Case Law Details
Rochana Agarwal Vs ACIT (Allahabad High Court)
The reason for issuing the notice under Section 148 of the Act is that during investigation, the Assessing Officer has gone through the income tax return and other related documents of the assessee and has found that the M/s KCGP Share Broking Service Pvt. Ltd. has been used to provide bogus accommodation entries to various beneficiaries. The assessee is one of the beneficiaries of M/s KCGP Share Broking Services Pvt. Ltd., which is engaged in providing accommodation entries to the beneficiaries. The assessee is a beneficiary of receiving bogus accommodation entries to the tune of Rs. 6,94,540/-. The ACIT has expressed the view that the assessee has introduced her own undisclosed income in her books of account by way of accommodation entries by showing artificial transactions to make the same valid transactions, though it is simply a planning to introduce unexplained money amounting to Rs. 6,94,540/- into books of account. After considering the report of the Assistant Director of Income Tax (Inv.), Unit-3(3), Kolkata and the material available on record, the ACIT recorded that he has reason to believe that the income amounting to Rs. 6,94,540/- has escaped assessment in respect of the assessee. Hence the issuance of notice under Section 148 of the Act was deemed fit.
By means of the earlier notice dated 16-05-2019 issued under Section 133 (6) of the Act regarding the case of the petitioner for the assessment year 2017-18, the Assessing Officer had merely called for the following informations :-
(i) copy of DEMAT A/c and substantiate that the entire profit on sale of scripts was offered to tax.
(ii) Financial ledger for F.Y. 2014-15 showing all transactions related to shares.
(iii) Copies of complete contract notes with regard to the shares/securities transaction undertaken during the F.Y. 2014-15 relevant to A.Y. 2015-16.
(iv) Explain the source for the investment made in the transactions.
Thus it is clear that the aforesaid notice dated 16-05-2019 calling for information under Section 133 (6) of the Act in the case of the petitioner for the assessment year 2017-18, did not at all cover the reasons for issuance of the notice under Section 148 for the assessment year 201516. Moreover, while issuing the notice under Section 133 (6) or while allegedly passing the unnumbered, undated and unsealed order dropping further proceedings in pursuance of the notice relating to assessment year 2017-18, no opinion had been framed by the Assessing Officer regarding the reasons on which the notice under Section 148 of the Act has been issued for the assessment year 2015-16.
we find that the notice under Section 148 of the Act has been issued by the assessing officer after conducting an investigation and going through the income tax return and other related documents of the assessee and after giving reason to believe that the income amounting to Rs. 6,94,540/- has escaped assessment in respect of the assessee. We are satisfied that there is prima facie material available on record before the assessing officer for issuing a notice for reassessment and the notice under Section 148 of the Act. While this Court examines the validity of the notice issued under Section 148 of the Income Tax Act, the Court does 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 is not a thing to be considered at this stage.
Thus, in our considered opinion the order dated 02-09-2021 passed by the Assessing Officer rejecting the petitioner’s objections against issuance of the notice, does not suffer from any such illegality as to warrant interference by this Court in exercise of its Writ Jurisdiction,
The Writ Petition lacks merits and is, accordingly, dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Shri Suyash Agrawal and Ms. Surangama Sharma, 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 Assistant Commissioner of Income Tax, Sitapur New (hereinafter referred to as “ACIT”) under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’) proposing to assess/reassess the income/loss for the assessment year 2015-16, stating therein that he has reasons to believe that petitioner’s income chargeable to tax has escaped assessment and directing the petitioner to submit a return for the said assessment year. The petitioner has also challenged the order dated 02.09.2021 passed by the ACIT rejecting her objections against the initiation of re-assessment proceedings under Section 147 read with Section 148 of the Act.
3. The petitioner’s case is that on 30.03.2016, he had filed an income tax return for the assessment year 2015-16 for a total income of Rs. 10,69,430/- before the Income Tax Officer-3 (5), Lakhimpur and the return of the petitioner was processed on the same day under Section 143 (1) of the Act. On 16.05.2019, the Income Tax Officer-3 (5), Lakhimpur Kheri had issued a notice to the petitioner under Section 133 (6) of the Act calling for certain information pertaining to the assessment year 2017-18. The petitioner submitted the requisite information through her reply filed on 04.06.2019 and the Income Tax Officer accepted the submissions of the petitioner made in her reply and dropped the proceedings.
4. On 31.03.2021, the ACIT issued the impugned notice under Section 148 of the Act to the petitioner in respect of the assessment year 2015-16 stating that he had reason to believe that the petitioner’s income chargeable to tax for the said assessment year has escaped assessment within the meaning of Section 147 of the Act. On 10.04.2021, the petitioner asked for being provided with the reasons for re-opening of the assessment. The petitioner’s contention is that the ACIT required her to file a return in compliance of the notice dated 31-03-2021 under Section 148 of the Act and only then the reasons for re-opening of the assessment would be supplied to her. On 31.03.2021, the petitioner filed a return in compliance to the aforesaid notice dated 31-03-2021 under Section 148 of the Act before Income Tax Officer-3 (5), Lakhimpur Kheri. On 01.06.2021, the ACIT supplied a copy of the approval under Section 151 of the Act containing the reasons for initiating the proceedings under Section 147 read with Section 148 of the Act and also containing the satisfaction of the Approving Authority for issuing notice under Section 148 of the Act.
5. The ACIT has recorded that during investigation, it was observed that the M/s KCGP Share Broking Service Pvt. Ltd. has been used to provide bogus accommodation entries to various beneficiaries. The assessee has sought to bring his unaccounted money into his regular books and/or convert his unaccounted money into camouflaged capital gain/loss and claiming it to be exempt under Section 10 (38), or setting of such bogus loss against genuine taxable profits.
6. The ACIT has further noted that the Assessing Officer has gone through the income tax return and other related documents of the assessee and has observed that the assessee is one of the beneficiaries of M/s KCGP Share Broking Services Pvt. Ltd., which is engaged in providing accommodation entry to the beneficiaries. The assessee is a beneficiary of receiving bogus accommodation entries to the tune of Rs. 6,94,540/-. The ACIT has expressed the view that the assessee has introduced her own undisclosed income in her books of account by way of accommodation entries by showing artificial transactions to make the same valid transactions though it is simply a planning to introduce unexplained money to the tune of Rs. 6,94,540/- into books of account. After considering the report of the Assistant Director of Income Tax (Inv.), Unit-3(3), Kolkata and the material available on record, the ACIT recorded that he has reason to believe that the income amounting to Rs. 6,94,540/- has escaped assessment in respect of the assessee. Hence the issue of notice under Section 148 of the Act was deemed fit.
7. On the basis of the aforesaid reasons, the Joint Commissioner of Income Tax, Sitapur Range communicated that the case falls under Clause 1 (v) of the Instruction dated 04.03.2021 issued by the CBDT, New Delhi and necessary approval of the learned CCIT, Allahabad has been obtained. Considering the reasons recorded by the Assessing Officer, the Approving Authority recorded satisfaction that it was a fit case of issuance of a notice under Section 148 of the Act.
8. The petitioner filed her objections against the notice, stating that during the assessment year 2015-16 she had earned gain on sale of shares. The Income Tax Officer-3 (5), Lakhimpur Kheri had made an inquiry and had issued a notice to the petitioner under Section 133 (6) of the Act on the above transaction relating to shares. The petitioner had submitted a written reply alongwith the relevant evidences and after examining the same, the Income Tax Officer-3 (5), Lakhimpur Kheri had disposed of his notice/inquiry by recording “submission of the assessee is accepted. Hence, no action is required in this case”. No other factual point was raised by the petitioner in her objections and besides the aforesaid sole factual objection, the petitioner relied upon certain case laws and submitted that re-assessment without any additional information would amount to change of opinion and a mere change of opinion does not empower the Assessing Officer to re-open the assessment. The petitioner requested for dropping the proceedings under Section 148 of the Act.
9. On 02.09.2021, the ACIT, Sitapur-New has passed an order rejecting the petitioner’s objection against initiation of re-assessment proceedings which order has been challenged by the petitioner by filing this writ petition.
10. We have considered the submissions made by Shri Suyash Agrawal and Ms. Surangama Sharma, learned counsel for the petitioner and Shri Manish Misra, the learned counsel for Income Tax Department.
11. Before proceeding to examine the rival contentions advanced on behalf the parties, it would be appropriate to refer to some pronouncements of the Hon’ble Supreme Court explaining the scope of judicial scrutiny under Article 226 of the Constitution of India while examining the validity of a notice issued under Section 148 of the Income Tax Act.
12. In Raymond woolen Mills Ltd. Versus I.T.O., (1999) 236 ITR 36 (SC) the Hon’ble Supreme Court held that at the stage of the notice of reopening of the assessment, the Court has only to see whether there is prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material cannot be considered at this stage.
13. Again, in Raymond Woollen Mills Ltd. v. ITO, (2008) 14 SCC 218, the Hon’ble Supreme Court reiterated that while examining the validity of a notice issued under Section 148 of the Income Tax Act, “we do not have to give a final decision as to whether there is a suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage.”
14. In light of the aforesaid pronouncements of the Hon’ble Supreme Court we proceed to examine the rival submissions of advanced on behalf of the parties so as to ascertain as to whether there was prima facie some material on the basis of which the Department could reopen the case, without going into the sufficiency or correctness of the material.
15. Suyash Agarwal has submitted that the Income Tax Officer-3 (5), Lakhimpur Kheri had made an inquiry and had issued a notice to the petitioner under Section 133 (6) of the Act on the above transaction relating to shares. The petitioner had submitted a written reply alongwith the relevant evidences and after examining the same, the Income Tax Officer-3 (5), Lakhimpur Kheri had disposed of his notice/inquiry by recording “submission of the assessee is accepted. Hence, no action is required in this case”. Therefore, there is no justification for issuance of a notice under Section 148 of the Act on the same issue.
16. A copy of the said order of ITO-3(5) has been filed as Annexure No. 3 to the Writ Petition. It does not bear any number, date or the official seal of the authority who has purportedly passed the order so as to inspire even a prima facie confidence regarding its genuineness. Moreover, it would be no bar against issuance of a notice under Section 148 of the Act, provided the requisite conditions exist.
17. The reason for issuing the notice under Section 148 of the Act is that during investigation, the Assessing Officer has gone through the income tax return and other related documents of the assessee and has found that the M/s KCGP Share Broking Service Pvt. Ltd. has been used to provide bogus accommodation entries to various beneficiaries. The assessee is one of the beneficiaries of M/s KCGP Share Broking Services Pvt. Ltd., which is engaged in providing accommodation entries to the beneficiaries. The assessee is a beneficiary of receiving bogus accommodation entries to the tune of Rs. 6,94,540/-. The ACIT has expressed the view that the assessee has introduced her own undisclosed income in her books of account by way of accommodation entries by showing artificial transactions to make the same valid transactions, though it is simply a planning to introduce unexplained money amounting to Rs. 6,94,540/- into books of account. After considering the report of the Assistant Director of Income Tax (Inv.), Unit-3(3), Kolkata and the material available on record, the ACIT recorded that he has reason to believe that the income amounting to Rs. 6,94,540/- has escaped assessment in respect of the assessee. Hence the issuance of notice under Section 148 of the Act was deemed fit.
18. By means of the earlier notice dated 16-05-2019 issued under Section 133 (6) of the Act regarding the case of the petitioner for the assessment year 2017-18, the Assessing Officer had merely called for the following informations :-
(i) copy of DEMAT A/c and substantiate that the entire profit on sale of scripts was offered to tax.
(ii) Financial ledger for F.Y. 2014-15 showing all transactions related to shares.
(iii) Copies of complete contract notes with regard to the shares/securities transaction undertaken during the F.Y. 2014-15 relevant to A.Y. 2015-16.
(iv) Explain the source for the investment made in the transactions.
19. Thus it is clear that the aforesaid notice dated 16-05-2019 calling for information under Section 133 (6) of the Act in the case of the petitioner for the assessment year 2017-18, did not at all cover the reasons for issuance of the notice under Section 148 for the assessment year 201516. Moreover, while issuing the notice under Section 133 (6) or while allegedly passing the unnumbered, undated and unsealed order dropping further proceedings in pursuance of the notice relating to assessment year 2017-18, no opinion had been framed by the Assessing Officer regarding the reasons on which the notice under Section 148 of the Act has been issued for the assessment year 2015-16.
20. In the objections filed against the notice under Section 148 of the Act, the petitioner has relied upon certain decisions of the other High Courts holding that reassessment without any additional information amounts to change of opinion.
21. The meaning of the expression “change of opinion” has been explained by the Hon’ble Supreme Court in CIT v. Techspan India (P) Ltd., (2018) 6 SCC 685, in the following words: –
“16. To check whether it is a case of change of opinion or not one has to see its meaning in literal as well as legal terms. The words “change of opinion” imply formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by an assessing officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection.
17. It is well settled and held by this Court in a catena of judgments and it would be sufficient to refer to CIT v. Kelvinator of India Ltd. wherein this Court has held as under: (SCC p. 725, para 5-7)
“5. … where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words “reason to believe”…. Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of “mere change of opinion”, which cannot be per se reason to reopen.
6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place.
7. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the assessing officer. Hence, after 1-41989, assessing officer has power to reopen, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.”
18. Before interfering with the proposed reopening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the reassessment proceedings.”
22. In the present case, prior to issuing the notice in question, the Assessing Officer had not formed any opinion regarding the reasons on which the notice under Section 148 of the Act has been issued and, therefore, it is not a case of “change of opinion” and challenge to the notice under Section 148 of the Act on the ground that it seeks to initiate reassessment on the ground of a change of opinion, cannot be accepted.
23. Sri Agarwal has contended that the “reason to believe” must be of the assessing officer himself and he cannot act on the reasons recorded by any other authority. In the present case, the assessing officer has acted on a report of the Assistant Director of Income Tax (Inv.), Unit-3 (3), Kolkata. The notice issued on the basis of information received from any other officer cannot be said to have been issued by the assessing officer on the basis of his own “reasons to believe” and it does not conform to the statutory mandate of Section 148 of the Act. He has placed reliance on a judgment of this Court in Indra Prastha Chemicals Pvt. Ltd. and others Versus Commissioner of Income-Tax and another, 2004 (271) ITR 113 = 2004 SCC OnLine All 2133, wherein it has been held that: –
9. Under section 147 of the Act the proceedings for the reassessment can be initiated only if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. The question whether the Assessing Officer had reasons to believe is not a question of limitation only but is a question of jurisdiction, a vital thing, which can always be investigated by the court in an application under article 226 of the Constitution as held in Daulatram Rawatmal v. ITO, [1960] 38 ITR 301 (Cal); Jamna Lal Kabra v. ITO, [1968] 69 ITR 461 (All); Calcutta Discount Co. Ltd. v. ITO, [1961] 41 ITR 191; C.M. Rajgharia v. ITO, [1975] 98 ITR 486 (Patna) and Madhya Pradesh Industries Ltd. v. ITO, [1965) 57 ITR 637 (SC).”
(Emphasis supplied)
24. A perusal of the reasons recorded by the assessing officer shows that after considering the report of the Assistant Director of Income Tax (Inv.), Unit-3(3), Kolkata, the Assessing Officer has conducted an investigation and has gone through the income tax return and other related documents of the assessee and has observed that the assessee is a beneficiary of receiving bogus accommodation entries to the tune of Rs. 6,94,540/- and it is only thereafter that he has recorded that he has reason to believe that the income amounting to Rs. 6,94,540/- has escaped assessment in respect of the assessee. When pursuant to an information received from the Assistant Director of Income Tax (Inv.), Unit-3 (3), Kolkata, the assessing officer has conducted an investigation, has gone through the income tax return and other related documents of the assessee and has observed that the assessee is a beneficiary of receiving bogus accommodation entries to the tune of Rs. 6,94,540/- and he has found a reason to believe that the income amounting to Rs. 6,94,540/- has escaped assessment in respect of the assessee, we do not find any force in the submission made on behalf of the petitioner that the assessing officer has acted on a report of the Assistant Director of Income Tax (Inv.), Unit-3 (3), Kolkata and he has not recorded his own reasons to believe, and thus the same is rejected.
25. Sri. Manish Mishra, the learned Counsel for the respondents, has placed reliance on the following passage of the decision of the Hon’ble Supreme Court in Phool Chand Bajrang Lal v. ITO, (1993) 4 SCC 77: –
“19. …Thus, where the transaction itself on the basis of subsequent information, is found to be a bogus transaction, the mere disclosure of that transaction at the time of original assessment proceedings, cannot be said to be disclosure of the “true” and “full” facts in the case and the ITO would have the jurisdiction to reopen the concluded assessment in such a case. It is correct that the assessing authority could have deferred the completion of the original assessment proceedings for further enquiry and investigation into the genuineness to the loan transaction but in our opinion his failure to do so and complete the original assessment proceedings would not take away his jurisdiction to act under Section 147 of the Act, on receipt of the information subsequently. The subsequent information on the basis of which the ITO acquired reasons to believe that income chargeable to tax had escaped assessment on account of the omission of the assessee to make a full and true disclosure of the primary facts was relevant, reliable and specific. It was not at all vague or non-specific.
…
25. From a combined review of the judgments of this Court, it follows that an Income Tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of the Income Tax Act, 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income 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 establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and nonspecific information. To that limited extent, the Court may look into the conclusion arrived at by the Income Tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income Tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income Tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if on the basis of subsequent information, the Income Tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment. The
High Courts which have interpreted Burlop Dealer case3 as laying down law to the contrary fell in error and did not appreciate the import of that judgment correctly.”
(Emphasis supplied)
26. When we examine the facts of the present case 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 (Supra), we find that the notice under Section 148 of the Act has been issued by the assessing officer after conducting an investigation and going through the income tax return and other related documents of the assessee and after giving reason to believe that the income amounting to Rs. 6,94,540/- has escaped assessment in respect of the assessee. We are satisfied that there is prima facie material available on record before the assessing officer for issuing a notice for reassessment and the notice under Section 148 of the Act. While this Court examines the validity of the notice issued under Section 148 of the Income Tax Act, the Court does 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 is not a thing to be considered at this stage.
27. Thus, in our considered opinion the order dated 02-09-2021 passed by the Assessing Officer rejecting the petitioner’s objections against issuance of the notice, does not suffer from any such illegality as to warrant interference by this Court in exercise of its Writ Jurisdiction,
28. The Writ Petition lacks merits and is, accordingly, dismissed.
29. Parties to bear their own costs.
