KAMLESH GUPTA AND SONS HUF,MUMBAI vs. THE INCOME TAX OFFICER WARD 19(2)(2), MUMBAI

PER SANDEEP GOSAIN, JM:

The present appeal has been filed by the assessee challenging the impugned order dated 21.06.2024, passed u/s 250 of the Income
Tax Act, 1961 (‘the Act’), by the Learned Commissioner of Income Tax
(Appeals)/National Faceless Appeal Centre, Delhi (‘Ld. CIT(A)’), for the assessment year 2012-13. The assessee has raised the following grounds of appeal:
1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), NFAC erred in confirming the issuance of notice u/s 148 on the basis of incorrect information therefore, the notice issued under section 148 itself is bad in law.
2. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), NFAC erred in confirming the issuance of notice u/s 148 without obtaining satisfaction as required by provisions of section 151 and therefore, the notice itself is bad in law.

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3. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), NFAC erred in confirming the assessment order passed U/s 143(3) r.w.s 147
without providing copy of reasons recorded, if any, and therefore the assessment is bad in law as held by Honourable Supreme court in case of GKN Driveshafts, 255 ITR 19
4. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), NFAC erred in confirming the assessment completed under section 143(3) rws
148 without bringing out the failure on part of assessee to disclose fully and truly all material facts as required u/s 147
therefore, the notice issued pursuant to the same is bad in law.
5. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), NFAC erred in confirming the addition of Rs.25,00,000/- on the basis of assumption. Without appreciating that the appellant had not entered into any such transaction and continuously denied during the assessment proceeding
The Appellant craves the leave to add, amend, alter and/or delete any of the above grounds of appeal at the time of hearing
2. Ground No. 1 to 4 raised by the assessee relates to challenging the order of reopening and the last ground of appeal challenges the issue on merits of case. Therefore, we have decided to dispose off all the grounds through the present common consolidated order.
3. During the proceedings before the Bench, Ld. AR of appellant has argued that the reopening of the assessment is incorrect and bad in law. The earlier assessment was completed under section 143(3) of the Act, but in the reasons recorded, it was mentioned that the same was completed under section 143(1) of the Act. The Ld. AR of appellant has relied on several cases-law before the Bench and pleaded that the reopening of assessment should be quashed. Even on merits, the Ld. AR of the appellant has argued that the appellant never took any loan from the person alleged in the reopening note.

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Hence, the addition made by the Ld. AO should be deleted, it was pleaded.
4. The Ld. DR has argued that the note written by the Ld. AO at the time of reopening is quite exhaustive and even the letter sent by the Ld. AO, to appellant while disposing of the objections clearly mentioned that he applied his mind while reopening the assessment.
In fact, the letter sent to appellant is a six pages note containing all facts and various-law relied on by Department to conclude that the assessment was validly reopened. It was vehemently argued by Ld. DR that based on the information from officer of Central Circle, the addition was made and hence the same should be confirmed.
5. Heard rival submissions and the issues are decided as under :-
5.1
Reopening of Assessment :- The reasons recorded by the Ld. AR are reproduced here for clarity :- a. In this case, a piece of information was received from the Asst.
Commissioner of Income Tax Central Circle 4(4), Mumbai. In the said piece of information, it is mentioned that a survey action was conducted in the case of M/s Dayal Tours and Travels (I) Pvt. Ltd.
on 08.12.2015 in connection with search action on Nadiadwala
Group. During the survey a Diary was impounded which was belong to Shri Gauri Shankar Choudhary, father of Shri Nitin
Choudhary, Director of M/s. Dayal Tours and travels (1) Pvt. Ltd.
who was a broker agent who arrange cash/cheque loans from various lenders/to various Borrowers.
b. On the basis of information received and also on perusal of the records of the assessee, it is noticed that the above mentioned assessee has availed accommodation entries from Gauri Shankar
Choudhary during the year under consideration.
c. Details of the entity to whom the assessee has given loan for the year under consideration are given as under:-

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Name of the Entity
PAN
Amount
Medium
Satyaveer
Saraliya
AIOPS1838K
25,00,000
Cheque d. In view of the above stated facts and circumstances of the case and after due application of my mind, I have reason to believe that income of the assessee chargeable to tax of at least
Rs.25,00,000/- or any other income chargeable to tax which comes to my notice subsequently in the course of proceedings for re-assessment has escaped assessment due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for this assessment year 2012-13
within the terms of provisions of section 147 of the Income-tax Act,
1961. Accordingly, the case is re-opened u/s 147 of the Income- tax Act for A.Y. 2012-13. e. In this case, return of income was filed for the year under consideration but no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceedings u/s 147 is reason to believe as mentioned above. It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated u/s 2(40) of the Act was made and the return of income was only processed u/s 143(1) of the Act. 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 has escaped assessment.
f. As per the proviso to section 151(1) of the income-tax Act, sanction of the Pr. CIT-19, Mumbai, is hereby sought to issue of notice u/s 148 of the Act for reopening of the case of the assessee for A.Y. 2011-12. 5.2. From the record and after hearing the arguments of both parties, it is observed that the ITO Ward 19(2)(2) Mumbai has issued a six pages letter dated 12.11.2019 to the appellant in which it was mentioned that there is specific information received from an impeccable source i.e. ACIT Central Circle
4(4) that the appellant availed accommodation entries from one Gauri Shankar
Choudhary during the previous year to the tune of Rs. 25 lakhs. Based on this Kamlesh Gupta & Sons HUF

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tangible material, a ‘valid’ reason was formed to ‘believe’ that income has escaped and accordingly the assessment was reopened. In our considered view, at the time of issuance of notice, what is required is only a ‘reasonable belief’
and not an established fact and for that proposition, the following cases-law are relied upon :- a) In the case of Raymond Woolen Ltd. 236 CTR 34(SC), Hon'ble Supreme
Court has held that “at the time of reopening the case, what is required is whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at that stage”.

b) Again, in the case of ITO Vs. Sarabhai M Lakhani (2000) 243 ITR 1 (SCJ) the Hon'ble Apex Court held that the power of the assessing officer under section 147[b] is wide enough to confer juri iction on any information received by the assessing officer from whatever source.

c) On the issue of reasons to believe, the Hon'ble Bombay High Court In the case of Indo European Breweries Ltd. Vs. ITO (Bom.) (2012), 343 ITR 195
(Bom.) observed as under: -
"A Division Bench of this Court presided over by the Hon'ble Mr.
Juri iction under Article 226 is not warranted."

d) In the case of Kalyanji Mavji & Co. Vs. CIT(SC)102 ITR 287, the Supreme
Court, the Apex Court has explained the concept of "Information'' for re- opening the assessment in "detail. As per this decision, the word
"information" would also include true and correct state of law derived from relevant judicial decisions either of the I.T. authorities or Courts of raw. Information may come from external sources or even from materials

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already on record or may be derived from the discovery of new and important matter or fresh facts. It was held that if the ground on which the original assessment is based is held to be erroneous by Supreme
Court in some other case, that will also amount to a fresh information which comes into existence subsequent to the original assessment. The taxpayer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority.

e) The appellant cannot challenge the sufficiency of belief – ITO Vs. Lakhani
Mewal Das 103 ITR 437 (SC).

f) What is the ultimate result of inquiry is not material for deciding the juri iction of the Ld. AO to reopen the assessment, even if it is found ultimately that there has been no escapement of income – Mahasukhram g) If “reason to believe’ of the Assessing Officer is founded on an “information which might have been received by the Assessing Officer after completion of assessment, it may be a sound foundation for exercising power under section 147, r.w.s. 148 of the Act – CIT Vs.
Kelvinator of India Ltd. 256 ITR 1(Del)(FB).

h) Fresh information enables the initiation of reassessment though it could have been discovered in earlier years. 177 ITR 409 (SC) Claggette Brachi
Co. Ltd.

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assessment was completed u/s. 143(1) of the Act, that would be only an inadvertent error because mentioning of wrong section can never lead to quashing the assessment. In a letter dated 13.11.2019, the Ld. AO had disposed off the objection to the issuance of notice u/s. 148 of the Act, 1961 as follows :

“In the instant case, .......... this office mail dated 4.11.2019 kind attention of the assessee is attracted to first proviso to section 147 of the Act. A plain reading of the proviso brings forth that reassessment may be carried out beyond a period of four year, but within six years, if any income chargeable to tax has escaped assessment for such assessment year by reasons of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. From the discussion in the foregoing paras it is crystal clear that the information as regards the accommodation entries was not available with the Assessing Officer. The assessee ought to have furnished such information suo motu during the course of original scrutiny proceeding. Simply complying with the notices u/s. 142(1) of the Act during the original assessment u/s. 143(3) does not absolve the assessee of the furnishing all material facts fully and truly to the assessing officer; and therefore, does not do away with any further reassessment proceedings that may arise upon availability of any fresh material facts. Therefore, in this case, the time limit of issuance of notice under section 148 of Act is fully justified and is in sync with section 147 of the Act.

Thus the Ld. AO was aware that the earlier assessment was completed under section 143(3) of the Act, even though it was inadvertently mentioned that the assessment was completed u/s. 143(1) of the Act.

Thus, what is required at the time of reopening the assessment is only ‘prima facie’ belief and ‘recording of reasons’ and as both the conditions are fulfilled, notice u/s. 147 is valid.

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has clearly mentioned in so many words that he received information Central
Circle Officer and also stated that the appellant availed an accommodation entry as mentioned above and hence it cannot be said that there is a mechanical reopening without application of mind. Similarly, in the case of Ravi Gopal Trivedy ITA No. 4062/Mum/2023, reopening was quashed by Hon'ble ITAT because there was no link between the two parties where alleged transactions took place. In our case, there is a close line link between the two parties i.e., information was received that the appellant availed an accommodation entry. So, this case also is also not applicable here. In the case of Navodaya Castles ITA No. 4613/Del/2010, the Hon'ble ITAT quashed reopening of the case by relying on the decision of Hon'ble Supreme Court decision in the case of Chhaugamal Rajpal and in that case, Hon'ble Supreme
Court has held that the Ld. AO had not even come to a prima facie conclusion that the transactions were not genuine transactions. But, in our case, the Ld.
AO has written a detailed letter to the appellant and in fact wrote a detailed 7
pages letter to the appellant stating the reasons and cases-law on the issue of reopening. So, it is definitely more than prima facie conclusion on the part of the Ld. AO while reopening the case. In the case of Saksham Industries ITA No.
1278/Pune/2024, there is no adjudication on the issue of reopening the assessment by the ITAT. The issue was decided against the appellant in the case of Well Trans Logistic 166 taxmann.com 72 (Del) because it was held that there was no live link between the parties, which is not issue in our impugned case. The issue in the case of Phonenex Data Services, relates to notice u/s.
153C and hence not applicable. In the case of Shankar Uttamchand 161
taxmann.com 536 (Surat Tribunal), the issue relates to a whatsapp message not confronted to appellant, whereas in our case, specific information received from another officer of Department based on a Survey u/s. 133A conducted.
Hence, all the cases relied on by the Ld. AR of the appellant are not relevant and applicable to our cases.

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5.5
For the reasons and various cases-law mentioned by under signed as above, the notice of reopening is held to be valid.

Copy of the Order forwarded to :

BY ORDER,

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