C/SCA/3279/2016 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 3279 of 2016 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE BIREN VAISHNAV 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India or any order made thereunder? PUSHPAK BULLION PVT LTD....Petitioner(s) Versus DEPUTY COMMISSIONER OF INCOME TAX - CIRCLE - 3(1) (1)....Respondent(s)Appearance: MR JP SHAH, SENIOR COUNSEL WITH MR MANISH J SHAH, ADVOCATE for Petitioner(s) No. 1 MR NITIN K MEHTA, ADVOCATE for Respondent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE BIREN VAISHNAV Page 1 of 10 HC-NIC Page 1 of 10 Created On Thu Aug 24 12:10:57 IST 2017 C/SCA/3279/2016 JUDGMENT Date : 22/08/2017 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. petitioner has challenged notice dated 27.3.2015 issued by respondent Assessing Officer seeking to reopen petitioner's assessment for assessment year 2008 2009. To issue such notice, Assessing Officer had recorded following reasons : In this case assessment for 2008 09 was finalized u/s.143(3) of I.T. Act of Rs.2,49,57,447/ as against returned income Rs.2,45,62,500/. Total purchase sales shown by assessee amounting to Rs.31,29,45,78,609,60/ and Rs.31,34,42,28,043/ respectively. Dy. Director of Income tax (Inv.), Unit 2(3), Mumbai;400 038 vide his letter No. DDIT(Inv.)/U 2(3)/ Intimation AO/20l4 15 dated 23.03.2015 supplied information that during course of investigation carried out by Dy. Director of Income tax (Inv), Unit 2(3), Mumbai 400 038 in case of Shri Chandrakant Prahladbhai Patel (PAN : AOZPP 4246 C) it was found from Bank statements. that Shri C.P.Patel indulged in Providing accommodation entries/bogus bills without actual supply of any goods or services. It was further noticed that most of cheques issued from one of his Current Account No.3l9801010038530, are preceded by substantial cash deposits. This bank, account was maintained in name of M/s. Shiyon Enterprises in Union Bank of India. Zaveri Bazar Branch. income declared by Shri Patel as compared to receipt shown by him in his Profit & Loss A/c also supports view that he Page 2 of 10 HC-NIC Page 2 of 10 Created On Thu Aug 24 12:10:57 IST 2017 C/SCA/3279/2016 JUDGMENT is involved in providing accommodation entries. assessee company is found to be availing accommodation entries from aforesaid bank account of Shri C.P. Patel. 3. Bank Account No. 319804040023854 maintained with Union Bank of India. Zavcri Bazar Branch, Mumbai of M/s. Pushpak Bullions Pvt. Ltd, shows debits in name of M/s. Shiyon Enterprises for period from 20.12.2007 to 31.03.2008 totaling to Rs. 2199645000/.As stated above M/s. Shiyon provides accommodation entries/bills. 4. It is also pertinent to mention from scrutiny records for AY 2008 09 that assessee company has debited purchases from M/s. Shiyon Enterprises in its books to extent of Rs.3,15,10,29,852/ (Rs. 313,19,43,551/ for bullion a/c and Rs. 1,90,86,301/ on account of jewellery a/c). 5. In view of above facts I have reason to believe that purchases made from M/s. Shiyon are bogus purchase because of which income has been reduced and therefore income chargeable to tax to tune of Rs. 3,15,10,29,852/ for A.Y. 2008 09 has escaped assessment. Therefore this is fit case for reopening assessment u/s. 147 for A.Ys. 2008 09. Issue notice u/s. 148 of I.T. Act. 2. assessee raised objections to notice of reopening under communication dated 5.6.2015. Such objections were rejected by Assessing Officer by order dated 9.6.2015. petitioner has therefore, filed this petition. 3. Appearing for petitioner, learned counsel Shri J.P. Shah vehemently contended that original assessment was framed after scrutiny. Assessing Officer during such scrutiny assessment had examined all aspects. He Page 3 of 10 HC-NIC Page 3 of 10 Created On Thu Aug 24 12:10:57 IST 2017 C/SCA/3279/2016 JUDGMENT thereafter, framed scrutiny assessment making no additions or disallowances. impugned notice has been issued beyond period of four years from end of relevant assessment year. There was no failure on part of assessee to disclose truly and fully all material facts. impugned notice is therefore, bad in law. 4. Learned advocate Shri Nitin Mehta for department opposed petition contending that Assessing Officer has recorded detailed reasons. At this stage, it is not necessary to examine contentious issues threadbare since assessee would have full opportunity to participate in assessment proceedings. What is necessary to ascertain is whether Assessing Officer had tangible materials at his command to form belief that income chargeable to tax had escaped assessment. He further pointed out that material at command of Assessing Officer now, was not part of assessment proceedings and could be unearthed only during investigation in case of entities dealing with petitioner. This was therefore, clear case of absence of true and full disclosures by assessee. He submitted that requirement of true and full disclosure would not confine to filing of return but would continue at all stages of assessment. It is prima facie found that assessee's dealings with M/s. Shiyon Enterprises were bogus. 5. From reasons recorded by Assessing Officer for issuing notice, it can be seen that from information supplied by investigation wing of department at Mumbai, it was revealed that during course of Page 4 of 10 HC-NIC Page 4 of 10 Created On Thu Aug 24 12:10:57 IST 2017 C/SCA/3279/2016 JUDGMENT investigation carried out in case of Shri Chandrakant Prahladbhai Patel, it was found from his bank statement that he had indulged in providing accommodation entries and bogus bills without actual supply of any goods or services. Most of these cheques were issued from current account maintained by him and issuance of these cheques preceded by substantial cash deposits in such account. account was maintained in name of M/s. Shiyon Enterprises in Union Bank of India, Zaveri Bazar branch. There was strong prima facie material suggesting that said Shri Chandrakant Patel was providing accommodation entries. It was found that assessee company was also availing accommodation entries from said Shri Chandrakant Patel. petitioner assessee also maintained bank account in same branch of Union Bank of India. study of bank account of assessee showed that debit in name of M/s. Shiyon Enterprises between 20.12.2007 to 31.3.2008 came to total of Rs.219.96 crores (rounded off). During assessment year 2008 2009, assessee company had debited purchases from M/s. Shiyon Enterprises in books of account. Inter alia on such grounds, Assessing Officer formed belief that purchases made by assessee from M/s. Shiyon Enterprises were bogus purchases and corresponding income had escaped assessment. 6. At stage when we are examining validity of notice of reopening of assessment, Court would not go into sufficiency of reasons recorded by Assessing Officer and if it is found that Assessing Officer had Page 5 of 10 HC-NIC Page 5 of 10 Created On Thu Aug 24 12:10:57 IST 2017 C/SCA/3279/2016 JUDGMENT tangible materials at his command to form bona fide belief of income chargeable to tax had escaped assessment, there would be no interference with Assessing Officer proceeding further with reassessment. In case of Assistant Commissioner of Income tax v. Rajesh Jhaveri Stock Brokers P. Ltd. reported in (2007) 291 ITR 500(SC), Supreme Court observed that expression reason to believe would mean cause or justification. If Assessing Officer has cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. expression cannot be read to mean that Assessing Officer should have finally ascertained fact by legal evidence or conclusion. What is required is reason to believe but not established fact of escapement of income. At stage of issuance of notice, only question is whether there was relevant material on which reasonable person could have formed requisite belief. Whether material would conclusively prove escapement of income was not concern at that stage. This is so because formation of belief is within realm of subjective satisfaction of Assessing Officer. At this stage therefore, what we have on record and emerging from reasons recorded is that there is strong prima facie material to suggest that purchases shown to have been made by assessee from M/s. Shiyon Enterprises were bogus. investigation wing of department had during course of investigation in case of Shri Chandrakant Patel found materials suggesting that he had indulged in providing accommodation entries and bogus bills. This was further supplemented by fact that in Page 6 of 10 HC-NIC Page 6 of 10 Created On Thu Aug 24 12:10:57 IST 2017 C/SCA/3279/2016 JUDGMENT current account of M/s. Shiyon Enterprises maintained at Jhaveri bazar branch of Union Bank of India, cheques issued were preceded by substantial cash deposits in account. assessee had also maintained bank account in same branch of same bank. assessee had claimed sizeable purchases from such entity during year under consideration. 7. In case of Yogendrakumar Gupta v. Income tax Officer reported in (2014) 366 ITR 186 (Guj), Division Bench of this Court had carried out detailed examination of legal position in background of somewhat similar facts and concluded as under : Assessing Officer required jurisdiction to reopen under section 147 read with section 148 of Act, where information must be specific and reliable. As held by Apex Court in case of Phul Chand Bajrang (supra), since belief is that of Income tax Officer, sufficiency of reasons for forming belief, is not for Court to judge but is open to assessee to establish that there exists no belief or that belief is not at all bona fide one or based on vague, irrelevant and non specific information. To that limited extent, Court may look at view taken by Income tax Officer and can examine whether any material is available on record from which requisite belief could be formed by Assessing Officer and whether that material has any rational connection or live link with formation of requisite belief. It is also immaterial that at time of making original assessment, Assessing Officer could have found by further inquiry or investigation as to whether transactions were genuine or not. If on basis of subsequent valid information, Assessing Officer forms reason to believe on satisfying twin conditions prescribed Page 7 of 10 HC-NIC Page 7 of 10 Created On Thu Aug 24 12:10:57 IST 2017 C/SCA/3279/2016 JUDGMENT under section 147 of Act that no full and true disclosure of facts was made by assessee at time of original assessment and, therefore, income chargeable to tax had escaped assessment, his belief and notice of reassessment based on such belief/ opinion needs no interference. In present case, since both necessary conditions have been duly fulfilled, sufficiency of reasons is not to be gone into by this Court. information furnished at time of original assessment, when by subsequent information received from DCIT, Kolkata, itself found to be controverted, objection to notice of reassessment under section 147 of Act must fail. At costs of ingemination, it needs to be mentioned that at time of scrutiny assessment, specific query was raised with regard to unsecured loans and advances received from said company namely, Basant Marketing Pvt. Ltd. based at Kolkata. These being transactions through cheques and drafts, there would arise no question of Assessing Officer not accepting such version of assessee and not treating them as genuine loans and advances. Furnishing 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 dummy company of one Shri Arun Dalmia, which provided accommodation entries to various beneficiaries. This Court has examined belief of Assessing Officer to limited extent to inquiry as to whether there was sufficient material available on record for Assessing Officer to form requisite belief whether there was live link existing of material and income chargeable to tax that escaped assessment. This does not appear to be case where Assessing Officer on vague or unspecific information initiated proceedings of reassessment, without bothering to form his own belief in respect of such material. We need to notice that Joint Director, CBI, Page 8 of 10 HC-NIC Page 8 of 10 Created On Thu Aug 24 12:10:57 IST 2017 C/SCA/3279/2016 JUDGMENT Mumbai, intimated to DIT (Investigation), Mumbai. case is registered against Mr.Arun Dalmia, Harsh Dalmia and during search at their residence and office premises, substantial material indicated that 20 dummy companies of Mr.Arun Dalmia were engaged in money laundering and income tax evasion. said entities included Basant Marketing Pvt. Ltd. also. From analysis of details furnished and beneficiaries reflected, which are spread across country, CIT, Koklata, suspected accommodation entry related to assessment year 2006 07 as well, this information has been provided to Director General of Income tax, Kolkata, who in turn, communicated to Chief Commissioner of Income tax, Ahmedabad. Further revelation of investigation as could be noticed from record examined (file) deserves no reflection in this petition. Insistence on part of petitioner to provide any further material forming part of investigation carried out against Dalmias also needs to meet with negation, as law requires supply of information on which Assessing Officer recorded her satisfaction, without necessitating supply of any specific documents. proceedings initiated under section 147 of Act would not be rendered void on non supply of such document for which confidentiality is claimed at this stage, following decision of Delhi High Court in case of Acorus Unitech Wireless (P.) Ltd. (supra). Assumption of jurisdiction on part of Assessing Officer is since based on fresh information, specific and reliable and otherwise sustainable under law, challenge to reassessment proceedings warrant no interference. Resultantly, petition is dismissed. Notice is discharged. There shall be, however, no order as to costs. 8. fact that assessee's sales and purchases came up for scrutiny during original assessment would be of no Page 9 of 10 HC-NIC Page 9 of 10 Created On Thu Aug 24 12:10:57 IST 2017 C/SCA/3279/2016 JUDGMENT consequence since now Assessing Officer relies on material which was not part of assessment proceedings and which material was provided by investigation wing unearthed during course of investigation in case of Shri Chandrakant Patel. 9. In result, petition is dismissed. Rule is discharged. Interim relief, if any stands vacated. (AKIL KURESHI, J.) (BIREN VAISHNAV, J.) raghu Page 10 of 10 HC-NIC Page 10 of 10 Created On Thu Aug 24 12:10:57 IST 2017 Pushpak Bullion Pvt. Ltd. v. Deputy Commissioner of Income-tax-Circle-3(1)(1)