Kalsha Builders Pvt Ltd vs. ACIT (Bombay High Court)

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O.O.C.J.
WRIT PETITION NO. 3656 OF 2018
Kalsha Builders Pvt Ltd .. Petitioner
Versus
Asst. Commissioner of Income Tax & Ors. .. Respondents
……………….
 Mr. Jitendra Jain a/w Mr. Vagish Mishra, Mr. Samir Singh & Mr.
Siddesh Rajput i/by Law Counsellors for the Petitioner
 Mr. Suresh Kumar for Respondent Nos. 1 and 2
……………….
CORAM : AKIL KURESHI &
S.C. GUPTE, JJ.
DATE : FEBRUARY 8, 2019.
P.C.:
1. Petitioner has challenged a notice of reopening of
assessment dated 28th/29th March, 2 seeking to reopen the
petitioner’s assessment for the assessment year 2011-12.
2. Brief facts are as under:
2.1 Petitioner is a company registered under the
Companies Act and engaged in the business of developing
real estate. For the assessment year 2011-12, the petitioner
had filed return of income which was taken in scrutiny by the
Assessing Officer. The Assessing Officer passed order under
1 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
Section 143(3) of the Income Tax Act, 1961 (“the Act” for
short) on 29.1.2014. To reopen such assessment, the
Assessing Officer issued the impugned notice. In order to do
so, he had recorded following reasons:
“Reasons for reopening of the assessment in case of M/s.
Kalsha Builders Pvt. Ltd. for A.Y. 2011-12 u/s 147 of the Act.
In this case the Assessee filled return of Income on 27.09.2011
declaring total income of Rs. 10,05,830/-/- The said return was
processed u/s 143(1) on 7.1.2012 determining Total Income of
Rs.10,05,830/- and Order Passed u/S 143(3) on 20.01.2014
determining Total Income of Rs. 3,14,72,770/-.
2. A search action u/S. 132 of the Income Tax Act, 1961 was carried
out at the residence and various premises of Shri. Shirish C. Shah
who happened to be main person engaged in providing bogus
accommodation entries like LICG, Share capital with huge share
premium, turnover, Loan etc;
3. On verification of the impounded material, it is seen that M/s.
Prabhav Industries Ltd., en entity controlled by Shirish C. Shah, has
made investment of Rs. 3,00,00,000/- to the above mentioned
assessee.
4. In order to overcome borrowed satisfaction notice u/S. 133(6)
was issued to M/s. Prabhav Industries Ltd requiring it to provide
various details. However, till date no reply has been received.
5. Thus, as M/s. Prabhav Industries Ltd., is engaged in providing
accommodation entries, investment made in the above said
assessee is nothing but unexplained cash credit.
6. In view of the above facts, I have reason to believe that
2 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
income chargeable to tax amounting to Rs. 3,00,00,000/- has
escaped assessment for A.Y. 2011-12 in view of the provisions of
Section 147 of the Income Tax Act.”
2.2 Upon being supplied the reasons, the petitioner raised
objections to the notice of reopening of assessment under
letter dated 16.5.2018. Such objections were rejected by the
Assessing Officer by an order dated 14.9.2018, hence, this
petition.
3. Taking us through the reasons recorded by the
Assessing Officer, learned counsel for the petitioner raised
following contentions:-
i. The reasons do not demonstrate any live link
between the material available with the Assessing
Officer and his formation of belief that the income
chargeable to tax had escaped assessment;
ii. The entire issue on which reopening of assessment
is sought, was minutely examined by the
Assessing Officer during the scrutiny assessment.
The impugned notice, is thus, based on change of
opinion;
iii. There was no failure on the part of the assessee to
disclose truly and fully all material facts. The
3 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
reasons also do not suggest any such failure.
4. On the other hand, learned counsel Mr. Suresh Kumar
for the Department submitted that the Assessing Officer had
recorded proper reasons for issuing such notice. After the
assessment was completed, the Assessing Officer received
information prima facie suggesting that the petitioner had
not made true disclosures. He had also issued inquiry notice
under Section 133(6) of the Act to the concerned parties. On
the basis of such materials, he formed an independent belief
that the income chargeable to tax had escaped assessment.
It is a writ large on the face of the reasons that there was
failure on the part of the assessee to disclose truly and fully
all material facts. Merely because the Assessing Officer in
the reasons has not repeated such words, would not be fatal
to the notice.
5. Having heard the learned counsel for the parties and
having perused the material on record, we find that in the
reasons, the Assessing Officer has referred to a search action
under Section 132 of the Act carried out at the residence and
various premises of one Shirish C. Shah who was found to be
engaged in providing bogus accommodation entries such as
4 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
capital gain, share capital with huge share premium etc.
Such material showed that one M/s. Prabhav Industries who
was an entity controlled by Shirish C. Shah had made
investment of Rs. 3 crore in the assessee company. The
Assessing Officer also recorded in such reasons that he had
issued notice under Section 133(6) of the Act to said Prabhav
Industries asking for various details. Such notice remained
unreplied. On such basis, the Assessing Officer formed a
belief that M/s. Prabhav Industries was engaged in providing
accommodation entires and that the investment made by the
said Prabahv Industries in the assessee was in the nature of
assessee’s unexplained cash credit.
6. It is true that during the scrutiny assessment, this issue
had come up for consideration before the Assessing Officer.
He had raised multiple queries under a letter dated
17.7.2013 asking inter alia for furnishing details of
assessee’s share capital, increase in the assessee’s share
capital and share premium account. The assessee had
replied to such queries. After which further queries came to
be raised by the Assessing Officer on 20.8.2013 in which
5 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
there was specific mention of the details of a sum of Rs. 3
crore having been paid by M/s. Prabahv Industries for
purchase of 1500 shares. The assessee was asked to provide
the identity of such investor, its creditworthiness and
genuineness of the transaction. The assessee having replied
to such queries raised in the order of assessment, the
assessee made no additions.
7. It is because of this, the assessee contended that the
Assessing Officer is precluded from raising same question all
over again by way of reassessment. The impugned notice
having been issued beyond the period of four years from the
end of relevant assessment year, the question of true and
full disclosure by the assessee would also be an additional
factor. However, when the Revenue suggests that the
assessee had indulged in the bogus accommodation entries
and therefore, said amount of Rs. 3 crore was nothing but
the assessee’s unexplained cash credit, the issue of change
of opinion and true and full disclosure would merge almost to
the extent of overlapping. In other words, if the Revenue can
prima facie show on the basis of additional material available
6 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
with the Assessing Officer after completing the scrutiny
assessment that the assessee had made a bogus claim,
merely because the issue was examined by the Assessing
Officer, would not preclude him from reopening the
assessment. Reference in this context can be made to the
decision of the Supreme Court in the case of M/s. Phool
Chand Bajrang Lal & Anr. Vs. I.T.O.1. It is a case in which
during the original scrutiny assessment, the question of
transaction of loan given by the assessee was examined.
Later on, however, the Assessing Officer received information
suggesting that the entire transaction was bogus. When the
question of validity of reopening of assessment came up for
consideration before the Supreme Court, it was observed as
under:-
“25. From a combined review of the judgments of this Court, it
follows that an Income-tax Officer acquires jurisdiction to reopen
assessment under Section 147(a) read with Section 148 of the Income
Tax Act, 1961 only if on the basis of specific, reliable and relevant
information coming to his possession subsequently, he has reasons
which he must record, to believe that by reason of omission or failure
on the part of the assessee to make a true and full disclosure of all
material facts necessary for his assessment during the concluded
assessment proceedings, any part of his income, profit or gains
chargeable to income tax has escaped assessment. He may start
1 (1993) 4 SCC 77
7 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
reassessment proceedings either because some fresh facts come to
light which where not previously disclosed or some information with
regard to the facts previously disclosed comes into his possession
which tends to expose the untruthfulness of those facts. In such
situations, it is not a case of mere change of opinion or the drawing
of a different inference from the same facts as were earlier available
but acting on fresh information. Since, the belief is that of the
Income-tax Officer, the sufficiency of reasons for forming the belief,
is not for the Court to judge but it is open to an assessee to establish
that there in fact existed no belief or that the belief was not at all a
bona fide one or was based on vague, irrelevant and non-specific
information. To that limited extent, the Court may look into the
conclusion arrived at by the Income Tax Officer and examine whether
there was any material available on the record from which the
requisite belief could be formed by the Income Tax Officer and further
whether that material had any rational connection or a live link for the
formation of the requisite belief. It would be immaterial whether the
Income-tax Officer at the time of making the original assessment
could or, could not have found by further enquiry or investigation,
whether the transaction was genuine or not, if one the basis of
subsequent information, the Income-tax Officer arrives at a
conclusion, after satisfying the twin conditions prescribed in Section
147(a) of the Act, that the assessee had not made a full and true
disclosure of the material facts at the time of original assessment and
therefore income chargeable to tax had escaped assessment. The
High Courts which have interpreted Burlop Dealer’s case (Supra) as
laying down law to the contrary fell in error and did not appreciate the
import of that judgment correctly.
26. We are not persuaded to accept the argument of Mr. Sharma
that the question regarding truthfulness or falsehood of the
transactions reflected in the return can only be examined during the
original assessment proceedings and not at any stage subsequent
thereto. The argument is too broad and general in nature and does
8 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
violence to the plain phraseology of Sections 147(a) and 148 of the Act
and is against the settled law by this Court. We have to look to the
purpose and intent of the provisions. One of the purposes of Section
147, appears to us to be, to ensure that a party cannot get away by
wilfully making a false or untrue statement at the time of original
assessment and when that falsity comes to notice, to turn around
and say “you accepted my lie, now your hands are tied and you can
do nothing”. It would be travesty of justice to allow the assessee that
latitude.
27. In our opinion, therefore, in the facts of the present case the
Income-tax Officer Azamgarh rightly initiated the reassessment
proceedings on the basis of subsequent information, which was
specific, relevant and reliable, and after recording the reasons for
formation of his own belief that in the original assessment
proceedings, the assessee had not disclosed the material facts truly
and fully and therefore income chargeable to tax had escaped
assessment. He, therefore, correctly invoked the provisions of
Sections 147(a) and 148 of the Act. The High Court was, thus, perfectly
justified in dismissing the writ petition. There is no merit in this appeal
which fails and is dismissed but with no order as to costs”
8. In this background, we may take stock of the reasons
recorded by the Assessing Officer. After the assessment was
completed, the Assessing Officer was supplied information
collected through search action at the residence and other
premises of Shirish C. Shah who was found to be the main
person engaged in providing bogus accommodation entires.
The material impounded during the search suggested that
Prabhav Industries was entirely controlled by Shirish C. Shah
9 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
which had made investment of Rs. 3 crore in assessee
company. The notice issued by the Assessing Officer to
Prabhav Industries under Section 133(6) remained
unanswered. It was on the basis of such material, the
Assessing Officer formed a belief that the said sum of Rs. 3
crore was nothing but the re-rooting of assessee’s
unexplained cash.
9. In facts of the present case, we do not find merits in
any of the contentions of the petitioner. Firstly, as noted,
merely because the Assessing Officer had examined the
transactions during the original assessment proceedings,
would not preclude him from subsequent inquiry it is shown
on the strength of additional material establishing prime
facie that the disclosures made by the assessee were not
true. If the entire claim is bogus and so established to be,
the assessee would fail the test of true and full disclosure.
Requirement of true and full disclosure runs through the
entire assessment and it does not end on filing of return.
The search action against Shirish C, Shah provided certain
information which was also processed by the Assessing
10 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
Officer before forming the belief that income chargeable to
tax had escaped assessment.
10. Secondly, the entire reasons when read as a whole,
more than sufficiently demonstrate the belief of the
Assessing Officer that the entire assessment goes on bogus
claim of share application money having been received by
the assessee company. Therefore, lack of true disclosures is
writ large on the face of the reasons. Mere non recitation of
such expression would not invalidate the reasons or the fact
that the reasons are based on allegations of lack of true and
full particulars.
11. Learned counsel for the petitioner submitted that the
Assessing Officer had issued notice to Prabhav Industries
under Section 133(6) of the Act which was replied and had
not remained unreplied as suggested in the reasons. Firstly,
this aspect has emerged in the rejoinder. Secondly, at this
stage, in a writ jurisdiction, we would not entertain such
disputed question since it is well settled that sufficiency of
the reasons at the end of the Assessing Officer to form a
11 of 12
::: Uploaded on – 12/02/2019 ::: Downloaded on – 28/02/2019 13:10:06 :::
2. OS WP 365618.
doc
belief that the income chargeable to tax had escaped
assessment would not be within the purview of examination
of writ court at this stage.
12. For the above reasons, the petition is dismissed.
Interim relief stands vacated.
[ S.C. GUPTE, J. ] [ AKIL KURESHI, J ]