TaxTMI 
TaxTMI 
TaxTMI 
2022 (3) TMI 644
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....herefore the legal issue raised by the assessee may be first examined and adjudicated. The learned Commissioner of Income-tax, Departmental representative for the Revenue does not have any objection. Therefore with the consent of both parties we are inclined to adjudicate the legal issue raised by the assessee against the assumption of reopening jurisdiction by the Assessing Officer under section 147/148 of the Income-tax Act, 1961 (hereinafter referred to as the Act) when admittedly the assessment has been reopened after four (4) years from the end of the relevant assessment year and the relevant assessment year (AY 2012-13) has undergone scrutiny assessment under section 153A read with section 143(3) of the Act dated March 31, 2016 so according to Shri S. K. Tulsiyan, the fulfilment of the additional condition precedent as laid down in the first proviso to section 147 also need to be satisfied, i. e., first proviso provides "no action of reopening shall be undertaken by the Assessing Officer after the expiry of four (4) years from the end of relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment order by reason of the failure on th....
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....g proceedings under section 147 merely on the basis of assumptions, presumptions and surmises. 5. That on the facts and in law and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in upholding the action of the learned Assessing Officer in initiating proceedings under section 147 without jurisdiction." 4. The facts of the case as discerned from the records including the paper book as well as from a perusal of the assessment order as well as the order of the learned Commissioner of Income-tax (Appeals) is that the assessee is a private limited company engaged in manufacture and trading of craft papers and paper boards. The assessee filed its return of income on March 11, 2013 declaring nil income (refer page 1 of paper book). Later a search operation was conducted under section 132 of the Act on September 16, 2013 at the premises of the assessee and thereafter the Assessing Officer issued statutory notice under section 153A of the Act on March 19, 2014 and thereafter issued notices under section 142(1) dated December 10, 2015 which is found placed at pages 3 to 5 of paper book, wherein the Assessing Officer had asked for the details of the ....
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.... paper book) and submissions placed at pages 12 to 19 of the paper book. From a perusal of the reply to the show-cause notice it is seen that the assessee had filed the details regarding the share application money of Rs. 1,58,50,000, share capital and share premium of Rs. 6,34,02,000. The assessee filed the following documents (refer pages 20-39 of the paper book) to prove identity of the share subscribers, their respective creditworthiness and genuineness of the transaction in respect of share application and share premium is received from the eleven (11) companies : (i) Form for application of equity shares (ii) Copy of board resolution of the respective companies (iii) Income-tax acknowledgment copy (iv) Certificate of incorporation. (v) Copy of bank statement duly marked. (vi) Copy of balance-sheet of the company showing the amount of shares shown in the audited balance-sheet assets side. (vii) Certificate of incorporation of Registrar of Companies of each share subscribing companies which shows that they are all registered companies under the Companies Act. (viii) PANs of all the share subscribing companies were furnished. (ix) And all of these share subscri....
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....d the reassessment order under section 153A/143(3) by order dated March 31, 2016 wherein the Assessing Officer had acknowledged that the assessee had duly complied with the notices under sections 143(2) and 142(1) of the Act and has filed replies along with documents to the requirements called for by detailed questionnaire asked by him. The Assessing Officer acknowledges that the chartered accountant of the assessee has attended the reassessment proceedings from time to time and filed details/particulars as called for as per the questionnaire and had duly noted that in course of assessment proceedings he had obtained and verified the same and thereafter has conducted the enquiry and after verification has accepted the same/return of income filed by the assessee. Moreover the Assessing Officer, (Assistant Commissioner of Income-tax, Central Circle-3, Patna) had observed in the assessment order that the order has been passed with prior approval of the Joint Commissioner of Income-tax, Central Range-1, Patna as per section 153D of the Act. 6. The aforesaid order passed by the Assessing Officer under section 153A read with section 143(3) dated March 30, 2016 was proposed to be opened ....
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....Ltd. 21-6-2011 2011-12 20,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Samkit Finance Pvt. Ltd. 29-6-2011 2011-12 20,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Samkit Finance Pvt. Ltd. 30-6-2011 2011-12 10,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Samkit Finance Pvt. Ltd. 19-8-2011 2011-12 20,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Samkit Finance Pvt. Ltd. 3-9-2011 2011-12 9,00,028 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Saphire Conclave Pvt. Ltd. 6-4-2011 2011-12 50,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Saphire Conclave Pvt. Ltd. 17-10-2011 2011-12 30,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Saphire Conclave Pvt. Ltd. 20-10-2011 2011-12 20,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Total 2,04,00,468 These ap....
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....34,02,000 and in the said scrutinised reassessment order dated March 31, 2016 under section 153A/143(3) of the Act in paras 3 and 4 has specifically observed that : "Statutory notice under sections 142(1) and 143(3) were issued to the assessee along with the detailed questionnaire. In response to which Shri Amit Kamalia, chartered accountant of the assessee attended and filed details/particulars as called for as per questionnaire and during the assessment proceedings obtained, verified and placed on record. All relevant records available have been perused and the case was discussed with the counsel of the assessee in detail. In the above circumstances, available facts in the record and after discussions made with authorised representative the return income is accepted and assessed at Rs. nil." 8. The assessee in its objection against the proposed reopening had specifically brought to the notice of the Assessing Officer that it had disclosed all material facts truly and fully as required as per the law during the already concluded reassessment proceedings dated March 31, 2016 under section 153A/143(3) of the Act, i. e., the precise material/adverse material from Investigation Win....
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.... to share application money for the financial year 2011-12, which includes share application money received from M/s. Samkit Finance Pvt. Ltd. amounting to Rs. 1,04,00,303 and from M/s. Saphire Conclave Pvt. Ltd. amounting Rs. 1,00,00,165 was not examined with due diligence as discussed above." 9. The aforesaid action of the Assessing Officer to overrule the objection raised by the assessee as well as his jurisdiction to reopen without satisfying the essential jurisdictional fact as stipulated under section 147 of the Act and more particularly the requirement of first proviso to section 147 of the Act is under challenge before us. It is noted that the Assessing Officer after overruling the objection raised by the assessee has made an addition of Rs. 2,04,00,468 under section 68 of the Act. Aggrieved by the aforesaid action of the Assessing Officer, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) who vide impugned order dated February 5, 2021 held that the Assessing Officer has rightly reopened the case of the assessee and, therefore, according to him, the issuance of notice under section 148 of the Act is valid (refer page 24 of the impugne....
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....ssessing Officer to reopen the assessment for this relevant assessment year which has already undergone reassessment under section 153A/143(3) of the Act, the additional condition precedent as prescribed by the first proviso to section 147 of the Act is attracted. According to the assessee, the essential condition precedent for invoking the reopening is not met by the Assessing Officer, so if has assailed the jurisdiction of the Assessing Officer to reopen and this being a legal issue and if found valid, then it goes to the root of the impugned action of the Assessing Officer, we are examining the same first. 12. Assailing the action of the Assessing Officer to have invoked his jurisdiction to reopen the assessment under section 147 of the Act by issuing notice under section 148 of the Act based on certain Investigation Wing report, according to the learned authorised representative, Shri S. K. Tulsiyan, the Assessing Officer has not validly recorded the "reason to believe escapement of income" of the assessee for the year under consideration. According to Shri S. K. Tulsiyan, the assessee had undergone thorough scrutiny under section 153A/143(3) of the Act on the very same issues....
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....s placed at page Nos. 3 to 5 shows that the Assessing Officer at that time itself dated December 10, 2015 had clearly nursed doubts about the credit entries from these two entities M/s. Saphire Conclave and M/s. Samkit Finance Pvt. Ltd. which is evident from page 4 wherein these two companies name also has been reflected among the eleven (11) share subscribers and their addresses given and even the finding of the Investigation Wing that these two companies are found to be non-existent by them. Armed with this adverse information only the Assessing Officer in that earlier proceeding had issued the show-cause notice date December 10, 2015 which was responded to by the assessee by filing all the details pertaining to these two companies and filed the following documents to substantiate the nature and source of the credit entries from both of them : (a) Form of application of equity shares (b) Copy of board resolution of the respective company (c) Income-tax acknowledgment copy (d) Certificate of incorporation (e) Copy of bank statement duly marked (f) Copy of balance-sheet of the company showing the amount of shares shown in the audited balance-sheet assets side. 13. Acco....
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.... has reached a conclusion on it. According to the learned authorised representative it is settled law that the Assessing Officer does not enjoy the power of review. According to Shri S. K. Tulsiyan, it is settled position of law that the concept of assessment is governed by the time barring rule and the assessee acquires a right as to the finality of the assessment proceeding. According to him, quietus of the completed assessment can be disturbed only when there is tangible material regarding undisclosed income or material to show escapement of income. Here according to Shri S. K. Tulsiyan not only this essential jurisdictional fact necessary for reopening as specified in section 147 of the Act, has been satisfied and since the reopening for the assessment year 2012-13 which has already undergone scrutiny under section 153A/143(3) of the Act was admittedly after four (4) years, the additional conditional precedent, jurisdictional fact i. e., the Assessing Officer's satisfaction that there was failure on the part of the assessee to disclose truly and fully the material facts necessary for assessment (regarding the issue i. e., the share capital/ premium from M/s. Samkit Finance ....
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....acts and circumstances of the case. Before we examine the legal issue one should bear in mind that the concept of assessment is governed by the time barring rule and an assessee acquires a right as to the finality of proceedings. Quietus of the completed assessments should not be disturbed which is the rule and exception to this rule is that it can be done only when there is information or evidence/material before him regarding undisclosed income or the Assessing Officer has information in his possession showing escapement of chargeable income and when Parliament allows such an action, which can be done only if the condition precedent stipulated therein is strictly satisfied. 16. Attention is sought to the provisions of section 147 of the Act which is reproduced hereunder : "If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section, or recomputed the loss or th....
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....essarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry which may result in detection of an income escaping assessment. Undoubtedly at the stage of recording the reasons for reopening the assessment ; all that is necessary is the formation of prima facie belief that an income has escaped the assessment ; and it is not necessary the fact of income having escaped is proved to the hilt. What is however, necessary is that there must be something which indicates even if not establishes the escapement of income from assessment. It is only on this basis that the Assessing Officer can form the belief that an income has escapement. Merely because some further investigation have not been carried out, which if made, could have led to detection to an income escaping assessment, cannot be reason enough to hold the view that income has escaped assessment. It is also important to bear in mind the subtle but important distinction between factor which indicate an income escaping the assessment and the factors which indicates a legitimate suspicion "about income escaping the assessment".....
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.... the satisfaction of the another authority. It is trite that when a statute requires a thing to be done in a certain manner, it shall be done in that manner alone and the court would not expect its being done in some other manner. It was also held in the decision in State of Bihar v. J. A. C. Saldanha, AIR 1980 SC 326. Satisfaction recorded should be "independent" and not borrowed or dictated satisfaction. In the decisions reported in State of U. P. v. Maharaja Dharamander Prasad Singh [1995] 5 SCC 302 it was held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to his own discretion. If discretion is exercised under the direction or compliance with some higher authorities instruction, then it will be a cases of failure to exercise discretion altogether. 20. In the case of Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC), the hon'ble Supreme Court held (page 11) : "It is well-settled as a result of several decision of this court that two distinct condition must be satisfied before the Assessing Officer can assume jurisdiction to issue notice under section 147(a). First, he must have reason to believe that the income of ....
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....ction to reopen an assessment. 22. In the light of the settled position of law regarding the legal issue raised by the assessee challenging the jurisdiction of the present Assessing Officer (second) to reopen the reassessment dated March 31, 2016 for the assessment year 2012-13 which had undergone scrutiny under section 153A/ 143(3) earlier in the hands of the Assistant Commissioner of Income-tax (with approval of Joint Commissioner of Income-tax under section 153D), wherein the first Assessing Officer has enquired about the very same transaction of share capital and premium, inter alia, along with other eleven (11) share subscribers/companies which was also based on the adverse report of the Investigation Wing. And based on a similar Investigation Wing material/adverse information regarding two (2) entities, i. e. M/s. Samkit Finance Pvt. Ltd. and M/s. Saphire Conclave Pvt. Ltd. before the present Assessing Officer, (hereinafter the "Second Assessing Officer") the Assessing Officer formed the belief of escapement of income. Even though it was brought to the notice of second Assessing Officer that the transaction with M/s. Samkit Finance Pvt. Ltd. and M/s. Saphire Conclave Pvt. L....
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....tel Wadhwa and Co. the auditor of the assessee-company. In the course of further investigation it was found that the 20840 shares of the assessee-company were transferred to the M/s. Pioneer Commosale Pvt. Ltd. on October 8, 2010. In this manner, the shares issued by the assessee-company for Rs. 56,60,000 was finally purchased by the family company of one of the director Shri Sanjay Kumar Modi M/s. Pioneer Commosale Pvt. Ltd. for Rs. 1,19,992. The above facts clearly shows that the assessee-company was in the practice of infusing unaccounted fund from dubious sources through the accommodation entries. It further finds support from the statement given by one of the director Shri Ashok Kumar Bagaria under section 132(4) in which it was categorically admitted that huge funds were poured into the coffer of the company by the help of accommodation entries. Therefore, considering the similar nature of transactions made with all the above companies and singularity of the occasion of issue of shares, it appears that the above companies being paper companies utilised as the conduits for providing accommodation entries solely managed by the accommodation entry operators. Therefore it is ....
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....uity shares (ii) Copy of board resolution of the respective companies (iii) Income-tax acknowledgment copy (iv) Certificate of incorporation (v) Copy of bank statement duly marked (vi) Copy of balance-sheet of the company showing the amount of shares shown in the audited balance-sheet assets side. (vii) Certificate of incorporation of Registrar of Companies of each share subscribing companies which shows that they are all registered companies under the Companies Act. (viii) PANs of all the share subscribing companies were furnished (ix) And all of these share subscribing companies are assessed to tax. (x) The assessee-company has filed copy of their balance-sheet which reflected the shares of the assessee-company in their respective books of account on the assets side. (xi) Their CIN, address were also furnished. (xii) The assessee-company after the receipt of share application money has allotted the shares to the respective applicants after approval by its Board. (xiii) After the approval in the Board meeting, the return of allotment in form 2 has been filed with the Registrar of Companies. (xiv) Then share certificate has been issued for the allotted sha....
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....g the nature and source of the credit entries from these two companies also. So we find that the first Assessing Officer has made the reassessment after discharging his duties as an investigator as well as that of an adjudicator. So the action of the Second Assessing Officer to again rake up the same issue which has undergone scrutiny by his predecessor Assessing Officer is nothing but review of the action of first Assessing Officer dated March 31, 2016, which power it is settled that the Assessing Officer (second) does not enjoy. So the impugned actions of the second Assessing Officer can at best be termed as change of opinion after review of earlier assessment which is not a jurisdictional ground to legally/validly usurp reopening jurisdiction. And therefore the action of the second Assessing Officer is held to be bad in law on this score alone. Moreover, we find substantial merit in the contention of the learned authorised representative Shri S. K. Tulsiyan that the second Assessing Officer has believed escapement of income on the strength of borrowed satisfaction of the Investigation Wing without conducting preliminary enquiry which action is also bad in law. Moreover, it is no....