The Gujarat High Court held that the Assessing Officer (AO) is empowered to reopen concluded assessment if information disclosed originally found to be bogus.
The petitioner company, Zaveri and Company Private Limited is engaged in the business of manufacturing and trading in jewellery, bullion trading, trading and speculation in commodities, shares and securities, units of mutual funds and derivatives, generation and sales of electric power through windmills and trading in SEZ unit as well as gold and silver refinery business. The petitioner had filed the return for the A.Y. 2012-13 and thereafter had filed a revised return. After the scrutiny assessment having been undertaken on various points and after issuing the show-cause notice, the Assessing Officer had framed the assessment order under section 143(3) of the said Act on 28.03.2014. Thereafter the petitioner received a notice under section 148 on 28.03.2017 seeking re-opening of the assessment for the A.Y. 2012-13 on the ground of the alleged accommodation entries obtained by the petitioner company, as revealed during the search proceedings in case of one Bhanwarlal Jain Group.
The reasons recorded for reopening of the assessment under section 147 of the Act for the assessment year 2012-13, as the office of the respondent had received the information from the office of DDIT that the petitioner company was identified as one of the beneficiaries of the accommodation entries unearthed during the course of search proceedings conducted in case of Sanjay Shah and Jignesh Shah of Ahmedabad, which had resulted into seizure of unaccounted cash of Rs. 19.37 crores along with the incriminating digital as well as documentary evidences. The clandestine record of unaccounted cash, synchronized trading, proving bogus LTCG in various BSE listed scrips and transport of such cash through angadiyas was found to be maintained in secret Tally Data file.
It was revealed that the petitioner had entered into the transactions in penny stock namely Dhvanil Chemicals Ltd. / Veronica Production Ltd., which companies were used for bogus LTCG and contrived losses, as admitted by the said Sanjay Shah and Jignesh Shah in their statements recorded during the course of search proceedings.
Advocate M.R.Bhatt on behalf of the revenue said that as per the settled legal position, two conditions have to be satisfied before the Assessing Officer invokes his jurisdiction to reopen the assessment under section 147 of the said Act after the expiry of four years from the end of the relevant assessment year – firstly, that the Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment for the concerned assessment year, and secondly, such escapement of assessment was by reason of failure on the part of the assessee to make the return under section 139, or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all the material facts necessary for his assessment for that assessment year.
Mr. Bhatt further added that so far as the case of the present petitioner is concerned, the assessment for the A.Y. 2012-13 is sought to be reopened by the Assessing Officer under section 147 or 148 of the said Act, on his having arrived at a satisfaction that the income for the said assessment year had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment.
The division bench of Justice Bela M.Trivedi and Justice A.C.Joshi held that the petitioner was assessed under section 115JB and that the assessee was already paying more tax under section 115JB than the income tax liability arising under the normal provisions of the Act. Whether the income chargeable to tax has escaped assessment or not, could not be considered at this stage and no conclusive opinion could be rendered at this point of time when the assessment / reassessment has not even started.
“Mr. M.R. Bhatt has rightly drawn the attention of this Court to the decision in case of Mehrunnisa Mohamed Fazal Maniar versus Income Tax Officer (supra), in which the proceedings under section 147/148 initiated by the Assessing Officer against the petitioners on the basis of fresh material brought to his notice in respect of the same search proceedings conducted under section 132 in case of Jignesh Shah on 11.09.2018, were challenged, and the Court vide the order dated 20.01.2021 has dismissed the said petitions, after considering the similar contentions as raised in the present petition,” the court said.
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