Saikrupa Fabrics Private Limited v. The Income Tax Officer Ward 4(1)(1

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 16716 of 2019 ================================================================SAIKRUPA FABRICS PRIVATE LIMITED VersusTHE INCOME TAX OFFICER WARD 4(1)(1) ================================================================ Appearance: MS VAIBHAVI K PARIKH(3238) for the PetitionerMRS MAUNA M BHATT(174) for the Respondent ================================================================ CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALAandHONOURABLE MR. JUSTICE ILESH J. VORA Date : 16/02/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE ILESH J. VORA) 1. By filing this petition under Article 226 of theConstitution of India, the writ applicant being aPrivate Limited Company has challenged the Noticedated 29.03.2019 issued under Section 148 of theIncome Tax Act, 1961 (hereinafter referred to as ‘theAct’ for short), in respect of Assessment Year 2012-13 by the Assessing Officer, on the ground that sameis illegal, without jurisdiction, as prescribed under theAct. 2. Briefly stated, the facts of the case are that thewrit applicant being a Private Limited Company filedits return of income on 20.03.2013, declaring thetotal income at Rs.32,05,100/-. On 11.03.2015, theassessment was framed under Section 143(3) of the Act. During the assessment proceedings variousdetails were called for by the Assessing Officerincluding the details pertaining to the transactions ofdebtors/creditors made during the year underconsideration. The writ applicant had furnishedvarious details as called for. The Assessing Officerafter considering the details furnished by the writapplicant, framed the assessment under Section143(3) of the Act, making no addition to the totalincome. 3. Thereafter, the Assessing Officer issuedimpugned notice under Section 148 of the Act forreopening of the assessment for the year 2012-13. Inresponse to the notice, the writ applicant filed itsreturn of income and asked to provide reasonsrecorded for the reassessment. The revenue vide itscommunication dated 14.05.2019 furnished thereasons recorded, which reads as under:- Reasons recorded: “Please refer to your letter dated 04.04.2019, inwhich you are requested to supply the copy ofreason recorded for reopening the assessment. 2.In this regard, the reason recorded forreopening assessment is as under: 1. In this case, the assessee has e-filed its return ofincome for A.Y.2012-13. On 20.03.2013 declaringtotal income at Rs.32,05.100/-. The same wasprocessed u/s 143(1) on 18.05.2013. The assesseecompany engaged in the business of textiles.Thereafter. The case was selected for scrutiny andthe assessment was finalized u/s 143(3) on 11.03.2015 determined total income at Rs.32.05.100/as per return income. 2. An Information received from the ADIT(Inv.), Unit-5. Kolkata vide letter No.ADIT/Kol/InformationFIU-IND/2018-19 /1460-76 dated 28.02.2019 that Sri OmPrakash Bihani. Who is a proprietor of M/s. ShreeAmbika Service. M/s. Shree Balaji Texofm, M/s.Shree Ambika Trading and M/s. Shree AmbikaEnterprises has provided entries to Mis. SaikrupaFabrics Pvt Ltd. The gist are as under: 2.1 Credible information is received that in the bankaccount vide A/c.No. 518011065594 maintainedwith ING Vysya Bank Ltd. Of K.K. Tagore Branch,Kolkata of M/s. Shree Ambika Service whoseproprietor is Sri Om Prakash Bihani, total credits ofINR 327.80 crores, which includes cash credits ofRs.263.68 crores and total debits of INR 327.68crores were noticed during the period from accountopening to 13.05.2014. It was further noticed thatthe funds so received in the account being paid toseveral firms by way of clearing cheques below thereporting thresh hold limit of Rs.50000/-. 2.1 Credible information is received that in the bankaccount vide A/c.No. 518011065594 maintainedwith ING Vysya Bank Ltd. Of K.K. Tagore Branch,Kolkata of M/s. Shree Ambika Service whoseproprietor is Sri Om Prakash Bihani, total credits ofINR 327.80 crores, which includes cash credits ofRs.263.68 crores and total debits of INR 327.68crores were noticed during the period from accountopening to 13.05.2014. It was further noticed thatthe funds so received in the account being paid toseveral firms by way of clearing cheques below thereporting thresh hold limit of Rs.50000/-. In connection with the above information soreceived, bank statement of the alerted bankaccount and other accounts have been obtainedand perused. Further, summon u/s.131 of the I.T.Act, 1961 was issued and served on Sri Om PrakashBihani, who is a proprietor of the subject entity M/s.Shree Ambika Service for his personal appearancefor recording of statement in connection with thenature and complexity of such transactions and thesource of cash deposits. In response Sri Om PrakashBihani appeared and statement was recorded u/s.131 on oath wherein he stated and confirmed thathe was a sole proprietor of the entities M/s. ShreeAmbika Service. M/s. Shree Balaji Texofm, M/s.Shree Ambika Trading and M/s. Shree AmbikaEnterprise which have been closed and non-operational since F.Y.2017-18. He further statedthat the transactions involved in the bank accountsof these entities are not relate to any actualbusiness instead these are hundi transaction whereSri Om Prakash Bihani – deposits cash provided tohim by various entities and the same were returnedback to such entities through account payee cheques in lieu of commission which he /- to Rs.20/- per Rs.1 lac of the fundsprovided to him by such entities. While goingthrough the alerted bank account no.518011065594 of the subject entity M/s. ShreeAmbika Service, it was perused that cash within therange of Rs.2 lacs to below Rs.10 lacs have beendeposited and immediately got transferred tovarious entities through cheques mostly below therange of Rs.50,000/-. This pattern of transaction wasalso observed in other bank accounts of hisproprietorship entities viz. A/c. No. 518011066024of M/s. Shree Balaji Texofm, A/c. No. 518011074998and A/c.No.638011009612 of M/s. Shree AmbikaEnterprises and A/c.No. 518011071843 of M/s ShreeAmbika Commercial. On confronting the reasonbehind such credit and debit entries, Sri Om PrakashBihani stated that the cash so deposited were theaggregated amount received on a day from variousentities and the same got debited through chequesto such entities with amount below Rs.50,000/- asper the instructions given by the beneficial ownersof such cash and in whose names cheques wereissued. He stated further that most of these entitiesare located in remote areas viz. Ahmedabad, Surat,Bangalore, etc. and the cash were the sale proceedsof the goods traded by such entities in Kolkata andhence for security reason these cash were providedto Sri Om Prakash Bihani who after depositing,issued cheques in the names of such entities. | 2.2 On this line, the alerted bank account statementof M/s. Shree Ambika Service and otherproprietorship entities have been perused and seenthat Shri Om Prakash Bihani had deposited cashamount in the bank accounts of his proprietorshipentities on which he received commission. In view ofthe above facts and circumstances, it is clearlyinferred that the entities to whom funds weretransferred through cheques and against which cashwere received are beneficial owners of suchtransferred fund. 3. The information clearly indicates that the concernfrom which the assessee has got entries is notindulged any business activities but the assesseehas brought money into their books through hundiwherein they provided cash to the subject entityM/s. Shree Ambika Service and other proprietorship 3. The information clearly indicates that the concernfrom which the assessee has got entries is notindulged any business activities but the assesseehas brought money into their books through hundiwherein they provided cash to the subject entityM/s. Shree Ambika Service and other proprietorship entities of Shri Om Prakash Bihani and received of6,95,874/- in cheques below the limit ofRs.50,.000/-. The details are under: 4. Further notice u/s 133(6) of the Act was issued bythe undersigned on 19.03.2019 and served byspeed post. However, the assessee failed to furnishthe reply to query letter issued to the assessee bythis office. Vide above letter, the assessee wasasked to provide the details of financial transactionsmade with Shri Om Prakash Bihani, who is aproprietor of M/s, Shree Ambika Service, M/s, ShreeBalaji Texofm, M/s. Shree Ambika Trading and M/s,Shree Ambika Enterprises during the year alongwith documentary evidences. However, theassesseedidnotrespondatall. The assessee is one of the beneficiaries who hadreceived of 6,95,874/- in cheques from M/s ShreeAmbika Service and other proprietorship entities ofShri Om Prakash Bihani in FY 2011-12 in the Shapeof hundi wherein the assessee provided cash. Thenature of credit received from M/s Shree AmbikaService and other proprietorship entities of Shri OmPrakash Bihani proves to be merely anaccommodation entry. Hence, there is escapementwithin the meaning of section 147 of the Act. Theassessee was required to file correct return ofincome and disclosed the income received duringthe A.Y.2012-13 for tax. However, the assesseefailed to disclose the income for AY. 2012-13 andalso failed to furnish the reply to query letter issuedto the assessee by this office. In view of the above, |have reason to believe that there is escapement ofincome to the extent of Rs. 6,95,874/- and failed todisclose fully and truly all necessary material factsin its return of income. 5. In this case, the assessment was finalized u/s143(3) of the Act on 11.03.2015 determined totalincome of Rs.32,05,100/- as per return income.However, the above information received fromtheAsst.DirectorofIncometax(Investigation),Unit-5, Kolkata on 04.03.2019i.e. after assessment finalized u/s 143(3) ofthe Act on 11.03.2015 and the reason tobelieve to reopen the case has been recordedas a result of fresh facts that the assesseecompany has taken bogus accommodationentries from Sri Om Prakash Bihani, who is aproprietor of the subject entity M/s. ShreeAmbika Service, M/s. Shree Balaji Texofm, M/s.Shree Ambika Trading and M/s. Shree AmbikaEnterprises has provided entries to M/s.Saikrupa Fabrics Pvt. Ltd in the shape ofhundi wherein the assessee companyprovidedcash. 6. In this case, a return of income was filed for theyear under consideration and assessment u/s.143(3) of the Act was passed on 11.03.2015determined total loss of Rs.32,05,100/-. Since, 4years from the end of the relevant year has expiredin this case, the requirements to initiate proceedingu/s.147 of the Act are reason to believe that incomefor the year under consideration has escapedassessment because of failure on the part of theassessee to disclose fully and truly all material factsnecessary for its assessment for the assessmentyear under consideration. It is pertinent to mentionhere that reasons to believe that income hasescaped assessment for the year underconsideration have been recorded above (referparagraphs 2 to 4). | have carefully considered theassessment records containing the submissionsmade by the assessee in response to variousnotices issued during the assessment proceedingsand have noted that the assessee has not fully andtruly disclosed material facts as above necessary forits assessment for the year under consideration. It is evident the above facts that the assessee hadnot truly and fully disclosed material facts necessaryfor its assessment for the year under consideration thereby necessitating reopening u/s 147 of the Act.“ 4. The writ applicant raised various objections videcommunication dated 10.06.2019, both on theground of jurisdiction as well as on merits andrequested the respondent to drop the reassessmentproceedings. Same came to be rejected by therespondent vide order dated 06.09.2019, holding thatthe assessment is valid and within jurisdiction. 5. Being aggrieved by the impugned notice as wellas the order disposing of the objections, the writapplicant came up with present writ application. 6. We have heard the learned Senior Advocate Mr.Tushar Hemani, assisted by Ms. Vaibhavi Parikh, thelearned advocate appearing for the writ applicantand Mrs. Mauna Bhatt, the learned Standing Counselappearing for the revenue. 7. Mr. Tushar Hemani, the learned Senior Counselhas raised various contentions as mentioned in thepetition. Referring to the reasons recorded and orderdisposing the objections raised by the writ applicant,it was contended that the Assessing Officer hadmechanically disposed of the preliminary objectionsand failed to take note of the objections and disposedof the same without assigning any proper reasons onthe issue. Therefore, it was submitted that theimpugned notice as well as the order disposing the objections are required to be set aside. 8. It was contended by learned Senior counsel thatat the time of framing the assessment under Section143(3) of the Act, all necessary particulars had beenfurnished to Assessing Officer, who while issuingnotice, under Section 142(1) had specifically calledupon the writ applicant to furnish details of sales andpurchase, both in quantity and value and details ofdebtors / creditors with whom the transactionexceeding Rs.10,00,000/- being made during theyear under consideration. Under the circumstances,Assessing Officer had framed the original assessmentafter due application of mind in respect of the issueon which the assessment is sought to be reopenedand as such impugned notice is based on merechange of opinion on the part of the AssessingOfficer. 9. It was contended by learned Senior Counsel thatthe writ applicant has not at all received any chequefrom any of the firms managed by Shri OmprakashBehani. In this context, it was urged that the writapplicant received several cheques from its debtorsagainst sale transactions and same were credited tothe profit and loss account for which, the writapplicant had furnished all details, at the stage oforiginal assessment. Thus, the income towards salesreceived during the year under consideration which had been credited to the P&L account and incomeembedded therein had been offered to tax. In thisbackground of facts, it was submitted that the actionof reopening is not at all justified in eye of law andimpugned notice deserves to be quashed. 10. It was submitted by the learned Senior Counselthat all the primary facts with regard to saletransactions had been fully disclosed in the return ofincome as well as at the time of original assessmentproceedings. Under the circumstances, it is not openfor the respondent to issue impugned notice beyondperiod of 4 years from the end of relevant year andtherefore, same deserves to be quashed and setaside as being without jurisdiction.that all the primary facts with regard to saletransactions had been fully disclosed in the return ofincome as well as at the time of original assessmentproceedings. Under the circumstances, it is not openfor the respondent to issue impugned notice beyondperiod of 4 years from the end of relevant year andtherefore, same deserves to be quashed and setaside as being without jurisdiction. 11.It was further submitted by the learned SeniorCounsel that the reasons to believe is bad in law asAssessing Officer recorded his satisfaction only onthe basis of the information received from the ADIT(Inv) Unit-5, Calcutta, without making hisindependent enquiries and hence the AssessingOfficer assumed jurisdiction only on borrowedsatisfaction for the purpose of carrying out fishinginquiry or investigation without their being anyspecific finding of escape of income, which isimpermissible in law and on that count also, theimpugned notice is bad in law. Counsel that the reasons to believe is bad in law asAssessing Officer recorded his satisfaction only onthe basis of the information received from the ADIT(Inv) Unit-5, Calcutta, without making hisindependent enquiries and hence the AssessingOfficer assumed jurisdiction only on borrowedsatisfaction for the purpose of carrying out fishinginquiry or investigation without their being anyspecific finding of escape of income, which isimpermissible in law and on that count also, theimpugned notice is bad in law. 12.In view of the aforesaid contentions, the learnedSenior Counsel Mr. Tushar Hemani, submitted thatthe reopening is, therefore, without jurisdiction andhence, the impugned notice deserves to be quashedand set aside.Senior Counsel Mr. Tushar Hemani, submitted thatthe reopening is, therefore, without jurisdiction andhence, the impugned notice deserves to be quashedand set aside. 13.On the other hand, the learned StandingCounsel Ms. Mauna Bhatt appearing for the revenue,reiterating the stand adopted by the revenue in theaffidavit in reply, as well as in the order of deposingof the objections, contended that the AssessingOfficer was in receipt of the information aftercompletion of the assessment and recorded reasonsbased on his independent enquiry and application ofmind. Under the circumstances, the action taken bythe revenue is just, legal and proper and does notwarrant any interference. Ms. Mauna Bhatt, thelearned Standing Counsel for the revenue submittedthat there being no merits in the writ application, thesame deserves to be dismissed.Counsel Ms. Mauna Bhatt appearing for the revenue,reiterating the stand adopted by the revenue in theaffidavit in reply, as well as in the order of deposingof the objections, contended that the AssessingOfficer was in receipt of the information aftercompletion of the assessment and recorded reasonsbased on his independent enquiry and application ofmind. Under the circumstances, the action taken bythe revenue is just, legal and proper and does notwarrant any interference. Ms. Mauna Bhatt, thelearned Standing Counsel for the revenue submittedthat there being no merits in the writ application, thesame deserves to be dismissed. 14.Having heard the learned counsel for therespective parties and having gone through thematerials on record, the only question falls for ourconsideration is that whether the revenue is justifiedin reopening the assessment for the year underconsideration?respective parties and having gone through thematerials on record, the only question falls for ourconsideration is that whether the revenue is justifiedin reopening the assessment for the year underconsideration? 15.The learned Senior Counsel Mr. Tushar Hemani,has challenged the impugned notice mainly on theground that the concluded assessment sought to bereopened by the Assessing Officer is nothing but achange of opinion on his part and at relevant timeand there was no failure on the part of the assesseeto disclose fully and truly all material facts necessaryfor its assessment. 15.The learned Senior Counsel Mr. Tushar Hemani,has challenged the impugned notice mainly on theground that the concluded assessment sought to bereopened by the Assessing Officer is nothing but achange of opinion on his part and at relevant timeand there was no failure on the part of the assesseeto disclose fully and truly all material facts necessaryfor its assessment. 16.A bare perusal of the reasons recorded, itappears that the Assessing Officer was in receipt ofthe information received from the ADIT (Inv), Unit-5,Calcutta vide letter dated 28.02.2019 to the effectthat one Mr. Omprakash Bihani being a Proprietor ofvarious enterprises like M/s. Shri Ambika Service,M/s. Balaji Texofm, M/s. Ambika Trading and M/s. ShriAmbika Enterprises, had provided accommodationentries to writ applicant i.e. M/s Sai Krupa Fabric Pvt.Ltd to the tune of Rs.6,95,874/-. During the enquirymade by ADIT (Inv) huge credits and debits in theaccount of M/s. Shri Ambika Services was noticed andit was further found that the funds so received in theaccount being paid to several firms by way ofcheques below the reporting threshold limit ofRs.50,000/-. The bank statement and other accountswere obtained and verified by the authority and forthe cross-check of the entries, the summon underSection 131 of the Act, was served upon Mr, Bihaniand his statement was recorded on oath wherein, he has confirmed that he being the Prop. of the abovereferred entities, which have been now closed andnon-operationable since F.Y. 2017-18. Mr. Behani, inhis statement recorded before the authority disclosedthat he was providing accommodation entries in theform of hundi transactions and his modus-operandiwas to get cash amount from the concerned entitiesand return back the same amount through accountpayee cheque in lieu of commission. The detailenquiry made by the authority revealed that the cashwithin range of Rs.2 lakhs to below 10 lacks weredeposited and same was transferred in a bankaccount through cheques. 17.We have examined the reasons recordedcarefully, wherein, we found that Mr. Behani was notdoing any business activities and was renderingservices of accommodation entry. So far the case ofwrit applicant is concerned, the information was inspecific nature and it was clearly mentioned that theassessee was one of the beneficiaries who hadreceived Rs.6,95,874/- through cheques from M/s.Ambika Service and other proprietorship entities asreferred to above, owned by Mr. Omprakash Behaniin the year under consideration. carefully, wherein, we found that Mr. Behani was notdoing any business activities and was renderingservices of accommodation entry. So far the case ofwrit applicant is concerned, the information was inspecific nature and it was clearly mentioned that theassessee was one of the beneficiaries who hadreceived Rs.6,95,874/- through cheques from M/s.Ambika Service and other proprietorship entities asreferred to above, owned by Mr. Omprakash Behaniin the year under consideration. 18.Record indicates that after receiving theinformation, the Assessing Officer has verified thesame and made independent enquiries and himselfinformation, the Assessing Officer has verified thesame and made independent enquiries and himself 18.Record indicates that after receiving theinformation, the Assessing Officer has verified thesame and made independent enquiries and himselfinformation, the Assessing Officer has verified thesame and made independent enquiries and himself was satisfied with regard to information and othermaterials available with him and came to theconclusion that the assessee being a beneficiaries ofthe accommodation entry to the tune ofRs.6,95,874/- credited by M/s. Ambika Service andother entities, managed by Mr. Omprakash Behaniand the writ applicant failed to disclose truly and fullywhile filing its return of income and at the previousassessment proceedings and therefore, the AssessingOfficer has reasons to believe that the income hasescaped assessment. While recording reasons, theAssessing Officer has further observed that theassessment sought to be reopened after freshmaterial in the form of information received from theconcerned authority, which were not available at thetime of previous assessment proceedings. 19.Mr. Tushar Hemani, the learned Senior Counselhas raised the contention that it is a case of changeof opinion in the hands of Assessing Officer as earlierhe had applied his mind and taken a consciousdecision in the previous assessment proceedings. Onthe other hand, learned Standing Counsel Ms. MaunaBhatt contended that the tangible material in theform of information received by the Assessing Officerafter completion of the assessment proceedings.Thus, the principle of change of opinion would notapply. We have carefully examined the facts of theinformation and reasons recorded for the reassessment of the proceedings. In the presentcase, during the assessment proceedings, noticesunder Section 143(2) and 143(1) were served andpursuant to the notices, the necessary details calledfor, were furnished by the assessee. The informationfurnished by the assessee appears to be transactionsabove Rs.10 lakhs, whereas, as per the information,the credit entries by the different entities were belowthe limits of Rs.50,000/-. Therefore, at the stage ofprevious assessment proceedings, the details withregard to alleged transaction of accommodationentries were not with the Assessing Officer. 20.We are of the view that the information asreferred to above, which is in the form of tangiblematerial, came into knowledge of the AssessingOfficer after the completion of the assessmentproceedings and admittedly the same was not onrecord and available at the time of previousassessment proceedings. Therefore, the principle ofchange of opinion, would not apply.referred to above, which is in the form of tangiblematerial, came into knowledge of the AssessingOfficer after the completion of the assessmentproceedings and admittedly the same was not onrecord and available at the time of previousassessment proceedings. Therefore, the principle ofchange of opinion, would not apply. 21.The next contention is that there was no failureon the part of the assessee to disclose fully and trulyall material facts necessary for its assessment. It issettled law that the assessee shall disclose full andtrue primary facts at the time of original assessment.In the instant case, the facts with regard totransactions of the entries, in the form ofon the part of the assessee to disclose fully and trulyall material facts necessary for its assessment. It issettled law that the assessee shall disclose full andtrue primary facts at the time of original assessment.In the instant case, the facts with regard totransactions of the entries, in the form of 21.The next contention is that there was no failureon the part of the assessee to disclose fully and trulyall material facts necessary for its assessment. It issettled law that the assessee shall disclose full andtrue primary facts at the time of original assessment.In the instant case, the facts with regard totransactions of the entries, in the form ofon the part of the assessee to disclose fully and trulyall material facts necessary for its assessment. It issettled law that the assessee shall disclose full andtrue primary facts at the time of original assessment.In the instant case, the facts with regard totransactions of the entries, in the form of accommodation entries having not been trulydisclosed by the assessee. A reference can be madeof the case of Jayant Security and Finance Ltd Vs.Asst. CIT, wherein, this Court in para-8 observed that“when disclosure are found to be prima-facie untrue,the opinion formed earlier would not preventAssessing Officer from examining the issue.” It is aptto refer and rely the case of Phoolchand Bhajranglaland Anr Vs. ITO, 1993 (4) SCC 77, the Apex Court inpara-9 held that “where transaction itself on thebasis of subsequent information is found to be bogustransactions, the mere disclosure of that transactionat the time of original proceedings cannot be said tobe a disclosure of true and full facts in the case andITO would have the jurisdiction to reopen theconcluded assessment in that case. 22.In view of the settled principles of law aspropounded by the Apex Court as well as by thisCourt and considering the reasons recorded forreopening, we are of the view that the AssessingOfficer himself was satisfied with regard to theinformation and other materials on record andformed an opinion that income has escapedassessment. Thus, Assessing Officer has applied hismind to the information and upon due satisfaction,led to form an opinion that the amount ofRs.6,95,874/- has escaped assessment. Under thecircumstances, we are satisfied that there was enough material before the Assessing Officer toinitiated proceedings under Section 148 of the Act. 23.In view of the foregoing reasons and consideringthe facts and circumstances of the present case, wehave no hesitation to hold that it could not be said tohave that there was no material or grounds beforethe Assessing Officer and the assumption ofjurisdiction on the part of the Assessing Officer underSection 147 of the Act to reopen the assessment iswithout authority of law. Thus, the impugned noticeis valid and legal. The assessee failed to make out acase.the facts and circumstances of the present case, wehave no hesitation to hold that it could not be said tohave that there was no material or grounds beforethe Assessing Officer and the assumption ofjurisdiction on the part of the Assessing Officer underSection 147 of the Act to reopen the assessment iswithout authority of law. Thus, the impugned noticeis valid and legal. The assessee failed to make out acase. 24.In the result, writ application deserves to bedismissed and is hereby dismissed. No order as tocosts.dismissed and is hereby dismissed. No order as tocosts. (J. B. PARDIWALA, J) P.S. JOSHI (ILESH J. VORA,J)