Shunty Bunty Motors Pvt. Ltd. vs Union Of India Thru' Its Secy. & 2 ...
2017 Latest Caselaw 7316 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Court No. - 35
 

 
Case :- WRIT TAX No. - 789 of 2017
 

 
Petitioner :- Shunty Bunty Motors Pvt. Ltd.
 
Respondent :- Union Of India Thru' Its Secy. & 2 Others
 
Counsel for Petitioner :- Rahul Agarwal
 
Counsel for Respondent :- S.S.C.
 

 
Hon'ble Bharati Sapru,J.

Hon'ble Saumitra Dayal Singh,J.

Heard Sri Rahul Agarwal, learned counsel for the petitioner Sri Praveen Kumar, learned counsel for the respondents.

This writ petition has been filed to challenge the reassessment proceedings for the Assessment Year 2010-11 initiated by issuance of a notice under Section 148 of the Income Tax Act (hereinafter referred to as the Act) dated 31.03.2017.

A perusal of the reason to believe recorded for issuance of the aforesaid notice brings out the fact that the Assessing Officer received certain information from the Additional Director of Income Tax (Investigation), Delhi regarding two accommodation entries having been obtained by the petitioner from M/s Peak Infocom Pvt. Ltd. for Rs. 40,00,000/- and from M/s DRS Impex Pvt. Ltd. for Rs. 25,00,000/-, during the financial year 2009-10. According to that information these two entries were part of large number of accommodation entries provided by a group of companies known as Himanshu Verma group.

The information appears to have surfaced in the course of the search proceedings conducted against certain entities described as Himanshu Verma group wherein statements were also recorded and material appears to have been seized indicating that these entries were mere accommodation entries.

Also, it is admitted to the petitioner that it's the original assessment for the Assessment Year 2010-11 was made under Section 143(1) and not under Section 143(3) of the Act. Therefore in this case, though the requirement of the proviso to Section 147 of the Act does not apply at all, it has been submitted by learned counsel for the petitioner that the Assessing Officer has not recorded his reason to believe but mechanically issued the notice under Section 148 of the Act to the petitioner without applying his mind to the information received.

Sri Praveen Kumar, learned counsel for the revenue on the other hand submits, the information received by the Assessing Officer was definite inasmuch as the person who the petitioner claims made the investment in the petitioner company, had himself denied the same. He further submits, this aspect was never examined during the original assessment proceedings to any extent and therefore the reason to believe in the form recorded is sufficient to sustain the jurisdiction of the Assessing Officer.

We find that for the jurisdiction under Section 147 of the Act to arise, there must exist necessary material or information on the basis of which a reason may arise to any prudent person in the situation of the Assessing Officer as to the belief of escapement of income from tax.

In the instant case, the assessee is in receipt of substantial amounts of money from third parties. At this stage, insofar as those parties appear to have denied such investment the Assessing Officer had in his possession relevant material (in the shape of denial of such investment) to record his reason as to his belief that such entries represent escaped income. The Assessing Officer has recorded his reasons to believe, in the following terms:-

"M/s. Shunty Bunty Motors Pvt. Ltd. has taken accommodation entry from Shri Himanshu Verma Group in F.Y. 2009-10 as follows:

Name of the Beneficiary

PAN

Name of Himanshu Verma Group Company

Amount (Rs.)

F.Y.

Shunty Bunty Motors Pvt. Ltd.

AAGCS7652F

Peak Infocom Pvt. Ltd.

40,00,000

2009-10

Shunty Bunty Motors Pvt. Ltd.

AAGCS7652F

DRS Impex Pvt. Ltd.

 
25,00,000
 
2009-10
 
         Total						Rs. 65,00,000/-
 

In view of the above and as per the material/information available in hand it is clear that the assessee company M/s. Shunty Bunty Motors Pvt. Ltd. has taken accommodation entries of Rs. 65,00,000/- during F.Y. 2009-10 relevant to A.Y. 2010-11, I have reason to believe that income of Rs. 65,97,500/- (Rs. 65,00,000/- + Rs. 97,500/- commission @ 1.5%) for A.Y. 2010-11 has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961."

Learned counsel for the petitioner further submits, the objection as raised has not been dealt with and decided by the Assessing Officer. From a perusal of the order passed on the objections filed by the petitioner, we find that he has first referred to the information received by him and then relied on the material received from the Investigation Wing of the revenue which is specific. Then while it may be true that the assessing officer has not dealt with or decided the objection raised by the petitioner with any elaborate reasoning. Yet, in the facts of this case it appears to be sufficient as at present the reassessment proceedings have been initiated with reference to direct and specific information of escapement and no final conclusion as to fact has been recorded.

Lastly, it has been submitted by learned counsel for the petitioner that no reason to believe can arise that any income had escaped assessment at the hands of the petitioner by merely stating or alleging that the petitioner had obtained accommodation entries without explaining the basis for referring such conclusion. In this regard reliance has been placed on a judgement of the Delhi High court in the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd., wherein it has been held as below:

"22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying "unaccounted cash" is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be "a known entry operator" is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom."

In the first place, it is noted that the aforesaid decision of the Delhi High court arises from a regular appeal filed under Section 260 A of the Act. Then, in that case, the reassessment order had been made wherein addition had been made on account of certain accommodation entry having been alleged by the revenue. The said reassessment order was challenged by way of statutory appeal filed under the Act. It is in such appeal that the Income Tax Tribunal, after examining the entire facts reached the conclusion that other than the mere allegation made by the assessing officer of the entry in question being accommodation entry, there was no material to support such conclusion. The Tribunal, therefore, set aside the reassessment order for absence of reason to believe.

Then as to merits, it is noted that in that case, the information received as has been extracted in that judgement was to the following effect:

"Reasons for the belief that income has escaped assessment:

In this case, information has been received from the Director of Income Tax, (Investigation) New Delhi that the Assessee has received amount of Rs. 5,00,000/- as follows:

Beneficiary's Name Meenakshi Overseas P. Ltd

Beneficiary Bank Name State Bank of Hyderabad

Beneficiary Bank Branch Koral Bagh

Value of entre taken 500,000/-

 
Instrument no. by which		
 
entry taken				8628
 
Date on which entry taken	31.03.2004
 
Name of A/c Holder of		Shubham Electronic & Electic
 
entry giving account			
 
Bank from which entry given 	SBH
 
Branch of entry given bank	KB
 
A/c No. Entry giving account	50038"
 

 
	The Assessing Officer after examining such information recorded his reason as below:
 

"Information so received has been gone through, The above said instruments are in the nature of accommodation entry, which the Assessee has taken after paying unaccounted cash to the accommodation entry given, who is a known entry operator as per the report of the Investigation Wing. In view of these facts, the alleged transaction is not the bonafide one. Therefore, I have reason to believe that an income of Rs. 5,00,000/- has escaped assessment in the AY 1004-05 due to failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment so far as this amount is concerned. Therefore, this case is fit for issuing notice under Section 148 of the Income Tax Act, 1961. In this case the assessment was made under Section 143(1) not under Section 143(3) of the IT Act, 1961.

I am therefore, satisfied that the said income, on account of accommodation entry worth Rs. 5,00,000/- received by the Assessee has escaped assessment and accordingly after recording the above said reasons as laid down under the provisions of Section 148 (2) of the Income Tax Act, 1961 under Section 148 is being issued."

In the aforesaid context the question had arisen before the Delhi High Court whether any reason to believe could have arisen to Assessing Officer that the entry of Rs. 5,00,000/- was an accommodation entry. As is clear from the reasons to believe (extracted above), in that case the information received was neutral. The Director of Income Tax (Investigation) had only communicated to the Assessing Officer the fact of that assessee having received Rs. 5,00,000/-. The details of the creditor and the mode of payment etc. had also been specified. However, neither the creditor had stated or was claimed to have stated that the said entry was an accommodation entry nor there was other material to suggest such fact. The Assessing Officer, of his own and without anything more entertained a belief that the aforesaid entry was an accommodation entry.

In this context the Delhi High Court then concluded that the allegation of existing on accommodation entry was merely a conclusion recorded by the Assessing Officer in absence of any reason as to that belief or as to existence of such a conclusion.

In the instant case, the facts are otherwise. The information received by the petitioner's Assessing Officer is specific, both as to the amount as also to the character of it being an accommodation entry. Not only that the information states that the entries are accommodation entries but that information further states that the person who is shown as a creditor in books of account of the assessee has himself denied the genuineness of that entry. Prima facie, therefore, there is both material as also a reason to believe that the said entries are accommodation entries.

In that view of the matter, we find that the jurisdiction appears to have been validly exercised by the Assessing Officer.

However, the observations made by us are only confined to the issue whether the jurisdiction to initiate reassessment proceeding had validly arisen against the petitioner for the Assessment Year 2010-11. No part of the observation made would be relevant to the merits of the dispute i.e. whether an addition on the above count is warranted in the entirety of the facts and circumstances of the case. That issue would remain to be examined in the consequential reassessment proceedings to be now conducted by the Assessing Officer in which the assessee would be within its right to rebut the allegation made against him and to lead such evidence in its defence as it may desire to establish that the aforesaid entries were in fact genuine entries and not accommodation entries.

Accordingly, the instant writ petition lacks merit and is dismissed. No order as to costs.

Order Date :- 27.11.2017

A. Singh