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TMI Blog2011 (9) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... ' have been show at Rs.1,66,37,402/-. Vide this office letter dated 14th October, 2005, the assessee company was asked to furnish complete details/confirmations with respect to the „Sundry Creditors'. Such details were submitted by the assessee company vide letter dated 10/2/06. However, confirmations were submitted with respect to only the following parties vide letter dated 03/03/06. a) WGF Financial Services Ltd. Rs. 9,04,753/- b) Comosum Investment Ltd Rs. 9,05,250/- c) Jalco Plasto Chem Industries Ltd Rs,33,18,000/- d) Jalco Financial Services P Ltd Rs,28,22,000/- e) Swastic Commerical P Ltd Rs. 9,78,660/- f) Trishul Commercial P Ltd Rs. 5,45,632/- g) Mansarovar Commercial P Ltd Rs. 8,66,669/- h) Carissa Investment P.Ltd. Rs.10,12,380/- But in respect of the following major parties, no confirmations were filed. a) Corporate Flyers P. Ltd Rs. 6,17,171/- (addition during the year Rs.72,171) b) Govan Advertising Rs.12,49,191/- c) Moderate Inv. & Commercial Enter Rs. 1,85,976/- (addition during the year Rs. 80,976) d) Hindustan Commerical Co Ltd Rs. 2,05,236/- (addition during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been disclosed by the assessee company in which the company failed. The Assessee failed to discharge his duties by not adding back the same into his computation of income as per the IT Act. Thus the income chargeable to tax has escaped assessment and to reassess such income chargeable to tax which has come to notice now and was of the failure on the part of the assessee by not adding back the same into the computation of income along with return filed by him and the assessee company fails to disclose fully and truly the above said material facts necessary for the assessment. I have therefore, reason to believe that the income chargeable to tax has escaped for the A.Y. 2003-04." 4. The petitioner filed objections to the reopening of the assessment and called upon the Assessing Officer to dispose of the said objections in terms of the decision of the Supreme Court in GKN Driveshafts (India) Ltd. Vs. ITO (2003) 259 ITR 19. Mainly, two objections were raised. Firstly, it is a case of change of opinion as it was alleged that the predecessor Assessing Officer had taken a conscious and deliberate decision to add an amount of Rs.19,86,551/- from the aforesaid amount of Rs. 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the same case reported in 256 ITR 1 as also the judgment of the same Court in CIT v. Eicher Ltd, 294 ITR 310(Delhi). b. CIT v. Foramer France 264 ITR 566(SC) affirming the judgment of the Allahabad High Court in the same case reported in (2001) 119 Taxman 61(All.) c. Idea Cellular v. DCIT 301 ITR 407 (Bombay) d. Hynoup Food and Oil Industries Ltd. V. ACIT 307 ITR 115(Guj.) B. Reopening after 4 years from the end of the relevant assessment year-proviso to Section 147 of the Act; i) The notice dated 4.9.2009, seeking to reopen the proceedings for the assessment year 2003-2004, has been issued after the expiry of a period of four years from the end of the relevant assessment year, as the said 4 years expired on 31.3.2008. ii) The proviso to Section 147 expressly stipulates that no notice reopening the assessment proceedings shall be issued after the expiry of a period of four years from the end of the relevant assessment year, unless there is failure on the part of the assessee to fully and truly disclose all material particulars. iii) In the present case, the details of the sum of Rs.166.37 lakhs was duly disclosed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have "reasons to believe" that an income has escaped assessment. The said expression cannot be read to mean that that the Assessing Officer should have finally ascertained the fact by legal evidence or inclusion. The function of the Assessing Officer is to administer the statue with solicitude for the public exchequer with an in-built idea of fairness to taxpayer (CIT V Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 161 Taxman 316 (SC). In determining whether commencement of reassessment proceedings is valid, the court has only to see whether there is prima facie some material on the basis of which the department opened the case. The sufficiency or correctness of the material is not a thing to be considered at this stage as held by Supreme Court in the case of Raymond Woolen Mills Ltd. V ITO (1999) 236 ITR 34 (SC), Green Arts (P) Ltd. V ITO (2005) 257 ITR 639 (Delhi). The assessee cannot challange sufficiency of belief-ITO V. Lakhmani Mewal Das (1976) 103 ITR 437 (SC). 5. It has been held by various courts that it is the duty of the assessee to disclose primary fact fully and truly. Reliance in this regard is placed upon following:- (a) Zohar Lokhandwala Vs. M G Kamat (1994) 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, the objection raised by you is no force and it may treated as dispose off the objection raised by you in the letter referred above. Your are therefore, requested to provide the details of creditors as discussed in para 1 of this letter. Kindly noted that since the case has to be disposed off at the earlies therefore, you are requested to comply properly by 03.09.2010 otherwise the inference will be draw that you have nothing to say and the case will be decided on merits." 7. The two contentions, change of opinion and that the petitioner had made full and true disclosure are raised before us. Reliance is placed on Jindal Photo Films Ltd. vs. DCIT, (1998) 234 ITR 170 (Del); CIT vs. Kelvinator of India Ltd., (2002) 256 ITR 1 (FB)(Del); CIT vs. Eicher Ltd., (2007) 294 ITR 310 (Del); CIT vs. Kelvinator India Ltd. (2010) 320 ITR 561 (SC), wherein the Full Bench decision of the Delhi High Court was affirmed, D.T. & T.D.C. Ltd. Vs. ACIT, (2010) 324 ITR 234 (Del); Rose Serviced Apartment Pvt. Ltd. & Anr. vs. Deputy Commissioner of Income Tax, 2011 TIOL 347 HC DEL IT; Ritu Investment Pvt. Ltd. vs. Deputy Commissioner of Income Tax, W.P.(C) 7515/2010; Cartini India Ltd. vs. Addl. CIT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the reasons were recorded. The note records:- "The assessee was asked to furnish complete details/confirmations with respect to sundry creditors amounting to Rs.166.37 lakh. Out of the above amount, the assessee could submit confirmation only in respect of creditors amounting to Rs.113.53 lakh and balance amount of Rs.52.84 lakh remained unconfirmed. The assessing officer held that provisions of section 41(1) were attracted as the above liabilities remained unpaid and ceased to exist. However unconfirmed creditors of Rs.19.87 lakh only were added back instead of total unconfirmed creditors of Rs.52.84 lakh. The omission resulted in underassessment of income of Rs.32.98 lakh involving short levy of tax of Rs.16.63 lakh." 11. The Commissioner of Income Tax on the note commented that the audit report had been accepted and accordingly the case was discussed with the Additional CIT, Circle 10(1), Additional CIT, R-10 and the Commissioner of Income Tax on 27th August, 2009 in the light of a letter written by the Assessing Officer. The Assessing Officer was asked to examine the case for issue of 148 notice. Thereafter, the reasons were recorded on 31st August, 2009 by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has reasons to believe that any income chargeable to tax has escaped assessment. A long string of decisions rendered by the Supreme Court have emphasized that the belief of the Assessing Officer must be in good faith and must not be a mere pretence. The apex court has further held that there must be a nexus between the material before the Assessing Officer and the belief which he forms regarding the escapement of the assessee‟s income. A writ court, therefore, is entitled to examine whether the Assessing Officer‟s belief was in good faith and whether such reasons had a nexus with the action proposed to be taken." 14. The present case is not one of change of opinion as urged by the petitioner. Question of change of opinion arises when an Assessing Officer forms an opinion and decides not to make an addition and holds that the assessee is correct. In the present case the Assessing Officer had asked specific and pointed queries with regard to the sundry creditors of Rs. 1,66,37,402/- asked for confirmations, names, addresses and details of services rendered. An addition of Rs.19,86,551/- was made for failure to furnish confirmation and explain what services wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of assessment. The terms of the Explanation, declared the court, were too plain to permit an argument that the duty of the assessee to disclose fully and truly all material facts would stand discharged when he produces the books of account or evidence which has a material bearing on the assessment. The court observed (page 644) : "It is the duty of the assessee to bring to the notice of the Incometax Officer particular items in the books of account or portions of documents which are relevant. Even if it be assumed that from the books produced, the Income-tax Officer, if he had been circumspect, could have found out the truth, the Income-tax Officer may not on that account be precluded from exercising the power to assess income which had escaped assessment." 15. To the same effect is the decision of the Supreme Court in Malegaon Electricity Co. P. Ltd. v. CIT [1970] 78 ITR 466 where the court observed (page 471) : "It is true that if the Income-tax Officer had made some investigation, particularly if he had looked into the previous assessment records, he would have been able to find out what the written down value of the assets sold was and consequently he would have been abl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or realizes that a mistake has been committed in the original assessment, the discovery of the mistake would be " information " within the meaning of s. 147(b). The submission appears to us inconsistent with the terms of s. 147(b). Plainly, the statutory provision envisages that the ITO must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment. The realisation that income has escaped assessment is covered by the words " reason to believe", and it follows from the " information " received by the ITO. The information is not the realisation, the information gives birth to the realisation." 18. In this case, the Supreme Court had primarily concerned with the expression „information‟ as stipulated in Section 147(b) of the Act as it existed and it was held that information of an internal audit party on a point of law cannot be regarded as information within the meaning of the said Section. 19. It is well settled that audit objection on the point of fact can be a valid ground for reopening of assessment. In the case of New Light Trading Co. vs. Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricted only to the income-tax return and the columns of the income-tax return or the tax audit report. This is the first stage. The said expression "failure to fully and truly disclose material facts" also relate to the stage of the assessment proceedings, the second stage. There can be omission and failure on the part of the assessee to disclose fully and truly material facts during the course of the assessment proceedings. This can happen when the assessee does not disclose or furnish to the Assessing Officer complete and correct information and details it is required and under an obligation to disclose. Burden is on the assessee to make full and true disclosure." In such circumstances, it cannot be held that there was full and true disclosure by the petitioner-assessee. The second contention of the petitioner fails. 22. In view of the aforesaid, we do not find any merit in the present writ petition and the same is accordingly dismissed. It is clarified that the observations made in this order are for the purpose of deciding the present lis regarding validity of the reassessment notice and the said observations/findings will not be construed as binding on the Assessing Officer/a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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