TMI Blog2013 (1) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... the genuineness of the transaction in the earlier AYs.i.e.1993-94 to 1995-96. All information regarding the sale by the assessee-company was before him. ‘Alleged under pricing of goods’ if any as mentioned in the order of 1997-98 and in the reopening orders cannot be termed non-disclosure of material facts by the assessee-company. Full and true facts of sale-price were made available to the AO who had passed orders for earlier years. If AO did not or could not draw particular inferences from the facts narrated in the returns of earlier AYs, then assessee cannot be accused of not disclosing full and true information - the said failure is apparently on the part of the AOs who had framed the assessments for AYs.1993-95 and had accepted the genuineness of the sale transactions entered in to by the assessee and sister concerns. Non-supply of reasons recorded by the AO to the assessee-company - Held that:- Awareness about the reasons recorded is totally different from supplying the copies of reasons to the assessee. FAA has admitted that it is no doubt true that appellant had requested for copy of the reasons recorded but this request was not repeated after that till filing of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisement expenses and freight charges, to the total income, on the ground that the Appellant has deliberately incurred a net loss by making sale to JJEL at a consideration lower than the cost of production. 2.2 The Appellant prays that the ACIT be directed to delete the addition of Rs. 50,96,991. Grounds of Appeal: A.Y. 1994-95 Ground No.1 -Validity of reassessment proceedings: 1.1 On the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-V ( CIT(A) ) erred in upholding the validity of re-assessment proceedings initiated by the Assistant Commissioner of Income-tax, Range 5(2) ( ACIT ) u/s.147 of the Income-tax Act, 1961 ( the Act ). 1.2 The Appellant submits that the re-assessment is void, bad in law, illegal, without and/or in excess of jurisdiction and otherwise ought to have been cancelled. 1.3 The Appellant prays that the ACIT be directed accordingly. Ground No.2 Addition on account of sales made to Johnson Johnson Exports Limited ( JJEL ) 2.1 On the facts and circumstances of the case and in law, the CIT(A) erred in directing the ACIT to add Rs. 1,21,82,084 after reducing advertisement expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49.24 Crores 30.05.2001 26.06.2001 2.1. Vide letter dt.26.06.2001 Assessee requested the AO to supply a copy of the reasons recorded for re-opening the assessments for respective AYs. Re-assessments were completed u/s.143(3) r.w.s.147on 10.01.2003, 10.01.2003 and 31.10.2002 for the AYs.1993-94, 1994-95, 1995-96 making additions to the tune of Rs.50,96,991/-, Rs.1,21,82,084/-, Rs.94,20,905/- to the income of the assessee-company for the respective AYs. Assessee-company preferred appeals before the First Appellate Authority (FAA). He partly allowed the appeal of the assessee-he gave relief to the extent of advertisement, freight and transport expenses. 2.2. Challenging the order of the FAA, assessee-company filed appeals before the Tribunal vide its orders dtd.14.09. 2007 and 12.10.2007 Tribunal restored the matter back to the file of the FAA. Following observations were made by the Tribunal in this regard- We have heard the parties. The Department has not controverted the submission of the assesSee that it has not been supplied with a copy of the reasons recorded by the Assessing Officer u/s 148 in spite of his having made a request to the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sments. He relied upon the case of Jeskaran Bhuvalka (76 ITR 128) and he finally held that there was failure on the part of the assessee and hence re-assessment proceedings were in accordance with the provisions of law.He further held that the proposal for re-opening for was approved by CIT-V,Mumbai by recording the finding Yes, I am satisfied that it is a fit case for issue of notice u/s. 148 , that CIT had applied his mind to the facts of the case, that the CIT had raised a query to how for the A.Ys. 1993-94, 1994-95 and 1995-96 it could be said that there was omission of failure on the part of the assessee that CIT accorded sanction to issue notice for the relevant Assessment Years after taking into consideration clarification issued by the Additional CIT. 3. Against the said orders of the FAA assessee company is before us. It would be useful to reproduce the reasons recorded by the AO for re-opening, before we proceed further. For the AY 1993-94 Notice u/s.148 was issued on the basis of following reasons: In the assessment order u/s 143(3) for A. Y. 1997-98 completed on 29.3.2000, a finding of fact has been recorded that the assessee company had sold certain products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remaining two AYs also. Before us,AR submitted that copy of the reasons recorded by the AO for reopening the assessment were not supplied to the assessee-company, though a request was made to the AO, that the assessee had disclosed all relevant facts to the AO, that there was no failure on part of the assessee that warranted invocation of provisions of section147/48, that reopening was done after four years,that provisio to section 147 was applicable in the case under consideration. He relied upon the orders of the Hon ble Jurisdictional High Court in the cases of Videsh Sanchar Nigam Ltd (IT Appeal No. 4235 of 2010). and Fomento Resorts Hotels Ltd. (Tax Appeal no 71 of 2006). He also referred to the order of Tata International Ltd. delivered by the E Bench of the Mumbai Tribunal (ITANo.3359-61/Mum/2009 AY. 2000-01 to 2002-03 dtd.29.06.2012). DR submitted that provisions of section 147 were rightly invoked/upheld by the AO/FAA, that there was failure on part of the assessee in not disclosing the required information. 3.1.1 We have heard the rival submissions and have perused the material before us. Before analysing the merits of cases under consideration we would like to dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 148 of the Act has a definite purpose and has to be undertaken with a specific object of netting escaped income. The foundation of such exercise has to be in the shape of information or materials which are definite in nature and not presumeptuous or imaginary. It is not designed for correction of errors Sec.147-148 are not substitute for the provisions that deal with rectification of mistakes i.e. Sec.154. iii). Escaped income includes not only the income escaped because of non-filing of return of income but also the taxable income that is under assessed / not assessed because of mistake of the assessee.In addition to it, if taxable income is left untaxed or was taxed at lower rate or chargeable income was underassessed or assessee was allowed excess deduction/exemption/rebate than his entitlement AO can reassess his income. If he on its own finds out some undisclosed income, it is also termed as escaped income. In short,whatever may be the reason all those cases where income escapes taxation, it is covered by the provisions of sections 147-48. It is noteworthy that allowing a wrong claim of a deduction, made by the assessee, results in partial escarpment of income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and truly all material particulars necessary for his assessment for that assessment year. Such a recording is absolutely mandatory. ix). A full disclosure is a disclosure which provides a complete statement of all material facts. A true disclosure is a disclosure which does not suppress material facts from the AO and does not contain any taint of falsehood. In other words Act casts a duty upon the assessee in this regard and assessee is expected not only to disclose all material facts, but to disclose them fully and truly. The term truly prima facie indicates that a full disclosure is not sufficient and that the assessee must also disclose the material truly. The ambit of the expression fully and truly is wider than the term fully. There may, therefore, be a case where a full disclosure may have been made by the assessee but the disclosure may not have been made truly. It is neither possible nor appropriate to categorise or limit the type of the cases which fall within the mischief of that expression. x). In case where the reopening of assessment is after expiry of a period of four years from the end of the relevant assessment years, the belief should be that, by rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice issued u/s.148 of the Act for reopening the assessment, therefore, cannot be sustained. We have perused, more than once, the reasons recorded by the AO and have found that except for the statement that there was omission on the part of the assessee to furnish the true and correct affairs of the company, there is nothing whatsoever in the reasons recorded to indicate the nature of the omission and as to which facts had not been truly and fully disclosed. Hence, on a plain reading of the reasons noted, it is apparent that there was no material on record on the basis of which the AO could have recorded the satisfaction about escapement of income by reason of failure on the part of the assessee to furnish true and correct affairs of the company. 4.1.1. If the AO had any reservation about the sale price of the goods sold to the group concerns, he should have questioned the genuineness of the transaction in the earlier AYs.i.e.1993-94 to1995-96. All information regarding the sale by the assessee-company was before him. Alleged under pricing of goods ; if any as mentioned in the order of 1997-98 and in the reopening orders; cannot be termed non-disclosure of material facts by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to re-opening is non-supply of reasons recorded by the AO to the assessee-company. FAA in his order passed in pursuance of order of the ITAT directions, has held that the assessee was aware of the reasons recorded by the AO. Awareness about the reasons recorded is totally different from supplying the copies of reasons to the assessee. FAA has admitted that it is no doubt true that appellant had requested vide letter dt. 26-06-2001 for copy of the reasons recorded but this request was not repeated after that till filing of appeal before CIT(A). We fail to understand that why a request for supplying a copy of the reasons recorded should be repeated ? Only the AO knows why he preferred not to supply the copy of the reasons recorded, even after receiving a request form the assessee, though he chose to re-produced the same in the Assessment Order.In our opinion conduct of the AO was against the settled principles of justice. 4.1.4. FAA has held that assessee-company had not disclosed fully and truly all material facts necessary for assessment. As discussed in para No. 4.1.to 4.1.2, we are of the opinion that there was no failure on the part of the assessee-company in disclosing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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