2021 (8) TMI 382 - HC - Income Tax

Reopening of assessment u/s 147 - bogus transactions or accommodation entries involving the assessee - subsequent reliable and creditworthy information received from the investigating wings - HELD THAT - In the case of Ess Kay Engineering Co. (P) Ltd. versus Commissioner of Income Tax 1997 (7) TMI 114 - SC ORDER it has been observed that the AO is not precluded from reopening the assessment of an earlier year on the basis of fresh material discovered subsequently during the course of assessment of next assessment year. As the petitioner that the reopening was sought to be done on the basis of false and incorrect material as no amount of ₹ 20 lacs was received from Kamdhenu Marketing, however, the petitioner had made purchases from Kamdhenu Marketing and had made payments against such purchases, and that the alleged receipt of accommodation entry of ₹ 1,05,00,000/- from Jignesh Shah was also based on false information, inasmuch as, the petitioner had borrowed the said amount from Arihant Enterprise Ltd. at the relevant time when Shri Dhiren Shah was the Director of the Company and not Jignesh Shah. Apart from the fact that no such contention was raised by the petitioner in the objections filed by it on reopening of the assessment, nor in the memo of petition, and has been raised for the first time in the affidavitin- rejoinder, such contention could not be taken into consideration at this juncture, it is also pertinent to note that the petitioner was issued a notice under section 133(6) of the said Act on 21.03.2019 requesting it to furnish the evidence to prove the genuineness of the transactions mentioned therein before the issuance of the impugned notice under section 148 of the said Act, however, the petitioner had chosen not to respond to the said notice. Be that as it may, the respondent has considered all the objections in detail raised by the petitioner in the impugned order dated 13.12.2019, which order being just and proper does not call for any interference. The petition being devoid of merits is dismissed.

Issues Involved:
1. Jurisdiction of the Assessing Officer under Section 147/148 of the Income Tax Act, 1961.
2. Validity of reopening the assessment for A.Y. 2012-13 based on subsequent information.
3. Full and true disclosure of material facts by the petitioner.
4. Credibility of information received from the investigating wings.
5. Assumption of jurisdiction by the Assessing Officer based on tangible material.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer under Section 147/148 of the Income Tax Act, 1961:
The core issue was whether the Assessing Officer (AO) could assume jurisdiction under Section 147/148 of the Income Tax Act, 1961, for reopening the assessment based on subsequent reliable and creditworthy information received from the investigating wings, which indicated bogus transactions or accommodation entries involving the assessee. The court noted that the AO had received credible information from two sources indicating that the petitioner was a beneficiary of accommodation entries, justifying the reopening of the assessment.

2. Validity of reopening the assessment for A.Y. 2012-13 based on subsequent information:
The petitioner challenged the reopening of the assessment for A.Y. 2012-13 under Section 147, arguing that the assessment was initially completed under Section 143(3) after thorough scrutiny. The court found that the AO had tangible material and credible information from the investigating wings, which established a live link with the escapement of income by the petitioner. The court upheld the AO's decision to reopen the assessment, emphasizing that the AO had a reason to believe that income had escaped assessment due to the petitioner's failure to disclose fully and truly all material facts.

3. Full and true disclosure of material facts by the petitioner:
The petitioner contended that it had disclosed all necessary material facts during the original assessment. However, the court observed that mere production of books of accounts or documents does not constitute full and true disclosure. The court highlighted that the AO had received credible information indicating that the petitioner had received accommodation entries, which were not disclosed during the original assessment. Therefore, the court held that the petitioner had not made a full and true disclosure of all material facts.

4. Credibility of information received from the investigating wings:
The respondent argued that the information received from the investigating wings was credible and specific, indicating that the petitioner was a beneficiary of accommodation entries. The court noted that the information was reliable and specific, and the AO had conducted further inquiries under Section 133(6) to verify the genuineness of the information. The court emphasized that the AO is empowered to reopen the assessment based on credible information that prima facie discredits the genuineness of the particulars furnished by the assessee.

5. Assumption of jurisdiction by the Assessing Officer based on tangible material:
The court reiterated that the AO must have a reason to believe that income chargeable to tax had escaped assessment, particularly after four years from the end of the relevant assessment year. The court found that the AO had tangible material and credible information indicating that the petitioner had received accommodation entries, justifying the reopening of the assessment. The court emphasized that the formation of belief by the AO is within the realm of subjective satisfaction, and the AO had cause or justification to know or suppose that income had escaped assessment.

Conclusion:
The court dismissed the petition, upholding the AO's decision to reopen the assessment based on credible information and tangible material. The court found that the petitioner had not made a full and true disclosure of all material facts and that the AO had valid reasons to believe that income had escaped assessment. The court emphasized the AO's duty to make further inquiries when credible information indicates potential tax evasion through accommodation entries. The petition was deemed devoid of merits, and the interim relief granted earlier was vacated.

← Previous Next →