[CASE NUMBER] [ENTITY] [ENTITY] [CASE NUMBER] With [CASE NUMBER] ForApprovalandSignature: HONOURABLEMR.JUSTICE[ENTITY] Sd/ and [ENTITY] Sd/
1 WhetherReportersofLocalPapersmaybeallowedtosee No thejudgment?
2 TobereferredtotheReporterornot? No 3 WhethertheirLordshipswishtoseethefaircopyofthe No judgment? 4 Whetherthiscaseinvolvesasubstantialquestionoflawas No
to the interpretation of the [ACT] or any ordermadethereunder?
M/[ENTITY] Petitioner(s) Versus [ENTITY],CIRCLE1(1) Respondent(s) Appearance:
[ENTITY],ADVOCATEforthePetitioner(s)No.1 [ENTITY],ADVOCATEfortheRespondent(s)No.1 CORAM:HONOURABLEMR.JUSTICE[ENTITY] and [ENTITY] Date:09/06/2017 COMMONCAVJUDGMENT (PER:HONOURABLEMR.JUSTICE[ENTITY]) [1.0] Ascommonquestionoflawandfactsariseinboththesepetitions and as such with respect to the same assessee but with respect to differentassessmentyears,boththesepetitionsareheard,decidedand disposedofbythiscommonjudgmentandorder.
HC-NIC Page 1 of 24 Created On Wed Aug 16 09:35:16 IST 2017 [CASE NUMBER] [2.0] BywayofthispetitionunderArticle226oftheConstitutionof India, the petitioner - assessee has prayed for an appropriate writ, directionandordertoquashandsetasidetheimpugnednoticeunder Section148oftheIncomeTaxAct,1961(hereinafterreferredtoas"[ACT]")bywhichtheAOhassoughttoreopentheassessmentforAY2011 12onthegroundthattheincomechargeabletotaxfortheAY201112 hasescapedassessmentwithinthemeaningof[ACT]
[CASE NUMBER] [2.1] BywayofthispetitionunderArticle226oftheConstitutionof India, the petitioner - assessee has prayed for an appropriate writ, directionandordertoquashandsetasidetheimpugnednoticeunder [SECTION] assessmentforAY201213onthegroundthattheincomechargeableto taxfortheAY201213hasescapedassessmentwithinthemeaningof [ACT]
[CASE NUMBER] [3.0] Factsleadingtothe[CASE NUMBER]are asunder:
[3.1] That the petitioner assessee filed the return of income for AY 201112on30.09.2011declaringtotalincomeofRs.33,03,230/.The samewasprocessedunderSection143(1)oftheITAct.Thatthereafter thecasewasselectedforscrutinyandthenoticeunderSection143(2)of theITActwasissued.Thequestionnairewasissuedanddulyservedon theassessee.Thattheassesseefurnishedthedetailsofincreasingshare capital,details of source of income,details ofsecuredandunsecured loans, details of share application money, details of shareholders etc. duringtheyearunderconsideration.ThatthereaftertheAOpassedthe HC-NIC Page 2 of 24 Created On Wed Aug 16 09:35:16 IST 2017 scrutiny assessment order under [SECTION] of the [ACT] on 25.02.2014makingcertainadditionsanddisallowances.
[3.2] Thatthereafterbyimpugnednoticedated01.09.2015,theAOhas sought to reopen the assessment for AY 201112. That the petitioner assesseefiledthereturnofincomeon27.10.2015declaringtotalincome ofRs.33,03,225/inresponsetotheimpugnednoticeunderSection148 oftheITAct.ThatthereafterattherequestoftheassesseetheAOhas furnished/providedthereasonsforreopeningoftheassessmentforAY 201112. The reasons recorded of reopening the assessment for AY 201112areasunder:
"ReasonsofReopeningtheAssessment Nameof M/s.AaspasMultimediaLtd.
assessee (FormerlyknownasAaspasInvestment Pvt.Ltd.) 607,SakarI, Nr.GandhigramRailwayStation, Ellisbridge,Ahmedabad PANNo. [CASE NUMBER] Status Company A.Y. 201112
The [ENTITY] vide confidential letter No.PDIT(Inv)/AHD/Pravin Jain/1516 dated 16.06.2015forwardedtheinformationthatasearchu/[SECTION]oftheI.T. ActwasconductedinthecaseofShriPravinKumarJainon1.10.2013. Thesearchactionresultedincollectionofevidenceandotherfindings whichconclusivelyprovedthatShriPravinKumarJainisengagedin providing accommodation entries of various natures like unsecured loans,bogusshareapplication/capitalandbogussalesandpurchases tothebeneficiariesspreadthroughoutIndia.
M/s. Aaspas Multimedia Ltd. has routed its unaccounted money amounting to Rs.4,80,00,000/ by way of share application from various bogus companies operated by Shri [ENTITY] as mentionedbelow.
1. AnchalPropertiesP.Ltd.
2. AnshMechandiseP.Ltd.
HC-NIC Page 3 of 24 Created On Wed Aug 16 09:35:16 IST 2017
3. OliveOverseasP.Ltd.
4. VanguardJewelsLtd.
Onthebasisofabovementionedfact,Ihavereasontobelievethat thereisanescapementofincomemorethanRs.1.00lacinthecaseof theaboveassesseeandthecaseistherefore,requriedtobereopened u/s.147oftheITActbywayofissuingnoticeu/[SECTION]ITAct."
[3.3] That on receipt of the reasons recorded for reopening the assessment for AY 201112, the petitioner assessee submitted its objections. It was submitted that no reliance can be placed and cognizancecannotbetakenfromthematerialfoundfromthethirdparty premises. It was further submitted that all the parties to share applicationmoneyisreceivedisdulyregisteredwithROCandtheyeven possess PAN. It was further submitted that at the time of scrutiny assessmentassesseefurnishedfullparticularswithrespecttothedetails ofshareapplicationmoneyandthesourceandtherefore,thesubsequent reopeningisnothingbutachangeofopinionofthesubsequentAO.That thereafter vide order dated 14.10.2016, the AO has disposed of the objectionsreferringtotheinformationreceivedfromtheInvestigating Wingandtheobjectionsraisedbythepetitionerarenotacceptedbythe AOandtheAOhasrejectedthesameintotality.Hence,thepetitioner assessee has preferred the [CASE NUMBER] challenging the impugned notice under [SECTION] of the [ACT] by whichtheAOhassoughttoreopentheassessmentforAY201112.
[CASE NUMBER] [4.0] Factsleadingtothe[CASE NUMBER]are asunder:
[4.1] That the petitioner assessee filed the return of income for AY 201213on29.09.2012declaringtotalincomeofRs.62,29,330/.The samewasprocessedunderSection143(1)oftheITAct.Thatthereafter HC-NIC Page 4 of 24 Created On Wed Aug 16 09:35:16 IST 2017 thecasewasselectedforscrutinyandthenoticeunderSection143(2)of theITActwasissued.Thequestionnairewasissuedanddulyservedon theassessee.Thattheassesseefurnishedthedetailsofincreasingshare capital,details of source of income,details ofsecuredandunsecured loans, details of share application money, details of shareholders etc. duringtheyearunderconsideration.ThatthereaftertheAOpassedthe scrutiny assessment order under [SECTION] of the [ACT] on 25.02.2014makingcertainadditionsanddisallowances.
[4.2] Thatthereafterbyimpugnednoticedated01.09.2015,theAOhas sought to reopen the assessment for AY 201213. That the petitioner assesseefiledthereturnofincomeon19.10.2015declaringtotalincome ofRs.62,29,334/inresponsetotheimpugnednoticeunderSection148 oftheITAct.ThatthereafterattherequestoftheassesseetheAOhas furnished/providedthereasonsforreopeningoftheassessmentforAY 201213. The reasons recorded of reopening the assessment for AY 201213areasunder:
"ReasonsofReopeningtheAssessment Nameof M/s.AaspasMultimediaLtd.
assessee (FormerlyknownasAaspasInvestment Pvt.Ltd.) 607,SakarI, Nr.GandhigramRailwayStation, Ellisbridge,Ahmedabad PANNo. [CASE NUMBER] Status Company A.Y. 201213
The [ENTITY] vide confidential letter No.PDIT(Inv)/AHD/Pravin Jain/1516 dated 16.06.2015forwardedtheinformationthatasearchu/[SECTION]oftheI.T. ActwasconductedinthecaseofShriPravinKumarJainon1.10.2013. Thesearchactionresultedincollectionofevidenceandotherfindings whichconclusivelyprovedthatShriPravinKumarJainisengagedin providing accommodation entries of various natures like unsecured HC-NIC Page 5 of 24 Created On Wed Aug 16 09:35:16 IST 2017 loans,bogusshareapplication/capitalandbogussalesandpurchases tothebeneficiariesspreadthroughoutIndia.
M/s. Aaspas Multimedia Ltd. has routed its unaccounted money amounting to Rs.4,87,00,000/ by way of share application fromvariousboguscompaniesoperatedbyShriPravinKumarJainas mentionedbelow.
1. KushHindustanEnt.Ltd.
2. DukeBusinessP.Ltd.
3. NakshatraBusinessP.Ltd.
4. OliveOverseasP.Ltd.
5. TriangularInfocomLtd.
6. VanguardJewelsLtd.
7. YashVJewelsLtd.
Onthebasisofabovementionedfact,Ihavereasontobelieve thatthereisanescapementofincomemorethanRs.1.00lacinthe caseoftheaboveassesseeandthecaseistherefore,requriedtobe reopenedu/s.147oftheITActbywayofissuingnoticeu/[SECTION] ITAct."
[4.3] That on receipt of the reasons recorded for reopening the assessment for AY 201213, the petitioner assessee submitted its objections. It was submitted that no reliance can be placed and cognizancecannotbetakenfromthematerialfoundfromthethirdparty premises. It was further submitted that all the parties to share applicationmoneyisreceivedisdulyregisteredwithROCandtheyeven possess PAN. It was further submitted that at the time of scrutiny assessmentassesseefurnishedfullparticularswithrespecttothedetails ofshareapplicationmoneyandthesourceandtherefore,thesubsequent reopeningisnothingbutachangeofopinionofthesubsequentAO.That thereafter vide order dated 14.10.2016, the AO has disposed of the objectionsreferringtotheinformationreceivedfromtheInvestigating Wingandtheobjectionsraisedbythepetitionerarenotacceptedbythe AOandtheAOhasrejectedthesameintotality.Hence,thepetitioner assessee has preferred the Special Civil Application No.21087/2016 HC-NIC Page 6 of 24 Created On Wed Aug 16 09:35:16 IST 2017 challenging the impugned notice under [SECTION] of the [ACT] by whichtheAOhassoughttoreopentheassessmentforAY201213.
[5.0] [ENTITY],learnedAdvocatehasappearedonbehalfof the petitioner assessee and Shri [ENTITY], learned Senior AdvocatehasappearedonbehalfoftheRevenue.
[5.1] It is vehemently submitted by Shri [ENTITY], learned Advocate appearingonbehalfofthepetitionerassesseethattheimpugnednotices underSection148oftheITActandreopeningoftheassessmentforAY 201112 and 201213 are absolutely bad in law and against the provisionsofthestatutemoreparticularlyunderSection147ofthe[ACT].
[5.2] It is further submitted by Shri [ENTITY], learned Advocate appearing on behalf of the petitioner assessee that as such the subsequentreopeningoftheassessmentforAY201112and201213is nothingbutchangeofopinionbythesubsequentOfficerandtherefore, mereonchangeofopinionofthesubsequentOfficerthereopeningof theconcludedassessmentisnotpermissible.
[5.3] It is further submitted by Shri [ENTITY], learned Advocate appearingonbehalfofthepetitionerassesseethatassuchtheoriginal assessmentswerescrutinyassessmentsunderSection143(3)ofthe[ACT]. That thorough inquiry was made during the original assessment proceedings relating to the identity of the shareholders, their creditworthiness and genuineness of the transactions. It is submitted thatdetailedquestionnairesweresentbytheAOandpursuantthereto the assessee furnished the details including PAN, returns of income, bankaccountdetailsandledgercopy.Itissubmittedthatdespitethe HC-NIC Page 7 of 24 Created On Wed Aug 16 09:35:16 IST 2017 abovetheAOwasoftheopinionthatassesseehasfailedintheonusto provethegenuinenessofthetransactionsasthelettersunderSection 133(6) issued to the parties returned unserved. It is submitted that assessee brought it to the notice of the AO that the assessees have changedandaskedthepartiestothemselvesconfirmationlettersandthe concernedpartiessubmittedthesame.Itissubmittedthatthereafterthe AO accepted the transactions to be genuine and did not make any addition in the assessment orders. It is submitted that therefore the subsequent reopening is nothing but change of opinion of the subsequentAOandtherefore,thereopeningoftheassessmentsonmere changeofopinionbythesubsequentAOdeservetobequashedandset aside. In support of his above submissions, Shri [ENTITY], learned Advocate appearing on behalf of the petitioner has relied upon the following decisions oftheHon'bleSupremeCourt,thisCourtandthe DelhiHighCourt.
1. [PRECEDENT]
2. [ENTITY].
[PRECEDENT]
3. ReplikaPress(P.)Ltd.
[PRECEDENT]
4. DelhiCITvs.UshaInternationalLtd.
(2012)348ITR485(Delhi)
5. [ENTITY] (2015)231Taxman889(Gujarat) [5.4] It is further submitted by Shri [ENTITY], learned Advocate appearingonbehalfofthepetitionerthatfromthereasonsrecordedand theaffidavitinreplyitappearsthatthestatementofoneShri[ENTITY]recordedduringthesearchofhispremisesisthebasisfor reopening of the assessments in case of assesseefor AY201112and HC-NIC Page 8 of 24 Created On Wed Aug 16 09:35:16 IST 2017 201213.Itissubmittedthathoweverevenbeforetheimpugnednotices, thesaidShriPravinKumarJainretractedfromhisstatementwhichis the basis for reopening of the assessment in the present case. It is submitted that therefore, retracted statement of the third party (Shri PravinKumarJain)cannotbemadethebasisforreopening.Insupport ofhisabovesubmissions,[ENTITY],learnedAdvocateappearingon behalfofthepetitionerhasrelieduponthefollowingdecisionsofthe Hon'bleSupremeCourt,BombayHighCourtandthisCourt.
1. [PRECEDENT]
2. IndianExpressNewspapers(Bombay)P.Ltd.
[PRECEDENT]
3. [ENTITY] (2013)217Taxman89(Gujarat)(MAG) [5.5] It is further submitted by Shri [ENTITY], learned Advocate appearingonbehalfofthepetitionerthatevenotherwisethereasonsto reopentheassessmentaretoovagueandnoindependentfindingsare recorded.Itis submitted that there is noindependentinquiryand/or findings recorded on an independent inquiry that the income has escapedassessmentsfortheyearsunderconsideration.
[5.6] It is further submitted by Shri [ENTITY], learned Advocate appearingonbehalfofthepetitionerthattheinformationgivenbythe Director of Income Tax (Investigation), Ahmedabad that the amount received by the assessee from other company was nothing but accommodationentryandtheassesseewasbeneficiary,isnotsufficient toreopentheassessmentwhentheAOhadnotappliedhisownmindto thatinformation.
In support of his above submissions, Shri [ENTITY], learned HC-NIC Page 9 of 24 Created On Wed Aug 16 09:35:16 IST 2017 Advocateappearingonbehalfofthepetitionerhasheavilyreliedupon thedecisionoftheDelhiHighCourtinthecaseofSignatureHotelsP. Ltd.vs.IncomeTaxOfficerandAnother reportedin (2011)338ITR 51(Delhi).HehasalsorelieduponthedecisionoftheDivisionBenchof thisCourtinthecaseofVarshabenSanatbhaiPatelvs.ITOreportedin (2016)281CTR75(Gujarat).
Makingabovesubmissionsandrelyinguponabovedecisions,itis requestedtoallowthepresentSpecialCivilApplicationsandquashand setasidetheimpugnednoticesunderSection148oftheITAct.
[6.0] Both these petitions are vehemently opposed by Shri [ENTITY],learnedCounselappearingonbehalfoftheRevenue.
[6.1] ItissubmittedbyShriBhatt,learnedCounselappearingonbehalf oftheRevenuethatinthepresentcasetheAOisjustifiedinissuingthe impugned notice under [SECTION] of the [ACT] to reopen the assessmentforAYs201112and201213ashehasformedanopinion thattheincomechargeabletotaxhasescapedassessment.
[6.2] ItissubmittedbyShriBhatt,learnedCounselappearingonbehalf oftheRevenuethataftertheassessmentorderswerepassedbytheAO, thereafter the AO received a specific information from the Principal Director of Income Tax (Investigation), Ahmedabad and forwarded informationthatasearchunderSection132oftheITActwasconducted in the case of one Shri[ENTITY] andthe searchaction has resultedincollectionofevidenceandotherfindingswhichconclusively prove that Shri [ENTITY] is engaged in providing accommodationentriesofvariousnatureslikeunsecuredloans,bogus share application / capital and bogus sales and purchases to the beneficiaries spread throughout India. The Assessing Officer further HC-NIC Page 10 of 24 Created On Wed Aug 16 09:35:16 IST 2017 receivedtheinformationthatthepresentassesseeisalsooneofthe beneficiaryofsuchaccommodationentryandisengagedinbogusshare applicationmoneyfromvariousbogusconcernsoperatedbyShri[ENTITY].Itissubmittedthatthereafteronthebasisofsuchmaterial and the information received the Assessing Officer after forming an opinionthattheincomechargeabletotaxhasescapedassessmenthas issuedimpugnednoticeunderSection148oftheITAct,whichisassuch withintheperiodoffouryears.
[6.3] ShriBhatt,learnedCounselfortheRevenuehasalsoreliedupon thedecisionoftheDivisionBenchofthisCourtinthecaseofDishman PharmaceuticalsandChemicalsLimitedvs.[ENTITY]ShehasalsoproducedbeforetheCourtthexeroxcopyof therelevantfileandinformationreceivedbytheAssessingOfficerfrom ShriPravinKumarJainonthebasisofwhichtheAssessingOfficerhas issued the impugned notice by forming an opinion that income chargeabletotaxasescapedassessment.
[6.4] Now,sofarasthesubmissiononbehalfofthepetitionerthatthe retractedstatementofthethirdparty(ShriPravinKumarJain)cannot bethebasistoreopentheassessmentsfortheyearsunderconsideration andtherefore,thereopeningoftheassessmentbasedonthestatement ofathirdpartywhohadretractedhisstatement,thereopeningisnot permissible.ItissubmittedbyShriBhatt,learnedCounselappearingon behalfoftheRevenuethatassuchfromthereasonsrecordeditcannot besaidthatreopeningisbasedsolelyonthestatementofShri[ENTITY]whohassubsequentlyretractedfromhisstatementwhich wasrecordedatthetimeofsearch.Itissubmittedthatthesearchaction inthecaseofShriPravinKumarJainresultedincollectionofevidence HC-NIC Page 11 of 24 Created On Wed Aug 16 09:35:16 IST 2017 which conclusively proved that the said Shri [ENTITY] is enaged in providing accommodation entries of various nature, unsecuredloans,bogusshareapplications/capitalandbogussaleand purchasestothebeneficiariesspreadthroughoutIndia.Thatfromthe collectionofevidence,presentassesseeisalsofoundtobeoneofthe beneficiaryandithasbeenfoundfromtheevidencecollectedduringthe searchconductedinthecaseofShriPravinKumarJainthatthepresent assesseehasrouteditsunaccountedmoneybywayofshareapplication fromvariousboguscompaniesoperatedbyShriPravinKumarJain.Itis submittedthatthesaidmaterialalongwiththeinformationwassentto theAOandthereafterthe AOhasformedanopinionconsideringthe material on record which was furnished by the Principal Director of IncomeTax(Investigation),Ahmedabadthattheincomechargeableto taxhasescapedassessmentduringtheyearunderconsideration.
[6.5] ItisfurthersubmittedbyShriBhatt,learnedCounselappearing onbehalfoftheRevenuethatevenotherwisetheevidentiaryvalueof thestatementofShriPravinKumarJainwhichwasrecordedduringthe search conducted which he is reported to have been retracted subsequentlyisrequiredtobeconsideredatthetimeofreassessment proceedings. It is submitted that at this stage what is required to be considerediswhethertheAOisjustifiedinreopeningtheassessmenton thebasisofthematerial/informationsuppliedbythePrincipalDirector of Income Tax (Investigation), Ahmedabad more particularly with respecttoshareapplicationtransactionsornot.
[6.6] ItisfurthersubmittedbyShriBhatt,learnedCounselappearing onbehalfoftheRevenuethattheimpugnednoticesareissuedandthe assessmentsaresoughttobereopenedonthebasisoftheinformation/ materialsuppliedfromtheofficeofDIT(Investigation),whichisinthe HC-NIC Page 12 of 24 Created On Wed Aug 16 09:35:16 IST 2017 natureoftangiblematerial,subsequentreopeningcannotbesaidtobe on a mere change of opinion by the subsequent AO as sought to be contendedonbehalfofthepetitioner.ItissubmittedthatbeforetheAO whileframingtheoriginalassessmentsnoopinionwasformedonthe material/informationwhichisassuchsubsequenttothepassingofthe assessmentorders.
[6.7] ShriBhatt,learnedCounselappearingonbehalfoftheRevenue hasalsoheavilyreliedupontherecentdecisiondated29.12.2016ofthe DivisionBenchofthisCourtinthecaseofAnkitFinancialServicesLtd. vs. [ENTITY] rendered in SpecialCivilApplicationNo.18961/2016bywhichtheDivisionBenchof this Courthas dismissedthe said petition inwhich the similar notice underSection148oftheITActwithsimilarallegationsandthereasons recordedwaschallenged,hasbeenrejectedbythisCourt.
Makingabovesubmissionsandrelyinguponabovedecisionsitis requestedtodismissthepresentpetitions.
[7.0] Heard learned Counsel appearing on behalf of the respective partiesatlength.
Attheoutsetitisrequiredtobenotedthatinthepresentpetitions theassesseehaschallengedthenoticesunderSection148oftheITAct bywhichtheassessmentforAYs201112and201213aresoughttobe reopened.
[7.1] Attheoutsetitisrequiredtobenotedanditisnotindisputethat assuchtheassessmentsaresoughttobereopenedwithintheperiodof4 yearsandtherefore, proviso to[SECTION]oftheITActshallnotbe applicable.
[7.2] From the reasons recorded and the affidavit in reply filed on HC-NIC Page 13 of 24 Created On Wed Aug 16 09:35:16 IST 2017 behalfoftheRevenue,itappearsthataftertheassessmentorderscame to be passed, the AO received the information from the Principal DirectorofIncomeTax(Investigation),AhmedabadvideitsConfidential Letterdated16.06.2015bywhichthePrincipalDirectorofIncomeTax (Investigation), Ahmedabad forwarded the information that a search underSection132oftheITActwasconductedinthecaseofoneShri [ENTITY] andthe searchaction resultedincollection ofthe evidenceandotherfindingswhichconclusivelyprovedthatthesaidShri PravinKumarJainwasengagedinprovidingaccommodationentriesof variousnatureslikeunsecuredloans,bogusshareapplication/capital andbogussalesandpurchasestothebeneficiariesspreadthroughout India.Fromtheinformationreceivedandthematerialreceivedfromthe OfficeofPrincipalDirectorofIncomeTax(Investigation),Ahmedabad,it is found that the assessee is one of the beneficiaries of bogus share application from various bogus companies operated by the said Shri [ENTITY].Thus,the information receivedfromtheOfficeof PrincipalDirectorofIncomeTax(Investigation),Ahmedabadalongwith the evidence collected during the search action in case of said Shri [ENTITY]theAOhasreopenedtheassessmentsforAYs2011 12and201213.Therefore,itcannotbesaidthattherewasnotangible material available with the AO to form an opinion that the income chargeable to tax has escaped assessment for the years under consideration.
[7.3] Additionally,wemaynoticethattheexpressionreasontobelieve cameupforconsiderationbeforetheSupremeCourtincaseofAssistant CommissionerofIncomeTaxvs.RajeshJhaveriStockBrokersP.Ltd.in which,itwasheldthatsuchexpressioncannotbereadtomeanthatthe Assessing Officer should have finally ascertained the fact by legal evidenceorconclusion.Thetermreasontobelievewouldmeancauseor HC-NIC Page 14 of 24 Created On Wed Aug 16 09:35:16 IST 2017 justification.IftheAssessingOfficerhascauseorjustificationtoknowor suppose that income had escaped assessment, it can be said to have reason to believe that an income has escaped assessment. It was observedasunder:
"16. [SECTION] authorises and permits the Assessing Officer to assessorreassessincomechargeabletotaxifhehasreasontobelieve thatincome forany assessmentyearhasescapedassessment.The wordreasoninthephrasereasontobelievewouldmeancauseor justification.IftheAssessingOfficerhascauseorjustificationtoknow orsupposethatincomehadescapedassessment,itcanbesaidto havereasontobelievethatanincomehadescapedassessment.The expressioncannotbereadtomeanthattheAssessingOfficershould havefinallyascertainedthefactbylegalevidenceorconclusion.The function of the Assessing Officer is to administer the statute with solicitudeforthepublicexchequerwithaninbuiltideaoffairnessto taxpayers.AsobservedbytheSupremeCourtinCentralProvinces ManganeseOreCo.[PRECEDENT] fulfillment of the two requisite conditions in that regard is essential.Atthatstage,thefinaloutcomeoftheproceedingisnot relevant.Inotherwords,attheinitiationstage,whatisrequiredis reason to believe, but not the established fact of escapement of income.Atthestageofissueofnotice,theonlyquestioniswhether therewasrelevantmaterialonwhichareasonablepersoncouldhave formedarequisitebelief.Whetherthematerialswouldconclusively prove the escapement is not the concern atthat stage. This is so becausetheformationofbeliefbytheAssessingOfficeriswithinthe realmofsubjectivesatisfaction(seeITOv.SelectedDalurbandCoal Co.Pvt.Ltd.[1996(217)ITR597(SC)];RaymondWoollenMills Ltd.v.ITO[1999(236)ITR34(SC)]."
[7.4] Now, so far as the challenge to the impugned notices on the groundthatthesameisontheborrowedinformationandthatAOhas not formed an independent opinion and/or belief that the income chargeabletotaxhasescapedassessment,itisrequiredtobenotedthat onthebasisoftheinformationsuppliedby/fromtheofficeofPrincipal DirectorofIncomeTax(Investigation),Ahmedabad,theAOhasfound thatthepetitioner-assesseeisthebeneficiaryofaccommodationentries providedbyoneShriPravinKumarJain.TheAOwashavingwithhim HC-NIC Page 15 of 24 Created On Wed Aug 16 09:35:16 IST 2017 findings of the Investigating Team based on the material recovered duringthesearchconductedofShriPravinKumarJainGroup.Underthe circumstances, it cannot be said that there was no tangible material availablewiththeAOto primafacie formanopinion/beliefthatthe incomechargeabletotaxhasescapedassessment.Thetransactionsof the assessee are required to be verified in detail on the basis of the material/evidencecollected during the searchof Shri [ENTITY].Thepetitioner-assesseeisallegedtobethebeneficiaryof accommodationentriesgivenbyShriPravinKumarJainGroupconcerns, therefore, the same are required to be verified in detail. Under the circumstancesandinthefactsandcircumstancesofthecase,itcannot besaidthatthereisnonapplicationofmindonthepartoftheAOthat whileissuingtheimpugnednoticesunderSection148oftheITAct.
[7.5] Now,sofarasthesubmissiononbehalfofthepetitionerthatas the transactions with respect to share applications by 4 companies / shareholders namedin the reasons recordedare concerned,the same wereverifiedbytheAOatthetimeofframingtheoriginalassessments andtherefore,thereopeningcanbesaidtobeonchangeofopinionby thesubsequentAOisconcerned,attheoutsetitisrequiredtobenoted thatassuchtherewasnomaterialavailablewiththeAOatthetimeof framing original assessments, which are now available with the AO received from the office of Principal Director of Income Tax (Investigation),Ahmedabad.
[7.6] Atthisstage,decisionoftheDivisionBenchofthisCourtinthe caseofYogendrakumarGupta(Supra)isrequiredtobereferredtoand considered. In the case before the Division Bench on the basis of information from CBI that loans accepted as genuine in original assessment were bogus, when the Assessing Officer initiated HC-NIC Page 16 of 24 Created On Wed Aug 16 09:35:16 IST 2017 reassessment proceedings under [SECTION] of the [ACT] beyond 4 years,theDivisionBenchhasobservedthatassumptionofjurisdictionon thepartoftheAOisbasedonfreshinformation,specificandreliable and otherwise sustainable under the law, challenge to reassessment proceedings warrant no interference and accordingly notice for reassessmentwasheldtobevalid.InthecasebeforetheDivisionBench, it was the caseon behalf of the assessee that atthe time oforiginal scrutinyassessment,specificquerywasraisedwithregardtounsecured loansandadvancesreceivedfromthecompanyBandthesebeingthe 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. The relevantobservationoftheDivisionBenchareinparas6to18.Inpara 19, the Division Bench has further observed that sufficiency of the reasonsrecordedbytheAssessingOfficerneednotbegoneintobythis Court.ItisfurtherobservedthattheAOwhenformshisbeliefonthe basis of subsequent new and specific information that the income chargeabletotaxhasescapedassessmentonaccountofomissiononthe partoftheassesseetomakefullandtruedisclosureofprimaryfacts,he may start reassessment proceedings as fresh facts revealed the non disclosurefullandtrue.Suchfactswerenotpreviouslydisclosedorit canbesaidthatifpreviouslydisclosed,theyexposeuntruthfulnessof factsrevealed.
[7.6.1] TheApexCourtinthecaseofRajeshJhaveriStockBrokers P. Ltd. (Supra) has held that at the stage of issuance of notice of reopening,theAssessingOfficermusthaveareasontobelieveandnot theestablishedfactofescapementofincomeinthefollowingmanner (headnote);
"Theexpressionreasontobelieveinsection147wouldmeancauseor HC-NIC Page 17 of 24 Created On Wed Aug 16 09:35:16 IST 2017 justification. If the Assessing Officer has cause or If the Assessing Officerhascauseorjustificationtoknoworsupposethatincomehad escapedassessment,itcanbesaidtohavereasontobelievethatan income had escaped assessment. The expression cannot be read to meanthattheAssessingOfficershouldhavefinallyascertainedthefact bylegalevidenceorconclusion.Whatisrequiredisreasontobelieve butnottheestablishedfactofescapementofincome.Atthestageof issue of notice, the only question is whether there was relevant materialonwhichareasonablepersoncouldhaveformedarequisite belief.Whetherthematerialswouldconclusivelyprovetheescapement isnottheconcernatthatstage.Thisissobecausetheformationof belief is within the realm of subjective satisfaction of the Assessing Officer.
[7.6.2] [PRECEDENT], the Court held that in determiningwhethercommencementofreassessmentproceedingswas valid,ithasonlytobeseenwhethertherewasprimafaciesomematerial on the basis of which the Department could reopen the case. The sufficiencyorcorrectnessofthematerialisnotathingtobeconsidered atsuchstage.
[7.7] [PRECEDENT]:
"13.Asweperceive,therearetwosetsofjudgmentsandcases,but thesejudgmentsandcasesproceedontheirownfacts.Inonesetof cases,theassesseeproducednecessarydocuments/evidencetoshow andestablishidentityoftheshareholders,bankaccountfromwhich paymentwasmade,thefactthatpaymentswerereceivedthorough banking channels, filed necessary affidavits of the shareholders or confirmations of the directors of the shareholder companies, but thereafter no further inquiries were conducted. The second set of casesarethosewheretherewasevidenceandmaterialtoshowthat the shareholder company was only a paper company having no sourceofincome,buthadmadesubstantialandhugeinvestmentsin the form of share application money. The assessing officer has referredtothebankstatement,financialpositionoftherecipientand beneficiary assessee and surrounding circumstances. The primary requirements,whichshouldbesatisfiedinsuchcasesis,identification of the creditors/shareholder, creditworthiness of creditors/shareholder and genuineness of the transaction. These HC-NIC Page 18 of 24 Created On Wed Aug 16 09:35:16 IST 2017 threerequirementshavetobetestednotsuperficiallybutindepth having regard to the human probabilities and normal course of humanconduct.
18. Lovely Exports Pvt. Ltd. (supra) was also considered and distinguishedinN.R.PortfolioPvt.Ltd.(supra)anditwasheldthat theentireevidenceavailableonrecordhastobeconsidered,after relyinguponCITVs.NipunBuildersandDevelopers,[2013]350ITR 407(Delhi),whereinithasbeenheldthatareasonableapproachhas to be adopted and whether initial onus stands discharged would dependuponfactsandcircumstancesofeachcase.Incaseofprivate limited companies, generally persons known to directors or shareholders,directlyorindirectly,buyorsubscribetoshares.Upon receiptofmoney,thesharesubscribersdonotlosetouchandbecome incommunicado. Call money, dividends, warrants, etc. have to be sentandtherelationshipremainsacontinuingone.Therefore,an assesseecannotsimplyfurnishsomedetailsandremainquietwhen summonsissuedtoshareholdersremainunservedanduncomplied. Asageneralproposition,itwouldbeimpropertouniversallyhold thattheassesseecannotpleadthattheyhad receivedmoney,but coulddonothingmoreanditwasfortheAssessingOfficertoenforce shareholders attendance in spite of the fact that the shareholders were missing and not available. Their reluctance and hiding may reflectonthegenuinenessofthetransactionandcreditworthinessof thecreditor.Itwouldbealsoincorrecttouniversallystatethatan Inspectormustbesenttoverifytheshareholders/subscribersatthe available addresses, though this might be required in some cases. Similarly, it would be incorrect to state thatthe AssessingOfficer shouldascertainandgetaddressesfromtheRegistrarofCompanies website or search for the addresses of shareholders themselves. Creditworthiness is not proved by showing issue and receipt of a chequeorbyfurnishingacopyofstatementofbankaccount,when circumstancesrequiresthatthereshouldbesomemoreevidenceof positive nature to show that the subscribers had made genuine investmentorhad,actedasangelinvestorsafterduediligenceorfor personal reasons. The final conclusion must be pragmatic and practical, which takes into account holistic view of the entire evidenceincludingthedifficulties,whichtheassesseemayfaceto unimpeachablyestablishcreditworthinessoftheshareholders."
[7.8] ConsideringtheaforesaiddecisionsoftheHon'bleApexCourtas wellasdecisionoftheDivisionBenchofthisCourtandDelhiHighCourt andapplyingthesametothefactsofthecaseonhand,itcannotbesaid thattherewasnomaterialbeforetheAOtoreopentheassessment.In thepresentcasealsothereassessmentproceedingshavebeeninitiated HC-NIC Page 19 of 24 Created On Wed Aug 16 09:35:16 IST 2017 bytheAOonthebasisofmaterialprovidedbythePrincipalDirectorof IncomeTax(Investigation),Ahmedabad.Itisalsorequiredtobenoted that the genuineness of the various companies who made share applicationsaredoubted.Theassesseeisallegedtohavebeenengaged in bogus share applications from various bogus concerns operated by Shri [ENTITY]. The assessee is the beneficiary of the said transactionsofshareapplicationbythosebogusconcerns.Inthewakeof information received by the AO, when AO formed a belief that the investmentmadefromthefundingofsuchcompanieswhicharebogus, theAOhasrightlyassumedthejurisdictionofinitiatingthereassessment proceedings.AO,onthebasisofinformationsubsequentlyhavingcome to his knowledge, recognized untruthfulness of the facts furnished earlier.Inthepresentcase,sinceboththenecessaryconditionstoreopen theassessmenthavebeendulyfulfilled,sufficiencyofthereasonsisnot to be gone into by this Court. Information furnished at the time of originalassessment,whenbysubsequentinformationreceivedfromthe Principal Director of Income Tax (Investigation), Ahmedabad, itself foundtobe controverted,the objection to the notice of reassessment undersection147oftheITActmustfail.Atthisstage,para20ofthe decisioninthecaseofYogendrakumarGupta(supra)isrequiredtobe referredto,whichreadsasunder:
"20.ThisCourthasexaminedthebeliefoftheAssessingOfficertoa limitedextenttoinquiryastowhethertherewassufficientmaterial availableonrecordfortheAssessingOfficertoformarequisitebelief whethertherewasalivelinkexistingofthematerialandtheincome chargeabletotaxthatescapedassessment.Thisdoesnotappeartobe thecasewheretheAssessingOfficeronvagueorunspecificinformation initiated theproceedings ofreassessment, without bothering toform hisownbeliefinrespectofsuchmaterial.[ENTITY] Joint Director, CBI, Mumbai, intimated to the DIT (Investigation), Mumbai.AcaseisregisteredagainstMr.[ENTITY],[ENTITY] and during the search at their residence and office premises, the substantialmaterialindicatedthat20dummycompaniesofMr.[ENTITY] were engaged in money laundering and the incometax evasion. The said entities included Basant Marketing Pvt. Ltd. also.
HC-NIC Page 20 of 24 Created On Wed Aug 16 09:35:16 IST 2017 Fromtheanalysisofdetailsfurnishedandthebeneficiariesreflected, whicharespreadacrossthecountry,theCIT,Koklata,suspectedthe accommodationentryrelatedtotheassessmentyear200607aswell, thisinformationhasbeenprovidedtoDirectorGeneralofIncometax, Kolkata, who in turn, communicated to the Chief Commissioner of Incometax,Ahmedabad.Furtherrevelationofinvestigationascould benoticedfromtherecordexamined(file)deservesnoreflectioninthis petition.Insistenceonthepartofthepetitionertoprovideanyfurther materialformingthepartofinvestigationcarriedoutagainstDalmias also needs to meet with negation, as the law requires supply of information on which Assessing Officer recorded her satisfaction, without necessitating supply of any specific documents. The proceedings initiated under [SECTION] of the Act would not be rendered void on nonsupply of such document for which confidentiality isclaimed atthisstage, following thedecision ofthe Delhi High Court in case of Acorus Unitech Wireless (P.) Ltd. (supra).AssumptionofjurisdictiononthepartoftheAssessingOfficer issincebasedonfreshinformation,specificandreliableandotherwise sustainable under the law, challenge to reassessment proceedings warrantnointerference."
[7.9] Inviewoftheaforesaidfactsandcircumstancesofthecase,the decisionsoftheHon'bleSupremeCourtinthecaseofLakhmaniMewal Das (Supra);thedecisionoftheDelhiHighCourtinthecaseofJSRS Udyog(Supra);ReplikaPress(P.)Limited(Supra)andthedecisionof this Courtin the case of [ENTITY] (Supra) shall not be applicable to the facts of the case on hand. In the facts and circumstancesofthecase,itcannotbesaidthatthereopeningofthe assessmentisonchangeofopinionbythesubsequentAO.
[7.10] Now,sofarasthesubmissiononbehalfoftheassesseethat thestatementofShri[ENTITY]whichwasrecordedatthetime ofsearchandwhichisthebasisforreopeningoftheassessmentsinthe yearsunderconsideration,wassubsequentlyretractedandtherefore,the reopeningoftheassessmentonsucharetractedstatementcannotbe sustainedisconcerned,attheoutsetitisrequiredtobenotedthatfrom thereasonsrecordeditcannotbesaidthatthereopeningissolelybased HC-NIC Page 21 of 24 Created On Wed Aug 16 09:35:16 IST 2017 uponthe statementofShri[ENTITY],whichis subsequently retracted.Fromthe reasonsrecordeditappearsthattheofficeofthe PrincipalDirectorofIncomeTax(Investigation), Ahmedabadsentthe material/evidencecollected during the searchof Shri [ENTITY] thatthepetitioner-assesseeisthebeneficiaryoftheaccommodation entries by way of share application from various bogus companies operated by Shri [ENTITY], only thereafter the impugned noticesunderSection148oftheITActareissuedandtheassessments fortheAYs201112and201213arereopened.
Evenotherwisewhatwillbetheeffectoftheretractedstatement ofShriPravinKumarJainisrequiredtobedecidedand/orconsideredat thetimeofreassessmentproceedings.
[7.11] Now,sofarastherelianceplaceduponthedecisionofthe DelhiHighCourtinthecaseofSignatureWorkers(P)Ltd.(Supra)by thelearnedCounselappearingonbehalfoftheassesseeisconcerned,on consideringthefactsinthesaiddecision,weareoftheopinionthatthe saiddecisionshallnotbeapplicabletothefactsofthecaseonhand.In thepresentcaseonthebasisoftheinformationreceivedfromtheoffice ofPrincipalDirectorofIncomeTax(Investigation),Ahmedabadalong withtheevidencecollectedduringthesearchandotherfindings,theAO hasconsideredthesameandafterverifyingandconsideringthematerial onrecordithasbeenfoundbytheAOthatthepresentassesseeisthe beneficiaryoftheaccommodationentries/bogusshareapplicationfrom various bogus companies operated by Shri [ENTITY]. In the affidavitinreplytheRevenuehasstatedinpara3.8asunder:
"Theallegationoftheassesseeisnotcorrect.Thecaseoftheassessee was reopened based on correct facts / law and procedural requirementsoftheActweredulycompliedwith.Theinformation provided by The Pr. Director of Income Tax (Investigation), Ahmedabad vide confidential letter No.PDIT(Inv)/AHD/Pravin HC-NIC Page 22 of 24 Created On Wed Aug 16 09:35:16 IST 2017 Jain/1516 dated 16.06.2015, was throroughly perused. The same hasbeensummarizedinthereasonsforreopeningrecordedpriorto issuanceofsection148notice.Fromthesame,reasontobelievethat incomehasescapedassessmentinconcernedAYhasbeenlogically derived. Thus, only after deriving requisite satisfaction regarding escapementofincomeonbasisofinformation/materialsuppliedby the Pr. Director of Income Tax (Investigation), Ahmedabad, reopeningwasinitiated.Thesameisevidentfromreasonsprovided for reopening. Information received from third party, more so the information collected by Investigation Wing as a consequence of search u/[SECTION] of the Act constitutes sufficient material for reopening,if,AssessingOfficerafterperusing the saidinformation arrives at conclusion that income has escaped assessment. This is preciselythecaseinpresentsituation.Thus,alltheallegationsmade bythepetitionerareincorrectinthiscase.Inthisregarditisstated that the findings of the Investigation wing are based on an the materialrecoveredduring searchconductedon [ENTITY].Thesamewassympathetically decodedandcorroboratedbyevidenceseizedduringthesearch.The detailsregardingmodusofrecordingtransactionshasbeendescribed indetailbytheInvestigationwing.Therelevantpartofthesamewith findingsofInvestigationWingwassummarizedinreasonsrecorded. ItwasfoundbytheInvestigationwingthatPravinKumarJaingroup wasengagedinbusinessofprovidingaccommodationentriesthrough itsconcernslikeAnchalPropertiesP.Ltd.,AnshMerchandiseP.Ltd., OliveOverseasP.Ltd.,VanguardJewelsLtd.etc. It was found that there are bogus transactions to / from accountofAnchalPropertiesP.Ltd.,AnshMerchandiseP.Ltd.,Olive OverseasP.Ltd.,VanguardJewelsLtd.,totheaccountoftheassessee company. On basis of corroborative evidence and systematic investigation, Investigation Wing has given a finding that all such transactionsofaccommodationentrygivenbycertainPravin[ENTITY] group concerns such as Anchal Properties P. Ltd., Ansh MerchandiseP.Ltd.,OliveOverseasP.Ltd.,VanguardJewelsLtd.are accompanied with bogus transactions by the corresponding other partyorthebeneficiaryi.e.AaspaasMultimediaLtd.inthepresent case.Atthisstage,informationcollectedbyInvestigationWingasa consequence of search u/[SECTION] of the Act constituted sufficient materialforreopening.InCITv.RajeshJhaveriStockBrokers(P)Ltd. [PRECEDENT]itcanbesaidtohave"reasonstobelieve"thatan incomehasescapedassessment.Thesaidexpressioncannotberead tomeanthattheAssessingOfficershouldhavefinallyascertainedthe fact by legal evidence or inclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequerwithaninbuiltideaoffairnesstotaxpayer".Inviewof HC-NIC Page 23 of 24 Created On Wed Aug 16 09:35:16 IST 2017 these facts, it is most humbly submitted that the allegation or argumentsraisedbythepetitionerareincorrect."
Considering the aforesaid facts and circumstances it cannot be saidthattheimpugnednoticesunderSection148oftheITActandthe impugnedreassessmentproceedingsarebadinlaw.
[7.12] Atthisstageitisrequiredtobenotedthatwithrespectto anotherasssessee-AnkitFinancialServicesLtd.(Supra)inwhosecase alsoonthebasisofsuchinformationreceivedfromtheofficeofPrincipal Director of Income Tax (Investigation), Ahmedabad and with similar allegation of beneficiary of the accommodation entries / share applicationfromtheboguscompaniesoperatedbyShriPravin[ENTITY]whentheassessmentforAY201011wassoughttobereopened andwhenthesamewaschallengedbeforethisCourt,theDivisionBench ofthisCourtvidejudgmentandorderdated29.12.2016inSpecialCivil ApplicationNo.18961/2016hasdismissedthesaidpetition.
[8.0] Inviewoftheaboveandforthereasonsstatedabove,itcannotbe said that the impugned notices under [SECTION] of the [ACT] are withoutjurisdictionand/orcontrarytosection147oftheITActand/or badinlaw.Underthecircumstances,boththepetitionsdeservetobe dismissed and are, accordingly, dismissed. Notice is discharged. Ad interimrelief,ifany,standsvacatedforthwith.Nocosts.
Sd/ ([ENTITY],J.) Sd/ ([ENTITY],J.) Ajay HC-NIC Page 24 of 24 Created On Wed Aug 16 09:35:16 IST 2017