Ambuj Foods Pvt. Ltd. Vs PCIT (Allahabad High Court)
In the present case, during the original assessment the A.O. had not formed any opinion in respect of the facts regarding routing of funds in the garb of share premium, which surfaced from the information received from the ADIT (Inv.), Unit – 6, Kolkata, the ACIT, Circle – 3 (2), New Delhi and the ITO (Inv.), Unit – 4, Kolkata. It was after receipt of this information, that the A.O. examined the records and found that the petitioner had received funds to the tune of Rs.95,00,000/- by way of routing funds materialized by M/s Radha Fincom Pvt. Ltd. & others, which were found to be merely paper concerns having no existent and real business. In this way, the unaccounted money of the petitioner amounting to Rs.95,00,000/-was routed to its books of accounts.
Regarding the submission of the learned Counsel for the petitioner, that assessment of the petitioner as well as that of M/s Arohul Foods Pvt. Ltd., which is a sister concern of the petitioner, was re-opened under Section 148 of the Act for A.Y. 2012-13 on similar issue, where re-opening of the case in the matter of M/s Arohul Foods Pvt. Ltd. was quashed by the ITAT, Lucknow Bench vide order dated 11-08-2021, it has been stated in the Counter affidavit that the department has not accepted the order of the ITAT and has challenged the order by filing an appeal under Section 260 A of the Act. Even otherwise, an order passed by the ITAT would not be relevant when the validity of the re-assessment is being examined by this Court in a Writ Petition.
Regarding the petitioner’s submission that the proceedings initiated after a lapse of more than four years are barred by the First Proviso appended to Section 147 of the Act, we find that Section 147 of the Act, as it stood at the relevant time, was as follows: –
“147. Income escaping assessment.— If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year):
Provided that where an assessment under sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
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Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.”
(Emphasis supplied)
As is evident from the discussion made in the preceding paragraphs of this judgment, the facts regarding the petitioner’s dealings with shell companies for routing its own unaccounted money into its books of accounts had not been truly and fully disclosed by the petitioner during the original assessment and scrutiny assessment. Therefore, the present case falls within the exception carved out in the First proviso, “unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assesse to disclose fully and truly all material facts necessary for his assessment, for that assessment year and the bar of initiating re-assessment proceedings after a lapse of four years since the original assessment contained in the First Proviso appended to Section 147 of the Act, would not apply to the present case. The information was embedded in the records produced before the A.O. and could be found on a detailed scrutiny and investigation, it would not make it a true and full disclosure and as per the Explanation 1 appended to Section 147 of the Act. Therefore, the submission to this effect made by the learned Counsel for the petitioner cannot be accepted.
Keeping into view the scope of power of judicial review while scrutinizing a notice issued under Section 148 of the Act as explained in Raymond woolen Mills Ltd. (1) and (2) and Phool Chand Bajarang Lal and Srikrishna (Supra), we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not and the sufficiency or correctness of the material need not be considered at this stage. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after receipt of information and conducting an investigation and after forming a reason to believe that the petitioner did not truly and fully disclose all the material facts because of which income amounting to Rs. 95,00,000/- has escaped assessment. We are satisfied that there is prima facie material available on record before the assessing officer for issuing a notice for reassessment. Thus, the notice under Section 148 as well as the order dated 03-03-2022 passed by the National Faceless Assessment Centre rejecting the petitioner’s objections against issuance of the notice, do not suffer from any such illegality as to warrant interference by this Court in exercise of its Writ Jurisdiction.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Sri Pradeep Agarwal assisted by Sri. Amar Mani Tiwari, Advocate, the learned Counsel for the petitioner and Shri Manish Misra, learned Counsel for the respondents.
2. By means of this Writ Petition filed under Article 226 of the Constitution of India, the petitioner has challenged the validity of a notice dated 31.03.2021 issued by the DCIT Circle Faizabad under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) proposing to assess/reassess the petitioner’s income/loss for the assessment year 2013-14 and directing the petitioner to submit a return for the said assessment year. The petitioner has also challenged the order dated 03-03-2022 passed by the National Faceless Assessment Centre, rejecting the objections filed by the petitioner in response to the aforesaid notice.
3. The petitioner’s case is that, it had filed its return for the Assessment Year 2013-14 on 05-08-2013 declaring a total income of Rs.3,65,440/-, which was processed on 19-05-2014 under Section 143 (1) of the Act. The case was selected for scrutiny and notices under Section 143 (2) and Section 142 (1) were issued alongwith a questionnaire asking for certain details. The questionnaire inter alia demanded production of all the share capital details of the petitioner’s share-holders alongwith PAN and mode of payment for obtaining shares in his name or in the name of family members, and also the details of share premium receipts. The petitioner submitted a reply giving statement of income and complete address of sundry creditors alongwith the details of all investor companies to whom shares were allotted. The petitioner stated that shares were allotted at a premium to some companies. There is no bar in the Companies Act against issuance of shares at a high premium, and there was no such bar in the Income Tax Act.
4. The petitioner submitted that if the shares were issued at fair market value, there was no question of any addition and there was no contravention. The fair market value of the shares could be calculated as per formula given in Rule 110 A of the Act, as per which, the fair market value of the company’s share works out to be Rs.206.50. The shares were issued at the fair market value and, therefore, there was no contravention of law.
5. It has also been submitted by the petitioner that the matter of increase in share capital was examined during assessment proceedings under Section 143 (3) of the Act and by means of an order dated 1011-2014, the petitioner was assessed for a total income of Rs.3,75,440/-. Nothing adverse came out from the information submitted in response to the questionnaire and an addition of Rs.10,000/- only was made to the petitioner’s income on account of internally vouched expenses debited in Profit & Loss account.
6. On 31-03-2021, the A.O. issued a notice under Section 148 of the Act for the Assessment Year 2013-14, stating that he had reason to believe that the petitioner’s income chargeable to tax has escaped assessment within the meaning of Section 147 of the Act.
7. The reasons for re-opening of assessment states that on the basis of information received from the ADIT (Inv.), Unit – 6, Kolkata, the ACIT, Circle – 3 (2), New Delhi and the ITO (Inv.), Unit – 4, Kolkata, regarding routing of funds in the garb of share premium, the A.O. examined the returns of other assesses and found that the petitioner had received funds to the tune of Rs.95,00,000/-(Rs.4,75,000/- towards share capital and Rs.90,25,000/- towards share premium thereon) by way of routing funds materialized by M/s Radha Fincom Pvt. Ltd. & others in A.Y. 2013-14 As per the departmental database of bogus shell companies, accommodation entry providers and operators, the company was merely a paper concern having no existent and real business. Finally the cases of these assessees for A.Y.2012-13 were re-opened under Section 147 of the Act and after a detailed and in-depth analysis of the information in possession of the office, it was established that the petitioner had routed its own money in the garb of shares application money and share premium through a number of shell companies operating from Kolkata.
8. In the course of analysis, the financial data of succeeding years was also examined, which revealed that all these shares were transferred in the names of the Directors and Institutions related to the Directors of the petitioner company in F.Y. 2015-16, as per details tabulated below: –
