SHREENATHJI TERINE PRIVATE LIMITED V. THE INCOME TAX OFFICER

SCA/19978/2019

AI Insights

The case involves Shreenathji Terine Private Limited challenging a notice issued by the Income Tax Officer under section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the Assessment Year 2012-2013. The notice was based on allegations that the company received accommodation entries from a shell company, M/s. Indigo Commodeal Pvt. Ltd., which purportedly had no real business activities. The petitioner argued that the reopening was unjustified as the identity of the share applicant was established and the company had filed regular returns and was active in business. The respondent defended the reopening by citing information from the Investigation Wing that suggested the transactions were suspicious. The court, after considering the arguments and evidence, concluded that the reopening was not justified and quashed the notice.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 767738 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 05-09-2022
• Assessment Year: misc
• Other Referred Cases: CIT v/s. Lovely Exports (P.) Ltd., M/s Peass Industrial Engineers Pvt. Ltd. Vs DCIT, A Raman & Co., Kalyanji Mavji, Rainbow Texchem (P) Ltd. v. Income-tax officer, Commissioner of Income tax v. Kelvinator of India Ltd.
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NIKUNT RAVAL; KALPANA RAVAL
• Assessee Lawyers: TUSHAR HEMANI; VAIBHAVI PARIKH
• Keywords: Accommodation entry; Assessment year 2012-2013; Income Tax; Reopening of assessment; Share premium
• Section: 147; 148; 143(3); 68; 151

Judgement Text

"C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 19978 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== SHREENATHJI TERINE PRIVATE LIMITED Versus THE INCOME TAX OFFICER ========================================================== Appearance: MR TUSHAR HEMANI SENIOR ADVOCATE WITH MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MR NIKUNT RAVAL WITH MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 05/09/2022 ORAL JUDGMENT Page 1 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1.Heard learned Senior Advocate Mr. Tushar Hemani assisted by learned advocate Ms. Vaibhavi Parikh for the petitioner and learned advocate Mr. Nikunt Raval with learned advocate Mrs. Kalpana K. Raval for the respondents. 2.Having regard to the controversy involved in this petition, with the consent of the learned advocates for the respective parties, the petition is taken up for final hearing. 3.Rule returnable forthwith. Learned advocate Mr. Nikunt Raval waives service of notice of rule for the respondents. 4.The petitioner has preferred this petition under Article 226 of the Constitution of India challenging the impugned notice dated Page 2 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 30.03.2019 issued under section 148 of the Income Tax Act, 1961 (For short “the Act”) proposing to reopen the assessment for the Assessment Year 2012-2013. 5.Brief facts of the case are that the petitioner - company during the Financial Year 2011-2012 relevant to Assessment Year 2012-13 issued 80,000 shares of Rs.10/- each at a premium of Rs.40/- per share to M/s. Indigo Commodeal Pvt. Ltd. Accordingly, the petitioner received share capital and share premium aggregating to Rs.40,00,000/- [i.e. 80,000 shares * Rs.50 per share (i.e. Rs.10 face value + Rs.40 share premium)] through banking channel in two different lots i.e. Rs.25,00,000/- on 03.06.2011 and Rs.15,00,000/- on 07.07.2011. 5.1) The petitioner filed return of income for the year under consideration on Page 3 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 30.09.2012 declaring total income at Rs.9,70,110/-. 5.2) The respondent issued the impugned notice dated 30.03.2019 under section 148 seeking to reopen the case of the petitioner for the year under consideration. 5.3) The petitioner filed return of income in response to the impugned notice on 27.04.2019 and requested the respondent to supply copy of reasons for reopening the assessment. 5.4) The respondent supplied the copy of reasons for reopening the assessment vide letter dated 25.05.2019. The reasons recorded by the Assessing Officer for reopening the assessment under section 147 of the Act read as under : Page 4 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 “1. Brief Details of the Assessee: The assessee is a Private Limited company and has filed its return of income for A.Y.2012-13 on 30/09/2012 by declaring of income at Rs.9,70,110/-. 2. Brief Details of Information collected/ received by the AO: In this case, an information has been received from the ITO (Inv.) Unit-1 and AIU Kolkata vide letter No.ITO9Inv.)/U-1/KOL/ Girdharilal Sharma/35357/2017-18 Dtd. 15/02/2018 that Shreenathji Terine Private Limited received accommodation entry from the alleged company M/s. Indigo Commodeal Pvt. Ltd which had no business activity. On perusal of the Balance Sheet, it is observed that it had only share premium and investment in unquoted shares. The assessee has shown its fixed asset is nil. On perusal of the bank account of Indigo Commodeal Pvt Ltd. it is also observed that there RTGS credits and transfers from different Bank Accounts and simultaneously the said amount transferred to the different Bank Account through RTGS/ transfer. Subsequently, funds were transferred to different current accounts. As per the Flow Chart fund transfers in different bank accounts obtained from the bank and beneficiary, it is noticed that the assessee Company Shreenathji Terine Pvt Ltd is one of the beneficiary companies who took entries from Page 5 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 these shell companies which do not have any real business and was operated only to bring their unaccounted money in the books. In this process, the assessee company Shreenathji Terine Pvt. Ltd gradually brought their unaccounted cash back in the books without paying any tax. The source of fund credited in the books of beneficiaries which is proved in above discussion to be fund transfer from different shell companies Account having no business. The details of following alleged bank account has been obtained from BANK OF BARODA. Analysis of this bank account shows the following credit and debit entries:- Sr. No. A/c. No. Name of the account holder FY Debit in Rs. Credit in Rs. 1 07430500000 101 Shreenathji Terine Pvt. Ltd. 2011-2012 40,00,000/- 40,00,000/- Further, it is reported that the matter of verification/enquiry was high value transaction in the current account and the economic rationale behind them. The statement of bank account held by the subject as given in the dissemination note were obtained. The detailed comparison of the total amount credited in the bank account vis-a- vis the gross sales reported has Page 6 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 been made about. It is found that there is wide difference between the gross receipts disclosed to the department in the return of the income. So, in order to verify the source and nature of transactions notice was issued to the subject, but the notice/summon couldn't be served on the assessee personally, so the notice was served by affixture by deputing the inspector of unit. However, in spite of that, neither assessee itself nor through authorized representative attended the office. So the subject Shreenathji Terine Pvt Ltd failed to produce satisfactory explain of the nature of transactions carried out in the said above bank account. 3. Analysis of information collected received: The information received from the ITO (Inv.) Unit-1 and AIU Kolkata has been carefully considered and found to be correct on the basis that for A.Y.2012-13 the assessee has shown that it has receipt huge amount as share premium which is not justifiable in view of the financials of the assessee company. 4.Inquiries made by the AO as sequel to information collected/ received: The Return filed by the assessee for A.Y.2012-13 has been perused and it is found that the assessee has shown sales at Rs.9,75,64,421/- and has shown purchases at Rs.3,43,63,170/-. Page 7 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 The assessee has shown meager Profit of Rs.667337/- from business activities which is not commensurate with huge figures of Sales and Purchases. (b) The assessee company Shreenathji Terine Pvt Ltd is one of the beneficiary companies who took entries from shell company which do not have any real business and was operated only to bring their unaccounted money in the books. In this process, the assessee company Shreenathji Terine Pvt Ltd gradually brought their unaccounted cash back in the books without paying any tax. The source of fund credited in the books of beneficiaries which is proved in above discussion to be fund transfer from shell company Account having no real business activities. 5. Findings of the AO: From the following points, it may be established that the credit entries of Rs. 40,00,000/- in bank account of the assessee company held with Bank of Baroda Bank are suspicious and accommodation entry only. (a) The Return filed by the assessee for A.Y.2012-13 has been perused and it is found that the assessee has shown sales at Rs.97,564,421/- and has shown purchases at Rs.3,43,63,170/- The assessee has shown meager Net Profit of Page 8 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 Rs.667337/-, which is not commensurate with huge figures of Sales and Purchases. (b) The assessee company Shreenathji Terine Pvt Ltd is one of the beneficiary companies who took entries from shell company which do not have any real business and was operated only to bring their unaccounted money in the books. In this process, the assessee company Shreenathji Terine Pvt Ltd gradually brought their unaccounted cash back in the books without paying any tax. The source of fund credited in the books of assessee company which is proved in above discussion to be accommodation entry and fund transfer from shell company i.e. Indigo Commodeal Pvt.Ltd. which do not having real business activities. 6. Basis of forming reason to believe and details of escapement of income: From the following points, it may be established that the credit entry from Indigo Commodeal Pvt. Ltd of Rs. 40,00,000/- in bank account of the assessee company is suspicious and accommodation entry only. (a) The Return filed by the assessee for A.Y.2012-13 has been perused and it is found that the assessee has shown sales at Rs.97,564,421/- and has shown purchases at Rs.3,43,63,170/-. The assessee has Page 9 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 shown meager Net Profit of Rs.667337/-, which is not commensurate with huge figures of Sales and Purchases. (b) The assessee company Shreenathji Terine Pvt Ltd is one of the beneficiary companies who took entry from shell company which do not have any real business and was operated only to bring their unaccounted money in the books. In this process, the assessee company Shreenathji Terine Pvt Ltd brought their unaccounted cash back in the books without paying any tax. The source of fund credited in the books of assessee company which is proved in above discussion to be accommodation entry and fund transfer from shell company l.e. Indigo Commodeal Pvt. Ltd. which do not having real business activities. As discussed in preceding paras the assessee company has credit of Rs.40,00,000/- in its Bank Account which is a paper transaction only, therefore, as per the provisions of section 68 of the IT Act such credit of Rs.40,00,000/- is income of the assessee company which has been escaped income assessment. In view of the circumstances and facts of the case, I have reason to believe that the income of Rs.40,00,000/- chargeable to tax has escaped assessment for AY 2012-13. Thus, it is a fit case for issue of notice u/ s. 148 of the I.T. Act Page 10 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 7. Escapement of Income chargeable to Tax in relation to any assets(including financial interest in any entity) located outside India Not Applicable 8. Applicability of the provisions of section 147/ 151 to the facts of the In this case a return of income was filed for the year under consideration, but no scrutiny assessment u/s. 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceeding u/s.147 is reason to believe which has been recorded as above. It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated u/s.2(40) of the Act was made and the return of income was only processed u/s.143(1) of the Act. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment.” Page 11 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 5.5) The petitioner, vide letter dated 12.07.2019, requested the respondent to supply a copy of sanction obtained under section 151 of the Act, material mentioned in the reasons for reopening and any other material relied upon by the respondent for reopening the case of the petitioner. 5.6) The respondent, vide letter dated 22.08.2019, supplied the copy of approval accorded by the Pr.CIT-2, Surat. However, it is the case of the petitioner that other documents, as sought for by the petitioner, were not supplied on the count that the same was part of Departmental internal procedure so also a confidential matter. 5.7) The petitioner, thereafter vide letter dated 03.09.2019, raised objections against reopening of the assessment. Page 12 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 5.8) The respondent, vide order dated 13.09.2019 disposed of such objections raised by the petitioner and held that the action of reopening is absolutely justified and valid in the eye of law. 5.9) The petitioner, thereafter, vide letter dated 14.09.2019, again requested the respondent herein to supply copy of various documents sought for by the petitioner vide its earlier letter dated 03.09.19 except the approval of the Principal Commissioner of Income Tax under section 151 of the Act. 5.10) The respondent, vide letter dated 11.10.19, stated that copy of documents sought for by the petitioner were supplied except copy/letter/ documents of information received by the respondent. The information so received has been communicated to the petitioner through reasons for reopening. Page 13 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 Such documents/ statements received with the information could not be supplied as it contains material not related to the Petitioner and the same is internal correspondence of the Department. 5.11) Being aggrieved by the impugned notice issued under section 148 of the Act, the petitioner has preferred the present petition. 6.Learned Senior Advocate Mr. Tushar Hemani for the petitioner submitted that the impugned notice under section 148 of the Act, issued by the respondent is patently bad, illegal, contrary to law and in gross violation of the fundamental rights guaranteed to the petitioner under Article 14 of the Constitution of India. Page 14 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 6.1) It was submitted that the reasons for reopening lacked validity and on the basis of such reasons, the respondent could not have reason to believe that income chargeable to tax has escaped assessment in the hands of the petitioner. 6.2) It was submitted that the respondent has stated in the reasons for reopening that M/s. Indigo Commodeal Pvt. Ltd. is a paper company and does not have any business activity, however, there is no rational for reaching such a conclusion inasmuch as no person has given any statement or confession to the effect that M/s. Indigo Commodeal Pvt. Ltd. is a paper company providing accommodation entries. 6.3) It was further submitted that M/s. Indigo Commodeal Pvt. Ltd. has filed return of income for the Assessment Year 2012-2013 Page 15 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 on 25.01.2016 declaring business income of Rs.2,82,005/- and the said company being engaged in the investment activity earned income in the form of interest on loans which is the business income of the said company and therefore, it cannot be said that no business activity has been carried out by the said company. It was further submitted that perusal of Balance-sheet of M/s. Indigo Commodeal Pvt. Ltd. reveals that the said company has fixed assets in the form of computer as well as furniture and fixtures and therefore, it cannot be said that the said company does not have fixed assets. It was submitted that assessment in the case of M/s. Indigo Commodeal Pvt. Ltd. for the Assessment Year 2013-2014 was also framed wherein the business income declared by the said company was accepted and the only disallowance made while framing assessment was the disallowance under section 14A of the Page 16 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 Act. M/s. Indigo Commodeal Pvt. Ltd. has also filed all the annual return with ROC. The said company has also filed annual accounts. The status of the said company is active as is evident from the MCA's master details of the said company. It was therefore, submitted that M/s. Indigo Commodeal Pvt. Ltd. was not a paper company and it does carry out its business. Thus, the respondent could not have reason to believe that income chargeable to tax had escaped assessment in the hands of the petitioner. 6.4) Learned Senior Advocate Mr. Hemani submitted that the summons as well as the notice could not be served to the petitioner as the premises of the petitioner were closed down on account of discontinuation of the business and neither any notice affixed was found by the petitioner nor any efforts were made at the end of the Department so as to Page 17 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 serve the notice through postal authorities and therefore, there was no occasion for the petitioner to comply either with such summons or any such notice. 6.5) It was submitted that the ground raised by the respondent to the effect that the petitioner had meagre profit which is not commensurate with its sales and purchases, is merely a passing remark and had the case of the petitioner been reopened on the said count the it would be nothing but reopening for making roving inquiries and the same is not permissible in the eye of law. 6.6) It was submitted that the Legislature has amended Section 68 of the Act by inserting a proviso which is in respect of receipt of share application money, share capital and share premium. Such proviso requires that in case of receipts in respect Page 18 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 of share capital and share premium, the concerned person, from whom such funds have been received, also need to offer an explanation about nature and source of such sum so credited and the same must be found satisfactory to the Assessing Officer. However, such amendment is with effect from 01.04.2013 and hence, the same is not applicable for the year under consideration i.e. Assessment Year 2012-2013. It was submitted that as per the pre-amendment law, the only burden on the recipient of share capital, share premium and/or share application money was to establish identity of concerned person from whom such funds have been received as is held by the Apex Court in the case of CIT v/s. Lovely Exports (P.) Ltd. reported in 216 CTR 195 (SC). It was submitted that in the present case identity of the concerned person is not in dispute at all. In fact, the Respondent has mentioned Page 19 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 the name of the concerned share applicant in the reasons for reopening itself which shows that identity of such persons is not in dispute at all, and once identity of the concerned person has been established, no addition can be made in the hands of the petitioner in respect of share capital and share premium received. 6.7) It was further submitted that the pre-requisite for reopening an assessment under section 147 of the Act is that there must be escapement of any income chargeable to tax. In the case of the petitioner, reopening proceedings have been resorted to in order to tax share capital and share premium received during the year under consideration. It was submitted that Share capital and Share premium is a Balance-sheet item which cannot give rise to a presumption that any Income chargeable to tax has escaped Page 20 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 assessment. Thus, in absence of any income chargeable to tax, reopening is not justified in the eye of law. Hence, impugned notice deserves to be quashed and set aside. 6.8) It was further submitted that notice under section 148 can be issued if and only if an Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment. It implies that an Assessing Officer himself must be satisfied that some income chargeable to tax has escaped assessment and such satisfaction must be of the concerned Assessing Officer himself. It was submitted that in the present case, no such satisfaction has been recorded by the respondent himself. In fact, the respondent has merely relied upon the information received from the office of the ITO (Inv.), Unit 1 and AIU, Kolkatta for the purpose of reopening the assessment in the Page 21 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 case of the petitioner. In absence of any such exercise at the end of the respondent, it becomes clear that the assessment has been reopened merely based on borrowed satisfaction as against the statutory requirement of independent satisfaction. 6.9) It was further submitted that as per section 151 of the Act, no notice shall be issued under section 148 of the Act after the expiry of a period of four years from the end of the relevant assessment year unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing officer, that it is a fit case for the issue of such notice. It was submitted that in the present case, reopening is beyond a period of four years from the end of the relevant assessment year and hence, sanction of Principal Chief Page 22 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is to be mandatorily obtained. 7.On the other hand, learned advocate Mr. Nikunt Raval for the respondent submitted that in the present case the information was received from the ITO (Inv.) Unit-1 and AIU, Kolkata vide letter dated 15.02.2018 that Shreenathji Terine Private Limited received accommodation entry from the alleged company M/s Indigo Commodeal Pvt Ltd, which had no business activity. It was submitted that on perusal of the Balance Sheet, it was found that it had only share premium and investment in unquoted shares. The assessee has shown its fixed asset as nil. Upon perusal of the bank account of Indigo Commodeal Pvt Ltd, it was found that there are RTGS credits and transfers from different Bank Accounts and simultaneously the said amount transferred to Page 23 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 the different Bank Account through RTGS/transfer. Subsequently, funds were transferred to different current accounts. As per the Flow chart of fund transfers in different bank accounts obtained from the bank and beneficiary, it was noticed that the assessee company - Shreenathji Terine Pvt Ltd is one of the beneficiary companies who took entries from these shell companies which do not have any real business and was operated only to bring their unaccounted money in the books. It was submitted that the assessee company - Shreenathji Terine Pvt Ltd gradually brought their unaccounted cash back in the books without paying any tax. It was submitted that the details of alleged bank account have been obtained from Bank of Baroda which shows the following credit and debit entries: Page 24 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 Sr. No. A/c. No. Name of the account holder FY Debit in Rs. Credit in Rs. 1 07430500000 101 Shreenathji Terine Pvt. Ltd. 2011-2012 40,00,000/- 40,00,000/- 7.1) It was submitted that upon detailed comparison of the total amount credited in the bank account vis-a-vis the gross sales it was found that there is wide difference between the gross receipts disclosed to the department in the return of the income. So, in order to verify the source and nature of transactions notice was issued but the notice/summon could not be served on the assessee personally, so the notice was served by affixture by deputing the inspector of unit. However, in spite of that, neither assessee itself nor through authorized representative attended the office. 7.2) Relying upon the judgment of this Court in case of M/s Peass Industrial Page 25 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 Engineers Pvt. Ltd. Vs DCIT reported in (2016) 72 Taxmann 302 (Gujrat), it was submitted that from the material available on record, if the Assessing Officer formed reasonable belief that income of the assessee has escaped assessment then the reopening of assessment was justified. 7.3) It was submitted that upon the information available before the Assessing Officer, at the initial stage what is required is reason to believe, but not established fact of escapement of Income. In support of such submission, reliance was placed on the decision in case of A Raman & Co., reported in 67 ITR 11 (SC), as well as in case of Kalyanji Mavji reported in 102 ITR 287 (SC). 7.4) It was submitted that the contention of the petitioner that the re-opening lacked Page 26 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 validity cannot be accepted as the case was reopened after the satisfaction arrived at by the the Assessing Officer and after taking due approval of the Higher Authorities. 7.5) It was submitted that contention of the petitioner that there is an amendment to Section 68 of the Act with effect from 01.04.2013 and hence the same is not applicable for the year under consideration and the assessee has to just establish the identity of the concerned person form who such funds are received, such facts could be verified and established only when the assessment is reopened. 7.6) Reliance was placed on the decision of this Court in case of Rainbow Texchem (P) Ltd. v. Income-tax officer reported in (2021) 129 taxmann.com 85 (Gujarat) to contend that where Assessing Officer issued a reopening Page 27 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 notice against assessee on the ground that an information was received from investigating wing that during a survey conducted in case of a person, several material was impounded which revealed accommodation entries, impugned notice for reopening the assessment on the basis of said information was justified. 8.Having heard the learned advocates for the respective parties and having considered the facts and materials placed on record, it appears that relying upon the information received from the Investigation Wing of the department, considering it is as a dependable source of information through whom transaction being undertaken by the assessee are collected and disseminated, the Assessing Officer has formed the reason to believe that income has escaped assessment on the assumption that source of funds credited in Page 28 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 the books of the petitioner company is a fund transferred from different shell company account having no business. 9.However, it is the case of the assessee that on the basis of the documentary evidence available on record of the department, M/s. Indigo Commodeal Pvt. Ltd. was having business income and not the Income from Other Sources and the assessment order passed under section 143(3) for the Assessment Year 2013- 2014 would also show that the company is engaged in the business. It was also pointed out that M/s. Indigo Commodeal Pvt. Ltd. has filed annual return with ROC showing the status of the company as active. 10. In absence of any tangible material with the respondent Assessing Officer, reopening notice issued merely on the basis of information would be without jurisdiction as Page 29 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 there is no nexus between the information coming in possession of the Assessing Officer and formation of belief that income chargeable to tax has escaped assessment. 11. The Assessing Officer while dealing with the objections raised by the petitioner has merely relied upon the information received from Investigation Wing of the department on the basis of an entry of Rs. 40 lakhs for the Financial Year 2011-2012 which is squared up during the year only. Therefore, in the facts of the case, there is no income which has escaped assessment except one entry of Rs. 40 lakhs being debited and credited in the books of the petitioner company for the year under consideration. Merely because the assessee has shown a meagre profit of Rs.6,67,337/- from the business activity which according to the Assessing Officer do not commensurate with the figures of sale and purchase Page 30 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 amounting to Rs.9,75,64,421/- and Rs.3,43,63,170/- respectively, the Assessing Officer could not have formed any reasonable belief that income has escaped assessment only because of one debit and credit entry of Rs. 40 lakh in the bank account of the petitioner company held with Bank of Baroda on the presumption that same is suspicious and accommodation entry only. 12. Thus the Assessing Officer has endeavored to review the assessment which has been completed under section 143(3) of the Act in absence of any prima facie material available with the Assessing Officer to reopen the case of the petitioner. The Apex Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. reported in (2010) 320 ITR 561(SC) has held as under: “2. A short question which arises for determination in this batch of Page 31 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 civil appeals is, whether the concept of \"change of opinion\" stands obliterated with effect from 1st April, 1989, i.e., after substitution of Section 147 of the Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987? xxxx 6. …………prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider, However, one needs to give a schematic interpretation to the words \"reason to believe\" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of \"mere change of opinion\", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power Page 32 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 to review; he has the power to re- assess. But re-assessment has to be based on fulfillment of certain pre- condition and if the concept of \"change of opinion\" is removed, as contended on behalf of the Department, then, in the garb of re- opening the assessment, review would take place. One must treat the concept of \"change of opinion\" as an in-built test to check abuse of power by the Assessing Officer…..” 13. In view of above facts and settled legal position, the contentions raised on behalf of the respondent authority as well as reliance placed on decisions would not be applicable in facts of the case. 14. For the foregoing reasons, the petition succeeds and the impugned notice dated 30.03.2019 issued under section 148 of the Act by the respondent exercising the powers to reopen the assessment for the Assessment Year 2012-2013 is illegal and hereby quashed and set aside. As a consequence, order dated 13.09.2019 of the Assessing Officer disposing Page 33 of 34 C/SCA/19978/2019 JUDGMENT DATED: 05/09/2022 of the objections of the petitioner against the impugned notice is also quashed and set aside. 15. Rule is made absolute to the aforesaid extent. No order as to costs. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 34 of 34 "