Priya Soparkar 1 14 wp 14479 18 c s IN HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.14479 OF 2018 My Car (Pune) Pvt. Ltd. Petitioner V/s. Income tax Officer 14(4) and ors. Respondents Mr.Jehangir Mistri, Senior Counsel with Mr.Sameer Dalal for Petitioner. Mr.Sham Walve for Respondent Nos.1 and 3. CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : FEBRUARY 21, 2019. P.C.: 1. At request of parties, petition is taken up for final disposal at stage of admission. 2. This petition under Article 226 of Constitution of India challenges notice dated 30th March, 2018 issued by respondent No.1 Assessing Officer under Section 148 of Income Tax Act, 1961 ( Act for short). impugned notice seeks to reopen assessment for Assessment Year 2011 12. ::: Uploaded on - 02/03/2019 ::: Downloaded on - 13/04/2019 14:40:08 ::: Priya Soparkar 2 14 wp 14479 18 c s 3. undisputed facts are that regular assessment proceedings were completed on 21st March, 2014 under Section 143(3) of Act. Thereafter, Assessing Officer has issued impugned notice seeking to reopen assessment for assessment year 2011 12. 4. reasons in support of impugned notice as communicated to petitioner read as under: 01. assessee filed its return of income declaring income of Rs.1,56,64,480/ on 28/09/2011. assessee company is engaged in business of selling of four wheeler and provide sales services. assessment was completed u/s 143(3) of Income Tax Act, 1961 on 23.03.2014 and income assessed of Rs.1,75,61,370/ . 02. In instant case, information received from Assistant Director of Income tax (Inv), unit 6(3), New Delhi which are as follows: This unit had conducted search in case of Himanshu Verma Group on 29.03.2012. This group was centralised with Assessing Officer of Central Circle 20, Delhi (ACIT, Central Circle 20, Delhi.) 2. Shri Himanshu Verma was engaged in activities of providing accommodation entries to various beneficiaries group. He did this by incorporation of numerous corporate and non corporate entities where directors/partners/proprietors were his employees and closed associates. 3. Modus operandi of Sh. Himanshu Verma was observed to be mainly of three types: i) He used to take cash from beneficiaries, deposit same in some of his entities/individuals' bank accounts, routing ::: Uploaded on - 02/03/2019 ::: Downloaded on - 13/04/2019 14:40:08 ::: Priya Soparkar 3 14 wp 14479 18 c s same and finally remitting it to various companies of beneficiary group in form of share application money, share capital and/or unsecured loan. ii) He used to accept cheques of one set of companies of beneficiary group to bank accounts of some his corporate entities, rotate same through his various group entities, finally remitting same to some other set of beneficiary companies. Through this method, beneficiary group companies used to inflate their balance sheets for purpose of procuring more funds from banks/financial institutions. This method was also applied for siphoning off fund from public limited company to Pvt. Limited companies of same group. iii) He used to take cheques of beneficiary companies and used to issue them sale bills, mainly of fabrics and related articles. This cheque amount was either withdrawn immediately or after rotating same amongst its group entities. cash was then returned back to beneficiary companies. This method was adopted by some concerns who wanted to inflate their purchases. 4. M/s MY CAR PUNE PRIVATE LIMITED, assessee has taken accommodation entry from Himanshu Verma Group in F.Y. 2010 11 as follows: Name PAN Name of Himanshu Verma & Group Company MY CAR AAECM271 Citylife 6000000 PUNE 3M Promoters Pvt. PRIVATE Ltd. LIMITED MY CAR AAECM271 Carewell 2000000 PUNE 3M Projects & PRIVATE Development LIMITED Pvt. Ltd. ::: Uploaded on - 02/03/2019 ::: Downloaded on - 13/04/2019 14:40:08 ::: Priya Soparkar 4 14 wp 14479 18 c s MY CAR AAECM271 Cornelius 5500000 PUNE 3M Marketing & PRIVATE Research Pvt. LIMITED Ltd. MY CAR AAECM271 Gyanda Exim 3000000 PUNE 3M Pvt. Ltd. PRIVATE LIMITED MY CAR AAECM271 Kripalu 6000000 PUNE 3M Promoters Pvt. PRIVATE Ltd. LIMITED MY CAR AAECM271 Mayurvika 7500000 PUNE 3M Management PRIVATE Services Pvt. LIMITED Ltd. MY CAR AAECM271 Mithilianchal 2000000 PUNE 3M Investment & PRIVATE Finance Pvt. LIMITED Ltd. MY CAR AAECM271 Saunak 3600000 PUNE 3M Technologies PRIVATE Pvt. Ltd. LIMITED MY CAR AAECM271 Shulini Realty 2000000 PUNE 3M Pvt. Ltd. PRIVATE LIMITED MY CAR AAECM271 Soffpro 3600000 PUNE 3M Technologies PRIVATE Pvt. Ltd. LIMITED MY CAR AAECM271 Vedanshi 5500000 PUNE 3M Marketing & PRIVATE Research Pvt. LIMITED Ltd. ::: Uploaded on - 02/03/2019 ::: Downloaded on - 13/04/2019 14:40:08 ::: Priya Soparkar 5 14 wp 14479 18 c s MY CAR AAECM271 White Color 7500000 PUNE 3M Management PRIVATE Ser Pvt. Ltd. LIMITED AO's Comments: (i) It is evident from above said facts that assessee had not fully & truly disclosed all material of facts for its assessment for year under consideration thereby necessitating reopening u/s 147 of Income Tax Act, 1961. (ii) It is true that assessee has filed copy of annual report, P & L a/c, balance sheet alongwith return of income where various information/material were disclosed. However, requisite full and true disclosure of material facts for necessary for assessment has not been made as noted above. It is pertinent to mention here that even though assessee has produced annual report, P & L a/c, balance sheet alongwith return of income as mentioned above, requisite material facts as noted above in reasons for reopening were embedded in such manner that material evidences could not be discovered by AO and could have been discovered with due diligence, according provisions of explanation 1 of section 147 of Income Tax Act, 1961. (iii) It is pertinent to mention here that material facts relevant for assessment year on issues under consideration were not filed during course of assessment proceeding and same may be embedded in annual report, audited P & L a/c, Balance sheet and books of account in such manner that it would require due diligence by AO to extract these information. For aforesaid reasons, it is not case of change of opinion by AO. 04. Therefore, I have reason to believe that assessee has not fully and truly disclosed all material of facts and income of Rs.5,42,00,000/ has escaped assessment by reason of failure on part of assessee within meaning of Sec.147 of Income tax Act, 1961. Therefore approval for issue of notice under section 148 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 13/04/2019 14:40:08 ::: Priya Soparkar 6 14 wp 14479 18 c s may be given. Pune/Dt: 30.03.2018 (Dr.Jivan Bachhav) Deputy Commissioner of Income Tax, Circle 14, Pune. 6 Whether Pr.C.I.T. is satisfied on As per annexure. reasons recorded by A.O. that it is fit case for issue of notice u/s 148 of Income Tax Act, 1961. Pune/ Date 31.03.2018 Pr. Commissioner of Income Tax. annexure to aforesaid reasons being sanction order in terms of Section 151 (1) of Act of Principal Commissioner of Income Tax is also communicated to petitioner. It reads as under: I have perused above reason recorded by A.O. along with information in his possession. It is noted that assessee had heavy transaction (was providing accommodation entries to various beneficiary groups amounting to Rs.5,42,00,000/ , siphoning off fund from Public Ltd. Co. to Pvt. Ltd. Co., inflation of beneficiaries purchases) during relevant financial year. assessee has filed return of income declaring total income of Rs.1,56,64,480/ but all above activities need to be verified. Therefore, I am also satisfied that income has escaped assessment in this case. Hence, approval u/s 151(1) of Income tax Act is being accorded for Issue of Notice u/s 147 r.w.s. 148 of Income tax Act. ::: Uploaded on - 02/03/2019 ::: Downloaded on - 13/04/2019 14:40:08 ::: Priya Soparkar 7 14 wp 14479 18 c s Dated 31/03/2018 (Ashok Kumar Pandey) Pr.Commissioner of Income tax 6, Pune. 5. On receipt of reasons, petitioner filed its objections to above reasons on 18th September, 2018 with Assessing Officer. By order dated 31st October, 2018, Assessing Officer rejected objections. Thus, this petition. 6. On perusal of reasons as recorded by Assessing Officer and sanction granted by Commissioner of Income Tax, we pointed out to Mr.Walve learned counsel appearing for revenue that sanction appears to have been granted on complete misreading of reasons. reasons for sanction is different from reasons recorded and thus appears to be without application of mind to reasons recorded. 7. In response Mr.Walve for respondent submitted that paragraph 3(ii) of recorded reasons is in accord with sanction granted by Principal Commissioner of Income Tax. Thus sanction was granted with due application of mind and ::: Uploaded on - 02/03/2019 ::: Downloaded on - 13/04/2019 14:40:08 ::: Priya Soparkar 8 14 wp 14479 18 c s cannot be faulted. 8. We note that para 3(ii) of reasons recorded in support of impugned notice records activity of one Himanshu Verma group in providing accommodation entries while order granting sanction proceeds on basis that it is respondent assessee who is engaged in providing accommodation entries. In above view, submission of Mr. Walve does not merit acceptance. Further, order granting sanction records that funds of public limited company are being siphoned of to private limited companies. This is not evident at all from reasons recorded which makes references only to Private Limited companies being used as vehicles for providing accounting entries by Himanshu Verma group. Thus, on face of it, sanction granted is bad in law. It is settled position in law that grant of sanction by Commissioner of Income Tax under Section 151 of Act, is not mechanical act on his part but it requires due application of mind to reasons recorded before granting sanction. This has been so provided as to safeguard against issue of reopening notice (which ::: Uploaded on - 02/03/2019 ::: Downloaded on - 13/04/2019 14:40:08 ::: Priya Soparkar 9 14 wp 14479 18 c s seek to disturb settled position) to ensure that assessee is not troubled with reopening issues without satisfactory reasons. Therefore, it must pass muster of Superior Officer in context of Sections 147 and 148 of Act, before it is issued to party. 9. In above view, as sanction order indicates non application of mind to reasons recorded by Assessing Officer, impugned notice is bad in law. Thus, quashed and set aside. 10. Accordingly, petition is allowed. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.) . ::: Uploaded on - 02/03/2019 ::: Downloaded on - 13/04/2019 14:40:08 ::: My Car (Pune) Pvt. Ltd. v. Income-tax Officer14(4) and or