IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2506 OF 2019 Usha Exports Petitioner. V/s. Assistant Commissioner of Income Tax. Respondents. Dr.K.Shivram, Senior Advocate with Mr.Rahul Kakani for Petitioner. Mr.Sham Walve for Respondents. CORAM : NITIN JAMDAR AND M.S. KARNIK, JJ. DATE : 12 December 2019. PC. By this petition, Petitioner challenges notice dated 28 March 2019 seeking to reopen assessment for assessment year 2012-13, and order dated 4 September 2019 disposing of objections raised by Petitioner to said notice. 2. Petitioner is partnership firm carrying on business of manufacturing and exports of diamonds. Petitioner filed return of income for assessment year 2012-13 on 20 September 2012 declaring total income of Rs.29,76,330/-. Respondent No.1- Assessing Officer sought details from skn 2 2506.19-wp.edited.doc Petitioner regarding purchases, sundry creditors and sundry debtors and notice to that effect under section 142(1) of Income Tax Act, 1961 was issued on 31 July 2014. Petitioner replied to said notice on 19 August 2014 and submitted details as sought for. assessment order was passed by Assessing Officer on 19 February 2015 under section 143(3) of Act without making any disallowances of purchases. 3. Petitioner received notice from Assessing Officer dated 29 September 2012, seeking to reopen assessment for assessment year 2012-13. reasons supplied along with notice were as follows: In this case, assessee has filed Return of Income for AY 2012-13 declaring Total income of at Rs.29,76,330/- on 29/09/2012. Information gathered by this office reveals that captioned assessee is one of beneficiaries who purchased HAWALA bills from companies;managed by Rajendra Jain Group, who are engaged in business/ activity of issuing bogus bills without delivery of goods as per requirements of their customers. Information collected by office of DGIT (Inv), Mumbai also confirmed fact that above assessee is beneficiary on account of purchasing bogus bills without delivery of goods from parties mentioned below for FY 2011-12 relevant to assessment year 2012-13. Name of Parties from whom assessee has made purchases is under:- Sr.no Name of Bill Provider Amount 1 M/s Aadi Impex 4,14,18,494/- ::: Uploaded on - 19/12/2019 ::: Downloaded on - 20/12/2019 14:41:50 ::: skn 3 2506.19-wp.edited.doc 2 M/s Kalash Enterprises 4,69,23,678/- TOTAL 8,83,42,172/- As per information, above mentioned party is engaged in business of issuing fraudulent sales bills without delivery of goods. In statement recorded from above party by Income Tax Department, it was admitted that, they had sold bills as per requirement of assessee. In view of these facts, I have reason to believe that income of Rs.8,83,42,172/- chargeable to tax, has escaped for assessment year 2012- 13, and therefore, assessment needs to be re-opened as per provision of section 147 of IT Act 1961 for A.Y. 2012-13 and notice u/s. 148 of I.T. Act needs to be issued. After considering response of Petitioner, Assessing Officer concluded that purchases were made, however, they were made at lower cost from grey market and disallowed certain purchases as bogus purchases. 4. On 28 March 2019, Respondent No.1- Assessing Officer issued impugned notice under section 148 of Act. Reasons for issuing notice were supplied to Petitioner ,which are reproduced as under: assessee is engaged in business of Manufacturing Industry, trading and exporting of rough diamonds and diamond powder. Assessee had filed its return on 20/09/2012 for A.Y. 2012-13 declaring total business income of Rs.29,76,330/-. In this case, information gathered by office that assessee is one of beneficiaries of having indulged in taking bogus ::: Uploaded on - 19/12/2019 ::: Downloaded on - 20/12/2019 14:41:50 ::: skn 4 2506.19-wp.edited.doc accommodation entries of Rs.7,87,00,670/- from group of entities managed by Shri Rajendra Jain, Shri Dharmichand Jain and Shri Sanjay Choudhary Group, case was reopened and assessment was finalized u/s 143(3) r.w.s. 147 of I.T. Act, 1961 on 28/12/2017 determining assessed income at Rs.52,12,360/- after disallowance of Rs.21,72,138/- [ i.e. 2.76% of non-genuine/ bogus purchase of Rs.7,87,00,670/-). issue of bogus accommodation entries were widely discussed in assessment order. Further, assessee had debited amount of 7,87,00,670/- on account of purchases from M/s Aadi Impex and M/s. Kalash Enterprises. All these enterprises are ultimately controlled by Shri Rajendra Jain. This fact has been established during scrutiny assessments that such transactions were bogus accommodation entries. However, on scrutiny of assessment order, it was observed that Assessing Officer had made only addition of Rs.21,72,138/- [ie. 2.76% of non genuine/bogus purchase of Rs.7,87,00,670/-). 1 It is observed that all purchases made by assessee were bogus and not actually purchased by assessee, then as per proviso mentioned above, all expenditure belongs to bogus purchase would have been disallowed. Also, parties who had issued bogus bills they have given their statements on oath, that only bills and no actual transaction had taken place between them and assessee company. In this connection, it is pertinent to note that Hon ble Supreme Court while dismissing SLP had upheld decision of High Court for addition of entire income on account of bogus purchases in case of M/s NK Proteins Ltd. v/s. DCIT [2017-TIOL-23-SC-IT] vide its order dated 16/01/2017. Subsequently, department in other cases too had made 100% disallowance on account of accommodation entry/bogus purchases. Accordingly, ::: Uploaded on - 19/12/2019 ::: Downloaded on - 20/12/2019 14:41:50 ::: skn 5 2506.19-wp.edited.doc bogus purchases amounting to Rs.7,87,00,670/- were required to be disallowed and added back to total income of assessee. In view of above, I have reason to believe that income chargeable to tax of above Rs.1,00,000/- has escaped assessment within meaning of section 147 of Income-tax Act, r.w. explanation thereto for A.Y. 2012- 13. Petitioner submitted its objections on 2 May 2019. These objections have been disposed of by impugned order dated 4 September 2019. Petitioner is, therefore, before this Court by filing present writ petition under Article 226 of Constitution of India. 5. By order dated 20 November 2019, parties were put to notice that Petition would be taken up for final disposal at admission stage. Accordingly, petition is taken up for final disposal. 6. Heard Dr.K.Shivram, learned Senior Advocate for Petitioner and Shri Sham Walve for Respondents. 7. assessment for year 2012-13 is sought to be reopened by impugned notice dated 28 March 2019. This is beyond period of four years. period of four years is of significance because of first proviso to section 147 of Act. It ::: Uploaded on - 19/12/2019 ::: Downloaded on - 20/12/2019 14:41:50 ::: skn 6 2506.19-wp.edited.doc stipulates additional requirement when assessment is sought to be reopened after expiry of four years from end of relevant assessment year. Where assessment under section 143(3) is made for relevant assessment year, then no action shall be taken after expiry of four years from end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year for assessee's failure to disclose fully and truly all material facts necessary for his assessment for that assessment year. By various judicial pronouncements, this condition is now firmly established as jurisdictional requirement to reopen of assessment. Further, reassessment shall not be undertaken on mere change of opinion and reassessment proceedings are not akin to review. In such circumstances, writ petition under Article 226 can be entertained by Courts despite availability of alternate remedy of appeal. 8. Dr.Shivram, learned Senior Advocate for Petitioner submits that there two main points on which petitioner is entitled to succeed. First, that not only there is no failure by Petitioner to disclose all material facts fully and truly, but there is not even mention to that effect in reasons supplied to Petitioner. Second, all material was available and looked into by Assessing office when first reassessment proceeding took place and now it is only change of opinion. Mr. Walve, learned counsel for Respondent, based on contentions raised in reply affidavit, supported impugned action of Assessing Officer. ::: Uploaded on - 19/12/2019 ::: Downloaded on - 20/12/2019 14:41:50 ::: skn 7 2506.19-wp.edited.doc 9. first contention raised by Dr.Shivram regarding absence of statement regarding petitioner's failure in reasons is correct. reasons supplied along with impugned notice, which are reproduced above, contain no assertion there was any failure of petitioner to disclose fully and truly all material facts necessary for assessment. This omission can be ground to set aside Reassessment notice. Pursuant to reasons given along with first reopening notice dated 29 September 2012, Petitioner had supplied all material regarding very same allegations against Petitioner and same were examined by Assessing Officer. All material was placed before Assessing Officer by Petitioner. Acting upon this material, Assessing Officer had, in fact, made certain additions. Therefore, it cannot be said that there was failure by Petitioner to disclose all material facts fully and truly. In circumstances, jurisdictional requirement to reopen assessment proceeding after four years is not present. Neither it has been alleged. 10. Dr. Shivram then submitted that foundation of first reopening notice and second notice is same. That is issue of bogus purchases and accommodation of entries and that there is clear change of opinion by Assessing Officer. He submitted that, in reasons supplied along with first reopening notice, issue of bogus accommodation of entries regarding purchases was discussed. reasons given for second reopening ::: Uploaded on - 19/12/2019 ::: Downloaded on - 20/12/2019 14:41:50 ::: skn 8 2506.19-wp.edited.doc notice reproduced above also refer to said fact. reasons also refer to decision of Supreme Court in case of M/s.N.K.Proteins Ltd. (2017-TIOL-23-SC-IT v. DCIT ). Even this decision was before Assessing Officer in proceeding pursuant to first reopening notice. Petitioner, along with its objections, placed explanatory note as to how said decision of Supreme Court in M/s.N.K.Proteins did not apply to facts of case. Therefore, this aspect was also considered when proceeding under first reopening notice was conducted. In circumstances, contention of Petitioner that impugned reopening notice is issued only on mere change of opinion will have to be accepted. 11. Since we are satisfied that jurisdictional requirements for reopening of assessment of Petitioner for assessment year 2012-13 after four years are absent, and action of Respondent No.1- Assessing Officer is without jurisdiction, Petitioner is entitled to succeed. 12. Writ Petition is allowed. impugned notice notice dated 28 March 2019 seeking to reopen assessment for assessment year 2012-13 and order dated 4 September 2019 disposing of objections are quashed and set aside. (M.S. KARNIK, J.) (NITIN JAMDAR, J.) Usha Exports v. Assistant Commissioner of Income-tax