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TMI Blog2021 (3) TMI 1171X X X X Extracts X X X X X X X X Extracts X X X X ..... ccommodation entries and the company was one of the beneficiaries of the transactions, despite of this, the assessee failed to disclose true and correct facts at the relevant time and therefore, the Assessing Officer is entitled to initiate reassessment proceedings on the basis of tangible material came in his hand, which tends to expose the untruthfulness of the entry of purchase made in the books of accounts. Whether reassessment proceedings could be said to have been initiated mechanically on the basis of third party information? - Assessing Officer has verified the information and after application of mind and upon due satisfaction, he formed an opinion that income has escaped assessment. While according the sanction under Section 151 of the Act, the authority concerned has not applied his mind properly and mechanically accorded the sanction - As perused the papers of the approval, which shows that the competent authority has given the satisfaction in hand writing and has expressed his satisfaction with regard to reasons recorded and accorded the sanction to issue impugned notice. Therefore, the approval for reassessment was granted on the date on which the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urat that some of the companies opened their bank accounts with ICICI Bank Surat and used their accounts for making foreign remittances against fake import documents. The ED conducted investigation and filed a charge sheet against some persons on 18.07.2014 and later on a supplementary chargesheet was filed on 18.07.2014 before the Special Court under the Prevention of Money Laundering Act, 2002. During the course of investigation by ED, searches at several places were conducted. Further, investigations were also carried by the Income Tax department on the inputs from other Govt. Agencies as well as its own information; which brought the big scam of money laundering to the fore. In the investigation, it was found that foreign remittances have been made by the following 12 entities from their bank accounts to the Dubai and Hongkong based companies on the strength of fake documents for the purpose of money laundering: Sr Name of the entity PAN 1 Agni Gems Pvt. Ltd AAHCA9913G 2 Hem Jewels Pvt Ltd AACCH4749N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Several entities were traced related to this group on the basis funds trail, which were used as a conduit for channelizing funds to various concerns, ultimate beneficiaries of which were Hong Kong and Dubai based entities, to which the funds were transferred on the fake documents. 5. The detailed information so received from the Investigation Wing, Surat has been perused carefully and it is found that the assessee company is one of the concerns which has provided entry of funds to the below: mentioned entities operated by Shri Afroz Fatta during the F.Y. 2011 12 relevant to A.Y.2012- 13: Sr.No Parties Name Target entities Amount of transaction (in crore) 1 M/s. Nisha Diamond Pvt. Ltd M/s. Agni Gems Pvt. Ltd 14.62 Total 14.62 6. The above information received from the investigation Wing has been analysed along with the case records available in the case of the assessee company. On perusal of assessment records in the case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracting provisions of Explanation 1 of section 147 of the Act. Further, this case is being analysed now on the basis of fresh material which was not available with the Assessing Officer at the time of assessment. It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for its assessment for the year under consideration thereby reopening u/s. 147 of the Act. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s. 148 has been obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act. 3. Further it is pertinent to mention here that as per the guidelines of Hon'ble Gujarat High Court in the case of Sahkari Khand Udhyog Mandal Ltd., you may file objection if desire so, within 60 days of receipt of the reason. 2.4 The writ applicant raised the objections vide its communication dated 04.07.2019, mainly on the following issues on facts and law: (i) Provision of Section 148(2) not complied with; (ii) No failure on the part of the assessee to disclose fully and truly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and truly all material necessary facts for its assessment. In this context, the learned counsel submitted that the notice under Section 142(1) was issued by the Assessing Officer to call for certain particulars like details of bank, sales and purchase, stock etc. In response to the notice, the assessee had furnished the names of the persons from whom the purchases and sales were made including the transaction related to purchase with M/s. Agni Gems Pvt. Ltd. The learned counsel has urged that based on the particulars furnished by the assessee, the transaction with M/s. Agni Gems Pvt. Ltd was verified and accepted by the then Assessing Officer and passed the assessment order without any major additions. In this background of facts, the learned counsel submitted that there was no failure on the part of the assessee to disclose material facts necessary for the assessment for the year under consideration. Therefore, reopening is bad. 5.5 The learned counsel vehemently submitted that according to the case of the revenue, assessee has made entered into transaction with M/s. Agni Gems Pvt. Ltd amount to ₹ 3,25,54,800/ and in the reasons recorded, the amount of ₹ 14,62,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue submitted that the Assessing Officer has verified the information and after independent inquiries, he found that the transactions with M/s. Agni Gems Pvt. Ltd., is not genuine and it is an accommodation entries and the assessee was one of the beneficiaries and therefore, the income has escaped assessment. 8. In view of the above contentions, the learned counsel for the revenue urged that the writ application may not be entertained. 9. Having heard the learned counsel appearing for the respective parties and having gone through the materials on record, the only question that falls for our consideration is whether the revenue is justified in reopening the assessment beyond the period of 4 years under Section 147 of the Act. 10. It is settled law that the reopening of the assessment beyond 4 years from the end of the relevant year, the Assessing Officer must have reasons to believe that income chargeable to tax have escaped assessment and same was occasioned either on account of failure on the part of the assessee to make a return of his income or disclose fully and truly all material facts necessary for assessment of that year and both the conditions are condition preced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt by the assessee was not genuine and true transactions. The Assessing Officer has also taken into account the statements of Mr. Afroze Mohd. Hasanfatta and Mr. Madan Jain which have been recorded under Section 150 of the PML Act, 2002 and found that the 12 companies had received huge amount from different entities like the present assessee through RTGS credits in their respective bank accounts. through their bank accounts and the said amount were transferred to Dubai and Hongkong companies on the strength of fake import. 14. After careful examination of the materials on record, we found that the Assessing Officer has examined the information received from the Surat wing and based on the information made inquiries to the information and after independent application of find, and upon due satisfaction, he reached to the conclusion that the alleged transaction with the M/s. Agni Gems Pvt. Ltd. Seems to be a bogus purchase and it is accommodation entries provided at the instance of Afroze Mohd. Hasanfatta and their group. Therefore, the reasons recorded led to belief, to form an opinion by the Assessing Officer regarding the escapement of assessment having live link with the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n itself on the basis of subsequent information, is found to be a bogus transaction, the mere disclosure of that transaction at the time of original assessment proceedings, cannot be said to be disclosure of the true and full facts in the case and the I.T.O. would have the jurisdiction to reopen the concluded assessment in such a case. It is correct that the assessing authority could have deferred the completion of the original assessment proceedings for further enquiry and investigation into the genuineness to the loan transaction but in our opinion his failure to do so and complete the original assessment proceedings would not take away his jurisdiction to act under Section 147 of the Act, on receipt of the information subsequently. The subsequent information on the basis of which the I.T.O. acquired reasons to believe that income chargeable to tax had escaped assessment on account of the omission of the assessee to make a full and true disclosure of the primary facts was relevant, reliable and specific. It was not at all vague or non-specific. 18. In case of Yogendrakumar Gupta Vs. ITO (2014) 366 ITR , this Court while rejecting petition challenging the notice for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out during assessment proceedings about exprenses incurred relatable to tax free income u/s. 14A, there was an omission and failure on its part to disclose fully and truly material facts, hence, reopening was justified. 23. The next contention raised by the learned counsel is that the reassessment proceedings could be said to have been initiated mechanically on the basis of third party information. We have examined the reasons as indicated above, and we are of the view that the Assessing Officer has verified the information and after application of mind and upon due satisfaction, he formed an opinion that income has escaped assessment. In this regard, it would be profitable to refer the decision of Principal Commissioner of Income Tax, Rajkot Vs. Gokul Ceramics reported in (2016) Taxman 1 (Gujarat), wherein, similar contention was raised and while rejecting the contention, this Court made the following observations. Paras 9 to 14 read 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 along with report and show cause notice placed at the dispos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not relevant. What is relevant is the existence of reasons to make the Income Tax Officer believe that there has been under assessment of the assessee's income for a particular year. We are satisfied that the first condition to invoke the jurisdiction of the Income Tax Officer under Section 147(a) of the Act was satisfied. 11. In case of Income Tax Officer v. Purushottam Das Bangur (supra) after completion of assessment in case of the assessee, the Assessing Officer received letter from Directorate of Investigation giving detailed particulars 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the officers of the Mining Department, there was under reporting of the raising figure to the extent indicated in the said letter. The report is made by a Government Department and that too after conducting a joint inspection. It gives a reasonably specific estimate of the excessive coal mining said to have been done by the respondent over and above the figure disclosed by it in its returns. Whether the facts stated in the letter are true or not is not the concern at this stage. It may be well be that the assessee may be able to establish that the facts 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. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The same is not to be judged at that stage. In SFIL Stock Broking Ltd. (supra), the bench has interfered as it was not discernible whether the assessing officer had applied his mind to the information and independently arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities Co. Pvt. Ltd. (supra), the Division Bench had noted that certain companies were used as conduits but the 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. 14. Learned Single Judge of M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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