2016 (7) TMI 515 - HC - Income Tax

Reopening of assessment - accommodation entries receipt - Held that - It may be also noted that while in the reasons recorded, it has been stated that M/s Glamour Sales Pvt. Ltd. is not existing at the given address and therefore, the identity and creditworthiness and genuineness of the transaction could not be established, whereas in the order disposing of the objections, the Assessing Officer has travelled much further and observed that M/s Glamour Sales Pvt. Ltd. of Kolkatta is a fictitious entity just created to give accommodation entries to beneficiaries on commission basis; that the above investor company is not actual one but it is a paper company created for giving benefit to the beneficiaries; that any transaction with such bogus company is considered to be non-genuine and therefore, the share capital with share premium received from the so called bogus company is nothing but the assessee s own fund circulated through M/s Glamour Sales Pvt. Ltd. via its bank accounts. In this regard, it is by now well settled that the validity of the reopening has to be examined on the basis of the reasons recorded and the reasons recorded cannot be supplemented either by the order disposing of the objection or by filing an affidavit in that regard. In the present case, the Assessing Officer has examined the claim and not made any additions and has not discussed anything therein. However, once he has examined such claim, it is not permissible to reopen the assessment even within four years on the very same grounds. It is evident that the Assessing Officer has, therefore, formed an opinion on the issue in question though not reflected in the assessment order passed under section 143(3) of the Act. Thus, reopening of the assessment to examine the very same claim is, therefore, clearly based upon a change of opinion. The assumption of jurisdiction on the part of the Assessing Officer by issuance of notice under section 148 of the Act on a mere change of opinion is, therefore, clearly without jurisdiction. The impugned notice under section 148 of the Act, therefore, cannot be sustained. - Decided in favour of assessee.

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment.
2. Whether the reopening of the assessment is based on a change of opinion.
3. Validity of the reasons recorded for reopening the assessment.
4. Examination of the identity, creditworthiness, and genuineness of the transaction with M/s Glamour Sales Pvt. Ltd.

Detailed Analysis:

1. Legality of the Notice Issued Under Section 148 of the Income Tax Act, 1961 for Reopening the Assessment:
The petitioner challenged the notice dated 24.03.2015 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the assessment year 2010-11. The petitioner argued that the reopening was based on a mere change of opinion, which is not permissible under the law. The court noted that the assessment was initially completed under Section 143(3) of the Act, where the Assessing Officer had examined the issue of share application money received from M/s Glamour Sales Pvt. Ltd. and had not made any additions. Therefore, the reopening of the assessment on the same grounds was not justified.

2. Whether the Reopening of the Assessment is Based on a Change of Opinion:
The court observed that during the original assessment proceedings, the Assessing Officer had called for details from M/s Glamour Sales Pvt. Ltd. under Section 133(6) of the Act, and the company had duly furnished the required information. The assessment was completed without making any additions regarding the share application money. The court held that reopening the assessment on the same grounds constituted a change of opinion, which is not permissible. The court cited the case of Gujarat Power Corporation Ltd. v. Assistant Commissioner of Income Tax, where it was held that reopening an assessment on the same grounds is not permissible if the Assessing Officer had already examined the issue during the original assessment proceedings.

3. Validity of the Reasons Recorded for Reopening the Assessment:
The reasons recorded for reopening the assessment stated that the investor company, M/s Glamour Sales Pvt. Ltd., was not found at the given address during the assessment proceedings for the assessment year 2012-13. The court noted that during the original assessment proceedings for the assessment year 2010-11, M/s Glamour Sales Pvt. Ltd. had responded to the notice under Section 133(6) and had furnished the necessary details. Therefore, the reasons recorded for reopening the assessment were not valid. The court emphasized that the validity of the reopening has to be examined based on the reasons recorded and cannot be supplemented by the order disposing of the objections or by filing an affidavit.

4. Examination of the Identity, Creditworthiness, and Genuineness of the Transaction with M/s Glamour Sales Pvt. Ltd.:
The court observed that the Assessing Officer had examined the issue of share application money received from M/s Glamour Sales Pvt. Ltd. during the original assessment proceedings and had not made any additions. The court noted that the reasons recorded for reopening the assessment did not establish that M/s Glamour Sales Pvt. Ltd. was a fictitious entity or that the transactions were not genuine. The court held that the reopening of the assessment was based on a mere change of opinion and was, therefore, without jurisdiction.

Conclusion:
The court allowed the petition and quashed the impugned notice dated 24th March 2015 issued under Section 148 of the Income Tax Act, 1961. The court held that the reopening of the assessment was based on a mere change of opinion and was, therefore, not permissible. The court emphasized that the reasons recorded for reopening the assessment were not valid and that the Assessing Officer had already examined the issue during the original assessment proceedings.

← Previous Next →