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TMI Blog2018 (12) TMI 1397X X X X Extracts X X X X X X X X Extracts X X X X ..... These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the AO also formed a belief that income chargeable to tax had also escaped assessment. AO 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 show cause 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. AO truly had to form a bona fide belief that income had escaped assessment. - Decided against assessee - WRIT PETITION NO.3340 OF 2018 - - - Dated:- 13-12-2018 - AKIL KURESHI AND M.S.SANKLECHA, JJ. Mr. Firoz Andhyarujina with Mr. Maneek Andhyarujina with Mr. Harsh Kapadia for the Petitioner. Mr. Suresh Kumar for the Respondents. P.C.: 1. Petitioner has challenged a notice of reopening of assessment dated 26th March, 2018. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ARYPK0082F . Nontaxable income The ADIT (Inv.) also provided photocopies of bank statements of Finelink Suppliers Pvt. Ltd. for the period 22.05.2010 to 31.03.2012 and stated that .....From the bank statement and further investigation it is crystal clear that fund had routed through these A/c resulting in complex layering without economic rationale and raised suspicion. The entire funds thus received were immediately being transferred or remitted to other A/cs by way of RTGS, Fund Trf, confirming the real beneficiaries like one M/s Avirat Ventures Pvt. Ltd., PAN:AAHCA9499D bring back its unaccounted money/cash into their regular books of accounts of total ₹ 110.25 lakhs for the F.Y. 2010-11. The AO is also requested to quantify the yearwise amount received by their assessees from the given soft copy Bank statement .. 3. In view of the above specific information, I have a reason to believe that in the case of the assessee, income chargeable to tax exceeding ₹ 1 lakh has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee of invalidity of the reopening of assessment was upheld. 6. On the other hand, learned counsel Shri Suresh Kumar appearing for the Department opposed the petition contending that the original return was accepted without scrutiny. The Assessing Officer has recorded proper reasons for issuing notice. The issues on merits raised by the petitioner can be examined only during the assessment. 7. As noted, the return of the petitioner was accepted without scrutiny. Thus, there was no scrutiny assessment in the present case. Under the circumstances, the question of change of opinion would not arise since the Assessing Officer had not formed any opinion on any of the issues arising out of the return filed by the petitioner. The Supreme Court in case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500 . in this context observed as under: 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word 'reason' in the phrase reason to believe would mean cause or justificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a) But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. The Supreme Court analyzed the distinction between the acceptance of return under Section 143(1) of the Act and assessment which has been framed under Section 143(3) of the Act. The Court held that in the former case the Assessing Officer would have much wider latitude to reopen the assessment. In the said judgment the Court also discussed the concept for reason to believe. Referring the earlier judgments of the Supreme Court, the Court reiterated that the term reason to believe does not imply with certainty that the addition would be invariably made in the assessment. 8. This asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h at this stage was not supplied, would not invalidate the reasons recorded by the Assessing Officer in issuing the impugned notice. 12. In case of Principal Commissioner of Income-tax, Rajkot-3 V. Gokul Ceramics 241 Taxman 1 in division bench of Gujarat High Court had in somewhat similar circumstances observed as under: 9. It can thus be seen that the entire material collected by the DGCEI during the search, which included incriminating documents and other such relevant materials, was alongwith report and show cause notice placed at the disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had 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 show cause notice issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price of share increased during period in question and quotation appearing at Calcutta Stock Exchange was as a result of manipulated transaction. On the basis of such information, the Assessing Officer issued notice for reopening of the assessment. The question, therefore, arose whether the information contained in the letter of Directorate of Investigation could be said to be definite information and the Assessing Officer could act upon such information for taking action under Section 147(b) of the Act. In such background, the Supreme Court observed as under: 12. Ms. Gauri Rastogi, the learned counsel appearing for the respondents, has urged that the letter of Shri Bagai was received by the Income tax Officer on March 26, 1974 and on the very next day, that is, on March 27, 1974, he issued the impugned notice under Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only after making the necessary enquiry. At the stage of the issuance of the notice, the only question is whether there was relevant material, as stated above, on which a reasonable person could have formed the requisite belief. Since we are unable to say that the said letter could not have constituted the basis for forming such a belief, it cannot be said that the issuance of notice was invalid. Inasmuch as, as a result of our order, the reassessment proceedings have not to go on we don not and we ought not to express any opinion on the merits. 13. In case of A.G.R. Investment Ltd. v. Additional Commissioner of Income Tax and anr. (supra), a Division Bench of Delhi High Court considered the validity of reopening of assessment where the notice was based on information received from Directorate of investigation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, furnished the names of the companies with which it had entered into transactions and the assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments were made to the assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score. 14. Learned Single Judge of Madras High Court in case of Sterlite Industries (India) Ltd. v. Assistant Commissioner of Income Tax reported in MANU/TN/0471/2008MANU/TN/0471/2008 : [2008] 302 ITR 275 (Mad) upheld the notice for reopening which was based on information from enforcement directorate showing possible inflation of purchases made by the assessee. 13. The decisions cited before us do not involve controversy as we are examining in this petition. In the case of Chhugamal Rajpal (supra) as noted, the Supreme Court held the reopening of assessment invalid upon finding that the Assessing Officer had not set out any reasons for coming to the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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