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TMI Blog2016 (7) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... been examined during the original assessment proceedings substantially overlap in the present case. If the allegations contained in the reasons recorded are ultimately established, which must depend on the nature of material that may ultimately be brought on record during the reassessment and with respect to which we obviously would not make any comment, it would certainly indicate that the assessee had claimed bogus labour contract charges without incurring them. According to the department, in large number of cases, labour contractors who were in fact, the employees of the assessee, were paid labour charges without their being any such expenditure being incurred by the assessee. If these facts are ultimately established, it would only indicate that the assessee had claimed higher expenditure than what was incurred thereby suppressing the profit. It is true that the Assessing Officer had relied heavily on the investigation carried out by the investigation wing and the material collected during such process, which culminated into a final report submitted by the investigation wing. However, it is not impermissible for the Assessing Officer to rely on such material, as long as of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led at the main factory premise of HVK International Pvt. Ltd. was taken in the hard disks and were seized as per Annexure A50 to A53. From the backup of the PC of Shri Dharmesh R. Lad, accountant of the HVK, a list of Labour Contractor in excel sheet form have been found along with the amount of work done in the period of last several years. The predecided limit of the expenses to be booked in account of each labour contractor in last several years was found in these excel sheets. Wherein the details of limit fixed against the name of each impugned labour contractor and actual amount debited from books of HVK was given. It meant that it was predecided that the expense to be claimed in the case so called labour contractor should not exceed the prefixed limit for that particular year. The veracity of these excel sheets get proved from the fact that the debit amount given matches with the actual amount debited in the books of impugned labour contractor for the respective periods. Further, the evidences found and detailed analysis made by the Investigation wing, the most of these labour contractors have been proved to be the employees of HVK and bogus labour expenses were debite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority. II. During the scrutiny assessment, the issue of labour charges was examined by the Assessing Officer in detail and any attempt of reopening on his part on this ground would be based on change of opinion. III. The reasons do not disclose any material on the basis of which, a belief can be formed that income chargeable to tax has escaped assessment. In any case, the Assessing Officer has relied solely on the report of the investigation wing of the department without applying his mind to such material. In short, it is his borrowed satisfaction and not his own satisfaction which has been recorded in the reasons. 5. On the other hand, learned counsel Shri Sudhir Mehta for the department opposed the petition, contending that there is primafacie material suggesting that bogus labour charges were claimed by the assessee to increase the expenditure. These materials came to light during a search operation. Such material was not before the Assessing Officer during the original assessment. The Assessing Officer after having applied his mind to the material brought to his notice by the investigation wing, has recorded proper reasons and thereafter, issued notice for reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd are also fabricated. Thus, it appears that there are sufficient grounds/reasons to believe that income has escaped. 8. The reasons can be analyzed. In short, the case of the department is that the assessee had claimed bogus labour contract charges paid to these contractors to inflate the expenses and thereby deflate the profit. Reference to the data collected from the backup and server of the computer regarding preset limit of such expenditure, must be seen in light of the entire reasons recorded and cannot be seen in isolation. This first part which has reference to the preset limit for claiming expenditure, which also matched with the actual booking of expenditure for labour charge paid to these contractors, does not, when seen in light of later portion of the reasons recorded suggest that in fact, the expenditure was slashed off and artificial limit or ceiling was applied against a larger sum actually paid by the assessee, contrary to what strenuously argued before us by the learned counsel for the petitioner. The later portion of the reasons recorded amply clarify the case of the Assessing Officer viz. that these labour contract charges were completely bogus and almost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings. Any examination by the Assessing Officer of the assessee's claim of labour expenses would be confined to the declarations made by the assessee and the material produced by the assessee in response to the queries raised by the Assessing Officer. When later on, fresh material has come on record, which would primafacie suggest claim of bogus labour charges, examination by the Assessing Officer at the time of scrutiny assessment, would not permit the petitioner to argue that such issue cannot be gone into again by reopening the assessment. The question of true and full disclosure and the issue having been examined during the original assessment proceedings substantially overlap in the present case. 11. Coming to the last contention of the petitioner, we have already perused the reasons recorded, which in our opinion, do not suggest either any inconsistency or absence of any material to enable the Assessing Officer to form a belief that income chargeable to tax has escaped assessment. If the allegations contained in the reasons recorded are ultimately established, which must depend on the nature of material that may ultimately be brought on record during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also escaped assessment. When thus the Assessing officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the reopening could not and should not have been declared as invalid, on the ground that he proceeded on the showcause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue. 10. In case of Central Provinces Manganese Ore Co. Ltd. vs. Income Tax Officer, Nagpur (supra) the Supreme Court noted that in case of the assessee which had an office in London, this Customs authority had come to know that the assessee had declared very low price in respect of the consignment of Manganese exported by them out of India. After due inquiries and investigations, the Customs authorities found that the assessee was systematically undervoicing the value of Manganese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 147(b) of the Act and that he did not have conducted any inquiry or investigation into the information sent by Shri Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri Bagai does not mean that the Income Tax Officer did not apply his mind to the information contained in the said letter of Shri Bagai. On the basis of the said facts and information contained in the said letter, the Income Tax officer, without any further investigation, could have formed the opinion that there was reason to believe that the income of the assessee chargeable to tax had escaped assessment. The High Court, in our opinion, was in error in proceeding on the basis that it could not be said that the Income Tax Officer had in his possession information on the basis of which he could have reasons to believe that income of the assessee chargeable to tax had escaped assessment for the relevant assessment years. For the reasons aforementioned, we are unable to uphold the impugned judgment of the High Court. The appeal is, therefore, allowed, the impugned judgment of the High Court is set aside and the Writ Petitions filed by the respondents are dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee was beneficiary of bogus accommodation entries. The Court while upholding the validity of reopening observed that sufficiency of reason cannot be considered in a writ petition. It was observed as under: 23 The present factual canvas has to be scrutinized on the touchstone of the aforesaid enunciation of law. It is worth noting that the learned counsel for the petitioner has submitted with immense vehemence that the petitioner had entered into correspondence to have the documents but the assessing officer treated them as objections and made a communication. However, on a scrutiny of the order, it is perceivable that the authority has passed the order dealing with the objections in a very careful and studied manner. He has taken note of the fact that transactions involving ₹ 27 lakhs mentioned in the table in Annexure P2 constitute fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income. The assessing officer has referred to the subsequent information and adverted to the concept of true and full disclosure of facts. It is also noticeable that there was specific inf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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