9911796707
TMI Blog2022 (4) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... nder; 2.1 The writ applicant is a company incorporated under the Companies Act, 1956 (for short "the Act, 1956"). The Company is engaged in the business of Gold & Jewellery. During the Financial Year 2012-13, relevant to the Assessment Year 2013-14 (i.e,. the year under consideration), the writ applicant claims to have made various purchases including the purchases from a proprietary concern viz "Swastik Corporation" and according to the writ applicant, such purchases are duly reflected in the audited annual accounts. 2.2 The search action under Section 132 of the Act was carried out on 07.08.2013 in the cases of Amar Group of Surat wherein the case of the writ applicant herein was also covered. Later, notice under Section 153A of the Act was issued by the then Assessing Officer on 19.08.2014 for the year under consideration. The writ applicant filed its return of income on 20.10.2014 in response to the notice issued under Section 153A declaring its total income at Rs. 12,80,15, 570/-. 2.3 The then Assessing Officer vide notice dated 11.12.2015 issued under Section 142(1) of the Act called for various details including the details relating to the purchases made during the year u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buying/selling of stock and are entered in the Tally Accounts. Since Shri Bijal Ashok Shah, Prop. M/s. Swastik Corporation has admitted that he is engaged in the business of giving bogus entry. Thus the transactions made by M/s. Amar Jewellers Limited with M/s. Swastik Corporation amounting to Rs. 29,94,900/- are bogus in nature. 3. Report of the DDIT (Inv.), Unit-4(2) Mumbai has been perused with reference to the statements of Shri Bijal Ashok Shah, Prop. M/s. Swastik Corporation. After perusal and having verified, the finding of the DDIT (Inv.), Unit-4(2), Mumbain is found to be in order that M/s. Swastik Corporation is a paper entity, which is handled by Shri Bijal Ashok Shah engaged in the business of giving bogus accommodation entry in lieu of certain margin of commission. 4. After perusal of statement of Shri Bijal Ashok Shah, Prop. M/s. Swastik Corporation and the DDIT (inv.), Unit-4(2), Mumbai, it is confirmed that the assessee company M/s. Amar Jewellers Ltd. has received bogus purchase bills amounting to Rs. 29,94,900/- during the F.Y. 2012-13 relevant to A.Y.2013-14 from M/s. Swastik Corporation which is run and controlled by Shri Bijal Ashok Shah a commission agent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mention here that even though the the assessee has produced audited P&L account and balance sheet as mentioned above, the requisite material facts as noted above in the reasons for reopening was not as such disclosed and could not be discovered by the AO, accordingly attracting provisions of Explanation-1 of section 147 of the Act. It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment/reassessment. This fact is corroborated from the contents of notice issued by the AO u/s.143(2), 153A proceedings. It is important to highlight here that material facts relevant for the assessment on the issue(s) under consideration were not filed during the course of assessment proceeding and the same may be embedded in annual report, audited P&L A/c, balance sheet and books of account in such a manner that it would require due diligence by the AO to extract these information. For above stated reasons, it is not a case of change of opinion by the AO." 5. To the aforesaid, the writ applicant filed its objections as under; "6. In your letter dated 07.05.2019, your honour has observed that S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. It is to be noted that no notice u/s.133(6) was issued for making inquiry before issuing notice u/s.148. 11. On merits, it is submitted that during the year under consideration, assessee has made both purchases and sales with M/s. Swastik Corporation which are supported by bills and payments and receipts through banking channels. The ledger account of M/s. Swastik Corporation as appearing in the books of accounts of the assessee duly confirmed by the party is enclosed herewith." 6. The objections lodged by the writ applicant came to be disposed of by the Assessing Officer vide its order dated 13.09.2019. The order reads thus; "3.2 So far as, first objection is concerned, the course of action starting from dissemination of information upto supply of reasons related to proceedings of reopen of assessment is narrated hereunder for your ready reference:- (i) This office is in possession of information related to transaction with Swastik Corporation during F.Y.2012-13, which was disseminated through letter No.DDIT(Inv.) Unit-4(2)NM/Information/2017-18 dated 17.10.2017 by the ADIT (Inv.), Unit 4(2), Mumbai. (ii) Recorded the reasons for initiating proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration. The statement and subsequent investigation revealed that M/s. Swastik Corporation is a paper entity and Shri Bijal Ashok Shah, Prop. M/s. Swastik Corporation has admitted that he is engaged in the business of giving bogus entry/accommodation entry only in lieu of margin of commission without any corresponding buying/selling of stock,. In view of the above the contentions and ledger account furnished has no relevance on the issue discussed herein, hence the same is rejected." 7. The principal argument of Mr. Hemani on behalf of the assessee is that the reopening is beyond a period of four years and there was no failure on the part of the assessee to fully and truly disclose its income. Mr. Hemani would submit that the reopening is based on change of opinion. He would submit that the statement of Shri Bijal Ashok Shah which is sought to be relied upon could be said to be of a tainted person and would not constitute tangible material so as to arrive at the conclusion that the income in the hands of the assessee has escaped assessment. Mr. Hemani would submit that the reopening is nothing but a roving or a fishing inquiry. 8. Per contra, Ms. Raval, the learned seni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the formation of the belief contemplated by Section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the Court to investigate. The sufficiency of grounds which induce the income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief." 16. It is therefore, clear that the basis for a valid reopening of assessment should be the availability of tangible material, which can lead the AO to scrutinize the returns for the previous assessment year in question, to determine, whether a notice under Section 147 is called for. 17. It appears that in the case on hand, the search assessment was finalized under section 143(3) read with Section 153A of the Act on 28.03.2016. Thereafter, survey action under section 133A of the Act was conducted by the Investigating Wing, Mumbai on 14.01.2017 in the case of Shri Bijal Ashok Shah, proprietor of M/s. Swastik Corporation. During the course of the survey action, one statement of ijal Ashok Shah was recorded on oath wherein he admitted that he is engaged in the business of providing accommodation entries to the beneficiaries in lieu of commission. Bijal Ashok Shah also disclosed the modus operandi employed by him to provide t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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