2019 (2) TMI 1281 - HC - Income Tax

Unexplained cash credit - bogus claim of share application money - HELD THAT - No merits in any of the contentions of the petitioner. Firstly, as noted, merely because the AO had examined the transactions during the original assessment proceedings, would not preclude him from subsequent inquiry it is shown on the strength of additional material establishing prime-facie that the disclosures made by the assessee were not true. If the entire claim is bogus and so established to be, the assessee would fail the test of true and full disclosure. Requirement of true and full disclosure runs through the entire assessment and it does not end on filing of return. Action against Shirish C, Shah provided certain information which was also processed by the AO before forming the belief that income chargeable to tax had escaped assessment. The entire reasons when read as a whole, more than sufficiently demonstrate the belief of the Assessing Officer that the entire assessment goes on bogus claim of share application money having been received by the assessee company. Therefore, lack of true disclosures is writ large on the face of the reasons. Mere non recitation of such expression would not invalidate the reasons or the fact that the reasons are based on allegations of lack of true and full particulars. AO had issued notice to Prabhav Industries under Section 133(6) of the Act which was replied and had not remained unreplied as suggested in the reasons. Firstly, this aspect has emerged in the rejoinder. Secondly, at this stage, in a writ jurisdiction, we would not entertain such disputed question since it is well settled that sufficiency of the reasons at the end of the Assessing Officer to form a belief that the income chargeable to tax had escaped assessment would not be within the purview of examination of writ court at this stage.

Summary

Issues:
Challenging notice of reopening of assessment for the assessment year 2011-12.

Detailed Analysis:
1. The petitioner, a real estate company, challenged a notice of reopening of assessment for the assessment year 2011-12. The Assessing Officer had issued the notice based on reasons recorded after a search action at the premises of an individual engaged in providing bogus accommodation entries. The reasons stated that an entity controlled by the individual had made an investment in the petitioner company, which the Assessing Officer believed to be unexplained cash credit. The petitioner objected to the notice, arguing lack of a live link between available material and the belief of escaped income.

2. The petitioner contended that the issue was already examined during the original assessment, and the notice was based on a change of opinion. However, the Department argued that the Assessing Officer had proper reasons for issuing the notice, supported by information suggesting the petitioner's non-disclosure of true facts. The court found that the search action provided material indicating unexplained cash credit, justifying the reopening of assessment.

3. The court referred to a Supreme Court case emphasizing that reassessment can be initiated based on subsequent reliable information indicating non-disclosure of material facts during the original assessment. The court noted that lack of true disclosures was evident in the reasons recorded by the Assessing Officer, despite the petitioner's arguments to the contrary. The court rejected the petitioner's contentions and dismissed the petition, vacating interim relief granted earlier.

This detailed analysis provides an overview of the legal judgment, including the issues involved, arguments presented by the parties, and the court's reasoning leading to the dismissal of the petition challenging the notice of reopening of assessment.