2018 (5) TMI 1845 - HC - Income Tax

Reopening of assessment - information received from Investigation Wing of Kolkata making reference of shell companies which had given accommodation entries for share premium as assessee company as one of the beneficiary - proof of seeking mandatory sanction signed by the Principal Commissioner u/s 151 - correct date of notice - HELD THAT - Undisputably, the reasons were recorded on 29-03-2017. The proposal for granting sanction was placed before the Principal Commissioner of Income Tax on 31-03-2017 on which date, he also granted necessary sanction. The notice was actually issued and dispatched in the later part of the day. We therefore have no reason to believe that such notice was issued and dispatched before the sanction was signed by the Principal Commissioner. One more reason to accept the respondent s explanation about the issuance date in the impugned notice is that as noted, it was only on 29-03-2017 that he was supplied full information about different shell companies under a communication by the Joint Commissioner of Income Tax, Range-I, Surat. This communication of course, refers to handing over certain papers to him on 27-03-2017. However, this has reference only to the list (of shell companies) and not the further information received from Investigation Wing of Kolkata. It was contained in the brief email which accompanied the said letter dated 29-03-2017. Thus, it seems highly unlikely that the Assessing Officer would have decided to issue notice even before full information was supplied to him. In absence of any rebuttal we have no reason to discard the statement of the respondent-Assessing Officer made on oath which even otherwise gets support from the original files, attendant circumstances and facts noted above. - decided against assessee.

Issues Involved:
1. Validity of the reopening of assessments under Section 147 of the Income Tax Act, 1961.
2. Legitimacy of the information received from the Investigation Wing of Kolkata.
3. Compliance with procedural requirements for reopening assessments.
4. Allegation of typographical error in the date of the notice.

Issue-wise Detailed Analysis:

1. Validity of the reopening of assessments under Section 147 of the Income Tax Act, 1961:
The court examined the reasons recorded by the Assessing Officer (AO) for reopening the assessments. The AO received information from the DDIT (Inv) Unit-3(1), Kolkata, indicating that the petitioner company had received share capital/share premium from entities proved to be shell companies. The AO concluded that the share capital/share premium was not genuine and represented the petitioner’s own money introduced under the guise of share capital/share premium, thus liable for taxation under Section 68 of the Income Tax Act. The court referred to a previous judgment in the case of Aishwarya Dying Mills (P.) Ltd. v. Dy. CIT, where similar facts were considered, and the petition was dismissed. The court upheld the AO’s belief that income chargeable to tax had escaped assessment, finding that the AO had specific and definite information to form such a belief.

2. Legitimacy of the information received from the Investigation Wing of Kolkata:
The court noted that the AO had received detailed information from the Investigation Wing of Kolkata, which included a list of shell companies providing accommodation entries. The AO verified the materials available on record and concluded that the petitioner had received share capital/share premium from such shell companies. The court emphasized that the AO had specific and definite information to form a belief that income chargeable to tax had escaped assessment, dismissing the contention that the AO was proceeding on borrowed satisfaction or had insufficient information.

3. Compliance with procedural requirements for reopening assessments:
The petitioner argued that the AO initiated inquiries without a sound basis, constituting a roving inquiry. The court, however, held that the AO is permitted to carry out preliminary inquiries before issuing a notice of reopening to collect information and form a belief that income chargeable to tax had escaped assessment. The court found no statutory backing to limit the AO’s role in this respect and upheld the AO’s actions as compliant with the procedural requirements. The court also addressed the petitioner’s contention regarding the proviso to Section 133(6), clarifying that it does not take away the AO’s power to call for relevant information but requires approval from higher authorities in certain cases.

4. Allegation of typographical error in the date of the notice:
The petitioner contended that the impugned notice was dated 27-03-2017, while the sanction was granted on 31-03-2017, indicating that the notice preceded the sanction. The respondent explained that the date 27-03-2017 was a typographical error, and the notice was actually issued on 31-03-2017 after the sanction was granted. The court examined the sequence of events and found that the reasons were recorded on 29-03-2017, and the sanction was granted on 31-03-2017. The notice was dispatched on 31-03-2017, as evidenced by the dispatch records. The court accepted the respondent’s explanation and found no reason to invalidate the notice on this ground.

Conclusion:
The court dismissed the petitions, upholding the validity of the reopening of assessments under Section 147 of the Income Tax Act, 1961. The court found that the AO had specific and definite information to form a belief that income chargeable to tax had escaped assessment and that the procedural requirements were duly complied with. The court also accepted the explanation regarding the typographical error in the date of the notice, concluding that the notice was issued after the necessary sanction was granted.

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