Citation Codes

Equivalent Citations

citation codes

Case Number

W.P (C) 5536/2012

Attorney(S)

Mr. O.S Bajpai, Sr. Adv. with Mr. Shashwat Bajpai, Mr. V.N Jha and Mrs. Manasvini Bajpai, Advocates.
Ms. Suruchi Aggarwal, Sr. Standing Counsel.

Judges

Justice R.V. Easwar
Justice Badar Durrez Ahmed

Acts

Section 147 of the I.T Act 1961.Since assessment u/s 143(3) of the IT Act
SECTION 148 INCOME TAX ACT 1961
2007-08Assessment u/s 143(3) of the Income Tax Act, 1961
sec 151(1) of the Income Tax Act, 1961.5.
u/s 132 of the Income-tax Act, 1961
u/s 132 of the I.T Act 1961,

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Smart Summary

Structured Summary of the Opinion (Badar Durrez Ahmed, J.)

Factual and Procedural Background

This writ petition challenges a notice dated 30.08.2011 issued under section 148 of the Income Tax Act, 1961 (the Act) by respondent No. 3, and an order dated 03.08.2012 passed by respondent No. 3 rejecting the petitioner's objections to that notice.

Procedural history provided in the opinion:

Assessment under section 143(3) for assessment year 2007-08 was completed on 30.12.2009 at an income of Rs. 1,25,350/-.
The petitioner received the notice dated 30.08.2011 under section 148. The petitioner had earlier filed W.P. (C) No. 2664/2012 which was disposed of on 05.04.2012 by a Division Bench directing the petitioner to follow the procedure prescribed in G.K.N Driveshaft (India) Ltd. v. ITO, with liberty to approach the Court if required.
After the disposal, the petitioner filed objections to the section 148 notice and also submitted a return of income; respondent No. 3 rejected the objections by a speaking order dated 03.08.2012. The petitioner challenged both the notice and that order by the present writ petition.

Legal Issues Presented

Whether the notice dated 30.08.2011 issued under section 148 and the reopening of assessment under section 147 for A.Y. 2007-08 were valid, having regard to the reasons recorded for reopening.
Whether the assessing officer had the requisite belief under section 147 of the Act, given the material (including circulated information and subsequent steps taken) available prior to or during assessment proceedings.
Whether the order dated 03.08.2012 rejecting the petitioner's objections to the reopening should be quashed as vitiated by insufficiency of reasons for reopening.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
G.K.N Driveshaft (India) Ltd. v. ITO: (2003) 259 ITR 19 (SC)	Procedure to be followed when challenging reopening of assessments (i.e., the procedural framework laid down by the Supreme Court).	The Division Bench of this Court had earlier disposed W.P. (C) No. 2664/2012 directing the petitioner to subscribe to the procedure prescribed in G.K.N Driveshaft. That direction formed part of the prior disposal of the related writ petition.

Court's Reasoning and Analysis

The court examined the reasons recorded for reopening the assessment for A.Y. 2007-08 and the factual matrix surrounding those reasons. The recorded reasons relied on information arising out of a search under section 132 at the office of Mr. Tarun Goyal on 15.09.2008, and a subsequent report and list prepared by the Investigation Wing identifying beneficiaries of alleged accommodation entries. The assessing officer's recorded conclusion was that the petitioner had taken accommodation entries totaling Rs. 1,35,00,000/-, and therefore income had escaped assessment.

The court then analyzed a sequence of salient facts (as set out in the opinion) and their effect on the sufficiency of the reasons for reopening:

The assessing officer had issued a questionnaire to the petitioner on 18.02.2009 seeking details of share capital introduced/share application money/unsecured loans with confirmations and PAN particulars.
A letter dated 31.03.2009 from the Additional Director of Income Tax (Investigation) listing beneficiaries of accommodation entries (arising from the search at Mr. Tarun Goyal's premises) was circulated to assessing officers in Range-14 by the Addl. Commissioner (the circulation is variously dated in the record but is shown to have been transmitted to assessing officers and is admitted in the respondents' counter-affidavit).
It was admitted in the respondents' counter-affidavit that the information had been circulated to all assessing officers (the assessing officer of the petitioner included).
The petitioner did not respond to the 18.02.2009 questionnaire until late 2009, but on 09.11.2009 (and again on 27.11.2009) the petitioner furnished details of share capital raised, including sums received from the alleged accommodation-entry providers, and furnished confirmations from those parties.
To verify those confirmations the assessing officer issued notices under section 133(6) to the alleged provider companies on 27-30.11.2009; all five parties responded and reaffirmed their confirmations.
The assessment was framed on 30.12.2009 after these steps.

From this sequence, the court concluded that the information relied upon for reopening was in fact available to the assessing officer before framing the assessment and that the assessing officer had applied his mind to that information (as evidenced by the issuance of s.133(6) notices to verify facts). Consequently, the foundational assertion in the recorded reasons that the information was "neither available with the department nor did the assessee disclose the same at the time of the assessment proceedings" was factually incorrect.

Because the recorded reasons were based on that incorrect premise, the court held that the assessing officer did not, on the face of the recorded reasons, have the requisite belief under section 147 to reopen the assessment. The court treated this infirmity as fatal to the validity of the notice under section 148 and to the consequent order rejecting objections.

Holding and Implications

Holding: The Court quashed the notice dated 30.08.2011 issued under section 148 and the order dated 03.08.2012 rejecting the petitioner's objections. All proceedings pursuant thereto were also quashed. The writ petition was allowed and there was no order as to costs.

Implications:

Direct effect: The specific notice under section 148 (30.08.2011) and the consequent order rejecting objections (03.08.2012) in respect of A.Y. 2007-08 were held invalid and set aside; all proceedings that followed those actions were quashed.
On precedent: The opinion does not pronounce or announce any new broad legal principle beyond its application to the facts; it resolves the validity of the reopening on the factual insufficiency of the recorded reasons and the absence of a demonstrated requisite belief under section 147. The Court noted prior reliance on the procedural direction from G.K.N Driveshaft in the earlier disposal but did not rely on any new rule beyond the statutory tests under sections 147/148 and the factual findings recited in the opinion.

Note: This summary is limited exclusively to the material contained in the provided opinion and does not add or infer facts beyond that text.

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Pardesi Developers And Infrastructure Pvt. Ltd. Petitioner v. Commissioner Income Tax Delhi-Iv And Ors. S

JUDGMENT

BADAR DURREZ AHMED, J. (ORAL)

1. This writ petition is directed against a notice dated 30.08.2011 issued under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the ‘the said Act’) by the respondent No. 3. It is also prayed by the petitioner that the order dated 03.08.2012, whereby the objections of the petitioner were rejected, be also quashed. That order has also been passed by the respondent No. 3.

2. The facts may be briefly stated. The petitioner has received the said notice dated 30.08.2011 under section 148 of the said Act. Thereupon, the petitioner filed a writ petition bearing W.P (C) No. 2664/2012 before this Court. The said writ petition was disposed of by an order dated 05.04.2012 passed by the Division Bench of this Court directing the petitioner to subscribe to the procedure prescribed in G.K.N Driveshaft (India) Ltd. v. ITO: (2003) 259 ITR 19 (SC). However, while disposing of the writ petition the parties were granted liberty to approach the Court if required.

3. Thereafter, the petitioner preferred its objections to the said notice and also filed its return of income. The respondent No. 3 considered the objections and rejected the same by a speaking order dated 03.08.2012 The petitioner, being aggrieved by the said order dated 03.08.2012, has filed the present writ petition challenging both the notice dated 30.08.2011 and also the order dated 03.08.2012

4. The purported reasons for issuing the notice under section 148 and for reopening the assessments under section 147 of the said Act in respect of the assessment year 2007-08 were as under: -

“Reasons for issuing notice u/s 148 of the Act in the case of Pardeshi Developers & Infrastructure Pvt. Ltd. For the A.Y 2007-08

Assessment u/s 143(3) of the Income Tax Act, 1961 was completed in this case at an income of Rs. 1,25,350/- on 30.12.2009 Information received from investigation wing, New Delhi that a Search and seizure operation u/s 132 of the I.T Act 1961, was conducted at the office premises of Sh. Tarun Goyal, CA at 13/34, WEA, Arya Samaj Road, Karol Bagh, New Delhi on 15.09.2008 During the course of search operation statement of Shri Tarun Goel was recorded and it was established that Sh. Tarun Goyal has floated about 90 companies for the purpose of providing accommodation entries, which were not carrying out any genuine activity and are merely being used to provide accommodation entries, on the basis of material seized and statement recorded it was concluded that all the companies of Sh. Tarun Goyal are ‘bogus’.

As per the report, the Director of the companies were none but former and present employees of Shri Tarun Goyal. Shri Tarun Goyal has been using them for merely signing all the documents, bank cheques and also for transporting and exchanging cash and cheques in order to providing accommodation entries During the the search operation, as per his statement, Shri Tarun Goyal has accepted that he provides accommodation entries and his various companies are used for this purpose. The above information was neither available with the department nor did the assessee disclosed the same at the time of the assessment proceedings.

A detailed list of the beneficiaries of accommodation entries has been prepared by the concerned ADIT (Inv.) for the Asstt. Years 2004-05 to 2009-10. As per the list, M/s. Pardeshi Developers & Infrastructure Pvt. Ltd. Presently being assessed with Ward 14(1), New Delhi has taken the following accommodation entries during the period relevant to assessment year 2007-08.

Name of the Beneficiary

Name of Accommodation entry provider companies

Amount

M/s. Pardeshi Developers & Infrastructure Pvt. Ltd.

M/s. Bhavani Portfolio Pvt. Ltd.

50,00,000/-

M/s. Deep Sea Drilling Pvt. Ltd.

25,00,000/-

M/s. Taurus Iron & Steel Co. Pvt. Ltd.

25,00,000/-

M/s. Tejasvi Investments Pvt. Ltd.

10,00,000/-

M/s. Thar Steels Pvt. Ltd.

25,00,000/-

TOTAL

1,35,00,000/-

In view of the above, I am satisfied that the assessee has introduced his own money in the grab (sic) of share application money/share capital/unsecured loan/gift/expenses/purchase of shares through the above mentioned companies during the period under consideration, the details of which are mentioned above. Therefore, the assessee has deliberately furnished wrong facts at the time of filing of return and subsequently during the course of assessment proceedings completed u/s 143(3) on 30.12.2009, and by way of that concealed true particulars of its income.

In view of the above, I have reasons to believe that an amount of Rs. 1,35,00,000/- has escaped from the assessment for the A.Y 2007-08 which was chargeable to tax. I am also satisfied that on account of failure on the part of the assessee to disclose truly and fully all the material facts necessary for assessment for the above assessment year, the income chargeable to tax to the tune of Rs. 1,35,00,000/- has escaped assessment with the meaning of Section 147 of the I.T Act 1961.

Since assessment u/s 143(3) of the IT Act has been completed in this case for the assessment year 2007-08 on 30.12.2009, the reasons recorded above for the purpose of reopening assessment is put up (sic) kind satisfaction of Addl. Commissioner of Income Tax Range-14, New Delhi in terms of the proviso to sec 151(1) of the Income Tax Act, 1961.”

5. From the above it can be seen that the main allegation against the petitioner is that it was the part of a racket providing bogus accommodation entries which was allegedly master-minded by one Mr. Tarun Goyal. It is alleged that the petitioner was a beneficiary of the accommodation entries and that the said entries had been provided by 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. The said accommodation entries were allegedly to the extent of Rs. 1,35,00,000/-. The said provider companies were said to be bogus companies of Mr. Tarun Goyal. The aforesaid purported reasons indicate that the information that the entries were accommodation entries and were provided by bogus companies of Shri Tarun Goyal were not available with the assessing officer at the time the assessment was done under section 143(3) of the said Act. The exact words used in the purported reasons are as under: -

“The above information was neither available with the department nor did the assessee disclosed the same at the time of the assessment proceedings”

At this juncture, it would be necessary to point out that in the course of assessment proceedings under section 143(3) of the said Act, a questionnaire had been issued by the assessing officer to the petitioner on 18.02.2009 In the said questionnaire, serial No. 7 read as under: -

“7. Please furnish the details of the share capital introduced/share application money received/unsecured loan received during the year with confirmation from the person from whom the amount has been received showing its income tax particulars i.e PAN and their I.T Particulars.”

6. It is apparent that, without having received any specific information with regard to the alleged bogus companies of Tarun Goyal, as a general exercise, the assessing officer had issued the said questionnaire and had required petitioner/assessee to furnish details of share capital introduced and share money received. There was no response by the petitioner of this questionnaire till December, 2009.

7. We shall deal with that subsequently, but, for the present, it is necessary to note that on 24.08.2009 a letter was circulated by the Addl. Commissioner of Income Tax (Respondent No. 2) to all the assessing officers of Range-14, which includes the assessing officer of the present petitioner. Alongwith the said letter of 28.04.2009, a copy of a letter dated 31.03.2009 issued by the Addl. Director of Income Tax (Investigation) Unit, CR Building, New Delhi was also circulated. That letter was on the subject of list of beneficiaries of accommodation entries provided by Shri Tarun Goyal. The said letter dated 31.03.2009 reads as under: -

“Office of the Additional Director of Income-tax (Investigation)-Unit-IV, ARA Centre, E-2, Jhandewalan Extension, New Delhi - 110055

Ph: 23515123, Fax: 23629014

CONFIDENTIAL

F. No. Addl. DIT (Inv.)/Unit-IV/Beneficiaries/2008-09/393

Dated-31/03/2009

To,

The Commissioner of Income-Tax, Delhi-V, C.R Building, New Delhi.

Sir,

Sub: List of beneficiaries of accommodation entries provided by Sh. Tarun Goyal, C.A, 13/34, WEA, Arya Samaj Road, Karol Bagh, New Delhi-reg-

A search u/s 132 of the Income-tax Act, 1961 was conducted at the office premises of Shri Tarun Goyal, Chartered Accountant at 13/34, WEA, Arya Samaj Road, Karol Bagh, New Delhi by the Investigation Wing on 15.09.2008

Sh. Tarun Goyal created a number of private limited companies and firms for providing accommodation entries. The directors of these companies were his employees who worked in his office as peons, receptionists etc. All the documents were got signed from these employees. A number of Bank Accounts in various banks were opened in the names of these companies and his employees, in which huge cash deposits were made later cheques were issued to various beneficiaries, disguising the whole transaction as genuine.

1. During the course of search it was established that Sh. Tarun Goyal has floated about 90 companies for the purpose of providing accommodation entries.

2. All the companies floated by Sh. Tarun Goyal are not carrying out any genuine activity and are merely being used to provide accommodation entries. Hence all the companies of Sh. Tarun Goyal are ‘bogus’.

A. ALL THE COMPANIES RUN BY SH. TARUN GOYAL ARE ‘BOGUS’ COMPANIES

The network of companies run by Shri Tarun Goyal is only doing the business of providing accommodation entries to various beneficiaries and are not doing any real business, hence these companies are ‘BOGUS’.

b. All the directors are either his employees or close relatives. Shri Tarun Goyal could never produce the directors nor furnish their residential address.

c. The statement of the employees of Shri Tarun Goyal is on record, whereby they have clearly stated that they signed on the papers produced before them by Shri Tarun Goyal. They do not know about the basic details of the companies like shareholding patterns, nature of business of these companies etc.

d. The statement of the auditors of Shri Tarun Goyal is on record. They have stated to have never met the directors of the companies and audited the accounts only on the directions of Shri Tarun Goyal. As per the statement of auditors, the employees of Sh. Tarun Goyal were directors of the companies run by them; also they could not ascertain the so called share capital subscribed by Sh. Tarun Goyal as documentary proof of the same was lacking.

e. During the course of search, all the passbooks, cheque books, PAN Cards etc. were always in possession of Shri Tarun Goyal. On his directions all the employees signed all the documents.

f. All the bank account opening forms appear to be in the handwriting of Shri Tarun Goyal, it is possible that Sh. Tarun Goyal controlled and managed these companies as also operated all the bank accounts.

g. All the books of accounts of all the companies have retrieved from the computers/laptop of Shri Tarun Goyal.

h. Shri Tarun Goyal has given letters for the release of bank accounts of companies put under restraint after search. No such application was received from the so called directors of the companies.

i. Shri Tarun Goyal appears in all the scrutiny assessments as well as appeals of his companies himself before various income-tax authorities. From verification carried out in respective wards/circles where the above mentioned companies are assessed, it is evident that Sh. Tarun Goyal is appearing in all the income tax proceedings on behalf of all the companies. He is also not charging any fees for appearing in these cases.

Order to determine the extent of deviant activities of Sh. Tarun Goyal letters were also written to various government agencies. From these letters it was revealed that besides, aiding and abetting the evasion of taxes, he has been indulging in violation of various other provisions of the law of the land. Letters to various government agencies have also been written to various government agencies like Registrar of companies, Service tax Department, Economic Offences Wing (Delhi Police), Enforcement Directorate etc. for further investigations and follow-up on. This case has also been taken up by REIC for a multi-agency probe.

A detailed list of the beneficiaries of accommodation entries has been prepared by the concerned ADIT (Inv.) for the assessment years 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10. From the PAN data it has been found that the jurisdiction of these companies which have taken accommodation entries lies in your charge.

The information may kindly be transmitted to respective AOs so that further investigations may be carried out by them and necessary action may be initiated against these beneficiaries.

The case of various companies of Sh. Tarun Goyal have been centralized with DCIT, Central Circle-4.

With regards,

Yours faithfully,

(Dr. Narender Kumar)

Addl. DIT (Inv.), Unit-IV, New Delhi

Enclosed:

1. List of the beneficiaries of accommodation entries

2. Copies of Important Statements recorded on oath”

8. As can be seen from the above letter, a list of beneficiaries of all the accommodation entries as also copies of the statements recorded on oath were also included. The list of beneficiaries were in respect of assessment years 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. In the present case we are concerned with assessment year 2007-08. In the list of beneficiaries mentioned for the assessment year 2007-08 we find that serial No. 19 shows the petitioner as a beneficiary. The said serial No. 19 is extracted below: -

“Assessment Year 2007-08

S. No.

Beneficiaries

Name of entry provider

Amount

Total