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TMI Blog2024 (12) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the respondents. 4. By these petitions under Article 226 of the Constitution of India, the petitioner has challenged the validity and legality of the notices dated 30th March, 2021 issued under Section 148 of the Income Tax Act, 1961 (for short "the Act") for the Assessment Year 2016-17 and Assessment Year 2017-2018. 5.1 The brief case of the case are that the petitioner is a Company engaged in the business of trading of all types of bearings and its allied items. 5.2. The petitioner received the impugned notices. On receipt of the impugned notices, the assessee filed the return of income and also requested for the reasons recorded. The Assessing Officer provided the reasons recorded on 05.05.2021 for both the years. So far as Assessment Year 2016-17 is concerned the reasons recorded are as under:- "As per the information received from the credible sources that a search action u/s. 132 of the Income tax Act, 1961 was carried in the case of Jignesh Shah and Sanjay Shah. During the course of search action various incriminating documents were found and seized from the premises of Shri Jignesh Shah and Sanjay Shah. It is further worth to mention here that, on going thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith various entities whom are engaged in various business activities. Investigation office has issued summons at the every address available with department and almost all the summons have been served. However, no response has been received from any of the proprietors. In view of the above, it is clear that these entities are paper concerns and engaged in providing accommodation entries to the various unrelated concerns. No underlying business activity has been carried out against the bank transactions made by these entities with various entities During the year, the assessee has entered into transactions amounting Rs. 99,77,271/- with M/s. Mahavir Sales Corporation which is indulge in providing accommodation entries with out carried out any real business activities. In view of the above paras, failure on the part of the assessee to disclose fully and truly all the materia facts necessary for the assessment the income of the assessee has escaped assessment to the tune of Rs. 1,06,67,277/ for the AY 2016-17 within the meaning of Section 147 of the Income-tax Act, 1961.I have, therefore, reason to believe that this is a fit case for reopening the assessment u/s. 147 of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Year 2016-17 and the assessee also denied the allegations of transaction of Rs. 99,77,271/- with M/s. Mahavir Sales Corporation during the Financial Years 2015-16 and 2016-17, relevant for Assessment Years 2016-17 and 2017-2018. The petitioner denied that the receipt of the alleged accommodation entries from M/s. Mahavir Sales Corporation for both the years. 5.5 The respondent No. 2-Income Tax Officer, the National Faceless Assessment Centre passed an order dated 27.12.2021 disposing of the objections raised by the petitioner. 5.6. The opening paragraph of the objections order for Assessment Year 2016-17 reads as under:- "In the instant case, the assessee M/s. Filco Trade Centre Private Ltd., filed return of income for the AY 2016-17 on 10-10-2016 declaring income of Rs.93,32,480/-. The assessee's return for the A.Y. 2016-17 was processed u/s 143 (1) of the I. T. Act, 1961. The DGIT (System), New Delhi had made data available in the assessee case that the assessee is one of the beneficiaries of taking accommodation entry of unsecured loan to tune of Rs. 1,06,67,277/- in the form of fictitious loan from Shri Jignesh Shah and Sanjay Shah to the tune of Rs. 6,90,006/- and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no nexus with the facts of the case of the petitioner. It was submitted that though the petitioner has requested the respondent-Assessing Officer to provide him the details of the satisfaction note or the material and the documents which are relied upon for issuance of the impugned notices, however, no such information or documents were provided to the petitioner. 7.2 It was therefore, submitted that when the petitioner has not entered into any transactions with any of the parties referred into the reasons recorded, the mere allegations made by the Assessing Officer in the reasons recorded without there being any prima facie nexus stated therein, the very foundation for reopening would be belied. 7.3 It was further submitted that the Assessing Officer while disposing of the objections raised by the petitioner has also not referred to any material which has formed the basis for making allegations of accommodation entry being availed by the petitioner. 7.4 Learned Senior Advocate Mr. Hemani invited the attention of the Court to the response of the Assessing Officer in para 5.12.1 in the order disposing of the objections in respect of the denial of the petitioner of having a trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of accommodation entry as per the information made available to the respondent-Assessing Officer. It was therefore submitted that merely recording of the wrong name of the parties in the reasons recorded cannot invalidate the reasons recorded when, there is a information made available with the Assessing Officer which can be considered at the time of reassessment proceedings. 7.8 With regard to the allegation of accommodation entry availed by the petitioner assessee from Jignesh Shah and Sanjay Shah for the Assessment Year 2016-17 is concerned, it was submitted that the Assessing Officer has alleged that the petitioner availed accommodation entry of Rs. 6,90,006/- on the basis of the information available. It was submitted that so far as Assessment Year 2017-18 is concerned, on the basis of the information, the Assessing Officer has recorded the satisfaction which will be considered and therefore, no interference is required to be made by this Court while exercising the jurisdiction under Article 226 of the Constitution of India. 7.9 In support of his submissions, reliance was placed on the decision of this Court in the case of Mehrunnisa Mohamed Fazal Maniar Vs. Income Tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Having heard the learned advocates appearing for the respective parties and considering the facts of the case, it appears that the Assessing Officer has recorded the reasons based upon the information made available to him without application of mind. On perusal of the reasons recorded, it is apparent that the Assessing Officer has not referred to the nature of accommodation entry availed by the petitioner from Jignesh Shah and Sanjay Shah for Rs. 6,90,006/- for Assessment Year 2016-17 is concerned. Merely recording the facts from the information made available to the effect that the petitioner was beneficiary who has availed the accommodation entry to the tune of Rs.6,90,0006/- cannot be said to be a reason having nexus with the material made available to the Assessing Officer for opening of the assessment. In case of Mehrunnisa Mohamed Fazal Maniar (Supra) and the decision in case of Backbone Projects Ltd. (Supra) as well as the decision in case of Kantibhai Dharamshibhai Narola (Supra), the information was available with the Assessing Officer from the concern controlled by Jigesh Shah and Sanjay Shah from which the assessee was beneficiary of accommodation entry. It therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mention that the assessment was re-opened after taking recourse to all administrative and legal procedures and after duly recording the reasons for which the case was reopened. As per the provisions of section 151 of the Act, the notice u/s. 148 of the I.T. Act has been issued within the power conferred as per law and as per the provisions of the section 147 of the Income Tax Act, 1961. Hence, it cannot be said that notice u/s. 148 of the Act issued to the assessee is bad in law. The objection raised by the assessee is not acceptable as the Assessing Officer has reasonable belief that by omission on the part of the assessee to disclose fully and truly all material facts, the income of the assessee has escaped assessment and such reason to believe has been provided to the assessee vide notice u/s. 143 (2) of the Act dated 05.05.2021. On perusal of the information so received from Investigation Wing, Ahmedabad, it is noticed that M/s. Mahavir Sales Corporation (ASTPP8307L), controlled and managed by Shri Chiragkumar B. Patel has given accommodation entries of Rs. 99,77,271/- to the assessee M/s. Filco Trade Centre Pvt. Ltd. During the enquiry it is noticed that Shri Chiragkumar. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material is not a thing to be considered at that stage. (iii) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. (iv) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer,to the materials produced prior to the reopening of the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied-a postmortem exercise of analysing the materials produced subsequent to the reopening will not make an inherently defective reassessment order valid. (v) The crucial lin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression "tangible material" does not mean the material alien to the original record. (xiii) The order, disposing of objections or any counter affidavit filed during the writ proceedings before the Court cannot be substituted for the "reasons to believe". (xiv) The decision to reopen the assessment on the basis of the report of the Investigation Wing cannot always be condemned or dubbed as a fishing or roving inquiry. The expression "reason to believe" appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonable and prudent man on the basis of the information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and the assessments be reopened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts indicating incorrect allowance of the expense, such disclosure would constitute information as contemplated in clause (b) of Section 147. (xx) The reasons recorded or the material available on record must have nexus to the subjective opinion formed by the A.O. regarding the escapement of the income but then, while recording the reasons for the belief formed, the A.O. is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the A.O had cause or justification to know or suppose that the income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (supra)]. It is also well settled that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. 35. The power to reopen a completed assessment under Section 147 of the Act 1961 has been bestowed on the Assessing Officer, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 148 of the Act.
9.5 Considering the above conspectus of law, we are unable to look into the material referred to and relied upon by learned Senior Standing Counsel Mr. Patel to justify the reasons recorded so as to draw a presumption by us that the Assessing Officer has committed an error while recording the reasons and therefore, no interference is required to be made in the facts of the case.
9.6 Considering the material available on record in form of reasons recorded, we cannot travel beyond the same for the settled legal position that the Assessing Officer is required to confine to the reasons recorded for reopening and he is not authorized to refer to any other reason or fact even if it can be otherwise inferred or gathered from the record for the purpose of the validity of the assumption of the jurisdiction under Section 147 of the Act.
10. In view of the foregoing reasons, both the petitions succeed and were accordingly allowed. The impugned notices dated 30th March, 2021 issued for the Assessment Year 2016-17, 2017-18 are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to costs. X X X X Extracts X X X X X X X X Extracts X X X X
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