TaxTMI 
TaxTMI 
2021 (8) TMI 918
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....oner, who is an individual, had, filed Return of Income (RoI) on 17.03.2021 at net taxable income of Rs. 23,30,760/-. The assessment under section 143(3) r/w. section 153A of the Act was finalized on 31.12.2015. However, thereafter, the impugned notice under section 148 of the Act had been issued to the petitioner. The RoI for the Assessing Officer 2013-14 was filed on 21.03.2014 earlier, and there was submission dated 23.12.2015, filed before the Assessing Officer. The petitioner also furnished the information as was asked for. Thereafter, the assessment under section 143(3), r/w. section 153A of the Act was framed vide Assessment Order dated 31.12.2015. After filing RoI on 17.03.2021, based on proceedings under section 148 of the Act, the Assessing Officer supplied the reasons for reopening vide communication dated 24.03.2021. The notice under section 142(1) of the Act was issued on 08.04.2021. Against the reasons accorded, the petitioner, vide letter dated 22.04.2021, raised objections against reopening on factual as well as the legal grounds and certain submissions along with accompaniments thereto, were also filed vide communication dated 03.05.2021, however, the respondent au....
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....ad admitted that there was no name of the petitioner herein mentioned by the person namely Sanjay Shah and others whose premises had been searched on 11.09.2018. 3.4 The learned advocate for the petitioner submitted that in the order dated 10.05.2021, disposing of the objections raised by the petitioner, there was a reference of statement under section 131 of the Act dated 16.11.2018 made by Shri Jignesh Shah, wherein, he had admitted that he had provided the accommodation entry to various companies including Safal Herb Ltd. (earlier known as, Parikh Herbal Ltd.), however, such fact is incorrect for the reason that the petitioner is not provided with any such accommodation entry. Therefore, the reasons recorded are based on vague information and on conjectures and surmises. He submitted that this amounts to 'reason to suspect' and not 'reason to believe'. It is submitted that the very foundation to exercise jurisdiction under section 148 of the Act is based on information in the case of Shri Jignesh Shah and the statements made by him. However, since he has denied that he had not given the name of the petitioner and that, the petitioner was not a beneficiary, the question of proce....
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....n 131 / 132(4). He further submitted that unless any supportive material is there, even such a statement has no evidentiary value. It is submitted that even if it is presumed that there is an accommodation entry in respect of sell of scrip of M/s. Parikh Herbals, there is no documentary evidence or information received, has been confronted or brought on record. 3.8 The learned advocate for the petitioner further submitted that there is no approval under section 151 of the Act on record and therefore also, the proceedings are bad in law. 3.9 Making above submissions, it is urged by the learned advocate for the petitioner to allow the present petition and to quash and set aside the impugned notice. 4. Per contra, learned senior advocate Mr. M. R. Bhatt for the respondent authority, while opposing the present petition, drew our attention to the reasons recorded for reopening of assessment dated 24.03.2021, and submitted that how the petitioner is involved is very clear. He submitted that in the reasons recorded, it was mentioned that some common facts/patterns such as Cyclic Rise & Fall of price without any change in market and/or fundamentals of the company and large volume and tr....
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....d Sanjay Shah group (JSSS hereinafter), intimating claim of bogus exempt share profit from shares of M/s. Safal Herbs Ltd. by the assessee, the case for AY 2013-14 was reopened for reassessment. 4.2 The learned senior advocate for the respondent further drew the attention to the reasons recorded to submit that, Shri Jignesh Shah, in his statement recorded under section 131 of the Act on 16.11.2018 has accepted that he facilitated accommodation entries on long term capital gains through Sanjay Shah and Tushar Shah in companies such as Safal Herbs Ltd. (earlier Parikh Herbals Ltd.), Citizen Yarns Ltd., Noble Polymers Ltd., Dhyana Finstock Ltd., etc. The relevant part of statement of Jignesh Shah was also reproduced with the reasons recorded. 4.3 So far as the reliance placed by the learned advocate for the petitioner on the decision in United Electrical Company (P) Ltd./258 ITR 317 (supra), the learned senior advocate for the respondent submitted that the same is not applicable in the case on hand for the reason that the same is prior to the amendment. Eventually, he submitted that it was found from the detailed investigation report, based on documentary evidence and statements und....
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....ecord. The issue centered in the present petition is the issuance of the impugned notice under section 148 of the Act seeking to reopen the assessment of the petitioner for the year under consideration i.e. Assessment Year 2013-14. The challenge to the said action on the part of the department by the petitioner is on the count that when jurisdictional facts are not established, the department cannot assume the jurisdiction and reopen the assessment. According to the petitioner, at the relevant time, the petitioner had disclosed fully and truly, all material facts, relevant for the assessment and hence, merely, on the basis of change of opinion, the impugned notice is issued, which is not tenable in the eye of law. 5.1 At this juncture, it would be apt to refer to the observations made by us with regard to the scope and ambit of section 147 of the Act in paragraphs 7, 8, 9 and 10 of CAV Judgement dated 05.07.2021 rendered in Special Civil Application No. 19821 of 2019, which are as under: "7. At the outset, it may be noted that as per the settled legal position, two conditions have to be satisfied before the Assessing Officer invokes his jurisdiction to reopen the assessment unde....
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..... Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, 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 by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal P. Ltd. [1996] 217 ITR 597 (SC)]; Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances....
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....such a case. The precise observation made by the Supreme Court in the said case may be reproduced as under : - "In the present case as already noticed, the Income- Tax Officer, Azamgarh, subsequent to the completion of the original assessment proceedings, on making an enquiry from the jurisdictional Income-Tax Officer at Calcutta, learnt that the Calcutta company from whom the assessee claimed to have borrowed the loan of Rs. 50,000/- in cash had not really lent any money but only its name to cover up a bogus transaction and, after recording his satisfaction as required by the provisions of section 147 of the Act, proposed to reopen the assessment proceedings. The present is thus not a case where the Income-Tax Officer sought to draw any fresh inference which could have been raised at the time of the original assessment on the basis of the material placed before him by the assessee relating to the loan from the Calcutta company and which he failed to draw at that time. Acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment, which goes to expose the falsity of the statement made by the assessee at the time of the original a....
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.... mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment". 5.4 It would also be worthwhile to refer to the observations made by us in the CAV Judgment dated 06.08.2021 Special Civil Application No. 22613 of 2019, which read as under: "7. As stated hereinabove, the often posed question as to whether the Assessing Officer could have assumed the jurisdiction under Section 147/148 of the said Act on the basis of the information / material received from the investigating wings unearthing the bogus transactions or accommodation entries involving the assessee, has been again posed before this Court. Before adverting the submissions made by the learned advocates for the parties, it may be noted that the words "accommodation entries" have not been defined anywhere in the Act, however, in catena of decisions, the Courts have dealt with the issue of "accommodation entries". It cannot be gainsaid that the tax-evaders in order to bring back their unaccounted income to their books of accounts without paying any tax thereon,....
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....rthermore, information from the O/o. The DDIT- (Inv.), Unit-1(3), Ahmedabad was received on 24-03-2019 on webmail. As per the information, search u/s. 132 was launched on 11.09.2018 in case of Sanjay Shah and Jignesh Shah of Ahmedabad (JSSS hereinafter). The search resulted into seizure of unaccounted cash of 19.37 Crores (related to accommodation entries and commission earned thereon) along with incriminating digital as well as documentary evidences. Clandestine record of unaccounted cash, synchronized trading, proving bogus LTCG in various BSE listed scrips and transport of such cash through angadiyas was found to be maintained in secret Tally Data file with company name "123". In this secret file, against transactions of shares on BSE platform, movement (angadiya) and delivery (recd) of cash is recorded. Furthermore, the receipt of commission in cash is also recorded under the head "LTG Commission". The evidence manifest that this is the record of accommodation entries of LTCG against receipt of cash. The evidences demonstrate that accommodation entry provider duo has resorted to synchronized trading in shares of various listed companies because it is only through synchronized t....
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....espect of certain persons; iii) Cyclic Rise and Fall of Price without any change in Market and/or Fundamentals of the company indicates fabricated trading; iv) Incoherent Volume vs. Trades and their ratio. It happened in case of price manipulation; v) Very high Delivery based Volume which indicates deliveries are deliberately taken for purpose of generating fake LTCG; vi) Trades at Same Price during the day on many trading days. It indicates fabricated trades; vii) time Different Analysis lead to finding that large volume and trades occurred in very small-time window i.e. Time difference between passive order and trade. It indicates synchronized trading; viii) Meagre Order vs. Trade ratio indicates synchronized trading; ix) Selected group of clients making high trade volume in last 30 minutes indicates close price of the scrip was manipulated to move in a particular direction; x) Small group of clients mainly responsible for intra-day price movement - both Higher side and/or Lower side; xi) Many beneficiaries have traded in the scrip and contributed turnover of more than 100 Crores; xii) SEBI has passed adverse orders w.r.t. shareholding of the scrip, ....
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....eason that the petitioner was found to be the beneficiary of the accommodation entry. Therefore, there is clear failure on the part of the assessee to fully and truly disclose all the facts necessary for assessment proceeding under section 143(3) of the Act. 6.6 Thus, considering the aforesaid facts and circumstances of the case, we are of the considered view that it cannot be said that there is no reason to believe that the income chargeable to tax has escaped assessment because such exercise of reopening has been made only after due inquiries and recording of statements of concerned persons, as referred to herein above, and on having found prima facie material, impugned notice is issued to the petitioner. It further appears that, no procedural lapse and/or deviation from procedure prescribed in reopening and the reasons recorded do not lack validity as necessary approvals from the competent authority appears to have been received. 6.7 In Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income Tax, [2016] 76 Taxmann.com 106 (Gujarat), this Court has observed as under: "9. On the basis of aforesaid proposition laid by series of decisions, we are of the opinion tha....
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.... that this is not justifiable material to form a reason to belief by the Authority and therefore, this being a case, the Authority is justified in issuing notice under Section 148 of the Act to reopen the assessment and therefore, the challenge contained in the petition being devoid of merits, same deserves to be dismissed. As we found that for the exercise of power of reopening of assessment after a period of 4 years, a proper procedure is observed by the Authority, specific approval has been obtained from the competent Authority and upon perusal of original file, we have satisfied ourselves that the approval has been accorded in a proper manner by the competent Authority and since the notice is issued based upon substantial compliance of statutory provision, the Authority has acted well within the bounds of his powers and the Authority has issued notice. We found that the order which has been passed of rejecting the objections raised by the petitioner is also a well reasoned order passed after due exercise of jurisdiction and therefore, same is not, therefore, required to be interfered with." 6.8 Thus, the function of the assessing authority at this stage is to administer the s....
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....case, appear to have a rational connection with or relevant bearing on the formation of 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. Accordingly, no interference is called for at the hands of this Court in this petition under Article 226 of the Constitution of India. 6.11 We may reiterate the observation made by the Apex Court in Raymond Woollen Mills Ltd. (supra) that, "at the time of recording the reason for satisfaction of AO, there should be 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. It will be open to the assessee to prove that the assumption of fact made in the notice was erroneous at the time of assessment proceedings". 6.12 Further, in the case of Ess Kay Engineering Co. (P) Ltd. v. Commissioner of Income Tax, 247 ITR 818 (SC), also it has been observed that the Assessing Officer is not precluded from reopening the assessment of an earlier year on the basis of fresh material discovered subsequently during ....