IN THE HIGH COURT OF JUDICATURE AT BOMBAY
\nORDINARY ORIGINAL CIVIL JURISDICTION
\nWRIT PETITION NO. 2506 OF 2019
\nUsha Exports \u2026 Petitioner.
\nV\/s.
\nAssistant Commissioner of Income Tax. \u2026 Respondents.
\nDr.K.Shivram, Senior Advocate with Mr.Rahul Kakani
\nfor the Petitioner.
\nMr.Sham Walve for the Respondents.
\nCORAM : NITIN JAMDAR AND
\nM.S. KARNIK, JJ.
\nDATE : 12 December 2019.
\nPC.
\nBy this petition, the Petitioner challenges the notice
\ndated 28 March 2019 seeking to reopen the assessment for the
\nassessment year 2012-13, and the order dated 4 September 2019
\ndisposing of the objections raised by the Petitioner to the said notice.
\n2. The Petitioner is a partnership firm carrying on the
\nbusiness of manufacturing and exports of diamonds. The Petitioner
\nfiled the return of income for the assessment year 2012-13 on 20
\nSeptember 2012 declaring total income of Rs.29,76,330\/-. The
\nRespondent No.1- Assessing Officer sought details from the Petitioner regarding purchases, sundry creditors and sundry debtors
\nand a notice to that effect under section 142(1) of the Income Tax
\nAct, 1961 was issued on 31 July 2014. The Petitioner replied to the
\nsaid notice on 19 August 2014 and submitted details as sought for.
\nAn assessment order was passed by the Assessing Officer on 19
\nFebruary 2015 under section 143(3) of the Act without making any
\ndisallowances of the purchases.<\/p>\n
3. The Petitioner received a notice from the Assessing
\nOfficer dated 29 September 2012, seeking to reopen the assessment
\nfor the assessment year 2012-13. The reasons supplied along with
\nnotice were as follows:<\/p>\n
In this case, the assessee has filed the Return of Income for
\nthe AY 2012-13 declaring Total income of at
\nRs.29,76,330\/- on 29\/09\/2012. Information gathered by
\nthis office reveals that the captioned assessee is one of the
\nbeneficiaries who purchased HAWALA bills from
\ncompanies;managed by the Rajendra Jain Group, who are
\nengaged in the business\/ activity of issuing bogus bills
\nwithout delivery of goods as per requirements of their
\ncustomers. Information collected by the office of DGIT
\n(Inv), Mumbai also confirmed the fact that the above
\nassessee is a beneficiary on account of purchasing bogus
\nbills without delivery of goods from parties mentioned
\nbelow for the FY 2011-12 relevant to the assessment year
\n2012-13.<\/p>\n
The Name of Parties from whom assessee has made
\npurchases is a under:-
\nSr.no Name of Bill Provider Amount
\n1 M\/s Aadi Impex 4,14,18,494\/-<\/p>\n
2 M\/s Kalash Enterprises 4,69,23,678\/-
\nTOTAL 8,83,42,172\/-<\/p>\n
As per the information, the above mentioned party
\nis engaged in the business of issuing fraudulent sales bills
\nwithout delivery of goods. In the statement recorded
\nfrom the above party by the Income Tax Department, it
\nwas admitted that, they had sold bills as per the
\nrequirement of the assessee. In view of these facts, I have
\nreason to believe that income of Rs.8,83,42,172\/-
\nchargeable to tax, has escaped for assessment year 2012-
\n13, and therefore, the assessment needs to be re-opened as
\nper the provision of section 147 of the IT Act 1961 for
\nA.Y. 2012-13 and notice u\/s. 148 of the I.T. Act needs to
\nbe issued.<\/p>\n
After considering the response of the Petitioner, the Assessing Officer
\nconcluded that the purchases were made, however, they were made at
\na lower cost from the grey market and disallowed certain purchases as
\nbogus purchases.<\/p>\n
4. On 28 March 2019, the Respondent No.1- Assessing
\nOfficer issued the impugned notice under section 148 of the Act.
\nReasons for issuing the notice were supplied to the Petitioner ,which
\nare reproduced as under:<\/p>\n
The assessee is engaged in the business of Manufacturing
\nIndustry, trading and exporting of rough diamonds and
\ndiamond powder. Assessee had filed its return on
\n20\/09\/2012 for A.Y. 2012-13 declaring total business
\nincome of Rs.29,76,330\/-. In this case, information
\ngathered by the office that assessee is one of the
\nbeneficiaries of having indulged in taking bogus
\naccommodation entries of Rs.7,87,00,670\/- from the group
\nof entities managed by Shri Rajendra Jain, Shri
\nDharmichand Jain and Shri Sanjay Choudhary Group, the
\ncase was reopened and the assessment was finalized u\/s
\n143(3) r.w.s. 147 of I.T. Act, 1961 on 28\/12\/2017
\ndetermining assessed income at Rs.52,12,360\/- after
\ndisallowance of Rs.21,72,138\/- [ i.e. 2.76% of non-genuine\/
\nbogus purchase of Rs.7,87,00,670\/-).<\/p>\n
The issue of bogus accommodation entries were
\nwidely discussed in the assessment order. Further, assessee
\nhad debited an amount of 7,87,00,670\/- on account of
\npurchases from M\/s Aadi Impex and M\/s. Kalash
\nEnterprises. All these enterprises are ultimately controlled
\nby Shri Rajendra Jain. This fact has been established
\nduring scrutiny assessments that such transactions were
\nbogus accommodation entries. However, on scrutiny of
\nthe assessment order, it was observed that the Assessing
\nOfficer had made only addition of Rs.21,72,138\/- [ie.
\n2.76% of non genuine\/bogus purchase of
\nRs.7,87,00,670\/-).<\/p>\n
1 It is observed that all the purchases made by the
\nassessee were bogus and not actually purchased by the
\nassessee, then as per proviso mentioned above, all the
\nexpenditure belongs to the bogus purchase would have
\nbeen disallowed. Also, the parties who had issued the
\nbogus bills they have given their statements on oath, that
\nonly bills and no actual transaction had taken place
\nbetween them and the assessee company. In this
\nconnection, it is pertinent to note that the Hon\u2019ble
\nSupreme Court while dismissing the SLP had upheld the
\ndecision of High Court for addition of entire income on
\naccount of bogus purchases in the case of M\/s NK Proteins
\nLtd. v\/s. DCIT [2017-TIOL-23-SC-IT] vide its order dated
\n16\/01\/2017. Subsequently, the department in other cases
\ntoo had made 100% disallowance on account of
\naccommodation entry\/bogus purchases. Accordingly,
\nbogus purchases amounting to Rs.7,87,00,670\/- were
\nrequired to be disallowed and added back to total income
\nof the assessee.<\/p>\n
In view of the above, I have reason to believe that
\nincome chargeable to tax of above Rs.1,00,000\/- has
\nescaped assessment within the meaning of section 147 of
\nthe Income-tax Act, r.w. explanation thereto for A.Y. 2012-
\n13.\u2019<\/p>\n
The Petitioner submitted its objections on 2 May 2019. These
\nobjections have been disposed of by the impugned order dated 4
\nSeptember 2019. The Petitioner is, therefore, before this Court by
\nfiling the present writ petition under Article 226 of the Constitution
\nof India.<\/p>\n
5. By order dated 20 November 2019, the parties were put
\nto notice that the Petition would be taken up for final disposal at the
\nadmission stage. Accordingly, the petition is taken up for final
\ndisposal.<\/p>\n
6. Heard Dr.K.Shivram, learned Senior Advocate for the
\nPetitioner and Shri Sham Walve for the Respondents.<\/p>\n
7. The assessment for the year 2012-13 is sought to be
\nreopened by the impugned notice dated 28 March 2019. This is
\nbeyond the period of four years. The period of four years is of
\nsignificance because of the first proviso to section 147 of the Act. It
\nstipulates an additional requirement when the assessment is sought to
\nbe reopened after the expiry of four years from the end of the relevant
\nassessment year. Where an assessment under section 143(3) is made
\nfor the relevant assessment year, then no action shall be taken after
\nthe expiry of four years from the end of the relevant assessment year,
\nunless any income chargeable to tax has escaped assessment for such
\nassessment year for the assessee’s failure to disclose fully and truly all
\nmaterial facts necessary for his assessment for that assessment year. By
\nvarious judicial pronouncements, this condition is now firmly
\nestablished as the jurisdictional requirement to reopen of the
\nassessment. Further, the reassessment shall not be undertaken on a
\nmere change of opinion and reassessment proceedings are not akin to
\nreview. In such circumstances, a writ petition under Article 226 can
\nbe entertained by the Courts despite the availability of an alternate
\nremedy of appeal.<\/p>\n
8. Dr.Shivram, learned Senior Advocate for the Petitioner
\nsubmits that there two main points on which the petitioner is entitled
\nto succeed. First, that not only there is no failure by the Petitioner to
\ndisclose all material facts fully and truly, but there is not even a
\nmention to that effect in the reasons supplied to the Petitioner.<\/p>\n
Second, all the material was available and looked into by the
\nAssessing office when first reassessment proceeding took place and
\nnow it is only a change of opinion. Mr. Walve, the learned counsel for
\nthe Respondent, based on the contentions raised in reply affidavit,
\nsupported the impugned action of the Assessing Officer.<\/p>\n
9. The first contention raised by Dr.Shivram regarding the
\nabsence of statement regarding petitioner’s failure in the reasons is
\ncorrect. The reasons supplied along with the impugned notice, which
\nare reproduced above, contain no assertion there was any failure of
\nthe petitioner to disclose fully and truly all material facts necessary for
\nthe assessment. This omission can be a ground to set aside the
\nReassessment notice. Pursuant to the reasons given along with first
\nreopening notice dated 29 September 2012, the Petitioner had
\nsupplied all the material regarding the very same allegations against
\nthe Petitioner and the same were examined by the Assessing Officer.
\nAll the material was placed before the Assessing Officer by the
\nPetitioner. Acting upon this material, the Assessing Officer had, in
\nfact, made certain additions. Therefore, it cannot be said that there
\nwas a failure by the Petitioner to disclose all material facts fully and
\ntruly. In the circumstances, the jurisdictional requirement to reopen
\nthe assessment proceeding after four years is not present. Neither it
\nhas been alleged.
\n10. Dr. Shivram then submitted that the foundation of the
\nfirst reopening notice and the second notice is the same. That is
\nthe issue of bogus purchases and accommodation of entries and that
\nthere is a clear change of opinion by the Assessing Officer. He
\nsubmitted that, in the reasons supplied along with first reopening
\nnotice, the issue of bogus accommodation of entries regarding
\npurchases was discussed. The reasons given for second reopening
\nnotice reproduced above also refer to the said fact. The reasons also
\nrefer to a decision of the Supreme Court in the case of
\nM\/s.N.K.Proteins Ltd. (2017-TIOL-23-SC-IT v. DCIT ). Even
\nthis decision was before the Assessing Officer in the proceeding
\npursuant to first reopening notice. The Petitioner, along with its
\nobjections, placed explanatory note as to how the said decision of the
\nSupreme Court in M\/s.N.K.Proteins did not apply to the facts of the
\ncase. Therefore, this aspect was also considered when the proceeding
\nunder the first reopening notice was conducted. In the
\ncircumstances, the contention of the Petitioner that the impugned
\nreopening notice is issued only on mere change of opinion will have
\nto be accepted.
\n11. Since we are satisfied that the jurisdictional requirements
\nfor reopening of the assessment of the Petitioner for the assessment
\nyear 2012-13 after four years are absent, and the action of the
\nRespondent No.1- Assessing Officer is without jurisdiction, the
\nPetitioner is entitled to succeed.
\n12. Writ Petition is allowed. The impugned notice notice
\ndated 28 March 2019 seeking to reopen the assessment for the
\nassessment year 2012-13 and the order dated 4 September 2019
\ndisposing of the objections are quashed and set aside.
\n(M.S. KARNIK, J.) (NITIN JAMDAR, J.)<\/p>\n","protected":false},"excerpt":{"rendered":"
The reasons also refer to a decision of the Supreme Court in the case of M\/s.N.K.Proteins Ltd. (2017-TIOL-23-SC-IT v. DCIT ). Even this decision was before the Assessing Officer in the proceeding pursuant to first reopening notice. The Petitioner, along with its objections, placed explanatory note as to how the said decision of the Supreme Court in M\/s.N.K.Proteins did not apply to the facts of the case. Therefore, this aspect was also considered when the proceeding under the first reopening notice was conducted<\/p>\n