TMI Blog2017 (5) TMI 1801X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent : Mr. R. B. Mathur JUDGMENT In both these appeals, common questions of law and facts are involved and they relate to same assessee they are decided by this common judgment. 1. By way of these appeals, the appellant has assailed the judgment and order the Tribunal whereby the Tribunal has allowed the appeals of department and reversed the order of CIT(A). 2. This Court while admitting the matters framed the following questions of law:- In DBITA No. 349/2005 i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that notice for reassessment under Section 148 dated 28.3.2001 is justified and is not barred by limitation when original assessment was completed after detailed scrutiny under Section 143(3)? ii) Whether the Income Tax Appellate Tribunal was right in law in reversing the order of the Commissioner of Income Tax (Appeals) in respect of genuineness of the security/trade credit of Rs. 4,00,000/-. In DBITA No. 99/2006 i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in sustaining the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn under section 139. As far as the second part of clause(a) of section 147 is concerned, it is now well settled that the duty of the assessee is only to disclose fully and truly all material facts necessary for his assessment for the relevant year. The expression material facts refers only to the primary facts. There is no duty cast on the assessee to indicate or draw the attention of the Assessing Officer to what factual or legal or other inferences can be drawn from the primary facts. Relying on the decision of the Apex Court in Calcutta Discount Co. Ltd. s case (1961) 41 ITR 191, the Apex Court in a later decision, viz., Associated Stone Industries (Kotah) Ltd. s case (1997) 224 ITR 560, held that the duty of the assessee is only to fully and truly disclose all material facts. Explaining the expression material facts as contained in section 34(1)(a) of the IT Act, 1922, the court observed that it refers only to the primary facts and the duty of the assessee is to disclose such primary facts. The court further observed that there is no duty cast on the assessee to indicate or draw the attention of the Income Tax Officer to what factual or legal or other inferences can be dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction and hereby quashed. The writ petition is accordingly allowed but without any order on costs. 9. Thereafter, he has relied upon another decision of Delhi High Court in case of Wel Intertrade (P) Ltd. vs. Income Tax Officer, Ward 18(3) reported in [2009] 178 Taxman 27 (Delhi) wherein para 9 it has been held as under:- 9.We have considered these submissions and we are inclined to agree with the submissions made by the learned Counsel for the petitioner. The proviso to Section 147 reads as under: Provided that where an assessment under Subsection (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. A plain reading of the said proviso makes it mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 130 ITR 1, the Supreme Court held : It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income Tax Officer can assume jurisdiction to issue notice under section 147 (a). First, he must have reason to believe that the income of the assessee has escaped assessment and secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under section 147 (a) are has reason to believe and these words are stronger than the words is satisfied . The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if one the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment. 5. In view of the aforesaid, the Tribunal was justified in holding that the initiation of proceedings under Section 148 was barred by limitation. 11. He has also relied upon the two decisions of the Gujarat High Court in the case of Shree Sidhnath Enterprise vs. Assistant Commissioner of Income Tax reported in [2016] 240 Taxman 631(Gujarat) wherein para 18, 19 20, it has been h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correct inference from the primary facts. It is not the responsibility of the assessee to advise the Income Tax Officer with regard to the inference which he should draw from the primary facts. If an Income Tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. In the present case, the Assessing Officer, at the time of the first reopening, examined the cash transactions to the extent he thought necessary and on the basis of the inference drawn by him, accepted the return as filed by the petitioner. However, the successor Assessing Officer now finds the inference drawn by the Assessing Officer to be erroneous, which amounts to a mere change of opinion and does not justify initiation of action under section 147 of the Act. Moreover, the Assessing Officer while recording the reasons, does not appear to have applied her mind to the information furnished by the Investigation Wing, inasmuch as, if she had ascertained the facts from the record, she would have found that certain cash deposits have already been examined at the time of assessment unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns recorded in the cash book, the assessment is sought to be reopened. Under the circumstances, it cannot be said that there is any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the year under consideration. In the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment, the Assessing Officer lacks jurisdiction to reopen the assessment beyond a period of four years from the end of the relevant assessment year. The impugned notice which has been issued beyond a period of four years from the end of the relevant assessment year, without there being any basis for formation of the requisite belief that income chargeable to tax has escaped assessment on account of any failure on the part of the petitioner to disclose fully and truly all material facts, therefore, cannot be sustained. 12. Another decision of Gujarat High Court in case of Commissioner of Income Tax vs. Ankit C. Maheshwari reported in [2014] 48 taxmann. com 147 (Gujarat) wherein it has been held as under:- 9. We have heard Mr. Sudhir Mehta, learned advocate appearing on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case the reassessment proceedings were initiated after 31-3-1995 and, hence the proceedings initiated by issue of notice under Section 148 is ab initio barred by limitation. In this case, the initiation of proceedings is after a period of four years and the finding given by the Tribunal is that no income has escaped assessment by reason of failure on the part of the assessee. Hence, there is no jurisdiction to reopen the assessment under the provision of Section 147 of the Act. The scope of the said provision has been considered by this Court in the case of CIT v. Elgi Finance Ltd. : [2006]286ITR674(Mad), and the same reads as follows: The law relating to the reassessment has undergone a change from 1-4-1989. The change was brought in by the Direct Tax Laws (Amendment) Act, 1987. Two sets of provisions were available under Section 147 in Clause (a) and Clause (b). This distinction has now been taken away by the Amendment Act. Previously, the line of distinction was a limitation period of four years and the limitation period exceeding four years. The assessing officer would reopen a back assessment within a period of four years as long as he had reason to believe in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of CIT v. Annamalai Finance Ltd : [2005]273ITR451(Bom) it was held that Section 147 of the Act does not postulate conferment of power upon the assessing officer to initiate reassessment proceedings upon a mere change of opinion. It is incumbent on the assessing officer to prove that there was a failure to disclose material facts necessary for the assessment for the issuance of notice beyond the period of four years. 11. It is true that the Apex Court does not make the law from the date it is pronounced but from ab initio. This theory is based on the principle of ACTUS CURIAE NEMINEM GRAVABIT (An act of the court shall prejudice no man). The party ought not to be prejudiced by the delay, but should be allowed to enter up his judgment retrospectively to meet the ends of justice. When highest court of the land declares a principle of law, it should be assumed as if this was the law for all time. But law is not an antique to be abroad, dusted and put back on the shelf. It is dynamic in nature. It is often difficult to describe with exactitude the correct position of law at a given point of time. Till the time apex body determines the correct position things go as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Industrial Traders cannot be the basis for disbelieving the transaction, but if it is corroborated and some other materials are available on record to support the statements of Shri Manish Mehrotra, the statement of Shri Manish Mehrotra, proprietor of Longman Industrial Traders cannot be brushed aside for considering the genuineness of transaction. But, so far the question of reopening of the assessment is concerned, if the person concerned, from whom the material has been purchased, he himself states subsequently before the authorities that the transaction was not genuine and AO received this information, that can be a ground for reopening of assessment as that is only a stage of show-cause notice. If the AO has any such material or information to take the prima facie view that income has escaped, on the basis of such information, the show-cause notice for reopening of assessment can be issued at this stage. At notice stage no final finding of the fact is necessary that the transaction was not genuine. If, on the material information, prima facie view can be taken regarding escapement of income, the AO is well within his jurisdiction to issue the show-cause notice for reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Ess Ess Kay Engineering Co. P. Ltd. reported in 247 ITR 818 which reads as under:- This is a case of reopening. We have perused the documents. We find there was material on the basis of which the Income Tax Officer could proceed to reopen the case, it is not a case of mere change of opinion. We are not inclined to interfere with the decision of the High Court merely because the case of the assesseee was accepted as correct in the original assessment for this assessment year. It does not preclude the Income Tax Officer to reopen the assessment of an earlier year on the bais of his findings of fact made on the basis of fresh materials in the course of assessment of the next assessment year. The appeal is dismissed. No order as to costs. 17. We have heard counsel for both the sides. 18. Before proceeding with the matter it will not be out of place to mention that the second assessment order for the year 94-95 was over on 29th February, 2000. 19. Taking into consideration that the second reassessment order was between the same parties, the transactions were examined and reopened for the third time after a lapse of almost one year on 28th March, 2001. This is nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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