Kalsha Builders Pvt Ltd v. Asst. Commissioner Of Income Tax & Ors

R.M. AMBERKAR (Private Secretary) IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. WRIT PETITION NO. 3656 OF 2018 Kalsha Builders Pvt Ltd ..Petitioner Versus Asst. Commissioner of Income Tax & Ors. ..Respondents ................... Mr. Jitendra Jain a/w Mr. Vagish Mishra, Mr. Samir Singh & Mr.Siddesh Rajput i/by Law Counsellors for the Petitioner Mr. Jitendra Jain a/w Mr. Vagish Mishra, Mr. Samir Singh & Mr.Siddesh Rajput i/by Law Counsellors for the Petitioner Mr. Suresh Kumar for Respondent Nos. 1 and 2Mr. Suresh Kumar for Respondent Nos. 1 and 2 ................... CORAM : AKIL KURESHI & S.C. GUPTE, JJ. DATE : FEBRUARY 8, 2019. P.C.: 1.Petitioner has challenged a notice of reopening ofassessment dated 28th/29th March, 2 seeking to reopen thepetitioner's assessment for the assessment year 2011-12. 2.Brief facts are as under: 2.1 Petitioner is a company registered under theCompanies Act and engaged in the business of developingreal estate. For the assessment year 2011-12, the petitionerhad filed return of income which was taken in scrutiny by theAssessing OfÏcer. The Assessing OfÏcer passed order under Section 143(3) of the Income Tax Act, 1961 ("the Act" forshort) on 29.1.2014. To reopen such assessment, theAssessing OfÏcer issued the impugned notice. In order to doso, he had recorded following reasons: "Reasons for reopening of the assessment in case of M/s.Kalsha Builders Pvt. Ltd. for A.Y. 2011-12 u/s 147 of the Act. In this case the Assessee filled return of Income on 27.09.2011declaring total income of Rs. 10,05,830/-/- The said return wasprocessed u/s 143(1) on 7.1.2012 determining Total Income ofRs.10,05,830/- and Order Passed u/S 143(3) on 20.01.2014determining Total Income of Rs. 3,14,72,770/-. 2. A search action u/S. 132 of the Income Tax Act, 1961 was carriedout at the residence and various premises of Shri. Shirish C. Shahwho happened to be main person engaged in providing bogusaccommodation entries like LICG, Share capital with huge sharepremium, turnover, Loan etc; 3.On verification of the impounded material, it is seen that M/s.Prabhav Industries Ltd., en entity controlled by Shirish C. Shah, hasmade investment of Rs. 3,00,00,000/- to the above mentionedassessee. 4.In order to overcome borrowed satisfaction notice u/S. 133(6)was issued to M/s. Prabhav Industries Ltd requiring it to providevarious details. However, till date no reply has been received. 5.Thus, as M/s. Prabhav Industries Ltd., is engaged in providingaccommodation entries, investment made in the above saidassessee is nothing but unexplained cash credit. 6.In view of the above facts, I have reason to believe that income chargeable to tax amounting to Rs. 3,00,00,000/- hasescaped assessment for A.Y. 2011-12 in view of the provisions ofSection 147 of the Income Tax Act." 2.2 Upon being supplied the reasons, the petitioner raisedobjections to the notice of reopening of assessment underletter dated 16.5.2018. Such objections were rejected by theAssessing OfÏcer by an order dated 14.9.2018, hence, thispetition. 3.Taking us through the reasons recorded by theAssessing OfÏcer, learned counsel for the petitioner raisedfollowing contentions:- i.The reasons do not demonstrate any live linkbetween the material available with the AssessingOfÏcer and his formation of belief that the incomechargeable to tax had escaped assessment;between the material available with the AssessingOfÏcer and his formation of belief that the incomechargeable to tax had escaped assessment; ii.The entire issue on which reopening of assessmentis sought, was minutely examined by theAssessing OfÏcer during the scrutiny assessment.The impugned notice, is thus, based on change ofopinion;is sought, was minutely examined by theAssessing OfÏcer during the scrutiny assessment.The impugned notice, is thus, based on change ofopinion; i.The reasons do not demonstrate any live linkbetween the material available with the AssessingOfÏcer and his formation of belief that the incomechargeable to tax had escaped assessment;between the material available with the AssessingOfÏcer and his formation of belief that the incomechargeable to tax had escaped assessment; ii.The entire issue on which reopening of assessmentis sought, was minutely examined by theAssessing OfÏcer during the scrutiny assessment.The impugned notice, is thus, based on change ofopinion;is sought, was minutely examined by theAssessing OfÏcer during the scrutiny assessment.The impugned notice, is thus, based on change ofopinion; iii.There was no failure on the part of the assessee todisclose truly and fully all material facts. Thedisclose truly and fully all material facts. The reasons also do not suggest any such failure. 4.On the other hand, learned counsel Mr. Suresh Kumarfor the Department submitted that the Assessing OfÏcer hadrecorded proper reasons for issuing such notice. After theassessment was completed, the Assessing OfÏcer receivedinformation prima facie suggesting that the petitioner hadnot made true disclosures. He had also issued inquiry noticeunder Section 133(6) of the Act to the concerned parties. Onthe basis of such materials, he formed an independent beliefthat the income chargeable to tax had escaped assessment.It is a writ large on the face of the reasons that there wasfailure on the part of the assessee to disclose truly and fullyall material facts. Merely because the Assessing OfÏcer inthe reasons has not repeated such words, would not be fatalto the notice. 5.Having heard the learned counsel for the parties andhaving perused the material on record, we find that in thereasons, the Assessing OfÏcer has referred to a search actionunder Section 132 of the Act carried out at the residence andvarious premises of one Shirish C. Shah who was found to beengaged in providing bogus accommodation entries such as capital gain, share capital with huge share premium etc.Such material showed that one M/s. Prabhav Industries whowas an entity controlled by Shirish C. Shah had madeinvestment of Rs. 3 crore in the assessee company. TheAssessing OfÏcer also recorded in such reasons that he hadissued notice under Section 133(6) of the Act to said PrabhavIndustries asking for various details. Such notice remainedunreplied. On such basis, the Assessing OfÏcer formed abelief that M/s. Prabhav Industries was engaged in providingaccommodation entires and that the investment made by thesaid Prabahv Industries in the assessee was in the nature ofassessee's unexplained cash credit. 6.It is true that during the scrutiny assessment, this issuehad come up for consideration before the Assessing OfÏcer.He had raised multiple queries under a letter dated17.7.2013 asking inter alia for furnishing details ofassessee's share capital, increase in the assessee's sharecapital and share premium account. The assessee hadreplied to such queries. After which further queries came tobe raised by the Assessing OfÏcer on 20.8.2013 in which there was specific mention of the details of a sum of Rs. 3crore having been paid by M/s. Prabahv Industries forpurchase of 1500 shares. The assessee was asked to providethe identity of such investor, its creditworthiness andgenuineness of the transaction. The assessee having repliedto such queries raised in the order of assessment, theassessee made no additions. there was specific mention of the details of a sum of Rs. 3crore having been paid by M/s. Prabahv Industries forpurchase of 1500 shares. The assessee was asked to providethe identity of such investor, its creditworthiness andgenuineness of the transaction. The assessee having repliedto such queries raised in the order of assessment, theassessee made no additions. 7.It is because of this, the assessee contended that theAssessing OfÏcer is precluded from raising same question allover again by way of reassessment. The impugned noticehaving been issued beyond the period of four years from theend of relevant assessment year, the question of true andfull disclosure by the assessee would also be an additionalfactor. However, when the Revenue suggests that theassessee had indulged in the bogus accommodation entriesand therefore, said amount of Rs. 3 crore was nothing butthe assessee's unexplained cash credit, the issue of changeof opinion and true and full disclosure would merge almost tothe extent of overlapping. In other words, if the Revenue canprima facie show on the basis of additional material available with the Assessing OfÏcer after completing the scrutinyassessment that the assessee had made a bogus claim,merely because the issue was examined by the AssessingOfÏcer, would not preclude him from reopening theassessment. Reference in this context can be made to thedecision of the Supreme Court in the case of M/s. PhoolChand Bajrang Lal & Anr. Vs. I.T.O.[1]. It is a case in whichduring the original scrutiny assessment, the question oftransaction of loan given by the assessee was examined.Later on, however, the Assessing OfÏcer received informationsuggesting that the entire transaction was bogus. When thequestion of validity of reopening of assessment came up forconsideration before the Supreme Court, it was observed as under:- "25.From a combined review of the judgments of this Court, itfollows that an Income-tax Officer acquires jurisdiction to reopenassessment under Section 147(a) read with Section 148 of the IncomeTax Act, 1961 only if on the basis of specific, reliable and relevantinformation coming to his possession subsequently, he has reasonswhich he must record, to believe that by reason of omission or failureon the part of the assessee to make a true and full disclosure of allmaterial facts necessary for his assessment during the concludedassessment proceedings, any part of his income, profit or gainschargeable to income tax has escaped assessment. He may start under:- "25.From a combined review of the judgments of this Court, itfollows that an Income-tax Officer acquires jurisdiction to reopenassessment under Section 147(a) read with Section 148 of the IncomeTax Act, 1961 only if on the basis of specific, reliable and relevantinformation coming to his possession subsequently, he has reasonswhich he must record, to believe that by reason of omission or failureon the part of the assessee to make a true and full disclosure of allmaterial facts necessary for his assessment during the concludedassessment proceedings, any part of his income, profit or gainschargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come tolight which where not previously disclosed or some information withregard to the facts previously disclosed comes into his possessionwhich tends to expose the untruthfulness of those facts. In suchsituations, it is not a case of mere change of opinion or the drawingof a different inference from the same facts as were earlier availablebut acting on fresh information. Since, the belief is that of theIncome-tax Officer, the sufficiency of reasons for forming the belief,is not for the Court to judge but it is open to an assessee to establishthat there in fact existed no belief or that the belief was not at all abona fide one or was based on vague, irrelevant and non-specificinformation. To that limited extent, the Court may look into theconclusion arrived at by the Income Tax Officer and examine whetherthere was any material available on the record from which therequisite belief could be formed by the Income Tax Officer and furtherwhether that material had any rational connection or a live link for theformation of the requisite belief. It would be immaterial whether theIncome-tax Officer at the time of making the original assessmentcould or, could not have found by further enquiry or investigation,whether the transaction was genuine or not, if one the basis ofsubsequent information, the Income-tax Officer arrives at aconclusion, after satisfying the twin conditions prescribed in Section147(a)of the Act, that the assessee had not made a full and truedisclosure of the material facts at the time of original assessment andtherefore income chargeable to tax had escaped assessment. TheHigh Courts which have interpreted Burlop Dealer's case (Supra) aslaying down law to the contrary fell in error and did not appreciate theimport of that judgment correctly. 26.We are not persuaded to accept the argument of Mr. Sharmathat the question regarding truthfulness or falsehood of thetransactions reflected in the return can only be examined during theoriginal assessment proceedings and not at any stage subsequentthereto. The argument is too broad and general in nature and does violence to the plain phraseology of Sections 147(a) and 148of the Actand is against the settled law by this Court. We have to look to thepurpose and intent of the provisions. One of the purposes of Section147, appears to us to be, to ensure that a party cannot get away bywilfully making a false or untrue statement at the time of originalassessment and when that falsity comes to notice, to turn aroundand say "you accepted my lie, now your hands are tied and you cando nothing". It would be travesty of justice to allow the assessee thatlatitude. violence to the plain phraseology of Sections 147(a) and 148of the Actand is against the settled law by this Court. We have to look to thepurpose and intent of the provisions. One of the purposes of Section147, appears to us to be, to ensure that a party cannot get away bywilfully making a false or untrue statement at the time of originalassessment and when that falsity comes to notice, to turn aroundand say "you accepted my lie, now your hands are tied and you cando nothing". It would be travesty of justice to allow the assessee thatlatitude. 27.In our opinion, therefore, in the facts of the present case theIncome-tax Officer Azamgarh rightly initiated the reassessmentproceedings on the basis of subsequent information, which wasspecific, relevant and reliable, and after recording the reasons forformation of his own belief that in the original assessmentproceedings, the assessee had not disclosed the material facts trulyand fully and therefore income chargeable to tax had escapedassessment. He, therefore, correctly invoked the provisions ofSections 147(a) and 148 of the Act. The High Court was, thus, perfectlyjustified in dismissing the writ petition. There is no merit in this appealwhich fails and is dismissed but with no order as to costs" 8.In this background, we may take stock of the reasonsrecorded by the Assessing OfÏcer. After the assessment wascompleted, the Assessing OfÏcer was supplied informationcollected through search action at the residence and otherpremises of Shirish C. Shah who was found to be the mainperson engaged in providing bogus accommodation entires.The material impounded during the search suggested thatPrabhav Industries was entirely controlled by Shirish C. Shah which had made investment of Rs. 3 crore in assesseecompany. The notice issued by the Assessing OfÏcer toPrabhav Industries under Section 133(6) remainedunanswered. It was on the basis of such material, theAssessing OfÏcer formed a belief that the said sum of Rs. 3crore was nothing but the re-rooting of assessee'sunexplained cash. 9.In facts of the present case, we do not find merits inany of the contentions of the petitioner. Firstly, as noted,merely because the Assessing OfÏcer had examined thetransactions during the original assessment proceedings,would not preclude him from subsequent inquiry it is shownon the strength of additional material establishing primefacie that the disclosures made by the assessee were nottrue. If the entire claim is bogus and so established to be,the assessee would fail the test of true and full disclosure.Requirement of true and full disclosure runs through theentire assessment and it does not end on filing of return.The search action against Shirish C, Shah provided certaininformation which was also processed by the Assessing OfÏcer before forming the belief that income chargeable totax had escaped assessment. 10. Secondly, the entire reasons when read as a whole,more than sufÏciently demonstrate the belief of theAssessing OfÏcer that the entire assessment goes on bogusclaim of share application money having been received bythe assessee company. Therefore, lack of true disclosures iswrit large on the face of the reasons. Mere non recitation ofsuch expression would not invalidate the reasons or the factthat the reasons are based on allegations of lack of true andfull particulars. 11. Learned counsel for the petitioner submitted that theAssessing OfÏcer had issued notice to Prabhav Industriesunder Section 133(6) of the Act which was replied and hadnot remained unreplied as suggested in the reasons. Firstly,this aspect has emerged in the rejoinder. Secondly, at thisstage, in a writ jurisdiction, we would not entertain suchdisputed question since it is well settled that sufÏciency ofthe reasons at the end of the Assessing OfÏcer to form a 11. Learned counsel for the petitioner submitted that theAssessing OfÏcer had issued notice to Prabhav Industriesunder Section 133(6) of the Act which was replied and hadnot remained unreplied as suggested in the reasons. Firstly,this aspect has emerged in the rejoinder. Secondly, at thisstage, in a writ jurisdiction, we would not entertain suchdisputed question since it is well settled that sufÏciency ofthe reasons at the end of the Assessing OfÏcer to form a belief that the income chargeable to tax had escapedassessment would not be within the purview of examinationof writ court at this stage. 12. For the above reasons, the petition is dismissed.Interim relief stands vacated. [ S.C. GUPTE, J. ] [ AKIL KURESHI, J ]