TaxTMI 
TaxTMI 
2022 (4) TMI 46
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....to re-open the respondent's assessment, for the assessment year (AO) 2010-11. The respondent is hereafter, referred to as "the assessee". 2. The facts are that search proceedings were conducted- by the revenue, under the Act, at the office premises of one Shirish Chandrakant Shah on 09.04.2013 at Mumbai; during the course of the search, several materials- and documents, were seized. On analysis of such documents, the revenue was of opinion that Shirish Chandrakant Shah was providing accommodation entries, through various companies controlled and managed by him, and that the assessee was one of the beneficiaries of the business (of accommodation entries provided by Shri Shirish Shah) through bogus companies. This was based on the fact that many companies which invested amounts towards share capital on high premiums -in the assessee's company were also controlled and managed by Shri Shirish Shah. The AO, on a consideration of these and other materials, was of opinion that the assessee was also a beneficiary of the accommodation entries provided by Shri Shirish Shah. On the basis of this opinion the impugned notice to re-assess the income of the assessee for AY 2010-2011, was issue....
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....n the case of Pradeep Birewar group and that a search took place in respect of that group along with various individuals who had obtained accommodation entries of long term capital gains (LTCG) in the shares of Ganesh Spinners Ltd. from Shirish Chandrakant Shah. It was found that Pradeep Birewar was an Ahmedabad based accommodation entry provider engaged in facilitating one-time accommodation entries to various clients. The "reasons to believe" further noted that the materials seized, including the books of Shirish Chandrakant Shah contained date wise details of cash receipts and accommodation entries paid. On a consideration of all those materials, it was found that cash credit of Rs. 70.01 crores was received by Shirish Chandrakant Shah for the period 11.02.2010 to 29.07.2011. 7. The AO also recorded as follows: "2 Further, this office has also completed assessment in the cases of Pradeep Birewar group. A search action in the case of Pradeep Birewar was carried out along with various individuals who had obtained accommodation entries of Long-Term Capital Gains (LTCG) in the shares of Shri Ganesh Spinners Limited (now known as Yantra Natural Resources Limited) from Shi....
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.... the assessee has not been able to establish that the income admitted under IDS 2016 by Garg Logistics Pvt Ltd. went in the books of investor companies. It is worth to highlight that Investor companies are independent paper companies and they have provided entries independently and not through Garg Logistics Pvt Ltd. 2.3 Thus the claim of the assessee company that Cash declared by Garg Logistics was utilized to make investment in assessee company through paper companies remains unexplained. Besides, in the case of Trinetra Commerce & Trade(P) Ltd in [2016]75 taxmann.com 70(Calcutta) it was seen that assessee-company had received share capital from persons/entities whose identity, creditworthiness etc were not established. Addition u/s 68 was made been made in hands of assessee-company. Subsequent, one person K disclosed such amount before Settlement Commission as his undisclosed income. Based upon such admittance by 'K', in case of assessee company ITAT had deleted the addition u/s 68 holding that it would amount to double addition. However, Hon'ble High Court held that addition in hands of both K & assessee-company are justified since both are different person....
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....O could not have relied upon the declaration made by the Garg Logistics to so conclude. The High Court also derived strength from the circular of the CBDT dated 01.09.2016, especially, the answer to Query no.10. Contentions of parties 10. It was argued on behalf of the revenue by the Additional Solicitor General (ASG) for India, Mr. N. Venkataraman, that the impugned judgment cannot be sustained as there was tangible material justifying the reopening of assessment in the circumstances of the case. It was pointed out that the AO traced the history of the assessee company, its close association with Pradeep Birewar, one time accommodation entry received by the assessee which was discovered in the course of search in the case of Shirish Chandrakant Shah as well as Pradeep Birewar and the transaction of routing its income as investment in bogus share capital. It was urged that the mere circumstance that Garg Logistics declared the amount of Rs. 6.36 crores as undisclosed income per se could not be an explanation to induce the AO to drop reassessment notice. 11. The revenue pointed out that in fact Garg Logistics Pvt. Ltd. had not invested any amount towards share application m....
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....res as share premium and share capital during FY 2009-10 from various persons/ companies being accommodation entry providers which was untaxed and escaped assessment and that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for its AY 2010-2011, are not valid and are bad in law and facts of the present case. The foundation of the "reasons to believe" in this case lacks validity and is beyond the scheme and scope of Section 147 and 148 of the Act and IDS. 16. It was argued, that revenue reopened the assessment casually on self-contradictory grounds and the re-opening is impermissible as there is no valid "reason to believe" that the assessee's income escaped assessment. Reliance is placed on Commissioner of Income Tax v. Rajesh Jhaveri Stock Broker Ltd. 2007 (7) SCR765 and the High Court also categorically observed that the reason so recorded lacks validity and conclusions are made on surmises and conjectures which are not permissible under the law and not backed by any material on record. 17. It was argued, the fact that the assessment was originally done under Section 143(1) is not decisive in determining the validity of ....
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....e income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice." 19. Long ago, in its decision reported as Calcutta Discount Company Ltd v Income Tax officer 1961 (2) SCR 241 this court had underscored the obligation of every assessee to make a true and full disclosure and said that: "There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assesses." The court further held that once the duty is discharged, it is upto the assessing officer to inquire further and draw the necessary inferences while completing the assessment. 20. As to what can be the valid grounds for re-opening an assessment has been the subject matter of several decisions of this court. In Income Tax Officer, Calcutta & Ors. vs. Lakhmani Mewal Das 1976 (3) SCR 956 this court held that the "reasons to believe" must be based on objective materials, and on a reasonable view. The court held as follows: "The grounds or reasons which lead to t....
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....this court, in Commissioner of Income Tax, Delhi v. Kelvinator of India Ltd 2010 (1) SCR 768 after considering the previous decisions, re-stated the correct position as follows: "5....where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe"..... Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. 6. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. 7. One must treat the concept of "change of opinion" as an in-built test to check abuse of pow....
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....unt of unaccounted income of promoters/directors was introduced in the closely held companies of the assessee group through Shirish Chandrakant Shah, alleged to be a Mumbai based accommodation entry provider- through Pradeep Birewar, another accommodation entry provider based at Ahmedabad. During the course of search at the office premise of Shirish Chandrakant Shah (on 09.04.2013 at Mumbai) apparently, an MS Excel sheet "pradeep abad" in the Excel file "ac1.xls" in a pen-drive, backed up from a removable disc folder (called "Bips backup 14.02.2012) was seized from the computer in that office in form of computer back up. The AO, in the reasons recorded with the re-assessment notice stated that a comparison of data of accommodation entry provided by Shirish Chandrakant Shah through various companies controlled and managed by him and found from his office premise with the return of income of the assessee (for AY 2011-12) revealed that the latter (i.e. the assessee) had availed one time accommodation entry from various companies controlled and managed by Shirish Chandrakant Shah. The AO also noticed that the assessee had not proved credit worthiness of various share applicants, who in....
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....her, it is also apparent, that the AO's "reasons to believe" do not disclose any inquiry made in relation to Garg Logistic Pvt Ltd's account or declaration. 29. Another aspect which should not be lost sight of is that the information or "tangible material" which the assessing officer comes by enabling re-opening of an assessment, means that the entire assessment (for the concerned year) is at large; the revenue would then get to examine the returns for the previous year, on a clean slate - as it were. Therefore, to hold- as the High Court did, in this case, that since the assessee may have a reasonable explanation, is not a ground for quashing a notice under Section 147. As long as there is objective tangible material (in the form of documents, relevant to the issue) the sufficiency of that material cannot dictate the validity of the notice. 30. That brings the court to the scope and effect of the Income Declaration Scheme (IDS), introduced by Chapter IX of the Finance Act, 2016. The objective of its provisions was to enable an assessee to declare her (or his) suppressed undisclosed income or properties acquired through such income. It is based on voluntary disclosure of unta....
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....omatically extend to others. By way of example, we may notice that a person may be prosecuted for commission of an offence in relation to property under the Indian Penal Code as also under another Act, say for example, the Prevention of Corruption Act. Whereas charges under the Prevention of Corruption Act may fail, no sanction having been accorded therefore, the charges under the Penal Code would not." 32. In Tanna & Modi v Commissioner of Income Tax, Mumbai XXV & Ors 2007 (8) SCR 233 also, this court held, similarly that immunity granted for one purpose, cannot be extended for another: "20. It may be necessary for the aforementioned purpose to bear in mind that the immunity granted pursuant to acceptance of a declaration made under the voluntary taxation scheme or Kar Vivad Samadhan Scheme, 1998 does not lead to a total immunity. Immunity granted under the Scheme has its own limitations. The Scheme must be applied only in the event the conditions precedent laid down therefore are applicable. See State, CBI v. Sashi Balasubramanian and Anr.[2007]289ITR8(SC) and Alpesh Navinchandra Shah v. State of Maharashtra and Ors. 2007 (3) SCR 223 21. A raid was conducted ....