Mehrunnisa Mohamed Fazal Maniar Vs ITO (Gujrat High Court)
The case on hand is not a case where the Income Tax Officer seeks to draw any fresh inference which could have been raised at the time of the original assessment on the basis of the materials placed before him by the assessee relating to the transfer of Rs.25 Lakh through the Dhanlaxmi Bank during the F.Y. 2011-12 and which he failed to draw at that time. Acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment, which goes to expose the falsity of the statement made by the assessee at the time of original assessment is different from drawing a fresh inference from the same facts and material which was available with the I.T.O. at the time of the original assessment proceedings. The two situations are distinct and different. Thus, where the transaction itself on the basis of the 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 I.T.O. 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 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 I.T.O. acquired reasons to believe that the 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 nonspecific.
As held by the Apex Court in Phool Chand Bajrang Lal v. Income tax Officer reported in 203 ITR 456 (SC) where transaction itself on the basis of subsequent information is found to be a bogus transaction, the Court held that mere disclosure of such transaction at the time of original assessment proceedings, cannot be said to be a disclosure of ‘full’ and ‘true’ facts and the Assessing Officer surely would have the jurisdiction to reopen a concluded assessment in such a case. The Apex Court also had observed in the said case that the Assessing Officer 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 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 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 him and further whether that material had any rational connection or a live link with the formation of the requisite belief.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. Since the issues raised in both the captioned writ applications are interlinked, those were taken up for hearing analogously and are being disposed of by this common judgement and order.
2. For the sake of convenience, the Special Civil Application No.12615 of 2019 is treated as the lead matter.
3. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs:
“(A) Issue a writ of mandamus and/or a writ of certiorari and/or any other writ direction or order to quash and set aside the impugned notice under Section 148 dated 29.3.2019 at Annexure ‘A’ and objection rejection order dated 15.07.2019 at Annexure ‘F’ and all subsequent proceedings in continuity of the same and allow the petition as prayed for.
(B) Pending admission, hearing and disposal of this petition, adinterim relief be granted and the Hon’ble Court may pleased to stay the operation, implementation and execution of the impugned notice under Section 148 dated 29.3.2019 at Annexure ‘A’ and objection rejection order dated 15.07.2019 at Annexure ‘F’.
(C) Award the costs of this petition.
(G) Grant such other and further reliefs as this Hon’ble Court deems fit.”
4. The facts giving rise to this writ application may be summarized as under:
4.1 The subject matter of challenge in the present litigation is to the notice issued under Section 148 of the Income Tax Act, 1961 dated 29th March 2019 for the purpose of reopening of the assessment for A.Y. 2012-13.
4.2 The writ applicant is an individual. For the assessment year 2012-13, the writ applicant had filed a return of income on 27th September 2012 declaring the total income of Rs.10,35,770/. Such return was accepted without scrutiny under Section 143(1) of the Income Tax, 1961 (for short, ‘the Act’). To reopen such assessment, the impugned notice came to be issued by the Assessing Officer dated 14th May 2019. In order to do so, the Assessing Officer recorded the following reasons:
“2. In this case, information and documentary evidences were from the office of the DDIT (Inv), Unit 1(3), Ahmedabad vide his letter No.DDIT(Inv)1(3)/AJHD/S&S/JSSS/15 Scrips/Disssemination/ACDPJ5838L/201819 dated 25.03.2019 received through mail on 25.03.2019, wherein, it was intimated that the search u/ 132 action was on 11.09.2018 in the case of Jignesh Shah, an accommodation entry provider of Ahmedabad. The search resulted into seizure of unaccounted cash of Rs.19.3 Crores (related to accommodation entries and commission earned thereon) from residential of Jignesh Shah along with incriminating digital as well as documentary evidences. It was found during investigation that Jignesh S Shah is managing and controlling multiple companies and concerns, which are not carrying out any genuine business activity. These concerns are involved into activity of providing accommodation entries of various kinds such ass unsecured loans, share premium, bogus gains, contrived losses etc. The concerns were found to be nonexistent at their address. The directors of companies/persons in whose names concerns are registered admitted by way of filing affidavits that the companies/concerns are not carrying out genuine business activities and engaged into providing accommodation entries through Jignesh S Shah. The DDITI(Inv) has concluded from the investigation that the assessee Mehrunisssa M Fazal Maniar had obtain accommodation entries of Rs.25,00,000/ from Maninak Comtrade Pvt Ltd and Purvanial Trade and Commerce Pvt Ltd through Dhanlaxmi bank transfer during the F.Y. 201112.
3. I have gone through the information received from the Ahmedabad Investigation Wing and I have also analyzed the material and the return for A.Y. 201213 filed by the assessee. On the basis of the material, it is gathered that the assessee has entered into bogus/accommodation entry transaction of Rs.25,00,000/. The directors and the concerns persons in whose name these entities are registered, admitted by way of filing affidavit that the companies are not carrying out any genuine business and engaged into providing accommodation entries through Jignesh Shah. Therefore, the assessee has maneuvered a sum total of Rs.25,00,000/ by not showing his otherwise true income during the year under consideration by adopting fraudulent means and through a predesigned nexus.
4. As per the above discussion, I have reason to believe that undisclosed income of Rs.25,00,000/ on account of obtained accommodation entries from Mainak Comtrade Pvt Ltd and Purvanil Trade and Commerce Pvt Ltd has escaped assessment for A.Y. 201213 and I intend to reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to the notice subsequently in the course of the proceedings under this Section.
5. In this case a return of income was filed for the year under consideration but no scrutiny assessment u /s. 143(3) of the IT Act was made. Accordingly, in this case only requirement to initiate proceedings u/s 147 of the IT Act is reason to believe which has been recorded above.
6. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax ha escaped assessment.
7. In this case more than four years have lapsed from the end of the assessment year under consideration. Hence necessary sanction to issue notice u/s 148 of the Act is requested for approval from the Principal Commissioner of Income Tax1, Ahmedaad as per provision of section 151 of the Act.”
5. The writ applicant raised detailed objections to the notice of reopening under a communication dated 11th July 2019. Such objections were rejected by the Assessing Officer on 15th July 2019, upon which, this writ application came to be filed.
6. Mr. Darshan R. Patel, the learned counsel appearing for the writ applicant raised the following contentions:
(1) There is no material to come to the conclusion that the income in the case of the assessee has escaped assessment.
(2) The Assessing Officer has proceeded entirely on the basis of the information supplied to it by the Ahmedabad Investigation Wing and the investigation is going on without making any independent inquiry on its own. The Assessing Officer has thus proceeded on the borrowed satisfaction.
(3) The Assessing Officer wishes to make fishing inquiry.
(4) While according sanction under Section 151 of the Act for the purpose of issue of notice under Section 148 of the Act, the Joint CIT Range – 1(2), Ahmedabad and the Principal CIT – 1, Ahmedabad has only recorded, “yes, I am satisfied”. This, according to Mr. Patel, is nothing, but a mechanical recording of satisfaction without proper application of mind.
7. On the other hand, this writ application has been vehemently opposed by Mrs. Mauna Bhatt, the learned Senior Standing Counsel appearing for the Revenue. The learned Standing Counsel for the Revenue raised the following contentions:
(1) The return filed by the assessee was accepted without scrutiny. Since there was no scrutiny assessment, the Assessing Officer had no occasion to form any opinion on any of the issues arising out of the return filed by the assessee.
(2) The concept of change of opinion would therefore have no application in the present case.
(3) At the stage of reopening of the assessment, the Court may not minutely examine the possible additions which the Assessing Officer wishes to make.
(4) The scrutiny at that stage would be limited to examine whether the Assessing Officer had formed a valid belief on the basis of the material available with him that the income chargeable to tax had escaped assessment.
8. In such circumstances referred to above, the learned Standing Counsel appearing for the Revenue would submit that there being no merit in this writ application, the same be rejected.
