Dimexon Diamonds Ltd, Mumbai v. Deputy Commissioner Of Income Tax ,Central Circle -1(4), Mumbai & Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J.WRIT PETITION NO. 3564 OF 2018 Dimexon Diamonds Ltd, Mumbai..Petitioner Versus Deputy Commissioner of Income Tax ,Central Circle -1(4), Mumbai & Ors. ..Respondents ................... 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 2012-13, the petitioner had filed return of income declaring total income of Rs. 71.72 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 9.2.2016 in which he had addeda sum of Rs. 45.14 lacs (rounded off) to the total income ofthe assessee arrived by applying profit ratio of 9.20% out ofbogus purchases and accommodation entires was Rs. 4.90crore (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. 71,72,01,070/-. The ROI was processedu/S. 143(1) of the Act. Subsequently, the case was selected onscrutiny. During the course of assessment proceedings, an information received from the DGIT(Inv) vide letter dated 10-3-2014,wherein it was informed that the assessee company has obtainedbogus purchase bills / unsecured loan entries provided by Shri.Bhanwarlal Jain, Shri. Pravin Jain Group, Shri. Gautam Jain Groupand others. As per the information, the assesee company hadavailed accommodation entries / fictitious bills of Rs. 4,63,36,453/-and Rs. 27,29,282/- from M/s. Little Diam and M/s. Krishna Diamondsrespectively. The assessment proceedings were completed u/S. 143(3) ofthe Act, on 9.2.2016, assessing total income at Rs. 72,17,15,120/-.An amount of Rs. 45,14,048/- was added to the total income onaccount of bogus purchase being 9.20% of total accommodationentires of Rs. 4,90,65,735/-. The Hon'ble Supreme Court, in its recent judgment in the caseof M/s. N.K. Inds. has held that in the case of bogus purchase, theentire bogus purchase is to be disallowed u/S. 69C of the Act. It isevident that by not offering the whole of the amount of boguspurchase of Rs. 4,90,65,735/- to tax, the assessee has failed todisclose fully and truly all material facts necessary for its assessmentfor AY 2012-13. In view of the above, I have reason to believe that income tothe tune of Rs. 4,90,65,735/- has escaped assessment and is to bebrought to tax in the hands of M/s. Dimexon Diamons Ltd for A.Y.2012-13." (c). Upon being supplied the reasons, the petitioner raised objections to the notice of reopening of assessment underletter dated 9.10.2018. Said objections were rejected by the The Hon'ble Supreme Court, in its recent judgment in the caseof M/s. N.K. Inds. has held that in the case of bogus purchase, theentire bogus purchase is to be disallowed u/S. 69C of the Act. It isevident that by not offering the whole of the amount of boguspurchase of Rs. 4,90,65,735/- to tax, the assessee has failed todisclose fully and truly all material facts necessary for its assessmentfor AY 2012-13. In view of the above, I have reason to believe that income tothe tune of Rs. 4,90,65,735/- has escaped assessment and is to bebrought to tax in the hands of M/s. Dimexon Diamons Ltd for A.Y.2012-13." (c). Upon being supplied the reasons, the petitioner raised objections to the notice of reopening of assessment underletter dated 9.10.2018. Said objections were rejected by the Assessing OfÏcer on 15.11.2018. Copy of this order wasreceived by the petitioner on 21.11.2018. The AssessingOfÏcer passed 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 passed pursuant tosuch 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. DyCIT & Ors.[1]. The petitioner had also brought this aspect tothe notice of the Assessing OfÏcer under letter dated10.12.2018 despite which, the Assessing OfÏcer passed theorder of assessment without waiting for such period. Wehad, therefore, at the outset inquired with the learnedcounsel for the Revenue as to the reasons for this slip on thepart of the Assessing OfÏcer. In response to the same, Mr.Suresh Kumar tendered an additional afÏdavit dated1[2008] 296 ITR 90 (Bom) 25.1.2019 filed by the Assessing OfÏcer. Firstly, citing thereason of high pressure of work for oversight and secondlyhas tendered unconditional apology. We, therefore, closethis 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 theimpugned 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 accommodation 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 accommodation entries 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. 45.14 lacs to the income of the assessee by taking profitration of 9.20% 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 theincome. 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, there was 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 ]