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TMI Blog2024 (7) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... w. The entire law as to what would constitute reason to believe has been summed up in the case of Lakhmani Mewaldas [ 1976 (3) TMI 1 - SUPREME COURT] . Also see Paramjit Kaur' [ 2007 (8) TMI 323 - PUNJAB AND HARYANA HIGH COURT] wherein, making identical observations, the Hon'ble High Court has held that in the absence of sufficient material to form satisfaction of the Assessing Officer that income of the assessee had escaped assessment, the issuance of notices u/s 148 of the Act was not valid. Addition u/s 68 - The assessee had duly furnished the sufficient documents to prove the identity and creditworthiness of the creditors and genuineness of the transaction including the list of directors of the creditor, the loan confirmation from the creditor, the source of creditor, the bank statement of the creditor and even the said creditor had also replied to the notice issued u/s 133(6) of the Act issued by the Assessing Officer and duly confirmed the loan transaction. The most relevant document in this case is the assessment order of the creditor, M/s Annapurna Dealmark Pvt. Ltd. for assessment year 2012-13, which show that no addition has been made by the Assessing Officer in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Shanker Logistics Pvt. Ltd. PAN AAJCS8693 P is the beneficiary company during the AY 2012-13 and has taken entries from the aforesaid shell entities/ companies which do not have any real business and was operated only to bring their unaccounted money in the books. Thus, the assessee has introduced its unaccounted cash back in the books without paying any tax by taking bogus purchases or payment entries from these shell companies. 4. Basis of Forming reason to believe and details of escapement of income: There is specific information that the aforementioned companies are shell companies which provide accommodation entries to the various beneficiaries. Perusal of the bank accounts of the companies reveals that M/s Shanker Logistics Pvt. Ltd. was a beneficiary of the transactions of the above companies during the FY 2011-12. It can be concluded that M/s Shanker Logistics Pvt. Ltd. had used the company as a conduit to bring its own out of books income into the books of the company and thereby avoiding taxation on same and also to book bogus expense, thereby reducing taxable income and thus escaping taxation. As such income to tune of Rs. 20,00,000/- has escaped assessment during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in this case is A.Y 2012-13 and the reasons for reopening of the assessment were recorded on 26.03.2019. He has further submitted that the original assessment in this case was carried out u/s 143(3) of the Act. He, therefore, has submitted that Proviso to section 147 of the Act is attracted in this case, which provides that where original assessment has been carried out u/s 143(3) of the Act, no action shall be taken u/s 147 of the Act after the expiry of four years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for that assessment year. He has submitted that the assessee has fully disclosed all the material facts relating to the transactions carried out by the assessee. He has further invited our attention to the reasons recorded by the Assessing Officer to submit that there is no allegation either in the reasons recorded or otherwise that the income of the assessee has escaped assessment owing to any failure on the part of the assessee to fully and truly disclose the material facts necessary for the assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of belief regarding escapement of income. The powers of Assessing Officer to reopen an assessment, though wide, are not plenary. The words of the statute are reason to believe and not reason to suspect . There can be no manner of doubt that the words reason to believe suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. Such an action of the Assessing Officer regarding formation of belief of escapement of assessment and thereby in starting proceedings u/s 147 is open to challenge in a court of law. The entire law as to what would constitute reason to believe has been summed up b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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