INCOME TAX ACT, 1961

Section 148

Reassessment - Notice under section 148 - AO not having mechanically relied on the third party information and proceedings being initiated after verification and inquiry -

AO received information from ITO, Ward 6(1), Ahmedabad, that during scrutiny assessment under section 143(1) for assessment year 2011-12 in case of Smt. Harshaben Rasikbhai Gosai, who was the proprietor of Mahavir Enterprise, it was found that, there was a high value financial transaction in her bank account and in connivance with one Mr. Kundan Mudaliar, whose statement was recorded on oath under section 131(1A), they were alleged to have provided accommodation entries through bogus billing activities to many business concerns and assessee-company was also one of the beneficiaries. Accordingly, AO issued notice under section 148 so as to reopen assessment. Assessee challenged the notice by way of writ application on the ground that AO had mechanically without application of his mind and without further independent inquiry and materials, formed a belief that there was an escapement of income. Held: Having regard to the materials on record, it was clear that AO had initiated proceedings not only on the basis of information received from concerned department, but based upon his independent satisfaction and other available materials to form a belief with regard to the escaped assessment of income. The reasons recorded further established that, prop. of R.S. enterprise was the husband of Smt. Harshaben Gosai having financial transactions with the R.S Enterprise and Marshal Enterprise and all these entities, including JK enterprise and P.M. & Co. had no business activities and were managed to provide accommodation entries and routed the money through bank transactions showing transactions as sale and purchase issuing bogus invoices without actual delivery of goods. Therefore, on facts, there was live-link or direct nexus between material which suggested escapement of income and information on the basis of which, it could be said that, income had escaped assessment. Therefore, AO has acted on specific information and after collecting the relevant material had opened his mind through reasons and formed a belief that, income had escaped assessment. At the stage of section 148, what is required is 'reason to believe', but not the established fact of escapement of income.Accordingly, impugned notice issued under section 148 was valid and was, therefore, sustained.

Relied:Narayanappa v. CIT (1967) 63 ITR 219 (SC) : 1967 TaxPub(DT) 198 (SC), Calcutta Discount Co. Ltd. v. ITO AIR 1961 SC 372 : 1961 TaxPub(DT) 130 (SC), Ganga Saran & Sons Pvt. Ltd. v. ITO (1981) 3 SCC 143 : 1981 TaxPub(DT) 952 (SC), Pr. CIT, Rajkot -3, v. Gokul Ceramics (2016) 241 Taxman 341 (Guj.) : 2016 TaxPub(DT) 3157 (Guj-HC), Inductotherm (India) Pvt. Ltd. v. M. Gopalan, Dy. CIT (2013) 356 ITR 481 (Guj-HC) : 2012 TaxPub(DT) 3254 (Guj-HC), Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC) : 2007 TaxPub(DT) 1257 (SC), Jayant Security & Finance v. Asstt. CIT (2018) 254 Taxman 81 (Guj.) : 2018 TaxPub(DT) 979 (Guj-HC) and Ankit Agrochem (P) Ltd. v. Jt. CIT (2018) 253 Taxman 141 (Raj.-HC) : 2018 TaxPub(DT) 186 (Raj-HC).

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