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TMI Blog2021 (3) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... essed without any scrutiny by the Revenue under Section 143(1) of the Act. 2.2 The Assessing Officer has issued notice under Section 148 of the Act based on the reasons recorded dated 06.03.2019. In response to the said notice, the assessee requested the Department to treat the original return under Section 139(1) of the Act filed on 29.09.2012 as the return of income. Notice under Section 142(1) of the Act was issued calling for the necessary particulars. As per the case of the Revenue, the Assessing Officer had received information from the ITO, Ward 6(1), Ahmedabad, vide letter dated 11.04.2014, that during the scrutiny assessment under Section 143(1) for the A.Y. 2011-12 in the case of Smt. Harshaben Rasikbhai Gosai, who is the proprietor of Mahavir Enterprise, it was found that, there was a high value financial transaction in her bank account and in connivance with one Mr. Kundan Mudaliar, whose statement was recorded on oath under Section 131(1A) of the Act, they are alleged to have provided accommodation entries through bogus billing activities to many business concerns and the assessee company was also one of the beneficiaries. Smt.Harshaben Gosai, Mr.Kundan Mudaliar and M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or profession amounting to Rs. 1,49,207/-. Gross purchase during the year is Rs. 27,95,31,686/-, which is 126.3% of immediate previous year and sales amounting to Rs. 30,02,13,272/- is approximately 114% of previous assessment year i.e. 2011-12. Opening stock is Rs. 7,75,32,193/-. From the bank statement of R S Enterprise, P M & Company and J K Enterprise, it is seen that the assessee had made transaction with these concerns. It has 'been established during the assessment proceedings of Smt. Harshaben Rashikbhai Gosai [Prop. of Mahavir Enterprise] that these companies provided accommodation entry to the assessee company through bogus billing. The assessee company i.e. Cemach Machineries Limited has received Rs. 3,13,25,643/- from R S Enterprise Rs. 7,07,10,072/- from P M & Company and Rs. 4,64,43,777/- from J K enterprise. Thereby aggregating a total sum of Rs. 14,82,79,492/- which is received through fraudulent means [i.e. by way of bogus billings] which has escaped assessment. 3. Findings : It is observed from the table as mentioned in para 4 above, that high value financial transactions were made through various concern. Also, whatever the amount is received on a date is simpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the case, it was pointed out that, the respondent has merely relied upon the information received from the concerned ward of the Income Tax office for the purpose of re-opening of the assessment. Referring to the reasons for re-opening, Mr. Shah submitted that, the Assessing Officer has not at all applied his mind independently, so as to reach a conclusion that any income has escaped assessment. Therefore, in absence of any such exercise at the end of the respondent, it is evident that, the assessment has been reopened merely based on the borrowed satisfaction. (b) It was further pointed out that, the Assessing Officer has recorded the reasons for re-opening only for investigation and verification purpose. Therefore, on the basis of suspicion as to escapement of income chargeable to tax, the Assessing Officer has recorded the reasons for further verification of the issues, which cannot be permissible. In this regard, it was pointed out that, all the transactions were made through the cheques and necessary entries had been mentioned in the sales and ledger accounts. Therefore, for further scrutiny, re-opening of the assessment without any tangible material in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, Mr.K.M.Shah, learned counsel appearing for the writ applicant prays that, present writ application may be allowed. 8. Mrs. Mauna Bhatt, learned Sr. Standing Counsel appearing for the Revenue would submit that, the authority is justified in reopening of the assessment as they had having enough material to substantiate the re-opening and for forming a reasonable belief that, the income has escaped the assessment. She was pointed out that, after receiving the information in relation to the assessee with regard to accommodation entries through the bogus billing, the Assessing Officer had verified the details of the assessee with regard to sales and purchase made during the year under consideration and also made scrutiny about the bank statements of three entities and prima facie of the view that, the assessee had received the amount of Rs. 14,82,79,492/- by way of bogus sales through fake bills/vouchers and on that basis, after making independent inquiry and application of mind, he has reason to believe that, the income for the year under consideration has escaped assessment within the meaning of Section 147 of the Act. 9. In view of the above contentions, the learned counsel app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns which have weighed with the Income-tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147 (a). (iii) In Principal Commissioner of Income Tax, Rajkot -3, Vs. Gokul Ceramics, (2016) 241 taxmann 341 (Guj.), wherein, this Court has observed thus: "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 sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars collected from Bombay Stock Exchange which revealed earning of share and 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated in the said letter are not true but that conclusion can be arrived at 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 AGR Investment Ltd. vs. Additional Commissioner of Income Tax & (Supra), 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 afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had, at the stage of original assessment, 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." 13. Learned Single Judge of Madras High Court in case of Sterlite Industries (India) Ltd. vs. Assistant Commissioner of Income Tax reported in [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." (iv) In Inductotherm (India) Pvt. Ltd. vs. M. Gopalan, Deputy Commissioner of Income Tax, reported in (2013) 356 ITR 481, wherein, it was held as under: "even in case of reopening of an assessment which was previously accepted under Section 143(1) of the Act without scrutiny, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was accepted without any scrutiny and no assessment stipulated under Section 2(40) of the Act was made. In this background, the proviso to Section 147 of the Act will not apply and therefore, though the reopening initiated after expiry of four years, it would not be necessary for the assessing officer to show that, there was failure to disclose fully and truly the material facts necessary for the assessment by the assessee. The record indicates that, notice under Section 142(1) of the Act was served upon the assessee and he was asked to furnish necessary details for the verification, however, the assessee failed to submit necessary details. 14. We have examined the reasons for re-opening in details, more particularly paras 2 to 7 as referred to above. The reasons are self-explanatory. The Assessing Officer has observed that, the information with regard to one Smt. Harshaben Rasikbhai Gosai, Prop. Of Mahavir Enterprise and her companion Mr. Kundan Mudaliar, it was found that their main business was to provide accommodation entries by way of bogus sales and purchase through fake bills/vouchers without any actual business activities and the fact reveals from the statement of Mr. Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, the income has escaped assessment. 17. It is settled law that, at the stage of Section 148 of the Act, what is required is "reason to believe", but not the established fact of escapement of income. This aspect has been considered by the Apex Court in the case of Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri (2008) 14 SCC 208, wherein, the Apex Court has observed that, "at the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief and whether the material would conclusively prove the escapement is not the concern at that stage". 18. In view of the aforesaid discussions made hereinabove and considering the facts and circumstances of the case, it cannot be siad that there was no material before the assessing Officer to reopen the assessment and he proceeded mechanically based on the information received from the Income Tax Department, Ahmedabad. The information of Smt. Bhavnaben Gosai has some relevance with the transactions reflected in the bank account of the assessee. Therefore, it cannot be said that, the Assessing Officer has mechanically relied on the third party info ..... X X X X Extracts X X X X X X X X Extracts X X X X
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