TMI Blog2018 (12) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (7) TMI 1285 - BOMBAY HIGH COURT] another decision from Hon’ble P&H High Court in the case of CIT vs. Punjab Tractors Co-operative Multi-purpose Society Ltd. [1997 (8) TMI 37 - PUNJAB AND HARYANA HIGH COURT], affirmed the stand of the ld.CIT(A). Reopening of assessment - reason to believe that income has escaped assessment - incorrect claim of expenditure as a revenue expenditure towards the pension paid to retired partners - Held that:- ase was reopened with the issuance of notice u/s,.148 on 13.3.2015 as the ld. A.O found that the assessee incorrectly claimed the expenditure as a revenue expenditure towards the pension paid to retired partners. As per the partnership deed also, it was found that money received from the clients has been shown as advances from clients instead of offering the same as income. Thereafter, the assessee in response to the notice offered the total taxable income of Rs,13,56,49,603/- on 29.4.2015. The ld.AO communicated the reasons for reopening. The assessee filed its objections vide letter dated 18.2.2016. The ld.A.O disposed of the objections of the assessee by a speaking order on 10.03.2016. We note that the contention of the assessee that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A)-2/2015-16 dated 28.03.2017 against the order passed by the ACIT, Non-Corporate Circle-1, Chennai [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 31.03.2015 for the Assessment Year 2012-13. 2. The only issue to be decided in the appeal of the revenue is as to whether the ld CITA was justified in deleting the disallowance made in respect of payment of ₹ 1,58,56,741/- made to retired partners in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a firm of chartered accountants and had filed its return of income for the Asst Year 2012-13 on 28.9.2012 declaring total income of ₹ 10,70,28,740/-. Later the assessee filed a revised return of income on 31.3.2014 declaring total income of ₹ 10,70,28,740/- i.e same as original return and claimed TDS credit of ₹ 12,65,52,009/- as against the original TDS credit of ₹ 10,16,17,748/- and claimed consequential refund thereon of ₹ 9,34,80,130/- in the revised return. In the course of assessment proceedings, the ld AO sought to disallow the payment to retired partners in the sum of ₹ 1,58,56,741/- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plies only in cases where the income never reaches the assessee as his income. Whereas in the instant case the assessee had received the income and diverted it and therefore it was mere application of income. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) may be set aside and that of the AO restored. 4. The ld DR argued that this tribunal while deleting the addition made for Asst Year 2011-12 had placed reliance on the coordinate bench decision of Mumbai Tribunal in the case of C.C.Chokshi Co. vs JCIT in ITA Nos. 492 to 495/Mum/2003 for the Asst Years 1995-96 to 1997-98 , wherein on identical facts, it was held that the payment is by overriding title but not an application of income. The ld DR argued that this decision has been distinguished by yet another decision of Mumbai Tribunal in the case of S.B.Billimoria Co. vs ACIT reported in (2010) 125 ITD 122 (Mum) dated 19.12.2008. Accordingly he pleaded that the latest decision of Mumbai Tribunal dated 19.12.2008 would hold the field as on date and prayed for restoration of the order of the ld AO in this regard. 5. In response to this, the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue under dispute is now settled by the two decisions of Hon ble Bombay High Court supra and respectfully following the same, we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, the grounds raised by the revenue are dismissed. 3.1 We find that on identical issue /facts with respect to payment made to retired partners that too in the case of the assessee the Tribunal considered the factual matrix and considered the decision of the Tribunal on identical facts / issue for ay 2011-12, wherein the payment of expenditure allowable u/s.37(1) of the Act has been considered. The Tribunal also considered the partnership deed wherein identical reference has been made in various clauses with respect to determination and the payments to retiring partners or the spouse /nominees of the deceased partners and thereafter reached to the particular conclusion considering the another decision from the Mumbai Bench in the case of M/s.C.C.Chokshi Co., Vs JCIT in ITA Nos. 492 to 495/Mum/2003. The Tribunal also reproduced the relevant portion of the order in the case of M/s.C.C.Chokshi Co., and considered various decisions including from Hon ble Bombay High Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue expenditure u/s 37(1) of the Act. Therefore, the assessee is in appeal before the Tribunal. 7. On behalf of the assessee, Senior Counsel, Shri Percy J. Pardiwala appeared and presented the case. In his argument, the Senior Counsel stated that the assessee is a firm of Chartered Accountants rendering auditing, tax advisory and compliance as well as financial advisory services to its clients. The partners of the firm play pivotal role in rendering professional services. As a professional firm, the method of accounting adopted by the firm is cash method of accounting. As a matter of practice, memo of fees is raised on the client on completion of engagement. The income in respect of professional fees gets booked only on receipt of professional fees from the client. Similarly, at any given point of time, there are several ongoing professional engagements for which professional time has been spent and efforts are made. Such work in progress is not reflected in the accounts because of the cash method of accounting. In view of the above, there is considerable amount of income either unbilled or billed but not received and work in progress to be received from the clients for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deceased Partner; as the case may be, shall be entitled to receive further sums determined on the basis specified in clause 1 0.n in respect of the following: i) amounts bills, but not received, work completed, but not billed, and work partly completed and not billed as at the date of death or retirement, as the case may be, having regard to the fact that the Partnership follows the cash system of accounting. ii) In consideration of the Retiring Partner or the spouse or nominee of the deceased Partner, as the case may be, permitting the continuing partners the use of the Firm name of Deloitte Haskins Sells., to carry on the profession, along with the clientele and the attendant rights of the Firm; Determination and payment of amounts under clause 10.m iii) the contribution made by the surviving Partner or the deceased Partner as the case may be, during his association with the Firm, in increasing the future income earning potential of the Firm, the benefits whereof are likely to be reflected in the receipts of the Firm for a reasonable number of years immediately following the retirement or death of the Partner; and/or iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on being 2007- 08 or increased every year at the simple rate of 5% per annum, whichever is higher. Payments as per this clause shall be made in case any Partner retires on becoming permanently incapacitated from continuing as Partner or dies. In such case the Qualifying Period will not be considered. In case of death of a Partner or retirement of a Partner due to incapacity before completion of three years as a Partner, then the average annual amount received in the previous year would be worked out with reference to the Amount Received in the Previous Years in absolute terms for the period he served as a Partner. Provided that a Partner who retires on attainment of the normal Retirement age after completing at least five continuous years as a Partner but without completing the Qualifying Period of 20 years shall be entitled to the payments of ₹ 6,00,000 per annum for a period of ten years from the date of the retirement. The absolute amount referred to above will be indexed as per the Cost Inflation Index specified in section 48 of the Income Tax Act, 1961 and the base year for the Indexation being 2007-08 or increased every year at the simple rate of 5% pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retired partners to continue the same business in the same line with the new partners and to retain the retired partners to support competitiveness on their own and not to join a new firm which is a threat to the existing firm and to settle the pending bills relating to the income earned by them as a partner during their tenure in the partnership-firm. Further the Senior Counsel further submitted that the method and manner of payment is determined as per clause 10(m) of the partnership deed which is reproduced in the earlier paragraph. 10. Referring to the decision of 1TAT Mumbai Bench in the case of associated concern of the assessee-firm M/s C.C Chokshi Co. vs JC1T in I.T.A.No.s 492 to 495/Mum/2003 for the A.Y 1995-96 to 1997- 98 the Id. Senior Counsel submitted that on identical facts, the ITAT Mumbai, Bench held that the payment is by overriding title but not an application of income. He further submitted that clauses 22 and 28 of partnership deed of M/s C.C. Chokshi Co. are identical to the clauses 10(m), 10(n) and 7(e) of assessee s partnership deed and a comparative chart was submitted by the Senior Counsel which reads as under: Clause in the Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , does so, not as part of his income, but for and on behalf of the person to whom it is payable This proposition still holds good even today. Let us now see whether the facts in the case satisfies the test laid down by the Hon ble Supreme Court 9. For proper appropriation. Clause 22 of the Partnership deed of the assessee-firm is reproduced hereunder: 22 it is agreed that in addition to the amounts, it any, payable as provided in the preceding clause, namely clause 21, a retiring partner or the legal representative of a deceased partner as the case may be, shall be entitled to receive the further sum speared in clause 23, in respect of the following: (a) (I) amounts billed, but not received, (ii) work completed, but not billed, and (iii)work partly completed and not billed as at the date of death of retirement, as the case may be, having regard to the fact that the partnership follows the cash system of accounting, and (b) (i) in consideration of the retiring partner or the legal representative of the deceased partner, as the case maybe, permitting the continuing partners the use of the firm name of C. C. CHOKSHI Co. to carry on the profession, along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s expenditure necessary for earning the income. 12. It is therefore clear that the assessee is obliged to pay the amount computed under clause 23 before distribution of the same under Clause 28 of the partnership-Deed and it cannot be said to be an application of the income by the assessee firm. As under this obligation the income is diverted before it reaches the assessee it is deductible. The assessee is in fact in the position of a collector of income on behalf of the persons to whom it is payable and is only paying the amount subsequently. The decisions relied upon by the learned DR are not applicable to the facts of the case. 12. The Senior Counsel also relied on the decision of 1TAT Mumbai in the case of M/s C.C. Chokshi Co for the assessment years 200-01 to 2001-02 which held the issue in favour of the assessee following decision of the Coordinate Bench in I.T.A.Nos. 492 to 495/Mum/2003 and observed that the 1TAT has referred to several judgments in the above case including the judgment of Hon ble Supreme Court in the case of CIT vs Sitaldas Tirathdas, 41 ITR 367 which was relied upon by the Assessing Officer in the assessment order as well as by the CIT(A) in his a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the ITAT Mumbai Bench in the case of M/s C.C. Chokshi Co. (supra). 15. The Id. DR s contention is that the payment to retired partners is an application of income . When the partnership deed specifies that the payment made to the retiring partner is with regard to the work done by them during the tenure as a partner and towards the settlement of their income for the work done and to allow the partnership firm to continue its business, the payment cannot be held as an application of income or gratuitous payment. We therefore respectfully following the decision of Coordinate bench of 1TAT Mumbai in the case of the associate concern of the assessee, M/s C.C. Chokshi Co. (supra), hold that the payment is a diversion by overriding title and cannot be included in the total income. 16. The assessee also raised the ground for allowance of expenditure u/s 37(1) of the Act. Since we held that the payment made to retiring partners is diversion of income by overriding title, the ground raised by the assessee became infructuous and hence dismissed. 17. The next ground is related to the TDS credit of1,98,27,735/- which has been suffered by the assessee in connection with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010-11. The said advances represented advances received from clients on account of professional fees. The assessee is following cash system of accounting and the bills are raised as and when the services are rendered. No professional charges are received in advance, therefore, the same cannot take the character of income unless the invoices are raised and services are rendered. In exceptional cases, the assessee-firm received advances from clients before rendering such services. Such advances are kept in advance account. The advance received from client is transferred to professional fee account on completion of service. The assessee further submitted that the advance is a very small amount as compared to the aggregate professional fees. Apart from the above, alternatively the Id. AR submitted that the advance received during the assessment year under consideration was only 2,79,161/- which may be added to the income of the assessee if the assessee s contentions are not accepted. Further Ld. A.R submitted that on identical facts in the case of A.F. Ferguson Co in ITA No.7792/M/04 dated 30/01/2008 Mumbai 1TAT has dismissed the appeal of the revenue. 28. We heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Punjab Tractors Co-operative Multi-purpose Society Ltd. in 234 ITR 10, affirmed the stand of the ld.CIT(A). No contrary facts were brought to our notice by either side and more specifically by the Revenue, therefore, we find no infirmity in the conclusion drawn by the ld.CIT(A). 4.3 Our above conclusion will also cover the remaining appeals of the Revenue on identical issue. 5. Now we shall take up the Cross objections of the assessee for assessment year 2010-11 (C.O.No.47/Chny/2018), the assessee has challenged the reopening of assessment u/s.147 of the Act. The ld. Counsel for the assessee contended that there was no fresh material /evidence with the ld.A.O and the reopening was made merely on change of opinion and it was merely due to the reason to meet out the audit objections. It was furht5er contended that necessary details/information was furnished by the assessee during the assessment proceedings. However, the ld.D.R strongly defended the re-opening by inviting our attention to the finding contained in the assessment order /impugned order. 5.1 We have considered the rival submissions and perused the material available on record. So far as, reopening of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Kerala High Court in CIT vs Abdul Khadar Ahmad (2006) 156 taxman 206 (Kerala) even went to the extent so long as the AO has independently applied his mind to all the relevant aspect and has arrived to a belief the reopening cannot be said to be invalid. 5.3. We are aware that mere change of opinion cannot form the basis of reopening when the necessary facts were fully and truly disclosed by the assessee in that situation, the ITO is not entitled to reopen the assessment merely on the basis of change of opinion. However, powers under amended provision are wide enough where there is a reasonable belief with the Assessing Officer, that income has escaped assessment, because the powers with effect from 01/04/1989 are contextually different and the cumulative conditions spelt out in clauses (a) and (b) of section 147, prior to its amendment are not present in the amended provision. The only condition for action is that the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment. Such belief can be reached in any manner and is not qualified by a pre-condition of faith and true disclosure of material facts by an assessee as contem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f facts. Identical ratio was laid down in Brijmohan Agrawal vs ACIT (2004) 268 ITR 400, 405 (All.) and Ratnachudaman S. Utnal vs ITO (2004) 269 ITR 272, 277 (Karnataka) applying Sowdagar Ahmed Khan vs ITO (1968) 70 ITR 79 (SC). 5.5 So far as, the meaning of expression, reason to believe is concerned, it refers to belief which prompts the Assessing Officer to apply section 147 to a particular case. It depend upon the facts of each case. The belief must be of an honest and reasonable person based on reasonable grounds. The Assessing Officer is required to act, not on mere suspicion, but on direct or circumstantial evidence. Our view find support from the ratio laid down in following cases:- i. Epica Laboratories Ltd. vs DCIT 251 ITR 420, 425-426 (Bom.), ii. Vishnu Borewell vs ITO (2002) 257 ITR 512 (Orissa), iii. Central India Electric Supply Company Ltd. vs ITO (2011) 333 ITR 237 (Del.), iv. V.J. Services Company Middle East ltd. vs DCIT (2011) 339 ITR 169 (Uttrakhand), v. CIT vs Abhyudaya Builders (P. ) Ltd. (2012) 340 ITR 310 (All.), vi. CIT vs Dr. Devendra Gupta (2011) 336 ITR 59 (Raj.), vii. Emirates Shipping Line FZE vs Asst. DIT (2012) 349 ITR 493 (De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently Explanation 2(c)(iv) of section 147 would apply. Thereassessment proceedings after four years were valid. 5.8. In the case of Deputy CIT v. Gopal Ramnarayan Kasat, (2010) 328 ITR 556 (Bom), it was not the case of the assessee that the notice issued was after the expiry of the time limit provided in section 153(2). The reassessment proceedings were held to be valid. In Indian Hume Pipe Co. Ltd. v. Asst. CIT, (2012) 348 ITR 439 (Bom), both in the computation of taxable long-term capital gains in the original return of income and in the computation that was submitted in response to the query of the Assessing Officer there was a complete silence in regard to the dates on which the amounts were invested, as such there being a failure to disclose fully and truly material facts necessary for assessment. The reassessment proceedings were held to be valid. This view was also confirmed in following cases:- a. Dalmia P. Ltd. v. CIT, (2012) 348 ITR 469 (Del); b. CIT v. K. Mohan Co. (Exports), (2012) 349 ITR 653 (Bom); c. Remfry Sagar v. CIT, (2013) 351 ITR 75 (Del); d. OPG Metals Finsec Ltd. v. CIT, (2013) 358 ITR 144 (Del). 5.9. In the case of Venus Industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehicles and consumer durables on 'hire-purchase basis' as well as on 'lease/rent basis', a reassessment notice issued after four years has been held not to suffer from any illegality as the same was based on the bona fide action of the competent authority to determine whether or not the vehicles in respect of which the petitioner had been claiming depreciation, were actually owned by it. 5.11. In Jawand Sons v. CIT(A), (2010) 326 ITR 39 (P H), in the initial assessment, the benefit of deduction of the duty drawback and DEPB under section 80-IB was wrongly granted to the assessee, for which it was not entitled. Therefore, reassessment proceedings to withdraw the deduction were held to be valid. Likewise, in CIT v. Hindustan Tools Forgings P. Ltd., (2008) 306 ITR 209 (P H), where, the assessee in the regular assessment had been allowed deduction more than actually allowable under section 80HHC. Therefore, the action initiated by the AO for reassessment under section 147(b) could not be held to be invalid. 5.12. In the case of Markanda Vanaspati Mills Ltd. v. CIT, (2006) 280 ITR 503 (P H), wherein, the information furnished by the assessee gave no clue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity during the course of enquiry. The notice was held to be valid by the Hon ble High Court. In the case of Vippy Processors Pvt. Ltd. v. CIT, (2001) 249 ITR 7, 8 (MP), where the need to issue notice arose due to noticing of vast difference in value of properties disclosed by the assessee and that of the report of the Valuation Officer and the reasons that led to the issue of the notice were duly recorded and the same were also adequate and based on relevant facts and material, initiation was upheld. In Triple A Trading Investment Pvt. Ltd. v. Asst. CIT, (2001) 249 ITR 109, 110-11 (MP), where the notice was issued after recording reasons in that regard, initiation was upheld. 5.15. Likewise, Hon ble Gujarat High Court in Garden Finance Ltd. v. Add/. CIT, (2002) 257 ITR 481, 489, 494- 95, special leave petition dismissed by the Supreme Court: (2002) 255 ITR (St.) 7-8 (SC), where the assessee was holding shares in an amalgamating company and he was allotted shares in the amalgamated company and such shares were sold by him and he has disclosed the market price of such shares as on the date of amalgamation as the cost of acquisition of such shares and has not disclosed the cost o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not clear as to in whose hands the amount in question had to be assessed. The ITO was justified in taking proceedings under section 147 for assessing the amounts in the hands of the petitioners according to the claim made by the petitioners. Likewise, Hon ble Kerala High Court in CIT v. Dr. Sadique Ummer,(2010) 322 ITR 602 (Ker), where, the Assessing Officer collected further information to complete the reassessments which was also permissible under the Act. The finding of the first appellate authority as well as the Tribunal, that the Assessing Officer had no material to believe that the income had escaped assessment was wrong and contrary to facts. The assessee had not maintained any books of account. Therefore, the reopening of assessments was held to be valid and within time. In the case of CIT v. Uttam Chand Nahar, (2007) 295 ITR 403 (Raj), the notice requiring the assessee to file the return within 30 days was in accordance with section 148 as it must be deemed to be in force with effect from 1-4-1989, and in force as on the date notice was issued. There was no violation of section 148 in respect of the specified period within which the return is to be submitted. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment was held to be validly reopened under Explanation 2(c) to section 147. Likewise, in CIT v. N. Jayaprakash, (2006) 285 ITR 369 (Ker), where, the assessee could not, after having persuaded the assessing authority to withdraw the notice dated 1-10-1993, pointing out that it was not in conformity with law, be allowed to contend that the notice was valid due to the omission of the timelimit by the Finance (No.2) Act, 1996, with effect from 1-4-1989. In the absence of specific provision in the Finance (No. 2) Act, 1996, invalidating proceedings initiated by the Income-tax Officer, the action taken by him applying the then existing law could not be said to be invalid. 5.20. Likewise, in CIT v. S.R. Talwar, (2008) 305 ITR 286 (All), the factum of taking advances or loan from T and K, in which the assessee was one of the directors had not been disclosed nor a copy of the ledger account of the assessee maintained by the company filed. In view of the absence of these details, the Assessing Officer could not examine the taxability of advances or loan raised by the assessee. There was failure to disclose material facts necessary for assessment. The reassessment proceedings were h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sundry creditors in the balance-sheet of the assessee-firm for the previous year relevant to the assessment year 1989-90. These materials had a direct link and nexus for formation of a belief by the Assessing Officer that income of the assessee-firm had escaped assessment because of failure of the assessee to disclose fully and truly all material facts necessary for the assessment. In the case of CIT v. Best Wood Industries Saw Mills, (2011) 331 ITR 63 (Ker), the assessee challenged the validity of the reassessment on the ground that the AO had exceeded his jurisdiction under section 147 and both the first appellate authority as well as the Tribunal accepted the contention of the assessee holding that so far as the reassessments related to assessment of unexplained trade credits, they were invalid. On appeal, it has been held that the reassessments were to be valid. In Honda Siel Power Products Ltd. v. Deputy CIT, (2012) 340 ITR 53 (Del), there being omission and failure on the part of the assessee to disclose fully and truly material facts Thus reassessment proceedings were held to be valid. 5.23. In Atma Ram Properties Private Ltd. v. Deputy CIT, (2012) 343 ITR 141 (Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herm (India) P. Ltd. v. M. GopaLan, Deputy CIT [(2013) 356 ITR 481 (Guj)]; CIT v. Dhanalekshmi Bank Ltd. [(2013) 357 ITR 448 (Ker)]; xvi. Sitara Diamond Pvt. Ltd. v. ITO [(2013) 358 ITR 424 (Bom)]; xvii. Rayala Corporation P. Ltd. v. Asst. CIT [(2014) 363 ITR 630 (Mad)]. 5.25. So far as, the decision in the case of CIT vs Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) is concerned, the Hon ble Apex Court, while coming to a particular conclusion, only in a situation, when not a single piece of paper or document was recovered, therefore, the Hon ble Court held that since there was no tangible material found and the addition was merely on the basis of statement only then reopening of assessment u/s 147 of the Act was not permissible. Likewise, in the case of CIT vs S. Khader Khan Son (2012) 254 CTR 228 (SC), affirming the decision of Madras High Court in (2008) 300 ITR 157 (Mad.), the whole addition was made solely on the basis of statement u/s 133A and no other material was found, in that situation, it was held that the such statement has no evidentiary value. 5.26. In the case of Aradhna Estate Pvt. Ltd. vs DCIT (2018) 91 taxmann.com 119 (Gujarat), the Hon'ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, no action shall be taken under this section after the expiry of the four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of the failure on part of the assessee to make return under section 139 or in response to a notice issued under sub-section (1) of section 142 or 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. In this context, it is well settled that the requirement of full and true disclosure on part of the assessee is not confined to filing of return alone but would continue all throughout during the assessment proceedings also. In this context, the materials on record would suggest that the Assessing Officer had received fresh information after the assessment was over prima facie suggesting that sizeable amount of income chargeable to tax in case of the assessee had escaped assessment and that such escapement was on account of failure on part of the assessee to disclose truly and fully all material facts. The Assessing Officer formed such a belief on the basis of such materials placed before him and upon perusal of such material. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax has escaped assessment is fallacious. The Assessing Officer recorded detailed reasons pointing out the material available which had a live link with formation of belief that the income chargeable to tax had escaped assessment. At this stage, as is often repeated, one would not go into sufficiency of such reasons. [Para 13] Section 68 as is well known, provides that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. That the share application money received by the assessee from above-noted companies was only by nature of accommodation entries and in reality, it was the funds of the assessee which was being re-routed. Undoubtedly. Section 68 would have applicability. Proviso added by the Finance Act, 2012 with effect from 1-4- 2013, does not change this position. [Para 14] As per this proviso, where the assessee is a company and the sum so credited consists of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the validity of reopening also considered following decision, which were referred by both sides - I. Allied Strips Ltd. v. Asstt. CIT [2016] 384 ITR 424/69 taxmann.com 444 (Delhi) (para 5), II. Harikrishan Sunderlal Virmani v. Dy. CIT [2017] 394 ITR 146 (Guj.) (para 5), III. Raymond Woolen Mills Ltd.v. ITO [1999] 236 ITR 34 (SC) (para 6), IV. Yogendrakumar Gupta v. ITO [2014] 366 ITR 186/46 taxmann.com 56 (Guj.) (para 6), V. Aaspas Multimedia Ltd. v. Dy. CIT [2017] 83 taxmann.com 82/249 Taxman 568 (Guj.) (para 6), VI. Jayant Security Finance Ltd. v. Asstt. CIT [Sp. Civil Application No. 18921 of 2017, dated 12-2-2018] (para 12), VII. Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC) (para 13) and VIII. Pr. CIT v. Gokul Ceramics [2016] 241 Taxman 1/71 taxmann.com 341 (Guj.) (para 16). 5.28. The sum and substance of the aforesaid decision was that since the Assessing Officer was having sufficient material at his command to form a reasonable belief that income chargeable to tax had escaped assessment would not preclude him from reopening of assessment. Thus, the assessment notice/ re-opening was held to be justi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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