KOTTENZ INDIA MANUFACTURING PRIVATE LIMITED THROUGH DIRECTOR SHASHANK ARVIND KABRA vs. DEPUTY COMMSSIONER OF INCOME TAX CIRCLE 2(1)(2)

Petitioner   has   challenged   notice   dated 27.03.2017 issued by the respondent­Assessing Officer to   reopen   the   petitioner's   assessment   for   the assessment   year   2010­11. The   petition   arises   in following background.

Petitioner   is  a  private  limited   company.    For the assessment year 2010­11, the petitioner had filed the return of income on 27.09.2010 declaring total income   of   Rs.29,740/­.     This   return   was   processed under   section   143(1)   of   the   Income   Tax   Act,   1961 ('the Act' for short) and accepted without scrutiny. To reopen such assessment, impugned notice came to be issued.  For such purpose, the Assessing Officer has recorded following reasons: “In this case, return of income was filed on 27.09.2010   declaring   total   income   of Rs.29,740/­ which was processed u/s 143(1) of the Act on 28.04.2011. As   per   information   shared   by   the DGIT(Investigation)   Mumbai   vide   letter no.DGIT(Inv)/Information/PJ/2014­15

The petitioner raised objections to the notice of   reopening   under   a  letter   dated   05.10.2017. In such   objections,   besides   other   grounds,   the petitioner   had   raised   a   ground   that   the   reasons proceeded on erroneous factual background.   In the reasons recorded, the Assessing Officer had referred to share application money of Rs.30 lakhs received by the assessee company from five different companies. According   to   him,   these   companies   were   providing bogus   accommodation   entries   and   thus,   the   said investment was not genuine transaction.  According to the assessee however, the company had not received such share application money of Rs.30 lakhs from the said five entities during the relevant period.   The assessee   in   the   objections   therefore   raised   a specific   ground   in   this   respect   calling   upon   the Assessing Officer to supply any contrary material.

Such   objections   were   however   rejected   by   the Assessing   Officer   by   an   order   dated   28.10.2017. Unfortunately   in   such   order,   the   Assessing   Officer did not address this specific factual contention of the   petitioner.     Be   that   as   it   may,   when   such objections   were   rejected,   the   petitioner   has   filed this petition.

We have heard learned advocates for the parties. Notice for reopening has been issued in a case where no scrutiny assessment was originally framed.   The Assessing Officer therefore as held and explained by Supreme Court in case of  Assistant Commissioner of Income­tax v. Rajesh Jhaveri Stock Brokers P. Ltd. reported in (2007) 291 ITR 500 (SC), would have much wider latitude in reopening the assessment as long as he has reason to believe that income chargeable to tax has escaped assessment.  The reasons referred to the report of the investigation wing, in which, it was   pointed   out   that   one   Praveen   Kumar   Jain   had floated   several   companies   through   which   bogus accommodation entries were being provided ostensibly through   share   application   and   share   premium   money invested   in   different   companies.     The   petitioner company was beneficiary of investment of Rs.30 lakhs from these five dubious companies.  On the face of it therefore, the reasons do not lack validity nor if the Assessing Officer is correct in asserting above noted basic facts, he can be criticized for forming a belief   that   income   chargeable   to   tax   has   escaped assessment.     However,   counsel   for   the   petitioner raised   a   very   simple   and   basic   contention. He referred to the documents and pleadings on record to point out that from the outset, the case of the petitioner has been that the petitioner company has not received the said sum of Rs.30 lakhs from the five   companies   whose   names   are   mentioned   in   the reasons   recorded,   during   the   relevant   period.     He however,   agreed   that   the   petitioner   company   did receive share application money of Rs.10 lakhs from one   Anchal   Properties   P.   Ltd.   The   petitioner   has taken such a ground in the objections.  Such ground reads as under: “(II) Your

When the Assessing Officer was disposing of such objections, it was his duty to meet with this ground. Either accept it or reject it by citing reasons.  In the order disposing of objections, he did neither. It is   not   as   if   he   was   unaware   or   oblivion   of   this ground.   In   the   order   disposing   objections,   he referred   to   this   ground   of   the   assessee   at considerable length, but when it came to dealing with this ground, he was totally ambivalent.  He proceeded on   general   legal   principles   on   the   issue   of   his jurisdiction to reopen the assessment.  His duty was to examine this factual ground raised by the assessee and to deal with it in proper prospective.   At any rate,   the   Assessing   Officer   cannot   approach   the objections with a preset mind to dismiss it at any cost,   nor   can   he   dispose   of   the   objections mechanically which is precisely what he did in the present case.  Very clearly the Assessing Officer has exhibited a certain callousness in disposing of the objections.

This callous attitude on his part, does not stop at that stage.  Even when in the present petition the petitioner reiterated this ground, he did not meet with such ground in the affidavit in reply.  His duty was simple.  Either to say yes to what the petitioner has said in the petition and leave his counsel to argue the legal implications thereof or to deny what the   petitioner   has   said   by   supplying   necessary material.  He chose to remain silent.

This approach on the part of the Revenue forced us   to   call   for   the   original   files.     The   learned counsel on the basis of such files pointed out that the   computer   generated   system   of   the   department showed   that   in   connection   with   the   assessee's   PAN number   for   the   period   relevant   to   the   assessment year,   there   has   been   an   investment   of   Rs.30   lakhs from   above   noted   five   companies,   mentioned   in   the reasons by the Assessing Officer. For the purpose of present petition, this is sufficient material for us not   to   entertain   the   petition   any   further.     This being   a   disputed   question   of   fact,   we   are   not inclined   to   undertake   any   further   inquiry   in   this respect.     However,   while   disposing   of   the   writ petition,   we   make   it   clear   that   we   have   not conclusively and finally rejected this ground of the petitioner.     We   do   not   on   merits   reject   the petitioner's challenge to the notice of reopening and in view of peculiar facts, relegate him before the Assessing   Officer   by   permitting   him   to   raise   this ground during the course of assessment and then take appeal route if he is aggrieved by the final order that Assessing Officer may pass.

Subject   to   above   observations,   petition   is disposed of.   Notice is discharged.   Interim relief stands vacated. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH