Information that Dummy Concern used to route Unaccounted Money sufficient to Re-open Assessment: Madhya Pradesh High Court [Read Judgment]

Madhya Pradesh High Court - GST

A two-judge bench of the Madhya Pradesh High Court has held that the allegation that assessee is a dummy concern used to route unaccounted money by way of bogus share application money is sufficient to reopen assessment under section 147/148 of the Income Tax Act, 1961.

The petitioner/company has filed its return of income for the assessment year 2011-12 on 30.03.2012 declaring the income as nil. The balance sheet of the Company reflects that the share capital of the petitioner/company was carried forward from its previous year without any change or without any fresh share capital being issued or subscribed. The revenue initiated the re-assessment proceedings against the assessee.

Before the High Court, the petitioner- Company contended that the re-assessment was on the basis of a vague allegation that the petitioner company is a dummy concern of Shri Anand Bangur, who allegedly uses dummy companies for routing his unaccounted money through the group companies. It also reflected that the petitioner/company has bogus share application money to the extent of Rs.2,63,75,500/-.

After considering the facts of the case, Justice S C Sharma and Virender Singh had noted the fact that the reasons recorded in the matter were certainly communicated to the petitioner.

“The objections of the petitioner have been properly dealt and it is not a case of mere suspicion, it is a case, wherein the competent authority was having reason to believe to reopen the assessment. There was specific information available with the authorities. The reasons to believe had been properly understood by the authorities and there was material on the basis of which, notice was issued, the bench said.

“In exercise of the jurisdiction under Article 226 of the Constitution of India, the sufficiency or insufficiency for the formation of the reason to believe cannot be considered, as held by the Delhi High Court. It is certainly open to the assessee to participate in the reassessment proceedings and to put forth its stand in detail to satisfy the Assessing Officer that no escapement of income has taken place,” the bench added.

To Read the full text of the Judgment CLICK HERE