TMI Blog2019 (6) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners are rejected, it transpires that reasons given for rejecting the objections are nothing but an eyewash as justification, explanation and reconciliation provided by the petitioner is not even referred to by the respondent. Such an approach of the respondent is required to be deprecated. Reasons recorded by the assessing officer are based on incorrect facts in addition to the fact that the AO during the course of original assessment has scrutinised the details of salary expenditure by issuing notices u/s 142(1) and by calling for information and hence, it is evident that the assessment is sought to be reopened on a mere change of opinion, which is not permissible in law. AO has considered the claim of the petitioner with respect to the salary expenditure and, therefore, when the petitioner filed the objections to the impugned notice which is based only upon the salary register of Navsari unit impounded during the course of survey conducted in the year 2016, the respondent ought to have dropped the reopening proceedings. - Decided in favour of assessee - R/SPECIAL CIVIL APPLICATION NO. 15290 of 2018 - - - Dated:- 30-4-2019 - MS HARSHA DEVANI AND MR BHARGAV D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 143(3) of the Act, there were survey proceedings under section 133A of the Act on 14th and 15th September, 2016. Pursuant to said survey carried on by the department, impugned notice dated 28.3.2018 under section 148 of the Act was issued by the respondent for reopening the assessment for A.Y. 2011-2012 stating that he has reason to believe that income chargeable to tax had escaped assessment and called upon the petitioner to submit the return. The petitioner therefore, on 10.4.2018 submitted the same return which was filed under section 139 of the Act. The respondent along with letter dated 22.6.2018 supplied reasons recorded which are reproduced hereinbelow : 1. In this case, the assessee filed its return of income on 19/09/2011 declaring total income at ₹ 4,37,543/for the A. Y. 201112. Subsequently, the case was selected for the scrutiny and assessment proceedings were concluded on 31/01/2014. 2. A survey u/s. 133A of the IT Act was carried out in the case the assessee company on 14 15.09.2016. During the course of survey proceedings certain documents and books of account were found including salary registers for different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of payment of salary recorded in the salary register for the F.Y. 201011 relevant to the A.Y. 2011-12. To be specific, as against the amount of salary expenses of ₹ 7,81,100/debited into the P L account, evidence of actual payment of ₹ 2,78,700/only has been found in the form of salary register. 6. The duty cast upon the assessee is not only to disclose the material facts fully but also truly. The word 'truly' indicates that the disclosure made must conform to the actual state of things. A statement cannot be said to be true if it does not explain things exactly as they are. The disclosure, therefore, should be hones, sincere and not fraudulent [RENUSAGAR POWER CO. LTD vs. ITO, 117 ITR 719 (ALL)]. Further, every disclosure is not and cannot be treated as a true and full disclosure, it could be a false one or true one. Similarly, it could be full disclosure or a partial disclosure. A partial disclosure may be misleading one and not enough to meet the standard of disclosure. What is required is full and true disclosure of all material facts necessary for making the assessment for the A.Y. Concerned. [SRI KRISHNA PVT. LTD. vs. ITO, 221 ITR 538 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the petitioner stated thus : .... If the reconciliation between the numbers had been sought, the assessee would have provided the same. However, a sheet it attached completely reconciling salary of ₹ 2,78,700/as per salary register of Navsari unit with ₹ 7,81,100/debited to profit and loss account with reference evidences (Page No.27 to 48). Copies of salary registers of Navsari and Bardoli branch are also enclosed (AnnexureA B). The justification chart is also summarily presented below with explanation. Particulars Amount (Rs.) Amount (Rs.) Page Referenc e Navsari Unit Add: As per salary register impounded by the IT Department during survey of Navsari Unit 2,78,700 Annexure A Salary paid to Doorkeeper cum Watchman 1. Rameshbhai ₹ 3,900*12 months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 148 of the Act and the order rejecting the objections are bad in law inasmuch as the condition precedent for reopening a scrutiny assessment beyond a period of four years as laid down by the proviso to section 147 of the Act is that the escapement of income from assessment must be by reason of omission or failure on part of the assessee to disclose fully and truly all material facts necessary for assessment. It was submitted that this condition is not fulfilled by the respondent on the facts of the case. The petitioner disclosed not only all facts pertaining to salary and wages during the course of assessment, by supplying the information when asked for by the Assessing Officer, but in fact, the respondent ought to have been convinced after reading the objections that the very foundation of the reasons recorded was the salary register of one unit, when in fact, the petitioner had two units and ₹ 7,81,100/was the sum total of the salary recorded in the salary register of two units situated at Navsari and Bardoli. It was submitted that the order rejecting the objections suffered from total non application of mind and is contrary to decision of the Supreme Court in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons: 3.1 The reopening has been made after duly recording the reasons by the A.O. The facts suggest that the reopening of the assessment u/s147 has been done after following the due procedures of law and hence there is no illegality involved therein. Copies of impounded material and statements recorded have been supplied to the assessee company when a request received from its end. 3.2 In this case, an survey action u/s. 133 A of the I.T. Act, 1961 was carried out on 14/15.09.2018 wherefrom a salary register for F.Y. 201011 relevant to AY 201112 was found and impounded from the business premises of the assesseecompany. As per the said salary register a payment of ₹ 2,78,700/has been recorded for whole FY 201011 whereas in the books of accounts the same has been debited to tune of ₹ 7,81,100/which reveals this fact salary expenses were bogus and inflated to the tune of ₹ 5,02,400/. During the course of survey proceeding, Shri. Chetanbhai A. Kapadia, Director of the Company, was examined on oath and he failed to explanation the difference of salary recorded in the salary register impounded and debited to the profit and loss accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses debited in profit and loss account, there is a failure on part of the petitioner to disclose truly and fully all material facts and, therefore, the impugned notice under section 148 of the Act is legal and valid. 10. This is a classic case of total non application of mind on behalf of the respondent while passing an order rejecting the objections filed by the petitioner pursuant to the issuance of notice under section 148 of the Act. The respondent has brushed aside the justification, explanation and reconciliation furnished by the petitioner in the objections to the effect that the impugned notice is issued only considering the salary register of Navsari unit and the salary register of Bardoli unit has not been taken into consideration. In view of reconciliation furnished by the petitioner in the objections, any prudent person would have dropped the reopening proceedings. In facts of the case, the respondent while rejecting the objections, without considering the justification and reconciliation provided by the petitioner, has rejected the same as empty formality. The Apex Court in case of GKN Driveshafts India Ltd. (supra), has devised a mechanism to give an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification of detailed furnished by you vide letter dated 18.08.2013, it is observed that: ( i) You have balance with scheduled bank in fixed deposit to the tune of ₹ 45,52,610/and you have shown interest income thereon of ₹ 2,54,746/. Further, you have obtained unsecured loans from Director of ₹ 23,47,277/and interest paid thereon to the tune of ₹ 3,71,138/. It is noted that the said payment is covered u/s. 40 A(2)(b) of the Act. Considering the above, you are requested to explain why the interest given on unsecured loan to Directors is restricted to 6% instead of 12% paid by you as you earned interest on fixed deposits hardly @ 6%. ( ii) On verification of audit report, it is further observed that you have paid Director Remuneration of ₹ 5,78,400/to Smt. Sheetaben A. Kapadia and salary of ₹ 1,76,000/to Mrs.Pinalben C. Kapadia. The payment given to these two lady is specified under section 40 A (2)(b) of the Act. Therefor, you are requested to furnish the details of qualification and natures of work/duty performed by these two ladies and justify you claim. 12. The petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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