Reopening of Assessment valid as Assessee is beneficiary of Accommodation entry after Inquiries, Investigation: Gujarat High Court [Read Judgment]

Assessment - accommodation entry - Gujarat High Court - Taxscan

The Gujarat High Court ruled that the reopening of the Assessment was valid as the assessee is beneficiary of accommodation entry after inquiries and investigation.

Mr. Ketan S.Shah, the counsel for the petitioner, Bharatkumar Kalubhai Ghadiya the reopening is based on mere change of opinion as it is reopened on the basis of the so-called information, which is after passing of the assessment order, however, in the order disposing of the objections raised by the petitioner, the respondent had admitted that there was no name of the petitioner herein mentioned by the person namely Sanjay Shah and others whose premises had been searched.

It is submitted that the very foundation to exercise jurisdiction under section 148 of the Act is based on information in the case of Shri Jignesh Shah and the statements made by him. However, since he has denied that he had not given the name of the petitioner and that the petitioner was not a beneficiary, the question of proceeding further by way of impugned notice does not arise.

The petitioner submitted that even otherwise, the statement of a tainted party cannot be considered as tangible material so as to have reason to believe that the income chargeable to tax has escaped assessment. He submitted that the reopening is based on mere change of opinion of the Assessing Officer inasmuch as notice under section 148 of the Act can be issued only if an Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment and for such forms of belief, there should be some tangible material and act, which is lacking in the case on hand. He submitted that the case of the petitioner was selected for scrutiny assessment and the issue on hand was examined threadbare at the original assessment and accordingly, merely because the Assessing Officer happens to change his opinion, action under section 147 of the Act cannot be taken.

The division bench of Justice Bela M. Trivedi and Justice A.C Joshi held that it cannot be said that there is no reason to believe that the income chargeable to tax has escaped assessment because such exercise of reopening has been made only after due inquiries and recording of statements of concerned persons, as referred to hereinabove, and on having found prima facie material, impugned notice is issued to the petitioner. It further appears that no procedural lapse and/or deviation from procedure prescribed in reopening and the reasons recorded do not lack validity as necessary approvals from the competent authority appear to have been received.

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