TaxTMI 
TaxTMI 
2022 (9) TMI 661
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....47 of the Income Tax Act, 1961 by not appreciating the facts of the issue? 3. We have heard Mr. Prithu Dudhoria, learned standing counsel appearing for the appellant and Mr. Avratosh Majumdar, learned Senior advocate assisted by Mr. Avra Majumder, Mr. Binayak Gupta, Sk. Md. Bilmal Hossain and Mr. K. Ray advocates for the respondent assessee. 4. The assessee filed their return of income for the assessment year under consideration, A.Y. 2011-2012, on 30.09.2011 declaring a total income of Rs. 34,66,719/-. The assessment was completed under Section 143(3) on 27.03.2014 with the total income of Rs. 1,87,52,820/-. The assessment was reopened under Section 147 of the Act on the ground that the department was in receipt of information that in the assessee's current account since the year 2010 large value of non-cash transactions have occurred amounting to around Rs. 28,56,66,139/-. Thus, the allegation was that the assessee routed its own funds through paper/shell companies which also indicates bogus billings. Further during the financial year 2010-2011, a sum of Rs. 3.41 crores was deposited on different dates in the assessee's bank account which needs verification. Further it was ....
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.... original cash memos and bills to substantiate the cash deposits into its bank account and also failed to produce the stock register to substantiate its claim. Pointing out the defects and discrepancies in the Books of Accounts, Profit and Loss Account and the Balance Sheet, the same were rejected by the assessing officer by invoking the provisions of Section 145(3) of the Act and proceeded to pass an assessment under Section 149 of the Act. 5. Aggrieved by the order of assessment, the assessee preferred appeal to the Commissioner of Income Tax (Appeals 3), Kolkata, [CIT(A)] contending that the reassessment is invalid as it is a case of change of opinion on the same set of facts and that the assessing officer erred in rejecting the books of accounts and wrongly invoked the provisions of Section 145(3) of the Act. The CIT(A) in its order dated 31.01.2019 first took up for consideration as regards the validity of the reopening of the assessment. On perusal of the cash trail which was discussed by the CIT, he opined that those facts were not before the assessing officer when the scrutiny assessment order was passed on 27.03.2014. Further it was noted that sufficient material eviden....
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....ing that in the said case the original assessment was under Section 143(1) of the Act and not under Section 143(3) of the Act. The decision in Peass Industrial Engineers Private Limited was distinguished by stating that it was a case where the assessment was reopened within four years. Ultimately, the tribunal held the reopening of the assessment was bad in law since no allegation of failure on the part of the assessee to fully and truly disclose material facts has been brought out in the reasons recorded for reopening and the appeals was allowed. 7. The reopening of the assessment was based upon investigation done, during the course of which the transactions of the assessee in their bank account was examined and scrutinised. The total non-cash credit in the assessee's account from 28.09.2010 till 12.03.2011 was around Rs. 28,56,66,139/- and non-cash flow including transfers to the linked accounts was around Rs. 31,68,76,920/-. During the investigation, it came to light that from several bank accounts funds were credited into bank account of the assessee and those accounts were operated by companies, partnership firms, and proprietorship. Further on analysis, it was found that t....
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....oner of Income Tax Versus Rajesh Jhaveri Stock Markets Private Limited (2007) 291 ITR 500 (SC) wherein it was pointed out that 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. It was further pointed out that 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 income had escaped assessment. The expression cannot be read to mean that the assessing officer should finally ascertain the fact by legal evidence or conclusion. It was further pointed out that at that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is the reason to believe, but not the established fact of a statement 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. With regard to the effect of the information furn....
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....tion received from DGIT, Investigation Branch, Ahmedabad, can never be said to be additional information. We are of the opinion that the information which has been received is on 26.03.2015 from the DGIT, Investigation Branch, Ahmedabad, whereby it has been revealed that present petitioner is also the beneficiaries of those Kayan brothers who are in the activity of entry operation throughout the country and therefore, it cannot be said 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. 9. The learned tribunal had distinguished the decision solely on the ground that the assessment in the said case was reopened within 4 years. Unfortunately, the tribunal failed to take note of the ratio disidendi laid down in the said decision upholding the reopening of the assessment after completion of the scrutiny assessment upon information being received from the investigation wing that the assessee therein was a beneficiar....
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....021) 130 Taxmann.com 492 (Gujarat). We may also refer to the decision of the Hon'ble Supreme Court in Central Provinces Manganese Ore Company Limited Versus ITO (1991) 191 ITR 662 wherein it was held: .....for initiation of action under Section 147(a) (as the provision stood at the relevant time) fulfilment 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. 11. The special leave petition filed against the decision of the Gujarat High Court in Priya Blue Industries was dismissed by the Hon'ble Supreme Court as reported in 2022 138 taxman.com 69 (SC). 12. Mr. Majumder placed reliance on the decision in Sarvana Stocks Investments Private Limited Versus Deputy Commissioner of Income Tax (2021) 133 Taxmann.com 315....
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.... entities who have either not filed their return of income or shown very negligible net profit out of huge turn over. Further, the nature of transaction done by the assessee was examined and it was pointed out that funds which come through those paper entities to the assessee are immediately transferred to other paper entities and ultimately withdrawal of cash from their bank accounts. Therefore, the assessing officer concluded that the assessee has routed its own funds through the shell companies which would clearly indicate bogus billings. Therefore, the assessee was directed to show cause as to why the transactions should not be considered as unexplained cash credit in their hands. The assessee submitted their reply on 14.12.2018.The reply was considered and the assessing officer found that the assessee failed to substantiate the transactions in their ICICI Bank account. The genuineness of the transactions were not established by the assessee and the summons which were issued to those entities were also non complied with. These facts which were brought on record during the reassessment proceedings was re-examined by the CIT(A) who has also recorded its independent findings while....