WELCOME PLYWOOD PVT LTD. vs. THE INCOME TAX OFFICER 11 (3)-4 AND 2 ORS

This Petition under Article 226 challenges notice under sec- tion 148 of the Income-tax Act, 1961 (‘Act’) dated 13th March 2015 issued by Respondent No.1 proposing to reassess the income for the assessment year (‘AY’) 2009-10 and the order dated 30th December 2015, rejecting the objections raised by Petitioner chal- lenging the validity of the said notice.

The reasons for opening are as under: “ The return of income in this case for A.Y. 2009-10 was e-filed by the assessee on 30.09.2009 declaring total income at Rs. NIL/. A search and survey action was carried out by investigation wing in the case of Shri Praveen Kumar Jain and his groups on 01.10.2013. The search action resulted into col- lection of evidences and other findings which conclusively proved that Shri Praveen Kumar Jain through a web of concerns run and oper- ated by him, is engaged in providing accommo- dation entries of various nature like bogus unse- cured loans, bogus share application and bogus sales (Purchase for the Beneficiaries) etc. As per the information received, it is seen that the following concern of Shri. Praveen Kumar Jain has provided entries in respect of shares at a premium to the assessee as under:- Sr. No. Name of the Bogus Concern Operated by Praveen Kumar Jain PAN F.Y. Amount

The Petitioner responded to the reasons giving all details and explanations. The relevant para is as under: “ Kindly see the Balance Sheet of the company as on 31/3/2009 and as at 31/3/2008. There is no change whatsoever of the capital of Rs.60 lacs. In fact there is no premium which is alleged in the let- ter. It appears that this notice has been issued wrongly to the assessee company as the company had never received any sum of Rs.34,50,000/- as al- leged on account of share premium.”

The Respondent No. 1 placed reliance on the judgement of the Supreme Court in the case of Raymond Woollen Mills (1999) 236 ITR 34 (S.C) and rejected the objections of the Petitioner.

The criteria for reopening of assessment after a period of four years are no longer res integra in view of the judgement of this Court in the case of Ananta Landmark P. Ltd v Dy. CIT wherein this Court held that where assessment was not sought to be reopened on the ‘reasonable belief’ that income had escaped as- sessment on account of failure of assessee to disclose truly and 3/5 (f)Welcome Plywood.doc Sumedh Uploaded on - 28/06/2023 fully all material facts that were necessary for computation of in- come, but was a case wherein assessment was sought to be re- opened on account of ‘change of opinion’ of AO the reopening was “… the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postu- lates that there must be a direct nexus or live link be- tween the material coming to the notice of the In- come-tax Officer and the formation of his belief that there has been escapement of the income of the as- sessee from the assessment in the particular year be- cause of his failure to disclose fully and truly all mate- rial facts. “The live link or close nexus which should be there be- tween the material before the Income-tax Officer.”

In the present case, the Respondent No. 1 has received infor- mation from the office of DGIT (Inv.) that Khush Hindustan Ent. Ltd. has issued accommodation entries to the Petitioner for finan- cial year 2008-09. However, even though the Petitioner has placed 1 [1976] 103 ITR 437 4/5 (f)Welcome Plywood.doc Sumedh Uploaded on - 28/06/2023 on record the Balance Sheet and pointed out that there is no change in the capital of 60 lakhs and no sum has been received ₹ leave alone a sum of 34,50,000/- on account of share premium, ₹ the Respondents have sought to take a stand that at this stage they are not required to look into the sufficiency and correctness of the information and can consequently reopen the case. Upon a bare perusal of the Balance sheet it is evinced that there is no transaction which would show a live link or nexus with the alleged transaction viz. receipt of 34,50,000/- on account of share pre ₹ - mium as alleged by the Respondent. Besides the Respondent has failed to aver the particulars of the information available which has led to the belief that income has escaped assessment. There appears no new tangible material available on record to conclude that income had escaped assessment. In our view it is clearly a ‘change of opinion’.

We, therefore pass the following order- i. The impugned notice dated 13th March 2015 and the order dated 30th December 2015, issued by Respondent No.1 for AY 2009-10 are quashed and set aside; ii. Rule made absolute in above terms. No costs. (KAMAL KHATA, J.)