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TMI Blog2024 (12) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... sposing the objection. AO has formed reasonable belief that income chargeable to tax has escaped assessment only on the basis of the information available with him regarding the failure on the part of the petitioner-assessee of known source for the cash deposited ignoring that the petitioner has categorically stated in the reply that the cash deposited is out of the sales which is duly reflected in the books of account. In absence of any independent application of mind by the respondent-Assessing Officer and in absence of any live link between the information received and the material available record, the impugned notice cannot be sustained. Merely because the Assessing Officer wishes to verify veracity of cash deposit cannot be the basis for reopening for making roving and fishing inquiry by reassessment even in case where the return was not scrutinized before acceptance originally. Therefore, respondent assessing officer could not have assumed jurisdiction to issue the impugned notice for reopening. Decided in favour of assessee. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE D.N. RAY Appearance : For the Petitioner(s) No. 1: Mr Darshan B Gandhi (9771). F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls available on records, it is noticed that the assessee has made cash deposit during the demonetization period in its Bank Account of Rs. 56,07,000/-. As a outcome of enquiry / perusal and analysis of details available on records, it is noticed that the known source of cash deposit is not conclusively proved. 3. From the above details and Insight information available on the system for the year under consideration, it is found that the assessee has made transaction of cash deposit and source of the cash deposit is not proved. 4. The report is perused and having satisfied with the outcome and no further enquiry is necessary. I have gone through the information received and I have also gone through the material available on records. The ITBA/ITD data available in this office is also verified. The information and facts are found to be correct. On personal analysis of the data, prima facie, I have reason to believe that an amount of Rs. 56,07,000/- has escaped assessment within the meaning of section 147 of the I. T. Act. In view of this, the case is fit to be proceeded u/s, 147 and u/s. 148 of the I. T. Act. 5. The assessee has filed return of income for year under consideration, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2017 cash deposited was Rs.1,31,85,000/-. It was therefore, submitted that the petitioner has explained in detail the cash collected from the customers as well as the cash sales during the Financial Year 2016-17 and the cash deposited by the petitioner in the bank account. 6.3 It was further submitted that the Assessing Officer has also not referred to the inquiry conducted pursuant to the summons under section 131 (1) of the Act by the Investigation Wing and straightaway arrived at a conclusion that there is escapement of income in absence of any material available on record. It was therefore submitted that the impugned notice is without jurisdiction as the same is issued only to verify, more particularly, when the petitioner has provided all the details along with audited balance-sheet, statement of bank account along with the reply. 6.4 In support of his submissions, reliance was placed on the following decisions: (i) Hemant Manharlal Shah HUF vs. ITO reported in [2018] 94 Taxmann.com 463 (Guj.); (ii) CIT vs. Indo Arab Services reported in [2015] 64 taxmann.com 257 (Delhi); (iii) Sunrise Education Trust vs. ITO Exemption reported in [2018] 92 taxmann.com 74 (Guj.); (iv) Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, Officer Circle 1(1) reported in [2018] 91 taxmann.com 181 (Gujarat) wherein, this Court held that on the basis of the additional information received by the Assessing Officer, a belief was formed that the transaction entered by the petitioner in the said case was a sham transaction and therefore, this Court did not interfere with the notice for reopening. In the facts of the said case, this Court has considered various decisions which are relied upon by learned Senior Standing Counsel Mr. Patel as under: 7. The reasons thus recorded do not proceed only on the information supplied by the Investigating Wing. The Assessing Officer having applied his mind and processed such information, formed his belief that the income chargeable to tax has escaped assessment. Neither the application of mind, nor the formation of belief that income chargeable to tax has escaped assessment on the basis of information available at the disposal of Assessing Officer, have to be expressed in any rigid format in the reasons recorded. Hence, as these two essential requirements can be gathered from the reasons recorded, the notice for reopening cannot fail on such basis. Division Bench of this Court in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 evade excise duty. On the basis of such material, the Assessing Officer also formed a belief that income chargeable to tax had also escaped assessment. When thus the Assessing officer had such material available with him which he perused, considered, applied his mind and recorded the finding of belief that income chargeable to tax had escaped assessment, the re-opening could not and should not have been declared as invalid, on the ground that he proceeded on the show-cause notice issued by the Excise Department which had yet not culminated into final order. At this stage the Assessing Officer was not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. In this context, we may refer to various decisions cited by the counsel for the Revenue. 10. In case of Central Provinces Manganese Ore Co. Ltd. vs. Income Tax Officer, Nagpur (Supra) the Supreme Court noted that in case of the assessee wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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, 1974 and on the very next day, that is, on March 27, 1974, he issued the impugned notice under Section 147 (b) of the Act and that he did not have conducted any inquiry or investigation into the information sent by Shri Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri Bagai does not mean that the Income Tax Officer did not apply his mind to the information contained in the said letter of Shri Bagai. On the basis of the said facts and information contained in the said letter, the Income Tax officer, without any further investigation, could have formed the opinion that there was reason to believe that the income of the assessee chargeable to tax had escaped assessment. The High Court, in our opinion, was in error in proceeding on the basis that it could not be said that the Income Tax Officer had in his possession information on the basis of which he could have reasons to believe that income of the assessee charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any opinion on the merits. 13. In case of AGR Investment Ltd. vs. Additional Commissioner of Income Tax Anr. (Supra), Division Bench of Delhi High Court considered the validity of reopening of assessment where the notice was based on information received from Directorate of investigation that the assessee was beneficiary of bogus accommodation entries. The Court while upholding the validity of reopening observed that sufficiency of reason cannot be considered in a writ petition. It was observed as under : 23. The present factual canvas has to be scrutinized on the touchstone of the aforesaid enunciation of law. It is worth noting that the learned counsel for the petitioner has submitted with immense vehemence that the petitioner had entered into correspondence to have the documents but the assessing officer treated them as objections and made a communication. However, on a scrutiny of the order, it is perceivable that the authority has passed the order dealing with the objections in a very careful and studied manner. He has taken note of the fact that transactions involving Rs.27 lakhs mentioned in the table in Annexure P-2 constitute fresh information in respect of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of Madras High Court in case of Sterlite Industries (India) Ltd. vs. Assistant Commissioner of Income Tax reported in [2008] 302 ITR 275 (Mad) upheld the notice for reopening which was based on information from enforcement directorate showing possible inflation of purchases made by the assessee. 8. The question of change of opinion and failure on the part of the assessee to disclose truly and fully all material facts, in the present case are closely connected. Undoubtedly, as noted earlier, the Assessing Officer during the original assessment had examined the transactions. However, such examination would necessarily be on the basis of disclosures made by the assessee in the return filed and during the scrutiny assessment. If the Assessing Officer has information to form a reasonable opinion that prima facie the entire transaction itself was sham and bogus, as reference to such transaction during the original assessment and raising certain queries in this respect would not prevent him from reopening the assessment on the principle of change of opinion. As noted, the opinion would be formed on the basis of disclosures. When disclosures are found to be prima facie untrue, the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived from Basant Marketing Pvt. Ltd. as accommodation entry , which she could not have done without further inquiry/ verification. Yet another contention emphasized by the learned Senior Counsel is that the post notice correspondence made after the reasons recorded could not have added anything which was lacking in the reasons themselves. He urged that in absence of any statement given by any Director of Basant Marketing Pvt. Ltd. stating that the assessee received and obtained accommodation entry in the form of loans and advances, the reasons lack basis. The Director Mr. Dalmia of Basant Marketing Pvt. Ltd. as contended also does not reveal anywhere and, therefore, it is premature on the part of the Assessing Officer to so record the reasons. It is further urged that the affidavit of Rishabh Dalmia stating on oath that the loan transactions with the petitioner are genuine for having been carried out only through cheques, prima facie vindicates that the entire exercise is based on suspicion. The entire thrust, therefore, is that issuance of notice is nothing but a fishing inquiry. 19. As discussed at length while adverting to the law, that sufficiency of reasons recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment under section 147 of the Act must fail. At the costs of in gemination, it needs to be mentioned that at the time of scrutiny assessment, a specific query was raised with regard to unsecured loans and advances received from the said company namely, Basant Marketing Pvt. Ltd. based at Kolkata. These being the transactions through the cheques and drafts, there would arise no question of the Assessing Officer not accepting such version of the assessee and not treating them as genuine loans and advances. Furnishing the details of names, addresses, PANs, etc. also would lose its relevance if subsequently furnished information, which has been made basis for issuance of notice impugned, concludes that Basant Marketing Pvt. Ltd. is merely a dummy company of one Shri Arun Dalmia, which provided the accommodation entries to various beneficiaries. 21. This Court has examined the belief of the Assessing Officer to a limited extent to inquiry as to whether there was sufficient material available on record for the Assessing Officer to form a requisite belief whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. This does not appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dispute that the petitioner has disclosed in the return of income for the Assessment Year 2017-18 that the petitioner has deposited cash of Rs. 80,07,000/- between 09.11.2016 and 30.12.2016. Moreover, the petitioner has also explained in the objection reply to the impugned notice by explaining that the deposit was of Rs. 80,07,000/- and not Rs. 56,07,000/- as stated in the impugned notice. The assessee has explained that there were cash sales in addition to the cash received from the debtors which was deposited during the said period. It also emerges from the said reply that the total cash deposited by the petitioner up to 07.11.2016 was Rs. 3,23,00,000/- and the cash deposited during the demonetization period is Rs. 80,07,000/- as against total cash sales of Rs. 57,55,624/-. 9. Thus, the petitioner has explained the cash deposit in the bank account during demonetization period. The Assessing Officer however, has discarded above explanation of the petitioner only observing that the petitioner has failed to furnish supporting and corroborative evidence proving direct nexus of cash deposited during demonetization with the amount of cash received from the customers. Such reasons ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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