Allahabad H.C : there is absolutely no material in possession of the AO to form a belief that income has escaped assessment and to initiate the reassessment proceeding under s. 148 of the Act

High Court Of Allahabad

Shyam Bansal vs. Assistant Commissioner Of Income Tax

Section 147

Asst. Year 1998-99

A.K. Yog & Prakash Krishna, JJ.

Civil Misc. Writ Petn. No. 94 of 2006

17th January, 2006

Counsel Appeared

Ravi Kant with Shakeel Ahmed, for the Assessee : R.K. Upadhyaya, for the Revenue

JUDGMENT

By the court :

Heard Shri Ravi Kant, senior advocate assisted by Shri Shakeel Ahmed, advocate for the petitioner and Shri R.K. Upadhyaya, learned standing counsel for the Department.

2. The present writ petition has been filed claiming the following reliefs : (a) Issue a suitable writ, order or direction in the nature of writ of certiorari, calling for the records and quashing the impugned notice dt. 28th March, 2005 (Annex. IV to the writ petition) issued by the respondent. (b) Issue a writ, order or direction in the nature of prohibition restraining the respondent from proceedings any further action with the reassessment of the income of petitioner in response to the notice dt. 28th March, 2005 (Annex. IV to the writ petition) for the asst. yr. 1998-99. (c) Issue any other writ, order or direction as this Hon’ble Court may deem fit and proper in the petition against the respondents. (d) Award the costs of the petition to the petitioner.

3. The facts giving rise to the present writ petition in brief are as follows : The petitioner for the asst. yr. 1998-99 submitted his return of income of Rs. 2,44,443. The assessment was completed after notice to the petitioner under s. 143(3) of the Act. True copy of the assessment order has been annexed as Annex. 3 to the writ petition. It may be stated here that while completing the assessment a show-cause notice was given by the assessing authority vide Annex. 1 to the writ petition asking the petitioner besides other things, date of acquisition, with source, of the shares sold and also to produce copies of purchase and sale vouchers with copy of relevant bank account and also required the petitioner to justify the claim under ss. 54F and 54EA of the Act. Reply was submitted by the petitioner stating that the purchase amount of shares was disclosed under VDIS, 1997. He also along with reply enclosed the purchase and sale bill of the shares. However, the assessment was completed but in the assessment order there is no discussion about the income earned as long-term gains from the sale of shares. It appears that subsequently the Department issued a notice under s. 148 of the IT Act. A true copy of the said notice has been annexed as Annex. 4 to the writ petition. The Department on the request of the petitioner has supplied the reasons for reinitiating proceedings relevant for the asst. yr. 1998-99. The Asstt. CIT-1, Agra, has recorded the following reasons for reopening the assessment :

“Reason to believe Shri Shyam Bansal, 1-2, State Bank Colony, Bhadwar House, Agra. Asst. yr. 1998-99 As per enquiries made by the DI (Inv.) Wing, Unit, Agra, the assessee has taken fictitious entry of long-term gain as per details given below :

Sl. Name Bank a/c Name & Beneficiary Amount DD Date of Date of Nature of No. of of address of bank & a/c No. DD clearing entry broker broker the No. beneficiary

1 Ashok Bank of Shri Canara 6,16,400 20-11-97 24-11-97 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra, Colony, CCA-1/94 Bhadawar House, Agra

2 Ashok Bank of Shri Canara 8,00,000 20-11-97 24-11-97 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra, Colony, CCA- 1/94 Bhadawar House, Agra

3 Ashok Bank of Shri Canara 4,95,521 21-11-97 25-11-97 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra CCA-Colony, 1/94 Bhadawar House, Agra

4 Ashok Bank of Shri Canara 6,98,950 18-12-97 23-12-97 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra CCA-Colony, 1/94 Bhadawar House, Agra

5 Ashok Bank of Shri Canara 4,99,250 9-1-98 14-1-8 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra CCA-Colony, 1/94 Bhadawar House, Agra

6 Ashok Bank of Shri Canara 1,99,700 13-1-98 21-1-98 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra CCA-Colony, 1/94 Bhadawar House, Agra

7 Ashok Bank of Shri Canara 5,48,656 15-1-98 21-1-98 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra CCA-Colony, 1/94 Bhadawar House, Agra

8 Ashok Bank of Shri Canara 3,58,748 16-3-98 23-3-98 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra CCA-Colony, 1/94 Bhadawar House, Agra

9 Ashok Bank of Shri Canara 3,49,388 18-3-98 23-3-98 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra CCA-Colony, 1/94 Bhadawar House, Agra

10 Ashok Bank of Shri Canara 2,99,476 20-3-98 24-3-98 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra CCA-Colony, 1/94 Bhadawar House, Agra

11 Ashok Bank of Shri Canara 4,99,127 21-3-98 26-3-98 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra CCA-Colony, 1/94 Bhadawar House, Agra

12 Ashok Bank of Shri Canara 6,46,245 25-3-98 27-3-98 Long-Gupta India, Shyam Bank, term & Co., Asaf Ali Bansal, 1-M.G. capital Delhi Road, 2, State Road, gain Delhi Bank Agra CCA-Colony, 1/94 Bhadawar House, Agra 60,11,461

The fictitious entry of long-term capital gain as mentioned above has been introduced by the assessee in his books of account claiming that it represents the sale proceeds of the shares as mentioned above. The unaccounted for money generated by the assessee has been introduced in the garb of sale proceeds of the aforesaid share. In a large number of assessees it is found that they have surrendered the entries and paid taxes also before the respective officers of their jurisdiction. Therefore, I have reason to believe that the income to the tune of amount which represents sale proceeds of shares is actually the assessee’s unaccounted money from undisclosed sources. This has escaped assessment. Therefore, this is a case where income has escaped assessment under the provisions of s. 147 and issue of notice under s. 148 of the IT Act is warranted. Hence, I have reason to believe that the above income of Rs. 60,11,461 has escaped assessment within the meaning of s. 147 of the Act, 1961. Therefore, action under s. 147 is to be taken for which proposal for obtaining approval of the Addl. CIT, Range-1, Agra, is being sent 151(2) before issuing notice under s. 148 of the IT Act, 1961.”

4. Challenging the validity, legality and jurisdiction of the AO to initiate reassessment proceedings, the present writ petition has been filed. Shri Ravi Kant, senior advocate, strenuously submitted that there is absolutely no material in possession of the AO to form a belief that income has escaped assessment and to initiate the reassessment proceeding under s. 148 of the Act. He has placed reliance upon an unreported judgment of this Court in Writ Petn. No. 874 of 1999, Dass Friends Builders (P) Ltd. vs. Dy. CIT, decided on 9th of August, 2005 [reported at (2006) 201 CTR (All) 447—Ed.]. Elaborating the argument it was submitted by the learned counsel for the petitioner that all the facts were disclosed before the assessing authority during the course of assessment proceedings. It was submitted that the petitioner has not concealed any income from the Department and as such the very issuance of notice under s. 148 of the Act is wholly without jurisdiction.

5. We have given careful consideration to the above submissions of the learned counsel for the petitioner. From a bare perusal of the reasons recorded by the authority concerned we find that DI (Inv.) Wing, Unit, Agra, has collected some material from the broker namely Ashok Gupta & Co., Delhi. The concerned authority is of the prima facie view that fictitious entry of long-term capital gain as mentioned in the reasons has been introduced in his books of account claiming that it represents sale proceeds of the shares. We find that AO is in possession of name of broker, bank account of broker, amount, date of clearing of bank drafts, etc. All these transactions are in the name of the petitioner.

6. The essential requirement for initiating reassessment proceeding under s. 147 r/w s. 148 is that the assessing authority must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year. It is well settled that sufficiency of material to form reason to believe cannot be subject-matter of writ jurisdiction. High Court in the exercise of its jurisdiction under Art. 226 of the Constitution of India can interfere in a writ petition against a notice issued under s. 148 of the Act when it is of the opinion that there is no material in possession of the assessing authority on which reasonably an opinion can be formed that the income has escaped assessment. Keeping this principle of law in mind, we have considered the submissions of the learned senior counsel for the petitioner and find that although the assessment of the petitioner was completed under s. 143(3) of the Act. But there is no discussion in the assessment order about the income earned by the assessee from the sale of shares by way of long-term capital gains. The entire assessment order is confined to the question relating to investment in the construction of house.

1. Explanation 2 to s. 147 enumerates the cases where it shall be deemed that income chargeable to tax has escaped assessment. Clause (b) to Expln. 2 of s. 147 provides that where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, it is one of the cases of deemed escapement of assessment. Therefore, the argument that the petitioner made all disclosures in the assessment proceeding regarding the income from the sale of shares by long-term capital gains is of little consequence as the AO has failed to examine the same.

2. The case relied upon by the learned counsel for the petitioner is distinguishable and it was decided on its own facts. In that case assessment year involved was 1995-96. On the basis of the assessment order certain material collected for the asst. yr. 1995-96, the assessment was sought to be reopened by the Department on the ground that in the subsequent assessment year the assessing authority after rejecting the account books has made an addition of 10 per cent in the income. Therefore, the income for the asst. yr. 1995-96 should also be assessed accordingly. We find hardly any application of the above case law to the facts of the present case. After going through the record of the case, we are satisfied that the Department is in possession of the material to initiate reassessment proceedings against the petitioner. We find no justification to interfere with the reassessment proceedings at this stage.

3. There is no merit in the writ petition. The writ petition is dismissed in limine. No order as to costs.

[Citation : 296 ITR 25]

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