deal with the scope and effect of section 147 as substituted w.e.f. April 1st, 1989, in which the Court has observed as under : - "Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. 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. The function of the Assessing Officer is to administer the statute....
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....he conditions must be fulfilled if the case falls within the ambit of the proviso to section 147." 9. In the case of Raymond Woollen Mills Ltd. Versus Income-Tax Officer and others reported in 1999 236 ITR 34(SC), the Supreme Court observed that the Court has only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 10. It is very pertinent to note that in the case of Phool Chand Bajrang Lal versus Income-Tax Officer reported in 203 ITR 456 (SC), it was observed that the acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment, which went to expose the falsity of the statement made by the assessee at the time of original assessment was different from drawing fresh inference from the same facts and material which was available with the Income-Tax Officer at the time of the original assessment proceedings. Where the transaction itself on the basis of the subsequent information was found to be a bogus transaction, the mere disclosure of that transaction at the time of origina....
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..../ information, etc. leading him to reopen the assessment. 5.3 The ambit and import of the term "reason to believe" has been examined in numerous cases, notably in ITO v. Lakhmani Mewal Das [(1976) 103 ITR 437: 1976 (3) SCC 757]. The Apex Court held that, "the reason must be held in good faith. It cannot be merely a pretence. It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the Income Tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a Court of law. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own....
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.... and when it prima facie establishes the link between the assessee and the third party who is an accommodation entry provider, the Assessing Officer is empowered rather duty bound to make further inquiry / investigation to unearth such camouflage or wrong or illegal dealings of the assessee. As observed by the Supreme Court in the case of Sumati Dayal vs Commissioner Of Income-Tax reported in AIR 1995 SC 2109, apparent must be considered as real until it is shown that there are reasons to believe that apparent is not real, and that the Taxing Officers are entitled to look into the surrounding circumstances to find out the reality, and the matter has to be considered by applying the test of human probabilities." 6. In the aforesaid prelude, if the facts of the case are adverted to, as referred to herein above, it is the case of the petitioner that the petitioner had returned the amounts in pursuance to the agreements to sell, as aforesaid during the year under consideration and that, there is no tangible material, even otherwise in the hands of the respondent to substantiate that the income chargeable to tax has escaped assessment qua the assessee. The department, in the reasons r....
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....ll companies of Banka Group from which the petitioner had received unsecured loan, was carried out by the Investigation Wing, Kolkata which revealed that, i) no profit accumulation in the company/ies across various financial year; ii) no actual business is done being "0" turnover; iii) most of the companies have shown income under the head of "other income", which shows that the companies have no actual business activity; iv) Shri Mukesh Banka, in his statements under sections 131 and 132(4) of the Act, respectively recorded on 30.05.2018 and 19.07.2018, has admitted that these companies are paper/shell companies, controlled and managed by him; v) the Directors of these companies are dummy Directors as per the statements of Shri Mukesh Banka, recorded under section 132(4) of the Act; and vi) these companies were found to be non-existent as per the inquiry made by the Inspector of the Income-Tax of Investigation Wing, Kolkata. 6.3 Moreover, on examination of the bank account, it was observed that the bank account was credited with transfers or RTGS, which were directly credited to the account of the beneficiary concerns or layered through the bank accounts of shell/paper companies ....
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....m the said additional material available on hand a reasonable belief is formed by the Assessing Authority that income of the petitioner has escaped assessment and therefore, once the reasonable belief is formulated by the Authority on the basis of cogent tangible material, the Authority is not expected to conclude at this stage the issue finally or to ascertain the fact by evidence or conclusion, we are of the opinion that function of the assessing authority at this stage is to administer the statute and what is required at this stage is a reason to believe and not establish fact of escapement of income and therefore, looking to the scope of Section 147 as also Sections 148 to 152 of the Act, even if scrutiny assessment has been undertaken, if substantial new material is found in the form of information on the basis of which the assessing authority can form a belief that the income of the petitioner has escaped assessment, it is always open for the assessing authority to reopen assessment. From the reasons which are recorded, it clearly emerges that the petitioner is the beneficiary of those entries by Kayan brothers, who are well known entry operators across the country and this f....
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.... has been undertaken, if substantial new material is found in the form of information on the basis of which the assessing authority can form a belief that the income of the petitioner has escaped assessment, it is always open for the assessing authority to reopen the assessment. 6.8 Further, in the decision in Aaspas Multimedia Ltd. v. Deputy Commissioner of Income Tax, Circle 1(1), [2017] 83 Taxmann.com 82 (Gujarat), it is observed as under: "...In the present case the reassessment proceedings have been initiated by the Assessing Officer on the basis of material provided by the Principal Director (Investigation). It is also required to be noted that the genuineness of the various companies who made share applications are doubted. The assessee is alleged to have been engaged in bogus share applications from various bogus concerns operated by PKJ. The assessee is the beneficiary of the said transactions of share application by those bogus concerns. In the wake of information received by the Assessing Officer, when the Assessing Officer formed a belief that the investment made from the funding of such companies which are bogus, the Assessing Officer has rightly assumed jurisdiction ....