The Gujarat High Court ruled that reopening of Assessment on Mere accommodation entries provided without any physical transportation of goods is valid.
The petitioner, Geetaben Dineshchandra Gupta is as an individual filed Return of Income for the year 2012-13, which was thoroughly processed by the respondent, and subsequently, scrutiny assessment under Section 143(3) of the Act was also framed.
Mr. Darshan R.Patel, the Counsel for the petitioner contended that despite the petitioner fully and truly disclosed all material facts relevant for his assessment during the course of scrutiny assessment along with a statement of income, the petitioner surprisingly received a notice issued under section 148 of the Act. Moreover, in the absence of reason sanctioned under the Act, the proceedings initiated are required to be quashed. It is further contended that the petitioner has no alternative remedy and therefore, has filed this petition praying for quashing and set aside the impugned notice, issued under section 148 of the Act.
On the other hand, the respondent has contended that the petition is filed at a pre-mature stage inasmuch as, it is the notice under section 148 read with section 147 of the Act only. It is further contended that the petitioner, in the proprietorship concern of Subhalaxmi Trading Company, carried out huge transactions of purchases and sales. Mere accommodation entries were provided without there being any physical transportation of goods. Further, such a statement has also been recorded under section 131 of the Act. The inquiry conducted further revealed that for providing such accommodation entries, entry providers normally earn commission ranging from 0.5% to 1%. Therefore, despite the petitioner earning such commission for providing accommodation entries, had not shown such commission in the return and therefore, based on such tangible material and after due application of mind, assessment has been reopened.
The division bench of Justice Bela M. Trivedi and Justice A. C. Joshi ruled that the assessee was the provider of accommodation entries and that, the income from commission, ranging from 0.5% to 1% was not disclosed and thereby, the income chargeable to tax has escaped assessment for the year under consideration. As emerges from the record, the petitioner has filed RoI for the A.Y. 2012-13 disclosing income of Rs.1,42,694/- despite showing a huge turnover of Rs.24,10,82,501/- in the audited books of account.
“A detailed investigation is carried out by the Investigation Wing of the respondent and the outcome of the same is referred to hereinabove, which prima facie substantiates the case of the respondent. Thus, we are of the considered opinion that formation of belief by the Assessing Officer that the income chargeable to tax has escaped assessment, based upon material derived during inquiry/investigation, appears to be justified,” the court added.
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