Whether assessment can be reopened even if AO had prior information about accommodation entries provided to assessee and AO had also issued notice u/s 133(6) before completing assessment - NO: HC

THE issues before the Bench are - Whether assessment can be reopened u/s 147 even if AO had prior information about the alleged accommodation entries provided to the assessee and the AO had also issued notice u/s 133(6) before completing the assessment; Whether when the assessee has replied to the questionnaire and the information sought u/s 133(6), it can be said that AO has failed to apply his mind to the factum of the case and Whether foundation of the notice issued u/s 148 is not vitiated, although the requisite belief u/s 147 has not been established. And the verdict goes in favour of assessee.

Facts of the case

The assessee's income was assessed u/s 143(3) and completed on 30.12.2009. In the year 2011, a notice u/s 148 was issued for reopening assessment. In the reasons recorded, the AO mentioned that he received information from investigation wing, New Delhi that a Search and seizure operation u/s 132, was conducted at the office premises of Sh. Tarun Goyal, Chartered Accountant on 15.09.2008. From the statement of Sh. Tarun Goyal it was established that he had floated about 90 companies, including the assessee company, for the purpose of providing accommodation entries, which were not carrying out any genuine activity and were merely being used to provide accommodation entries. The AO recorded in the reasons that the assessee had introduced his own money in the grab of share application money/share capital/unsecured loan/gift/expenses/purchase of shares through the above mentioned companies during the period under consideration. It was further recorded in the reasons that the above information was neither available with the department nor did the assessee disclosed the same at the time of the assessment proceedings. Therefore, AO was of the opinion that the assessee had deliberately furnished wrong facts at the time of filing of return and had concealed true particulars of its income.

It may also be noted that the year in which the assessment was completed i.e. 2009, a letter was circulated on 24.08.2009 by the Addl. Commissioner of Income Tax to all the AOs, which included the AO of the present petitioner. Alongwith the said letter of 24.08.2009, a copy of the letter dated 31.03.2009 issued by the Addl. Director of Income Tax (Investigation) Unit, New Delhi was also circulated. This letter was on the subject of list of beneficiaries of accommodation entries provided by Shri Tarun Goyal and that the assessee was the part of a racket providing bogus accommodation entries, which was allegedly master-minded by Sh. Tarun Goyal. Thereafter, on 09.11.2009 the assessee also furnished reply to the earlier questionnaire sought by the AO. Additionally, confirmation was also obtained from the assessee company.

However, the AO was of the firm opinion that the assessee has concealed facts and issued notice to reopen the assessment. The assessee filed objections before the AO, which were rejected by a speaking order dated 03.08.2012. The petitioner, being aggrieved by the said order filed a writ petition before the High Court.

Having heard the parties, the High Court held that,

+ we may also point out at this stage that in the counter affidavit it is admitted by the respondents that the said information was circulated to all the assessing officers on 30.04.2009. With the said counter affidavit, a copy of the letter dated 28.04.2009 along with the list of beneficiaries was also annexed as Annexure-II (Colly.). Thus, it is an admitted position that the said information had been circulated to all the assessing officers on 30.04.2009 which included the assessing officer of the petitioner. In other words, the assessing officer of the petitioner had received the said information with regard to the alleged accommodation-entry providing companies namely M/s Bhavani Portfolio Pvt.Ltd., M/s Deep Sea Drilling Pvt. Ltd., M/s Taurus Iron & Steel Co. Pvt. Ltd., M/s Tejasvi Investments Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. Thereafter, on 09.11.2009 the petitioner furnished a reply to the earlier questionnaire which had been issued on 18.02.2009. In that reply, the petitioner gave details of share capital raised. Those details included the sums received from the aforesaid alleged accommodation entry providers. Alongwith the said reply dated 09.11.2009, confirmations from the said parties were also furnished;

+ a similar reply was again furnished on 27.11.2009. Despite the furnishing of these details, the assessing officer, in order to further verify and confirm the said facts, issued notices under section 133(6) of the said Act to the said companies directly, on 30.11.2009. All the aforesaid five parties responded to those notices and reaffirmed their respective confirmations, which they had earlier provided to the assessing officer;

+ it is only subsequent thereto that the assessment was framed on 30.12.2009. In the backdrop of these facts, we find it difficult to believe the plea taken in the purported reasons that the said information was “neither available with the department nor did the assessee disclose the same at the time of assessment proceedings”. From the aforesaid facts it is clear that the information was available with the department and it had been circulated to all the assessing officers. There is nothing to show that the assessing officer did not receive the said information. And, there is nothing to show that the assessing officer had not applied his mind to the information received by him. On the contrary, it is apparently because he was mindful of the said information that he issued notices under section 133(6) of the said Act directly to the parties to confirm the factum of application of shares and the source of funds of such shares. Therefore, the very foundation of the notice under section 148 of the said Act is not established even ex facie. Consequently, it cannot be said that the assessing officer had the requisite belief under section 147 of the said Act and, as a consequence, the impugned notice dated 30.08.2011 and the order dated 03.08.2012 are liable to be quashed. It is ordered accordingly. All proceedings pursuant thereto also stand quashed.