Vineet Agarwal V. Assistant Commissioner Of Income Tax And 3 Others

WTAX/445/2022

AI Insights

The case involves Vineet Agarwal, the petitioner, challenging a notice issued under Section 148 of the Income Tax Act, 1961, by the Assistant Commissioner of Income Tax, which was based on allegations of involvement in accommodation entries and manipulation of share prices for tax evasion. The petitioner sought to quash the notice and the subsequent rejection of his objections by the National Faceless Assessment Centre. The court examined the reasons for the notice and the rejection of objections, finding them to be substantiated by evidence of undisclosed income and manipulation of share transactions.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 808104 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 29-03-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: GAURAV MAHAJAN; PRAVEEN KUMAR
• Assessee Lawyers: SUYASH AGARWAL
• Keywords: Accommodation entries; Bogus Long Term Capital gain; Certiorari; Certiorari; Prohibition; Reassessment; Undisclosed income
• Section: 148

Judgement Text

"Court No. - 3 Case :- WRIT TAX No. - 445 of 2022 Petitioner :- Vineet Agarwal Respondent :- Assistant Commissioner Of Income Tax And 3 Others Counsel for Petitioner :- Suyash Agarwal Counsel for Respondent :- C.S.C.,Gaurav Mahajan Hon'ble Surya Prakash Kesarwani,J. Hon'ble Jayant Banerji,J. Heard Sri Dibyanshu Agarwal, learned counsel for the petitioner and Sri Praveen Kumar, learned Senior Standing Counsel for the Income Tax Department. This writ petition has been filed praying for the following relief: \"(i) Issue a writ, order or direction in the nature of Certiorari quashing the impugned notice u/s 148 of the Act bearing DIN & Notice No.ITBA/AST/S/148/2020-21/1032032829(1) dated 31.03.2021 issued by the Respondent No. 1 in the petitioner's for A.Y.2013-14; case (ANNEXURE- 10) (ii) Issue Writ, Order or direction in the nature of Certiorari quashing the order dated 16.12.2021 passed by Respondent No. 3, rejecting the objection of the petitioner. (ANNEXURE- 13) (iii) Issue Writ, order or direction in the nature of Prohibition restraining the respondents from completing the reassessment proceeding u/s 148 of the Act for A.Y.2013-14.\" The reasons supplied by the Assessing Authority to the petitioner for issuance of notice under Section 148 of the Income Tax Act, 1961, is reproduced below: \"3. Analysis of information collected/received : A detailed investigation was carried out by the DDIT (Inv.), Unit -5, Delhi In respect of accommodation entries to book bogus long term capital gain by large number of assessees in 19 scrips. The scrip Presha Metallurgy is one such scrip under investigation. From the detailed findings given in the report, it is concluded that the share price of Presha Metallurgical Ltd. has been manipulated and bogus profits and losses have been booked in the names of clients/beneficiaries by trading in the scrip. From the detailed analysis of the trade data, it is observed that various persons have booked profit and losses in the Scrip during various FYs. In addition to that, there are also cases of short sell beneficiaries in which sell value is a substantial amount but the buy value is NIL which goes to. how the purchases of these shares have been made through off the market transactions. In the case or the assessee Vineet Agarwal also, the shares of MS Presha Metallurgical have been sold for Rs. 53,40,120/- whereas the buy vale has been shown as NIL. This goes to show that the shares were purchased through off market transactions. Thus, the assessee has a liberty to show the purchase price of the shares at a lower level by showing purchases at an earlier date when the prices of the shares were low whereas same were purchased just a few days before the Sell Transaction. 4. Enquiries madeby the AO as sequal to information collected/ receive: As per the information, the assessee Vineet Agarwal is one of the beneficiaries who has been provided accommodation entry by way of short sell transactions in respect of scrip Presha Metallurgicals Ltd. amounting to Rs. 53,40,120/- in the financial year 2012–13. After receiving the information, in order to verify the facts mentioned in the report regarding the assessee, the ITR filed by the assessee for A. Y. 2013-14 was downloaded from the e-fling portal and perused. It was found that during the year under consideration, the above transaction has not been disclosed in the return of income. However, since the accommodation entries are obtained from the entry operators after remitting the amount to them in cash hence it is clear that in order to obtained the accommodation entries of Rs. 53,40,120/- the assessee had first remitted this amount to the entry operator in cash out or undisclosed income so that same can be received back in due time through banking channels. 5. Finding of the AO: On going through the information and on the perusal of ITR of the assessee for the A.Y. 2013-14, t is found that the assessee Sh. Vineet Agarwal is the beneficiary of shares transactions in the scrip Presha Metallurgical Ltd., amounting to Rs. 53,40,120/ in the financial year 2012-13 and has invested this sum out of undisclosed income. As this undisclosed income is invested for the purpose of taking accommodation entry, hence it is also clear that through this transaction, the undisclosed income of the assessee himself is being routed to bring it to the books of account without payment of any taxes. 6. Basis of forming reasons : The report of the Investigation Wing clearly reveals that a number of entry operators are engaged in providing accommodation entries to various parties in the form of bogus LTCG claim. On the basis of the analysis of the data, the Investigation Wing has furnished a detailed report as to the name, address PAN and bogus transactions of various assessees. The name of the assessee is also appearing in the list of the beneficiaries who has been provided accommodation entries amounting to Rs.53,40,120/- by such entry operators through short sell transactions. An analysis of the ITR of the assessee also shows that he has not disclosed this transaction in the ITR However, it is clear that before obtaining the accommodation entry, the assessee had invested the sum of Rs. 53,40,120/- out of undisclosed income. Thus, the facts and circumstances of the case and the detailed enquiry report of the Wing clearly reveal that the assessee was fully involved in accepting bogus entries from Entry Operators in the form of bogus share transactions to avoid the payment of due taxes and also concealed investment and claimed income as exempt income. On the basis of material available as discussed above, I am of the view that assessee had introduced his own undisclosed money in the garb of bogus transaction of Rs. 53.40,120- Accordingly. after considering the facts mentioned in the report and in view of the material available on records, I have reasons to believe at income amounting to Rs 53,40,120/= has escaped assessment in respect of the assessee in the A.Y. 2013-14.\" The objection of the petitioner has been rejected by the National Faceless Assessment Centre, Delhi by order dated 16.12.2021, as under: \"5. I have gone through the assessee's objections and the same are dealt with as under:- a) On verification of the case of the assessee, it is noticed that Income of the assessee has written of Rs. 78,81,880/- instead of Rs. 7,94,644|/-. There is typographic mistake and the income of the assessee is Rs. 7,94,644/-, It is bona fide mistake which is accepted. b) As per asssessee Sr. 4 (b), he has shown Long Term Capital Gain in capital account not in ITR and stated that capital gain is exempted u/s 10(38). The assessee has to show correct and factual figure in the ITR and exemption can be allowed only after filling the Retune of Income not just mentioned that the figure is shown in capital account on the face of balance sheet which is the case of the assessee. Further for AY. 2013-14, asseessee has filed ITR-4 and shown income on presumptive basis. Assessee has not submitted any detail which is required to verify. Hence, whether the assessee has shown correct income can't be ascertain without reopening the case. c) Assessee has shown short term investment in ITR of Rs. 409821/- in Equity Shares, including share application money, for A.Y. 2012-13 but it was not clear in which fund investment was made. Further in ITR-4 of AY. 2013-14, assessee has shown LTCG- NIL, and STCG of Rs. 54205/- which is quite low of sale value of share of M/s Presha Metallurgical of Rs. 53,40,120/- d) Further as per the investigation report share of M/s Presha Metallurgical Ltd. has been manipulated and bogus profits and losses have been booked in the names of clients/beneficiaries by trading in the scrip, and assessee is one of the share holder of M/s Presha Metallurgical Ltd during the tenure of share manipulation. e) It is the fact that the assessee has shares of M/s Presha Metallurgical and same was sold for Rs. 53,40.120/- and transaction has not been disclosed in the return of income. In absence of the detail from the assessee side in the ITR about the LTCG, the AO treated amount receipt, as accommodation entries which is obtained from the entry operators after remitting the amount to them in cash on the basis of detailed investigation carried out by the DDIT (Inv.), Unit -5, Delhi, In respect of accommodation entries to book bogus long term captal gain by large number of assessees. This is based on fact not on assumption. From above detail AO has clear reason to believe that income has escaped assessment, requiring re-opening the case.\" We have perused the reasons for belief to issue notice under Section 148 of the Act, 1961 as recorded by the respondent as well as the order dated 16.12.2021 passed by the respondent No.3. Perusal of the reasons recorded by the respondent No.1 for issuance of notice under Section 148 of the Act, 1961 indicates that the reasons recorded are not irrelevant and instead it prima facie indicate escapement of income to tax. Under the circumstances, we do not find any good reason to interfere with the impugned notice or the order rejecting the objection. For the reasons afore-stated, we do not find any merit in this writ petition. Consequently, the writ petition fails and is hereby dismissed. Order Date :- 29.3.2022 NLY Digitally signed by NAND LAL YADAV Date: 2022.03.30 10:35:21 IST Reason: Location: High Court of Judicature at Allahabad "