M/S. JALARAM ENTERPRISES PVT. LTD. vs. INCOME TAX OFFICER WARD 15(2)(2)

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WP/11810/2018HC BombayHCBM01046751201801 March 2019Author: HON'BLE SHRI JUSTICE M.S. SANKLECHA,HON'BLE SHRI JUSTICE AKIL KURESHI6 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the impugned notice of reopening of assessment for AY 2014-15 was liable to be quashed. The Court noted that the petitioner had provided evidence, including a reply to a notice under Section 133(6) and objections to the reopening notice, clearly stating that the alleged accommodation entries of Rs. 40 lakhs and Rs. 15 lakhs were taken in FY 2009-10 (AY 2010-11). The petitioner had also submitted documentation proving that these loans were verified during the assessment proceedings for AY 2010-11. The Court found that the Assessing Officer's reasons for reopening were factually erroneous because the transactions cited did not relate to the assessment year under consideration (AY 2014-15). The Court observed that the Assessing Officer had not adequately addressed this crucial opposition from the petitioner and had given a general disposal to this ground. The Court concluded that when the very foundation of reassessment is missing, it is impermissible for the Assessing Officer to proceed with reassessment based on such a notice. Therefore, solely on this ground, the impugned notice was quashed. The petition was allowed.

What were the facts?

The petitioner, M/s. Jalaram Enterprises Private Limited, challenged a notice dated March 27, 2018, issued by the Income Tax Officer to reopen the assessment for Assessment Year (AY) 2014-15. The original assessment order under Section 143(3) was passed on November 30, 2016. The Assessing Officer's reasons for reopening were based on information received from DDIT (Inv) Unit 7(4), Mumbai, indicating that the assessee was a beneficiary of bogus entities controlled by Mr. Vipul Vidhur Bhatt. Mr. Bhatt, in his statement under Section 132(4), admitted to being an entry operator and that the entities were bogus, used for providing accommodation entries for commission. The information suggested the assessee had taken accommodation entries of Rs. 40 lakhs from M/s. Dolex Commercial Pvt. Ltd. and Rs. 15 lakhs from M/s. Shyam Alcohol and Chemicals Ltd., controlled by Mr. Bhatt, during the financial year relevant to AY 2014-15. The Assessing Officer concluded there was a failure to disclose material facts, leading to escapement of income to the extent of Rs. 55,00,000/-, justifying reopening under Section 147.

What were the issues?

1. Whether the notice of reopening of assessment for AY 2014-15 is liable to be quashed on the ground that the transactions forming the basis of the reasons recorded did not pertain to the assessment year in question, as per Section 147 of the Income Tax Act, 1961. Assessee's Contention: The petitioner argued that the alleged accommodation entries of Rs. 40 lakhs and Rs. 15 lakhs were taken in Financial Year (FY) 2009-10, which corresponds to AY 2010-11. These loans were verified during the assessment proceedings for AY 2010-11 by the ACIT, Central Circle 2, Mumbai. The petitioner submitted that complete details, including confirmations, bank statements, and return copies, were provided to prove the genuineness of the parties. The assessee contended that the reasons recorded for reopening AY 2014-15 were factually erroneous as the transactions were from AY 2010-11, which had already been assessed. Furthermore, this fact was already on record with the Assessing Officer's predecessor prior to the recording of reasons for reopening. Revenue's Contention: The judgment does not record specific contentions from the revenue on this issue. However, the Assessing Officer's reasons indicate a belief that income had escaped assessment due to non-disclosure of material facts.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 132(4),Section 133(6),Section 147,Section 148

AI-generated summary — verify with the full judgment below

12 wp 11810­18­c IN  THE HIGH  COURT OF JUDICATURE  AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.11810  OF 2018

M/s  Jalaram  Enterprises Private  Limited … Petitioner V/s. Income Tax Officer … Respondent ­­­ Ms.Ritika Agarwal  for  the Petitioner. Mr.Suresh Kumar  for the Respondent. ­­­ CORAM :  AKIL KURESHI AND M.S.SANKLECHA,  JJ. DATE   :  MARCH 01, 2019. P.C.:­

1.

Petitioner     has   challenged   a   notice     of   reopening   of assessment for the  assessment dated 27th March,  2018  issued by the Assessing Officer to reopen  the assessment of  the petitioner for the assessment  year  2014­15. 2. Brief facts are as under:­ Petitioner  is a private limited  company. Petitioner had filed return   of   income   for   the   said   assessment   year,   on   which   the Assessing Officer  passed order under Section 143(3)  of the Act 12 wp 11810­18­c on   30th  November,     2016. To   reopen   such   assessment,   the impugned notice   came to be   issued.   In order to do   so, the Assessing Officer had recorded following  reasons:

“1. The assessee company has filed the return of income   for   A.Y.2014­15   on   21.09.2014   declaring total   income   of   Rs.6,69,326/   The   said   return   of income   was   processed   u/s.143(1)   of   the   IT   Act, 1961. Thereafter,   the   assessment   was   made   u/s 143(3)   of   the   Act   vide   order   dated   30.11.2016 determining total income at Rs.21,21,640/­, which has been upheld in the appellate order of Ld. CIT(A) dated 02.06.2017. 2. As per the information received from the DDIT (lnv)   Unit   7(4),   Mumbai   vide   letter   No. DDIT(INV)/Unit­7(4)/Information/2016­17   dated 30.09.2016, the assessee M/s. Jalaram Enterprises Private Limited (PAN: AABCJ6334N) is one of the beneficiaries of bogus entities which are controlled and operated by Mr. Vipul Vidhur Bhatt. A Search & Seizure action u/s 132 of the Act was carried out in the   case   of   Mr.Vipul   Vidhur   Bhatt   and   his   other related entities on 05.02.2016 and his statement was recorded on 09.02.2016 u/s 132(4) of the Act. In the statement Mr.Vipul Vidhur Bhatt has accepted that he is an entry operator and all the entities are bogus   companies,   which   are   used   by   him   for providing   accommodation   entries   to   various beneficiaries for commission and also accepted that he is a Director in these companies and all other directors are dummy  directors.

3.

As  per  the  information  received,  during  the financial year relevant to the assessment year under consideration, M/s. Jalaram Enterprises Pvt. Ltd. has taken accommodation entries of Rs.40 lakhs from M/s. Dolex Commercial Pvt. Ltd. and Rs.15 lakhs from M/s. Shyam Alcohol and Chemicals Ltd., which 12 wp 11810­18­c are   controlled   and   operated   by   Mr.Vipul   vidhur Bhatt.   The  extent   of  such  accommodation  entries taken   may   be   much   more.   This   is   because,   the assessee   may   have   taken   accommodation   entries from   other   such   bogus   concerns,   which needs to enquired. Thus, the assessee has entered into   suspicious   and   prima­   facie   bogus   financial transactions, which has been done to suppress its profit.

4.

Therefore, after taking approval, vide notice u/s 133(6) of the I.T. Act, the Assessee­Company was asked to file Computation of Income, computation u/s 115JB (if applicable),Form 3CEB (if any), full set of the IT return, Tax Audit Report, reconciliation of 26AS CIB / AIR / OLTAS /Service Tax / STT / Sales­ tax Return with Audited books, Audited Profit and Loss account and Balance Sheet along with all its annexure   for   the   financial   year   relevant   to   the assessment year, latest by 27.03.2018 by 11.00 a.m

5.

In   response   to   notice   u/s.133(6),   the   assessee submitted its reply through e­mail on 27.03.2018 at 1.36 p.m.. The same has been perused.

6.

Further,   this   office   has   also   examined   the evidence and fact of the case independently and it is found   that,   there   is   failure   on   the   part   of   the assessee to disclose fully and truly all the material facts necessary for its assessment for the year under consideration.   Therefore,   I   have   the   reason   to believe that the income chargeable to tax under the provisions has escaped assessment to the extent of Rs.55,00,000/.

7.

Therefore, there is sufficient material on record, on the basis of which, I have reason to believe that assessee   has   not   made   full   and   true   disclosure, resulting in escapement of income chargeable to tax to the extent of 55,00,000/­ for A.Y.2014­15 within the meaning of section 147 of the IT Act. Hence, it is a fit case for initiation of proceedings u/s. 147 of the 12 wp 11810­18­c I.T.   Act,   1961   by   issuing   notice   u/s.   148   of   the Income Tax Act, 1961.”

3.

Short   ground   raised   by   the     petitioner     was   that   the transaction in question to which  the Assessing Officer has made a reference  in the reasons  recorded,  did not   take place  during a period   relevant   to the assessment   year in   question. In the petitioner's  own case  in Writ Petition  No.11811 of  2018  we had accepted  such  grounds    for    quashing   the    notice  impugned therein, making  following  observations:­ “6. We had   examined the documents on record   with   this limited  question in  mind.  The  reasons recorded by the Assessing Officer  refer to  a notice issued by him under Section 133(6)  of the   Act,   before   recording   the   reasons   and     issuing   notice   of reopening.   The petitioner   has produced written reply to such notice  under Section  133(6)  of the Act, in which the petitioner had pointed out  as under:­ “4. In   your   captioned     notice,   you   have   also raised  issue of alleged accommodation  entries of 40 lakh from M/s Dolex Commercial Pvt. Ltd.a nd Rs.15 lakh  from M/s Shyam Alcohol & Chemicals Ltd. We have to state as under:­ It is  submitted that the above parties  had  lent us the amounts  as early  as in FY  2009­10. The said loans  wee verified during  assessment proceedings of the company for the   AY   2010­11 by ld. ACIT ­CC­2 Mumbai. In response  to direct  inquiry made by the ld. ACIT  then the captioned  companies  had filed   complete   details   like   confirmation,   bank statements   and   the return copies to prove the genuineness,   creditworthiness   and   existence     of 12 wp 11810­18­c parties. A copy of the submission  made by the said lenders   before   the   ld.   ACIT     in   assessment proceedings for  AY  2010­11 alongwith the copies of  bank statement  and the return copy is enclosed herewith   and is marked as Annexure­”A” and “B” respectively.”

7.

As if this much was  not  enough, in  the objections raised by the petitioner to the notice of reopening of  assessment,  following further  ground was  raised:

“5. That     vide   submission     dated   26/03/2018 filed in response to your notice  dated 23/03/2018 u/s 133(6) for the impugned assessment year, the assessee has   already   submitted that   the above named parties had lent the amount as early as in FY 2009­10     i.e.  AY     2010­11. The   said  loans  were verified  during the assessment  proceedings  of the assessee  for AY 2010­11 by  ld. ACIT,  Central Circle 2,   Mumbai. In response to direct  inquiries  made the ld. ACIT   then the above named parties have filed   complete   details   like     confirmation,   bank statements and return of income copies to prove the genuineness,   creditworthiness   and     existence     of parties.  Copy of said letter dated 26/03/2018 along with  annexures is annexed hereto  and marked as “Exhibit A”.

6.

That   on   perusal   of   the     said   letter   dated 26/03/2018  and annexures  hereto,  it can be noted that the  assessee has received amounts from above mentioned  parties during AY  2010­11 which stands assessed. Thus, it is   submitted that the “reasons recorded” for AY   2012­13, AY   2013­14 and AY 2014­15   are   factually   erroneous   and   thus,     the reopening  deserves to be quashed.

7.

That it is  also submitted  that the above  fact was already on record  of your ld.  predecessor  in response     to   notice   issued   u/s   133(6)     prior   to recording reasons   u/s 148   of the Act. Thus, the reasons   recorded de­hors the original   assessment record and subsequent   inquiry   u/s.133(6) of the 12 wp 11810­18­c Act is wholly  without jurisdiction.”

8.

While  disposing of the objections,  the Assessing Officer  did not   clearly     meet   with     this   opposition   of   the   petitioner.   He instead,   gave  a  rather   general    disposal  to  this  ground.    The petitioner  has also   produced with this  petition, correspondence entered into by the petitioner   with the Assessing Officer during the assessment for the assessment year   2010­11, in which the petitioner  had supplied  full details of the said receipts from the said  two entities. Clearly  therefore, the petitioner  has  built up  a strong   case   to establish that the receipts in   question never related to the present   assessment year.   The Assessing Officer simply   cannot   take   shelter under the ground that all these aspects can be   examined under the reassessment   proceedings. When the very foundation of the reassessment  is missing, it would be   impermissible   for   the   Assessing   Officer   to   carry     on   the reassessment  based on such notice.

9.

In the result,   only on   this ground, impugned notice is quashed. Petition is allowed and disposed of. ”

4.

In the result,  for the reasons recorded,  impugned notice is quashed.  Petition  allowed and  disposed of  accordingly. (M.S.SANKLECHA,J.)                              (AKIL KURESHI,J.) ….

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