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2017 (1) TMI 506 - ITAT DELHI

2017 (1) TMI 506 - ITAT DELHI - TMI - Validity of reopening of assessment under Section 147 - deduction u/s 80HHC and 80IB - Non-application of certain provision of law - Held that:- It is evident that the Assessing Officer has nowhere mentioned that there was any failure on the part of the assessee to disclose fully and truly all material facts. The Assessing Officer has mentioned the facts and figure relating to deduction u/s 80HHC and 80IB claimed by the assessee and allowed by the Assessing .....

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e on the part of the assessee to disclose fully and truly all material facts. Moreover, in the reasons recorded, the Assessing Officer has not mentioned that there was any failure on the part of the assessee to disclose fully and truly all material facts. Learned DR tried to justify the action of the Assessing Officer on the ground that in the order dated 2nd December, 2008 passed by the Assessing Officer rejecting the assessee’s objection against the reopening of assessment, he has clearly ment .....

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od of four years from the end of the relevant assessment year was not justified because – (i) there was no failure on the part of the assessee to disclose fully and truly all material facts and (ii) there was no whisper in the reasons recorded that there was any failure on the part of the assessee to disclose all material facts.- Decided in favour of assessee - ITA No. 2202/Del/2010 - Dated:- 4-1-2017 - Shri G.D. Agrawal, Vice President And Shri Chandra Mohan Garg, Judicial Member Appellant by : .....

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the assessment was reopened beyond the period of four years when the original assessment was completed u/s 143(3). He stated that there was no failure on the part of the assessee to disclose all material facts. He stated that the assessee claimed deduction u/s 80IB as well as 80HHC which was allowed by the Assessing Officer after modifying the quantum of deduction claimed by the assessee. The case was reopened on the ground that while calculating deduction u/s 80HHC, deduction allowed u/s 80IB w .....

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decisions of Hon'ble Jurisdictional High Court :- (i) Haryana Acrylic Manufacturing Co. Vs. CIT - [2009] 308 ITR 38 (Delhi). ii) CIT Vs. Sonitpur Solvex Ltd. - [2013] 362 ITR 305 (Gauhati). 4. Learned DR, on the other hand, argued at length. He also furnished the written submissions, which read as under :- Gr. 1 and 2(The reasons recorded did not point out that there was failure on part Assessee of the assessee to disclose material facts): 1.1 This is ground is liable to be rejected because: .....

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led to disclose before the AO that he was not eligible for further deduction u/s 80HHC on the same profit in respect of which deduction had already been claimed u/s 80IB. The AO also observed that the assessee presented wrong information in respect of quantum of claim. iii) It is has been recorded in the satisfaction note(#88/PB) that the assessee made deduction of ₹ 18314935/- and actual deduction works out to be 1,11,84,667/- . It has also been pointed out that this difference is mainly .....

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1 In this case it is a material fact as to whether calculation of deductible amount u/s 80HHC has been made considering provisions contained in section 80IA(9) rws 80IB(13) {or not}. 2.2 The provisions contained in section 80IA(9) rws 80IB(13) are integral part of part C of Chapter VI-A which also contains section 80IB. Therefore, once a certificate is filed under signature of a Charted Accountant, the presumption is that calculation of deduction claimed has been made in accordance with provisio .....

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IB(13).Therefore, the provisions of explanation 1 to section 147 are attracted which are reproduced as under: …….. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. 2.5 Two ratios of judgment of Hon ble SC in case of Sri Krishna (P.) Ltd. Vs. ITO [1996] 87 Ta .....

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ieve and not whether the omission/failure and the escapement of income is established. The relevant portion is reproduced as under: 9. In that case, the alleged non-disclosure of material facts fully and truly - to put it in the words of the Court - was the failure of the assessee to disclose 'the true intention behind the sale of the shares'. The assessee had stated during the assessment proceedings that the sale of shares during the relevant assessment years was a casual transaction in .....

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s contention of the revenue was rejected holding that the true nature of transaction, being a matter capable of different opinions, is not a material or primary fact but a matter of inference and, hence, it cannot be said that there was an omission or failure of the nature contemplated by section 34 on the part of the assessee. Now, what needs to be emphasised is that the obligation on the assessee to disclose the material facts - or what are called, primary facts - is not a mere disclosure but .....

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he basis of which, he has reasons to believe that the assessee had put forward certain bogus and false unsecured hundi loans said to have been taken by him from non-existent persons or his dummies, as the case may be, and that on that account income chargeable to tax has escaped assessment. According to him, this was a false assertion to the knowledge of the assessee. The ITO says that during the assessment relating to subsequent assessment year, similar loans [from some of these very persons] w .....

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y for his assessment for that year. True it is that ITO could have investigated the truth of the said assertion - which he actually did in the subsequent assessment year - but that does not relieve the assessee of his obligation, placed upon him by the statute, to disclose fully and truly all material facts. Indubitably, whether a loan, alleged to have been taken by the assessee, is true or false, is a material fact - and not an inference, factual or legal, to be drawn from given facts. In this .....

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l material facts, fully and truly, necessary for his assessment for that year, income has escaped assessment ? We are of the firm opinion that it does. It is necessary to reiterate that we are now at the stage of the validity of the notice under section 148/147. The enquiry at this stage is only to see whether there are reasonable grounds for the ITO to believe and not whether the omission/failure and the escapement of income is established. It is necessary to keep this distinction in mind. (emp .....

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unt or portions of documents, which are relevant. Even if it is assumed that, from the documents produced, the Assessing Officer, if he had been circumspect, could have found out the truth, he is not on that account precluded from exercising the power to assess income, which had escaped assessment. 2.7 The reliance is placed on the ratio of Judgment of Hon ble SC in case of Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. v. CIT [1986] 159 ITR 624 (SC). In this case, the assets on which the asses .....

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Officer under section 147/148 was challenged on the ground that there was no failure on the part of the assessee to disclose fully, and truly all material facts necessary for his assessment. The Hon ble Supreme Court has held that the issue whether there was such non-disclosure of primary facts as had escaped assessment of income was essentially a question of fact. The Hon ble Court further held that it was well-settled that the obligation of the assessee was to disclose only primary facts and n .....

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e of ACIT Vs. Manubhai Sons & Co. [2007] 18 SOT 297 (MUM.) which in turn rely upon the above stated ratios of judgments of Hon ble SC in cases of Kantamani Venkata Narayana & Sons v. Addl. ITO, Rajahmundry(supra) and Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. v. CIT(supra). The relevant portion is reproduced as under: 6. It may not be out of place to mention here a decision of the Hon ble Supreme Court in Kantamani Venkata Narayana & Sons v. Addl. ITO, Rajahmundry [1967] 63 ITR .....

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nd out the truth, he is not on that account precluded from exercising the power to assess income, which had escaped assessment. Thus, the aforesaid judgment is in authority for the proposition that mere disclosure in the books of account or in other evidence does not necessarily mean that the assessee has disclosed fully and truly all material facts necessary for his assessment for the assessment year in question. 7. In Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. v. CIT [1986] 159 ITR 6242 ( .....

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t. Notice issued by the Assessing Officer under section 147/148 was challenged on the ground that there was no failure on the part of the assessee to disclose fully, and truly all material facts necessary for his assessment. The Hon ble Supreme Court has held that the issue whether there was such non-disclosure of primary facts as had escaped assessment of income was essentially a question of fact. The Hon ble Court further held that it was well-settled that the obligation of the assessee was to .....

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utta Discount company [1961] 41 ITR 191 does not help the cause of the assessee because issue at hand in that case was that AO alleged that assessee failed to disclose its true intension behind sales of shares . The Hon ble SC held that finding intension is a matter of inference which could be different for different people. Therefore, it is duty of the AO to draw inference from primary facts. 3.2 The Hon ble SC observed that from primary facts more inferences than one could be drawn, therefore, .....

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ructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The relevant portion of the judgment is reproduced as under, ……………….. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee To meet the possible contention that when some account books or other evidence h .....

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unt books and the documents." His omission to bring to the assessing authority's attention those particular items in the account books, or the particular portions of the documents, which are relevant, will amount to "omission to disclose fully and truly all material facts necessary for his assessment." Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the as .....

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disclosed. Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else-far less the assessee- to tell the assessing authori .....

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the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn? It may be pointed out that the Explanation to the sub- section has nothing to do with "inferences" and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. .....

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s regards any primary fact, which could have a material bearing on the question of "under-assessment", that would be efficient to give jurisdiction to -the Income- tax Officer to issue the notices under section 34. Whether these grounds were adequate or not or arriving at the conclusion that there was a non-disclosure of material facts would not be open for the court's investigation. In other words, all that is necessary to give this special jurisdiction is that the Income-tax Offi .....

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leted u/s 143(3). Assessment was sought to be reopened by issuing notice u/s 148 on 28th March, 2008. Thus, admittedly, the assessment was sought to be reopened beyond the period of four years in a case where the original assessment was completed u/s 143(3). On these facts, the proviso to Section 147 would be applicable, as per which, unless there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, the assessment cannot be reopened. Let .....

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31,872 as against assessee s claim of ₹ 97,43,578/-. Deduction u/s 80HHC was allowed at ₹ 1,82,08,386/- against assessee s claim of ₹ 1,83,14,935/-. It is seen that while calculating deduction u/s 80HHC the amount of deduction u/s 80IB was not reduced from the profit of export business in view of the provisions of section 80IA(9) which provides that where as amount of profits and gains of an industrial undertaking is claimed and allowed as deduction u/s 80IB, the profits to tha .....

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s escaped assessment for A.Y. 2001-02. It is therefore necessary to take action u/s 147/148 in this case to the said assessment year. Sd/- (Aseem Sharma) Assistant Commissioner of Income Tax Circle 25(1), New Delhi. 6. From the above, it is evident that the Assessing Officer has nowhere mentioned that there was any failure on the part of the assessee to disclose fully and truly all material facts. The Assessing Officer has mentioned the facts and figure relating to deduction u/s 80HHC and 80IB c .....

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in provision of law cannot be equated with the failure on the part of the assessee to disclose fully and truly all material facts. Moreover, in the reasons recorded, the Assessing Officer has not mentioned that there was any failure on the part of the assessee to disclose fully and truly all material facts. Learned DR tried to justify the action of the Assessing Officer on the ground that in the order dated 2nd December, 2008 passed by the Assessing Officer rejecting the assessee s objection aga .....

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tion in the reasons recorded that there was failure on the part of the assessee to disclose fully and truly all material facts but, in the counter-affidavit filed before Hon'ble Jurisdictional High Court, such assertion was made. Hon'ble Jurisdictional High Court did not accept the Revenue s contention and held that the notice issued u/s 148 based on the reasons recorded supplied to the petitioner cannot be sustained. The finding of their Lordships reads as under :- Held, allowing the pe .....

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was a failure on the part of the assessee to disclose fully and truly all material facts relating to accommodation entries raised from one of the companies to the extent of ₹ 5 lakhs. Thus, one of the conditions precedent for removing the bar against taking action after the said four year period remained unfulfilled. Consequently, the notice under section 148 based on the recorded reasons supplied to the petitioner as well as the consequent order were without jurisdiction as no action unde .....

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