2016 (7) TMI 195 - HC - Income Tax

Reopening of assessment - accommodation entities received - Held that - From the recording of reasons, it cannot be stated that the reasons do not indicate the manner in which the income chargeable to tax had escaped assessment. If the standpoint of the Assessing Officer is correct and at this stage in absence of any contrary contentions and in view of the materials pointed out in the reasons recorded, we would like to proceed on such basis; unescapable conclusion would be that the assessee s income to the tune of ₹ 2.10 crores remained unassessed. According to the reasons, the receipt of a sum of ₹ 2.10 crores from two companies of SCS i.e. Acacio and Adamina was in return of the cash or other credits from the assessee given to SCS. If that be so, the sources of such funds remained unexplained. These observations, of course, are in the context of the contentions of the petitioner which are directed against the notice for re-opening of the assesment. Surely, the assessment would be framed on the basis of material that may be available on record and in accordance with law. - Decided against assessee

Issues Involved:
1. Jurisdiction of the Assessing Officer to issue the notice.
2. Re-opening of assessment based on a change of opinion.
3. Adequacy of reasons recorded for re-opening the assessment.

Detailed Analysis:

Issue 1: Jurisdiction of the Assessing Officer to Issue the Notice
The petitioner contended that the notice dated 25.3.2015 was issued before the present respondent had jurisdiction over the case, as the transfer of assessment took place on 26.3.2015 and the records were received on 30.3.2015. The respondent countered this by stating that the notice was actually issued on 30.3.2015, and the date of 25.3.2015 was a typographical error. The court reviewed the dispatch register and confirmed that the notice was indeed issued on 30.3.2015, thus resolving the jurisdictional issue in favor of the respondent.

Issue 2: Re-opening of Assessment Based on a Change of Opinion
The petitioner argued that the original scrutiny assessment had already examined the purchase and sale of shares, including 2.80 lacs shares of Empower Industries Ltd., and thus re-opening on this ground would constitute a mere change of opinion. The court summarily rejected this contention, noting that the issue of alleged accommodation entries received by the petitioner was not part of the original assessment proceedings.

Issue 3: Adequacy of Reasons Recorded for Re-opening the Assessment
The petitioner claimed that the reasons recorded did not reflect how the income chargeable to tax had escaped assessment. The court examined the reasons provided, which detailed a search and survey action at the premises of Shri Shirish Chandrakant Shah (SCS) and his associates. It was found that SCS was engaged in providing accommodation entries, and the petitioner had received such entries totaling ?2.10 crores during the assessment year 2012-2013 through companies managed by SCS. The reasons recorded included detailed evidence from seized documents, digital data, and statements from SCS and his associates, indicating that the funds received were accommodation entries against cash payments or other credits. The court concluded that the reasons sufficiently indicated the manner in which income chargeable to tax had escaped assessment.

Conclusion:
The court dismissed the petition, upheld the validity of the notice for re-opening the assessment, and discharged the ad-interim relief. The assessment would proceed based on the material available on record and in accordance with law.

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