M/S PIYUSH INFRASTRUCTURE INDIA PRIVATE LIMITED vs. COMMISSIONER OF INCOME TAX AND ANR

IN THE HIGH COURT OF PUNJAB AND HARYANA AT

CHANDIGARH Date of decision:28.3.2014 M/s Piyush Infrastructure India Pvt. Ltd.

….Petitioner

VERSUS Commissioner of Income Tax, Central-I, Gurgaon

and another

.....Respondents CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA

HON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Mr. Akshay Bhan, Senior Advocate with

Mr. Deepesh Aneja and Mr. Alok Mittal,

Advocates for the petitioner. ******* HEMANT GUPTA, J.(Oral)

The challenge in the present writ petition is to the communication dated 18.03.2014 whereby reasons were communicated to the petitioner for the issuance of notice under Section 148 of the Income Tax Act, 1961 (for short ‘the Act’).

The petitioner filed its return for the assessment year 2009-10. The same was finalized vide assessment order dated 02.12.2011. During the course of assessment, the Assessing Officer has sought the details of the share-holders and the same was taken into consideration while finalizing the assessment. A notice under Section 148 of the Act for re-assessment was issued on 25.03.2013. The reasons recorded by the Assessing Officer issuing the said notice are contained in Annexure P-17 reads as under:- “Reasons for issuing notice u/s 148 in the case for A.Y. 2009-10 Dated- 25.03.2013 Return declaring loss of Rs.5,08,536/- was filed on 30.09.2009. Assessment u/s 143(3) of the Act was completed on 02.12.2011 at a loss of Rs.440536/-. Diwakar Gulati 2014.04.02 13:41 integrity of this document Later on an information was received that a search and seizure operation was conducted by Investigation Wing, Delhi on Sh. S.K. Jain on 04.09.2010. During the course of search certain incriminating documents such as unaccounted cash books and cheque books wherein there were details of entries provided by Sh. S.K. Jain through his different companies which were controlled by him were found and seized. The cash books contained the names of the middlemen through whom the cash was received by Sh. S.K. Jain and in lieu of this cash received he used to provide cheques to the beneficiary companies which in this case is the assessee M/s Piyush Infrastructure (India) Pvt. Ltd. Now this money received through cheque has been introduced in the books of the assessee as share capital/share premium/loan. As per detail available with this office the assessee has obtained accommodation entry during the year under consideration of Rs.1,20,00,000/-. In view of above facts, I have reason to believe and I am satisfied that income chargeable to tax has been under assessed to the extent of Rs.1,20,00,000/- for the A.Y. 2009-10 as per the provisions contained in section 68 of the Income Tax Act, 1961 in respect of accommodation entry obtained by the assessee company as per Return of income filed for the year under reference.”

The petitioner in response to the notice submitted objections 23.09.2013, inter alia, asserting that Assessing Officer has recorded that the cash was received by Sh. S.K. Jain through alleged middlemen. In other words, the Assessing Officer has admitted that the petitioner did not give any cash to Sh. S.K. Jain. It was also asserted that if any investment was made by Sh. S.K. Jain, the Income Tax Department should assess the amount in the hands of Sh. S.K. Jain and that the proceedings initiated against the petitioner are bad in law. In pursuance of such objections, the Assessing Officer has communicated on 18.03.2014 that re-opening of assessment is based upon information received from other sources is valid and re-assessment has to be carried out.

Learned counsel for the petitioner referred to the judgments of the Hon’ble Supreme Court reported as (2010) 320 ITR 561 titled as ‘Commissioner of Income Tax, Delhi Vs. Kelvinator of India Limited’; Diwakar Gulati 2014.04.02 13:41 integrity of this document (1991) 192 ITR 287 titled as ‘Commissioner of Income Tax Vs. Stellar Investment Ltd.’, and (2001)_251 ITR 263 titled as ‘Commissioner of Income Tax Vs. Stellar Investments.’

We have heard learned counsel for the petitioner and find that present is not a case for intervention in the re-assessment proceedings at this stage. A perusal of the record shows that during search and seizure operation conducted on Sh. S.K. Jain on 04.09.2010, certain incriminating documents such as cash books and cheque books leading to unaccounted transport were taken in possession by the Department. The cash book contains the names of the middlemen through whom cash was received by Sh. S.K. Jain and in lieu of this cash, he used to provide cheques to the beneficiary company which included the petitioner as well.

It would be matter of investigation as to who was the middlemen who has given the cash to Sh. S.K. Jain and in lieu thereof Sh. S.K. Jain has invested money in the petitioner-company as share-holder. At this stage, the issue cannot be pre-judged that the middleman is other than the petitioner. It can be a case of money laundering which requires to be examined during the assessment proceedings. When the assessment was framed by the Assessing Officer, it has no information about the recovery of incriminating documents from Sh. S.K. Jain wherein the cash book reflected investment in the petitioner-company, on the basis of cash given by the middlemen. Such information satisfies the pre-requisites of re-opening assessment as per the provisions contained in Section 147 of the Act.

In the judgment referred to by learned counsel for the petitioner in Kelvinator’s case (supra), the Hon’ble Supreme Court has said that mere change of opinion is not a “reason to believe” to re-open the assessment. The Hon’ble Supreme Court has drawn distinction between the ‘power of review’ and ‘power to re-assess’ wherein it has been observed as under:- Diwakar Gulati 2014.04.02 13:41 integrity of this document “6………..We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. 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 1st April, 1989, Assessing Officer has power to re-open, 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. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words “reason to believe” but also inserted the word “opinion” in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words “reason to believe”, Parliament re-introduced the said expression and deleted the word “opinion” on the ground that it would vest arbitrary powers in the Assessing Officer.”

In view of the aforesaid judgment, we find that reasons recorded have a link with the belief that income has escaped income. The source of information to frame an opinion to reassess the income is the documents seized from S.K.Jain. Such documents were not in possession of the Assessing Officer at the time of framing assessment. The relevancy of such documents is required to be inquired into. There cannot be any prejudging the issue at this stage, when the reassessment proceedings are dependent upon investigations of fact.

Thus, we do not find that any case is made out for interference in the writ juri iction of this Court at this stage.

Dismissed.

(HEMANT GUPTA)

JUDGE

MARCH 28, 2014

(FATEH DEEP SINGH) ‘D. Gulati’

JUDGE Diwakar Gulati 2014.04.02 13:41 integrity of this document