1 wp167-15 sas IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 167 OF 2015 M/s. Rushab Enterprises ..Petitioner. V/s. Asstt. Commissioner of Income Tax 24(3), Mumbai & Ors. Respondents. Mr. Percy Pardiwalla, Senior Advocate with Mr. Mihir C. Naniwadekar for appellant. Mrs. Shehnaz V. Bharucha for Respondents. CORAM : S.C.DHARMADHIKARI AND A.K. MENON, JJ. DATED : 15TH APRIL, 2015 P.C. :- 1. Rule, returnable forthwith. By consent of parties taken up for final hearing. 2. By this writ petition, Petitioner challenges impugned notice dated 26th March, 2014 issued under Section 148 of Income Tax Act, 1961 ('the Act') and impugned order 19th December, 2014 rejecting Petitioner's objection to reasons forming basis for issuing impugned notice. Petitioner is partnership firm and original assessment was completed under Section 143(3) of Act. ::: Uploaded on - 24/04/2015 ::: Downloaded on - 31/12/2018 15:34:53 ::: 2 wp167-15 During scrutiny of assessment, Petitioner was on 3rd November, 2008 required to answer certain questions at Serial Nos. 8, 12 and 14 of questionnaire pertaining to details regarding loans and advances both secured and unsecured and information regarding interest. Petitioner filed detailed reply to questionnaire and thereafter, Petitioner was called upon to provide details pertaining to four parties viz. Daksh Diamonds, Jewel Diam, Laxmi Trading Com. And Rose Impex. According to Assessing Officer, these questionnaire were duly answered but after period of four years from end of relevant assessment year, Assessing Officer issued notice under Section 148 of Act seeking to reopen assessment. Petitioner replied on 22nd April, 2014 and sought reasons for proposed reopening. 3. reasons were then supplied to Petitioner on 21th May, 2014. Petitioner submitted its objections to reopening on 7th November, 2014. Petitioner inter alia contended that notice in question was issued beyond period of four years from end of relevant assessment years. assessment had already been completed under ::: Uploaded on - 24/04/2015 ::: Downloaded on - 31/12/2018 15:34:53 ::: 3 wp167-15 Section 143(3) of Act and there was no basis or tangible material to justify reopening. Petitioner also pointed out that there was no failure to disclose fully and truly all materials and proposed reopening was only on account of change of opinion. Petitioner contended that there was no reason to believe that any income had escaped assessment. 4. After receiving objections dated 7th November, 2014, Assistant Commissioner of Income Tax vide letter dated 19th December, 2014 rejected objections and found that reopening of assessment for assessment year 2007-08 was in accordance with law. This order dated 19 th December, 2014 has led to filing of this petition. 5. affidavit of Mr. V.K.Mangla, Assistant Commissioner of Income Tax, 24(3), Mumbai dated 25 th February, 2015 has been filed in reply on behalf of Respondents. In said affidavit deponent has denied that notice is bad in law and reiterated that assessee has not disclosed material facts fully and truly that are necessary for assessment and taken unaccounted cash ::: Uploaded on - 24/04/2015 ::: Downloaded on - 31/12/2018 15:34:53 ::: 4 wp167-15 into its books. There is bald statement made that there is tangible material to reopen assessment. We do not find anything in said affidavit that establishes that there is reason to believe that income has escaped assessment. 6. We have heard Mr. Pardiwalla, learned senior counsel appearing on behalf of Petitioner and Mrs. Bharucha appearing on behalf of Respondent. Mr. Pardiwalla contended that four cases which were picked up by Assessing Officer all pertain to bonafide loans taken during course of business. Petitioner had in fact taken loans from 45 parties and had supplied particulars of these 45 parties to Assessing Officer on or about 14 th March, 2009. Mr.Pardiwalla pointed out that in Exhibit-B these particulars were provided and annexure at page 30 of petition was list of loan confirmations which had been provided to Assessing Officer for period ending 31 st March, 2007. We have perused said letter and annexure and find that assessee had provided names and particulars of parties who have advanced loans along with confirmation of amounts issued by petitioner to these members which was duly confirmed by individual ::: Uploaded on - 24/04/2015 ::: Downloaded on - 31/12/2018 15:34:53 ::: 5 wp167-15 members. Despite this, Mr, Pardiwalla urged that Assessing Officer proceeded to hold that scrutiny of four parties Daksh Diamonds, Jewel Diam, Laxmi Trading Com. and Rose Impex reveals that sums amounting to Rs.6,86,00,000/- were questionable and not bonafide loans. According to communication issued to Petitioner by Deputy Commissioner of Income Tax on 21st May, 2014 these items were claimed as unsecured loans but were actually unaccounted cash received through bogus loans and, therefore, Deputy Commissioner concluded that there is reason to believe that income has escaped assessment in hands of assessee for assessment year 2007-08 and, therefore, reopening of assessment was necessary. Deputy Commissioner also called upon Petitioner to provide information in respect of aforesaid four parties. 7. Vide letter dated 7th November, 2011 these particulars were provided to Deputy Commissioner. petitioner inter alia pointed out that aforesaid four parties had advanced loans through account payee cheques which were encashed in Petitioner's bank account used for business transactions. Interest is also paid on these loans and ::: Uploaded on - 24/04/2015 ::: Downloaded on - 31/12/2018 15:34:53 ::: 6 wp167-15 at time of payment of interest, tax was deducted at source and TDS returns were also filed. Revenue has contended that they were accommodation entries only on basis of mere surmises and guesswork which amounted to change of opinion. Petitioner further contended that all necessary information had already been provided at time of filing returns and therefore, there was no occasion for revenue to contend that it has failed to disclose all particulars. 8. On behalf of revenue, Mrs. Bharucha submitted that all four parties concerned had facilitated accommodation entries. They were not genuine and bonafide loans advanced to Petitioner. She has supported order of Assessing Officer. Commissioner of Income Tax while rejecting objections on 19th December, 2012 once again reiterated that Petitioner has routed unaccounted cash through bogus loans and has been found in books of account of Petitioner. According to her, revenue has received information from Director General of Income Tax (Inv) that assessee has taken unsecured loans from above parties by way of unaccounted cash/accommodation entries. We are unable to agree since Petitioner has clearly ::: Uploaded on - 24/04/2015 ::: Downloaded on - 31/12/2018 15:34:53 ::: 7 wp167-15 stated that all payments were made by account payee cheques which were encashed in bank account of Petitioner in regular course of business. We find that Petitioner has also paid interest on this loans after deduction of tax at source and TDS returns are also accordingly filed. There is no dispute in regard to above. We find nothing to support said contentions of revenue. revenue's contention in affidavit in reply has no merit. On other hand, loans appear to be taken in regular course of business and were found amongst 45 members in respect of which all particulars have already been furnished by assessee to Assessing Officer. fact remains that Assessing Officer had power to reopen assessment provided there was some tangible material on basis of which he has reason to believe that income chargeable to tax had escaped assessment. 9. We find no such reasons for Assessing Officer or revenue to come to conclusion that income had escaped assessment. All communication and evidence provided by Petitioner to revenue authorities disclosed that loans were bonafide, taken in regular course of business ::: Uploaded on - 24/04/2015 ::: Downloaded on - 31/12/2018 15:34:53 ::: 8 wp167-15 through account payee cheques. In circumstances, proposed reopening in our view lacks justification and impugned notice deserves to be quashed had set aside. So also impugned order dated 19th December, 2014 passed by Commissioner of Income Tax (Appeals) rejecting objections deserves to be quashed and set aside. Hence, we pass following order. 10. impugned notice dated 26th March, 2014 and impugned order dated 19th December, 2014 are quashed and set aside. Rule is made absolute in above terms. No order as to costs. (A.K.MENON, J.) (S.C.DHARMADHIKARI, J.) ::: Uploaded on - 24/04/2015 ::: Downloaded on - 31/12/2018 15:34:53 ::: Rushab Enterprises v. Asstt. Commissioner of Income-tax 24(3), Mumbai & Or