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TMI Blog2021 (4) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... he transaction shown in the books of accounts itself on the basis of subsequent information is found to be a bogus transaction and mere a disclosure of the cash entries reflected in the bank account, cannot be said to be disclosure of the full and true facts. Assessee was aware that the transaction was not business transaction and it was only an accommodation 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. In this context, we may refer the observation of the Apex Court in the case of Honda Siel Power Products Vs. Dy. CIT, [ 2011 (7) TMI 275 - SC ORDER ] wherein, it is held that assessee having not pointed out during assessment proceedings about expenses 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. Reassessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer has reopened the assessment under Section 147 by issuing impugned notice dated 31.03.2019 under Section 148 of the Act. 2.3 At the request of the writ applicant, reasons recorded have been furnished to the writ applicant on 17.05.2019, which reads as under : REASONS RECORDED : 1. The assessee Company has its return of income for AY 2012 -13 on 07.02.2013 declaring total income at ₹ 1,75, 310/ . The assessment u/s 143(3) was completed on 26.03.2015. 2. In this case, an information was received from the DDIT (Inv.) Unit 4(2), Mumbai vide letter No. DDIT(Inv.)4(2)/ Information/ABR/2018 19 dated 15.03.2019. In this case, an information has been received that during the investigation of the below mentioned assessee, it is found from the. statements of reported account No.23105133390, 23105133404, 23105138686, 23105138937 and 23105138988 with Standard Chartered Bank for the reported entities, prima facie it is seen that the transactions are seen as these accounts are used by these entities for layering of funds. Further, analysis of the above bank statements vis avis ITRs filed by reported entities was done and the findings are tabulated below: Sr.No. Name of the assessee PA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration. Hence necessary sanction to issue notice u/s. 148 been obtained separately from Principal Commissioner of Income Tax as per Provisions of section 151 of the Act. 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) Reasons were not recorded before issuance of notice; (ii) Approval of Principal CIT, in terms of Section 151 of the Act is not obtained; (iii) No failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment; (iii) Reopening is based on borrowed satisfaction . 2.5 The objections came to be rejected by the respondent vide order dated 30.08.2019. 3. Being aggrieved by the disposal of the objections against the notice for reopening of the assessment, the writ applicant has come up before this Court with the present writ application. 4. We have heard Mr. Sunit Shah, the learned Senior counsel assisted by Mr. Omkar C. Dave, the learned advocate appearing for the writ applicant and Mrs. Kalpana K. Raval, the learned Standing Counsel appearing for the revenue. 5. Mr. Sunit Shah, the learned Senior Counsel appearing for the wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome to any independent conclusion that the income has escaped assessment. Therefore, reopening based on the third party satisfaction cannot be sustained in law and the proceedings initiated on borrowed satisfaction required to be quashed and set aside. 6. In view of the aforesaid contention, the learned counsel for the writ application submitted that, the impugned notice as well as the order of disposing off the objections are bad, illegal and without jurisdiction and therefore, the same deserve to be quashed and set aside and accordingly, the writ application may be allowed. 7. On the other hand, Mrs. Kalpana K. Raval, learned Standing Counsel appearing for the revenue has vehemently opposed the writ application, contending that the revenue is justified in reopening the assessment for the year under consideration. She has urged that Assessing Officer has reason to believe that the income has escaped assessment as the primary information received from the Investigation Wing, Mumbai, it was found that the amount reflected in the bank account were used by the assessee for layering of funds and after independent inquiries and upon due satisfaction, the Assessing Officer formed an opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amination of the reasons recorded and materials on record, it appears that the Assessing Officer has verified the information with regard to suspicious cash transactions and upon analysis of the bank statements, it was seen that compare to turnover, the total income was very less, which in his opinion, was not commensurates with the profit. The Assessing Officer has further observed that in the absence of tax audit report, the turnover was also above ₹ 60,00,000/ . In this backdrop, the Assessing Officer, has come to the conclusion that the assessee is engaged in providing accommodation entries only and the credits of ₹ 51,00,000/ in the bank account was found unexplained and assessee is the beneficiaries of the transactions. After analysis of the reasons, with respect to formation of belief with regard to escaped income, we find that at the relevant time during the course of earlier assessment proceedings, the true facts with regard to cash transactions as referred to above, had not been disclosed truly and fully. From bare perusal of the reasons recorded, it appears that the Assessing Officer could be said to have applied his independent mind to the information receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, 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 nonspecific. 15. In case of Yogendrakumar Gupta Vs. ITO (2014) 366 ITR , this Court while rejecting petition challenging the notice for reopening which was issued beyond a period of 4 years from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on its part to disclose fully and truly material facts, hence, reopening was justified. 20. 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 disposal of the Assessing Officer. These materials prima facie suggested suppression of sale consideration of the tiles manufactured by the assessee to eva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me 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: 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, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 13. In case of AGR 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 notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Madras High Court in case of Sterlite Industries (India) Ltd. v. Assistant Commissioner of Income Tax reported in [2008] 302 ITR 275 (Mad) upheld the notice for reopening which was based on information from enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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