1 303 WP 2245-2019.doc Sequeira IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2245 OF 2019 Spicy Sangria Hotels Pvt. Ltd. Formally known as, Kush Stocks & Currencies Pvt. Ltd. .. Petitioner Vs Income Tax Officer, Ward 10(1)(4) .. Respondent Mr.Ketan Shah a/w Aman Shah with Nirav Punmiya, for Petitioner. Mr.Akhileshwar Sharma, for Respondent. CORAM : M.S.SANKLECHA & NITIN JAMDAR, JJ. Date : 10 October 2019. P.C. : This Petition under Article 226 of Constitution of India challenges notice dated 30 March 2019, issued under section 148 of Income Tax Act, 1961(the Act ). impugned notice dated 30 March 2019 seeks to reopen assessment for Assessment Year 2012-13. 2. It is undisputed position that no scrutiny assessment under section 143(3) of Act was done by Assessing Officer ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: 2 303 WP 2245-2019.doc for subject Assessment Year. return of income filed for Assessment Year 2012-13 was processed only by way of intimation under section 143(1) of Act. Thus though impugned notice was issued beyond period of four years from end of relevant Assessment Year, therefore would not be hit by limitation provided in proviso to section 147 of Assessment viz. no failure to disclose all material facts. 3. reasons recorded in support of impugned notice as made available to Petitioner read as under : 1. assessee has filed electronically its original return of income for A.Y. 2012-13 on 13/09/2012 declaring total income at Rs.20,93,780/- return of income was processed u/s. 143(1) of Income Tax Act, 1961 on 18/07/2013. 2. In case, information received from office of DDIT (Inv.), Unit 3(1), kolakata vide letter no.DDIT(Inv.) Kol/NMCE/Reports/2017- 18/10737 dated 12/03/2017. information is with regard to systematic evasion of taxes by Clients / Members of NMCE (National Multicommodity Exchange) during different financial years by misuse of NMCE platform. 3. It has been found from facts available on record that assessee through Client Code K00054 has purchased shares amounting to Rs.149,11,14,352/- and also sold shares amounting to Rs.149,44,73,390/- during F.Y. 2011-12 relevant to A.Y. 2012-13) thereby resulting into huge profits / loss through broker Star Commodities, Broker Code No.CL0431, as under:- ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: 3 303 WP 2245-2019.doc 4. Broker Broker Identify Name PAN Total Total Amoun P/L Count FY Code Name Code of of Buying Selling t Booked er (Memb Broker Client Differe Party er & nce Client Client (Ledge r File) CLO Star CL0431 Kush AAD 662542 67232 97855 PROFIT Adven 2011- 431 Comm 1= Stocks CK 60 812.5 2.5 t 2012 odities K00054 & 6412G Comm Curren odities cies Pvt. Ltd. CLO Star CL0431 Kush AAD 884772 89210 73309 PROFIT Darpa 2011- 431 Comm 1= Stocks CK 340.5 3318 77.5 n 2012 odities K00054 & 6412G Comm Curren odities cies Pvt. Ltd. CLO Star CL0431 Kush AAD 652940 66292 99875 PROFIT Krede 2011- 431 Comm 1= Stocks CK 00 750 0 nt 2012 odities K00054 & 6412G Comm Curren odities cies Pvt. Ltd. CLO Star CL0431 Kush AAD 352215 34388 832801 LOSS Remac 2011- 431 Comm 1= Stocks CK 943 7924. 8.5 trader 2012 odities K00054 & 6412G 5 Curren cies Pvt. Ltd. CLO Star CL0431 Kush AAD 851187 86394 127615 PROFIT R.R. 2011- 431 Comm 1= Stocks CK 00 850 0 Consu 2012 odities K00054 & 6412G mer Curren cies Pvt. Ltd. CLO Star CL0431 Kush AAD 374591 38561 110262 PROFIT Siddhi 2011- 431 Comm 1= Stocks CK 08 735 7 Comm 2012 odities K00054 & 6412G odeal Curren Pvt Lt cies Pvt. Ltd. 149111 14944 33590 4352 73390 39 ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: 4 303 WP 2245-2019.doc 5. It is also appeared from records that said assessee has took profit/ loss from different entitles / company who are found to be shell companies which are managed and controlled by various Kolkata based entry operators which are engaged in providing accommodation entries in various forms to beneficiaries. It has also been found from record that said assessee has traded through NMCE in order to book contrived losses / profit through these aforesaid shell / dummy entries. 6. After receipt of this information, return of income and other details available were examined. From all these facts and information collected in this regard, it can be seen that above transactions during year remain unexplained. Therefore, provisions of Explanation 2(b) to Section 147 of Income Tax Act, 1961 are clearly attracted. Since no regular assessment has been made in this case, first proviso to section 147 is not applicable in this case. Hence, above transactions to extent of Rs.33,59,039/- which, being unexplained, are credits to books of assessee which has not been offered for taxation for AY 2012-13. Total income that has escaped assessment during year comes to Rs.33,59,039/-. 7. In view of above, I have reason to believe that income chargeable to tax for A.Y. 2012-13 to extent of Rs.33,59,039/- has escaped assessment within meaning of Section 147 of Income Tax Act, 1961 as well as provisions of explanation 2(b) of section 147 of Act due to failure on assessee to disclose fully and truly all material facts necessary for assessment. It is therefore requested that ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: 5 303 WP 2245-2019.doc sanction to reopen case u/s.147 and issue of notice u/s.148 for AY 2012-13 may be given as per provisions of section 151(1) of Income Tax Act, 1961. 4. Mr.Shah appearing in support of Petition submits that impugned notice is without jurisdiction as Assessing Officer did not have any reason to believe that income chargeable to tax has escaped assessment. In particular he invites our attention to paragraph 5 of aforesaid reasons to point out that Assessing Officer was on fishing enquiry as he does not even allege that there is any income as it proceeds on basis that there is profit/loss for different entities. Thus basic requirement of income chargeable to tax having escaped assessment is not satisfied. It is further submitted that there is no tangible material evidence available with Assessing Officer to reopen assessment. This requirement has to be satisfied according to him even when return of income has been processed under section 143(1) by way of intimation. In support of his submissions Mr.Shah placed reliance upon decision of this Court in case of Nu Power Renewables (P.) Ltd. Vs. Deputy Commissioner of Income-tax, Circle 1(2)(a) [2019] 94 taxmann. com 29, decision of Delhi High Court in case of Principal Commissioner of Income-tax-6 Vs. Meenakshi Overseas (P.) Ltd. - [2017] 82 taxmann.com 300 (Delhi) and decision of Gujarat High Court in case of Bakulbhai Ramanlal Patel Vs Income Tax Officer (2011) 56 DTR 0212, to contend that re-opening notice ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: 6 303 WP 2245-2019.doc is without jurisdiction. 5. It is undisputed position that return of income was processed under section 143(1) by way of intimation. There was no scrutiny assessment done for subject Assessment Year in case of Petitioner. Supreme Court in case of Asst. Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers (P) Ltd., 291 ITR 500 (SC) has observed as under : 16. Section 147 authorises and permits Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. word reason in phrase reason to believe would mean cause or justification. If Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it 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. function of Assessing Officer is to administer statute with solicitude for public exchequer with inbuilt idea of fairness to taxpayers. As observed by Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991 (191) ITR 662], for initiation of action under section 147(a) (as provision stood at relevant time) fulfillment of two requisite conditions in that regard is essential. At that stage, final outcome of proceeding is not relevant. In other words, at initiation stage, what is required is reason to believe , but not established fact of escapement of income. At stage of issue of notice, only question is ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: 7 303 WP 2245-2019.doc whether there was relevant material on which reasonable person could have formed requisite belief. Whether materials would conclusively prove escapement is not concern at that stage. This is so because formation of belief by Assessing Officer is within realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)] ; Raymond Woollen Mills Ltd. v. ITO [ 1999 (236) ITR 34 (SC)]. 17. scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from provisions as they stood prior to such substitution. Under old provisions of section 147, separate clauses (a) and (b) laid down circumstances under which income escaping assessment for past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on part of assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a) But under substituted section 147 existence of only first condition suffices. In other words if Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen assessment. It is however to be noted that both ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: 8 303 WP 2245-2019.doc conditions must be fulfilled if case falls within ambit of proviso to section 147. case at hand is covered by main provision and not proviso. 18. So long as ingredients of section 147 are fulfilled, Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. 19. Inevitable conclusion is that High Court has wrongly applied Adanis case (supra) which has no application to case on facts in view of conceptual difference between Section 143(1) and Section 143(3) of Act. 6. Thus requirement at stage of issuing reopening notice is only with prima facie view that income chargeable to tax has escaped assessment. This is not final view and is subject to further consideration during assessment proceedings. In present facts we find that though paragraph 5 of reasons recorded in support of impugned notice for reopening of assessment is vague in as much as Assessing Officer is not even certain whether Petitioner made profits or loss or even entities/persons dealt with, would make reasons bad in law. However, reasons as conclusion that above in para 5 thereof is not only reason in support of impugned notice. other reason in support of impugned notice is recorded in Para 2 to 4 thereof viz. that income ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: 9 303 WP 2245-2019.doc of Rs.33.59 lakhs chargeable to tax has escaped assessment on basis of tangible material and information received from Deputy Director of Income Tax (Investigation) Kolkata by misuse of National Multicommodity Exchange platform. This is very income chargeable to tax which has escaped assessment at Rs.33.59 lakhs. This is as mentioned in reasons with regard to Petitioner purchasing and selling shares through Star Commodities i.e. Broker during previous year relevant to Assessment Year by misusing National Multicommodity Exchange platform. Thus even if paragaph 5 is ignored, reasons to support impugned reopening notice can be sustained on above reasons as indicated in paragraph 2 to 4 thereof. 7. So far as decisions relied upon by Mr.Shah for Petitioner, we find that Bombay High Court in Nu Power (supra) was dealing with reopening of assessment which had been completed under section 143(3) of Act and not case of return being processed at section 143(1) of Act, as in this case. It was in above context regular assessment having been completed under section 143(3) of Act and reopening notice having been issued beyond period of four years from end of relevant Assessment year that above Petition was admitted for prima facie no failure to disclose all material facts necessary for assessment. Thus above decision would have no application to facts of present case. ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: 10 303 WP 2245-2019.doc 8. So far as decision of Delhi High Court, in case of Meenakshi Overseas (supra) is concerned, we note it was rendered in appeal under section 260A of Act and not in exercise of its writ jurisdiction under Article 226 of Constitution of India. decision of Delhi High Court was after entire proceedings had been over under Act and after assessee had submitted itself to assessment and appellate proceedings under Act. It was in facts of that case that Tribunal had found that Assessing Officer did not have reason to believe that income chargeable to tax has escaped assessment and Hon ble Delhi High Court in appeal refused to interfere with finding of Tribunal. In this case while exercising of writ jurisdiction we are prima facie satisfied that there is material available with Assessing Officer to form reasonable belief that income chargeable to tax has escaped assessment. As pointed out above sufficiency of material to conclusively prove escapement of income is not test to interfere with impugned notice. Therefore above decision is also of no assistance to Petitioner. 9. last decision of Gujarat High Court in case of Bakulbhai Ramanlal Patel supra we note that reasons recorded proceeded on basis reasons for reopening of assessment itself stated that reopening has been done so that detailed investigation/verification could be done to find out whether any income chargeable to tax has escaped assessment. Therefore, it was in ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: 11 303 WP 2245-2019.doc above context that it was held to be clear case of fishing inquiry. Therefore Assessing Officer had no reason to believe, at time of issuing reopening notice that income chargeable to tax has escaped assessment. Therefore aforesaid decision is also of no assistance to Petitioner. Accordingly, we see no reason to entertain this Petition. 10. Accordingly, Petition is dismissed. (NITIN JAMDAR, J.) (M.S.SANKLECHA, J.) ::: Uploaded on - 18/10/2019 ::: Downloaded on - 24/10/2019 14:58:15 ::: Spicy Sangria Hotels Pvt. Ltd. Formally known as, Kush Stocks & Currencies Pvt. Ltd. v. Income-tax Officer, Ward 10(1)(4)