Dimexon Diamonds Ltd., Mumbai v. Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J.WRIT PETITION NO. 3568 OF 2018 Dimexon Diamonds Ltd., Mumbai..Petitioner Versus Deputy Commissioner of Income Tax,..RespondentsCentral Circle 1(4), Mumbai & Ors. ................... Mr. Satish Mody a/w Ms. Aasifa Khan for the Petitioner Mr. Satish Mody a/w Ms. Aasifa Khan for the Petitioner •Mr. Suresh Kumar for Respondent No. 1Mr. Suresh Kumar for Respondent No. 1 ................... CORAM : AKIL KURESHI & M.S. SANKLECHA, JJ. DATE : JANUARY 31, 2019. P.C.: 1.The petitioner has challenged a notice of reopening ofassessment dated 31.3.2018 issued by respondent No. 2 -Joint Commissioner of Income Tax. After the filing of thispetition, the petition was amended to challenge anassessment order dated 12.12.2018 passed by respondentNo. 1 - Deputy Commissioner of Income Tax. 2.Brief facts are as under:- (a). Petitioner is a Private Limited Company. For theassessment year 2011-12, the petitioner had filed return of income declaring total income of Rs. 58.82 crore (roundedoff). This return was taken in scrutiny by the AssessingOfÏcer during which information was received by theAssessing OfÏcer from the investigation made, conveyingthat the petitioner company had obtained bogus purchasebills / accommodation entries from one Shri. Bhanwarlal Jainand group entities. The Assessing OfÏcer passed order ofassessment under Section 143(3) of the Income Tax Act,1961 ("the Act" for short) on 23.3.2015 in which he hadadded a sum of Rs. 84.70 lacs (rounded off) to the totalincome of the assessee arrived by applying profit ratio of8.56% out of bogus purchases and accommodation entireswas Rs. 9.89 crore (rounded off). (b). To reopen such assessment, he issued the impugnednotice which as can be seen, was done beyond the period offour years from the end of relevant assessment year. Inorder to do so, he had recorded following reasons:- " In the instant case, the assessee e-filed its ROI on 28.9.2011declaring total income at Rs. 28,82,21,589/-. Further, in this case, ininformation was received from DGIT Inv.) Mumbai, on 2-3-2014,wherein it was informed that the assessee company has obtained accommodation entries / fictitious bills of Rs. 1,40,27,017 and Rs.6,32,01,012/- from M/s. Millenium Stars and M/s. Little Diamrespectively which are concealed to Shri. Pravin Jain and Shri.Bhanwarlal Jain. Further, it was informed that the assesee companyhad obtained accommodation entries for purchase from M/s. MayankImpex. Prop. Sanjay Choudhary (HUF) (AAAQS5732R) amonting toRs. 2,17,30,500/-. The assessment proceedings were completed and the orderu/S. 143(3) of the Act, was passed on 23.3.2015, assessing totalincome of the assessee at Rs. 60,24,88,070/- an amount of Rs.3,72,850/- was added to the total income on account of boguspurchase being 8.56% of total accommodation entries of Rs.9,89,58,529/- (1,40,27,012 + 6,32,01,012 + 17,30,500). As theassessee in its ROI had shown a GP of Rs. 8.56% therefore, the AOworked out the addition on GP at the same rate being the profitembedded in the amount of accommodation entires. Subsequently, an another information was received from theDCIT, CC-4, Surat informing that the assessee has takenaccommodation entires in the form of bogus purchase from M/s.Krishna Diam, amounting to Rs. 7,47,293/- during the FY 2010-11.The case was reopened and the reassessment proceedings u/S.143(3) r.w.s. 147 of the Act, were completed on 2.3.2016 re-assessing the total income on the case at Rs. 60,25,52,540/- anaddition of Rs. 63,968/- was made being 8.56% Rs. 7,47,293/-. In view of the decision of the Hon. Supreme Court, in the caseof M/s. N.K. Inds. wherein, the Hon'ble Apex Court, upheld the entireamount of Bogus purchase on the ground that there is no incumbentto restrict the disallowance u/S. 68/69 in the case of bonus purchaseand entire bogus purchase is to be disallowed u/S 69C of the Act. In view of the decision of the Hon. Supreme Court, in the caseof M/s. N.K. Inds. wherein, the Hon'ble Apex Court, upheld the entireamount of Bogus purchase on the ground that there is no incumbentto restrict the disallowance u/S. 68/69 in the case of bonus purchaseand entire bogus purchase is to be disallowed u/S 69C of the Act. In view of the above, it is evident that by no offering to tax, a amount of Rs. 9,97,05,822/- (1,40,27,017 + 6,32,01,012 + 2,17,30,500+ 7,47,293) the assessee has failed to disclose fully truly all materialfacts necessary for its assessment for AY 2011-12. In view of the above, I have reasons to believe that income tothe tune of Rs. 9,97,05,822/- has escaped assessment and is to bebrought to tax in the hands of M/s. Dimexon Diamons Ltd for A.Y.2011-12. (c). Upon being supplied the reasons, the petitioner raisedobjections to the notice of reopening of assessment underletter dated 9.10.2018. Said objections were rejected by theAssessing OfÏcer on 15.11.2018. The Assessing OfÏcerpassed the order of assessment on 12.12.2018. Thepetitioner has challenged the notice of reopening ofassessment. By way of amendment, he has also added achallenge to the order of assessment dated 12.12.2018passed pursuant to such notice. 3.The record would suggest that the Assessing OfÏcerpassed the order of assessment without waiting for a periodof four weeks from the date of communication of the orderdisposing of objections. This requirement flows from thejudgment of this Court in case of Asian Paints Ltd Vs. Dy CIT & Ors.[1]. The petitioner had also brought this aspect tothe notice of the Assessing OfÏcer despite which, theAssessing OfÏcer passed the order of assessment withoutwaiting for such period. We had, therefore, at the outsetinquired with the learned counsel for the Revenue as to thereasons for this slip on the part of the Assessing OfÏcer. Inresponse to the same, Mr. Suresh Kumar tendered anadditional afÏdavit dated 25.1.2019 filed by the AssessingOfÏcer. Firstly, citing the reason of high pressure of work foroversight and secondly has tendered unconditional apology.We, therefore, close this issue. 4.Nevertheless the passing of the Assessment Orderdated 12.12.2018 in defiance of the order of this Court inAsain Paints (supra) cannot be accepted. This is more so asthe petitioner by letter dated 10.12.2018 had informed theAssessing OfÏcer of the decision of this Court in Asian Paints(supra) that it is in the process of challenging the impugnednotice. In the above circumstances, we do not relegate thepetitioner to avail of the alternate remedy available underthe Act but exercise our writ jurisdiction and set aside the1[2008] 296 ITR 90 (Bom) impugned order dated 12.12.2018 as being withoutjurisdiction. Therefore, we are now at the pre-assessmentorder stage. 5.On merits of the petitioner's challenge to the impugnednotice, we may recall that the factum of the petitioner beingbeneficiary of bogus purchase bills and accommodationentries was within the knowledge of the Assessing OfÏcereven during the original scrutiny assessment. He therefore,passed the order of assessment in which he added a sum ofRs. 84.70 lacs to the income of the assessee by taking profitration of 8.56% on the total bogus purchases andaccommodation entries. Through the reasons, now hewishes to add the entire amount holding a belief that suchsum represents the petitioner's undisclosed income. We arenot called upon to decide whether the Assessing OfÏcer'sfirst approach of taxing only the profit element embedded inbogus purchases was correct or that his later approach oftaxing the entire bogus purchases is correct. What we arehowever called upon to judge is whether in facts of thepresent case, he can change his basis of assessing the income. In clear terms, once the Assessing OfÏcer noticedthe factum of bogus purchases and accommodation entriesand in scrutiny assessment, taxed the same in the mannerhe thought was appropriate, he cannot be allowed to shiftthe stand by issuing notice of reopening of assessment. Thiswould be based on mere change of opinion. We may stresson the point that after the assessment was completed, therewas no further material available with the Assessing OfÏcerwhich would enable him to form a belief that the incomechargeable to tax had escaped assessment. 6.In the result, the impugned notice is also set aside. 7.The petition is allowed in the above terms. [ M.S. SANKLECHA, J. ] [ AKIL KURESHI, J ]