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TMI Blog2021 (7) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent had initiated the proceedings under section 147 of the Act on the basis of incorrect facts or on the basis of borrowed belief of the Investigation Wings at Ahmedabad and Mumbai, as sought to be submitted by the learned advocate Mr. R.K. Patel for the petitioner. The Court also does not agree with the submission made by the learned advocate Mr. Patel that the respondent could not have reopened the assessment of the petitioner under section 147/148 of the said Act after the scrutiny assessment having been undertaken by the Assessing Officer under section 143(3) of the said Act for the A.Y. 2012-13. AO having arrived at his subjective satisfaction based on additional fresh material placed before him that the petitioner had not fully and truly disclosed all the material facts necessary for his assessment for the relevant assessment year and prima facie his income chargeable to tax had escaped assessment, he was fully justified in initiating the proceedings under section 147/148 In this case, the Assessing Officer has recorded the reasons in detail and the objections raised by the petitioner have also been dealt with by him in detail vide the impugned order. It may f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n nutshell as emerging from the record of the petition are that the petitioner - company is engaged in the business of manufacturing and trading in jewellery, bullion trading, trading and speculation in commodities, shares and securities, units of mutual funds and derivatives, generation and sales of electric power through windmills and trading in SEZ unit as well as gold and silver refinery business. The petitioner had filed the return for the A.Y. 2012-13 and thereafter had filed a revised return. After the scrutiny assessment having been undertaken on various points and after issuing the show-cause notice, the Assessing Officer had framed the assessment order under section 143(3) of the said Act on 28.03.2014. Thereafter the petitioner received a notice under section 148 on 28.03.2017 seeking re-opening of the assessment for the A.Y. 2012-13 on the ground of the alleged accommodation entries obtained by the petitioner - company, as revealed during the search proceedings in case of one Bhanwarlal Jain Group. The said proceedings terminated in the assessment order dated 29.12.2017 passed under section 143(3) read with Section 147 of the said Act (Annexure E). According to the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as one of the beneficiaries of the accommodation entries unearthed during the course of search proceedings conducted on 19.03.2019 in case of one Naresh Jain and his associates operating from Bombay. It was revealed that the petitioner had entered into the transactions in penny stock namely Dhvanil Chemicals Ltd. / Veronica Production Ltd., which companies were used for bogus LTCG and contrived losses, as admitted by the said Sanjay Shah and Jignesh Shah in their statements recorded during the course of search proceedings. During the course of investigation carried out by the Investigation Wing Mumbai, Shri Naresh Jain had also admitted in his statement recorded under section 132(4) of the said Act at his residence that he had used the scrip VMS Industries for providing accommodation entries. On the basis of said specific pieces of information received from the investigation wings, outlining the systemic evasion of taxes by the petitioner - assessee and others, the respondent had reason to believe that the petitioner - assessee company had sold scrips to Veronica Productions Ltd. / Dhvanil Chemical Ltd. for ₹ 7,15,585/- and had bought 64,200 scrips for ₹ 42,83,705/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of this Court in case of PKM Advisory Services Pvt. Ltd. Versus ITO reported in (2012) 21 taxmann.com 86 (Gujarat). Relying upon the provisions contained in section 151 of the said Act, and the decision of Supreme Court in the case of Chhugamal Rajpal versus S.P. Chaliha and others reported in 79 ITR 603, Mr. Patel submitted that there was absence of a reasoned sanction by the Principal Commissioner as contemplated in the said provision, which is statutory and mandatory requirement for reopening the assessment after the expiry of four years from the end of the relevant assessment year. 5. Per contra, the learned Senior Advocate Mr. M.R. Bhatt appearing for the respondent challenging the very maintainability of the petition, submitted that after the objections are duly considered by the respondent, the proper course would be to permit the Assessing Officer to frame an assessment in accordance with law, and in the event, the petitioner is aggrieved by the said re-assessment, he could file an appeal to the CIT Appeals, and thereafter to the Tribunal as per the provisions of the Act. Mr. Bhatt further submitted that the case of the petitioner was reopened for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material facts necessary for his assessment for that assessment year. So far as the case of the present petitioner is concerned, the assessment for the A.Y. 2012-13 is sought to be reopened by the Assessing Officer under section 147/148 of the said Act, on his having arrived at a satisfaction that the income for the said assessment year had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. 8. It is pertinent to note that as held by the Supreme Court in catena of decisions, the formation of belief by the Assessing Officer at the stage of initiation of action under section 147 of the Act is within the realm of subjective satisfaction. The Supreme Court in the case of Assistant Commissioner of Income Tax versus Rajesh Jhaveri Stock Brokers P. Ltd. reported in (2007) 291 ITR 500(SC), had an occasion to deal with the scope and effect of section 147 as substituted w.e.f. April 1st, 1989, in which the Court has observed as under : - 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial facts necessary for his assessment of that year. Both these conditions were conditions 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. 9. In the case of Raymond Woollen Mills Ltd. Versus Income-Tax Officer and others reported in 1999 236 ITR 34(SC), the Supreme Court observed that the Court has only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 10. It is very pertinent to note that in the case of Phool Chand Bajrang Lal versus Income- Tax Officer reported in 203 ITR 456 (SC), it was observed that the acquiring fresh information, specific in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-Tax Officer would have the jurisdiction to reopen the concluded assessment in such a case. 11. As stated hereinabove, the Assessing Officer has sought to reopen the assessment for A.Y. 2012-13 of the petitioner on the basis of fresh material having been received as a result of the search made by the Office of DDIT (Inv.) Unit- 1(3), Ahmedabad conducted on 11.09.2018 at the premises of Sanjay Shah and Jignesh Shah of Ahmedabad, and as a result of the investigation carried out during the search proceedings conducted by the office of Pr. DIT (Inv.), Unit- 2, Mumbai on 19.03.2019 at the premises of Naresh Jain and his associates at Bombay that the petitioner company was one of the beneficiaries of the accommodation entries as the petitioner had entered into the transactions in penny stock namely Dhvanil Chemicals Ltd. / Veronica Production Ltd., which companies were used for bogus LTCG and contrived losses. The Assessing Officer had also received specific information from the said investigating wings outlining the systemic evasion of taxes by the petitioner and others, and had therefore reason to believe that the petitioner had sold scrips to Veronica Production Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no such contention that the Principal Commissioner had granted sanction without application of mind or without assigning any reason, was taken up by the petitioner before the respondent authority in the objections filed by him, nonetheless the respondent has mentioned in the impugned order that his satisfaction was duly approved by the CIT-4, Ahmedabad vide his letter / approval dated 30.03.2019. Again in response to the said contention raised in the petition, the respondent has contended in his affidavit-in- reply that the case of the petitioner was reopened after obtaining the sanction from the Pr. CIT-4, Ahmedabad as required by section 151 of the said Act and that the Pr. CIT had approved the notice after appreciating the facts and after duly applying his mind. The petitioner has chosen not to controvert the said submission in the affidavit-in-rejoinder filed by him. 13. There is also no merit in the submission of Mr. Patel that the petitioner was assessed under section 115JB and that the assessee was already paying more tax under section 115JB than the income tax liability arising under the normal provisions of the Act. As rightly observed by the respondent in the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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