2013 (5) TMI 414 - DELHI HIGH COURT

Reopening of assessment - unexplained credit in the books of accounts - additions u/s 68 - AO issued summons under Section 131 to 25 parties from whom the share application money had been received - Statement of Mr. Deepak Gupta who has admitted that he has not carried out any business activity accept that of providing accommodation entries to the assessee - Held that:- Unable to accept the contention that there has been failure on the part of the assessee to disclose all material facts in his return as, first of all, there is no such allegation in the reasons as furnished to the assessee secondly, it cannot be ignored of the fact that the enquiry into the share application money had been conducted in detail by the AO in the first round of assessment.

Having framed his assessment after enquiry into the identity, genuineness and the creditworthiness of the share applicants, it would not be open for the AO to re-examine the same without there being any material allegation of failure, on the part of the assesse, to make a full and true disclosure. It is well-settled that in order to invoke the provisions of Section 147 after a period of four years from the end of the relevant assessment year, in addition to the AO having reason to believe that any income has escaped assessment, it must also be established that the income has escaped assessment on account of the assessee failing to make returns under Section 139 or on account of failure on the part of the assessee to disclose, fully and truly, the necessary material facts. See Wel Intertrade P. Ltd. & Anr. v. ITO (2008 (8) TMI 18 - HIGH COURT DELHI) and Haryana Acrylic Manufacturing Company v. CIT &Anr (2008 (11) TMI 2 - DELHI HIGH COURT)

Also see Duli Chand Singhania v. Asstt. CIT (2003 (12) TMI 23 - PUNJAB AND HARYANA High Court) wherein noted that absence of the finding that the escapement in income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts which is the sine qua non for assuming jurisdiction under section 147 in a case falling under the proviso thereto, makes the action taken by the AO wholly without jurisdiction.

Further the mere statement that the DRI has seized certain goods of the assessee and levied a penalty also cannot be stated to be a reason for reopening of assessment of the assessee as the said statement made is neither followed by the recording of a belief that the income escaped on that count or that the assessee has failed to disclose all relevant material, fully and truly, at the stage of the first assessment. Against revenue.