TMI Blog2021 (10) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons for reopening, there is not even a whisper as to what was not disclosed. In the order rejecting the objections, the Assessing Officer admits that all details were fully disclosed. In our view, this is not a case where the assessment is sought to be reopened It cannot be said in the present case that there was an omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. It cannot be stated that the condition precedent to the reopening of an assessment beyond a period of four years has been fulfilled. As observed in Parashuram Pottery Works Co. Ltd. [ 1976 (11) TMI 1 - SUPREME COURT] it would be in the interest of citizens of India or we should say, civilization that those who are entrusted with the task of calculating and realising the price that we pay for the civilization should familiarise themselves with the relevant provisions and become well versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. The petition is allowed. - WRIT PETITION NO.2814 OF 2019 - - - Dated:- 14-9-2021 - K.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat your income chargeable to tax for the Assessment Year 2012-13 has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961 . In response, petitioner, without prejudice to its rights and contentions, sought for the reasons to believe. Respondent, by its letter dated 28th May 2019 provided petitioner the reasons recorded for reopening of the assessment. 5. The short reasons to believe, for ease of reference, is scanned and reproduced hereinbelow : ANNEXURE Reason for re-opening of assessment u/s 147 of the I.T. Act, 1961 M/s. Ananta Landmarks Pvt. Ltd. PAN: AABCK6989Q Asst. Year: 2012-13 1. The assessee is engaged in the business of real estate and development and filed its return of income for AY 2012-13 on 15/09/2012 declaring total income of ₹ 6,96,880/-. The assessment in the instant case was completed u/s 143(3) on 20/02/2015 by accepting the returned income. 2. Thereafter, it is noticed that the assessee had availed following secured and unsecured loans as under: Sr. No. Lender Amount 1. SICO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssuing notice u/s 148 of the IT act as per provision u/s 151(1) of the Act. (Manoj Tripathi) Dy commissioner of Income tax Central Circle 5(3), Mumbai. Date: 14.03.2019 6. By a letter dated 14th June 2019, respondent gave a notice under Sub Section (1) of Section 142 of the Act calling upon petitioner to furnish further details/information/documents. Petitioner responded by its letter dated 19th June 2019 filing its objections to reopening of the assessment. According to petitioner, there was no failure to truly and fully disclose material facts and in any case, it was a mere change of opinion and there was no fresh tangible material for initiating reassessment proceedings. Respondent no.1 passed an order dated 30th September 2019 with reference to the objections raised by petitioner to the issuance of notice under Section 148 of the Act, which is impugned in this petition. According to respondent no.1, (i) To confer jurisdiction under Section 147 (a), two conditions were required to be satisfied, firstly the Assessing Officer must have reasons to believe that income, profits or gains chargeable to income tax had escaped assessment, and secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to believe that income has escaped assessment; (v) The contention of the assessee that true and full disclosure of material fact with respect to interest income was made during the course of original assessment proceedings is not correct as the assessee was fully aware that it is settled position of law that the interest expenses incurred for the purpose of business cannot be set off against the interest income under the income from other sources. The disclosure of material facts with respect to the setting off the interest expenses under Section 57 of the Act might be full but it cannot be considered as true. This is failure on the part of the assessee; (vi) Further, explanation 1 to Section 147 of the Act stipulates that mere production of books of accounts or other documents from which the Assessing Officer could have, with due diligence, inferred material facts, does not amount to full and true disclosure of material facts. 7. In our view, the order impugned requires to be set aside and we have to hold that the Assessing Officer had no jurisdiction to issue the notice under Section 148 of the Act. For ease of reference, we reproduce Section 147 as it then w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat was the material fact which was not truly and fully disclosed by the assessee. If we consider the reasons for reopening, except stating in paragraph 3 that a sum of ₹ 7,66,66,663/- which was chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary, there is nothing else in the reasons. In an unreported judgment of this Court in First Source Solutions Limited V/s. The Assistant Commissioner of Income Tax 12 (2) (1) and Anr. Writ Petition No.2762 of 2019 dated 31.08.2021 relied upon by Mr. Pardiwalla, the Court held that a general statement that the escapement of income is by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment is not enough. The Assessing Officer should indicate what was the material fact that was not truly and fully disclosed to him. In the affidavit in reply, it is stated that the reassessment proceedings was based on audit objections. In another unreported judgment of this Court in Jainam Investments V/s. Assistant Commissioner of Income Tax, Central Circle 8 (1) and Ors. Wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raints imposed by the first proviso to Section 147 of the Act . 10. Coming to the ground no.(i) for rejection that for issuing notice to reopen assessment, the Assessing Officer must only be satisfied that he had reasons to believe that income, profits and gains chargeable to income tax has escaped assessment and the second condition that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment is not required, Mr. Suresh Kumar in fairness agreed that that view of the Assessing Officer was incorrect. Mr. Suresh Kumar, as an Officer of the Court, agreed that both these are preconditions which are required to be fulfilled when assessment is sought to be reopened after four years. A Division Bench of this Court in Sesa Goa Limited V/s. Joint Commissioner of Income Tax and Ors. (2007) 294 ITR 101 (Bom) relied upon by Mr. Pardiwalla, has held : The power to reopen an assessment is not unbridled or unrestricted. The power is subject to the proviso embodied in the section itself. The proviso prescribes restrictions on the power of reopening the assessment by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment. The said statement is clearly made only as an attempt to take the case out of the restriction imposed by the proviso to Section 147 of the Act. (emphasis supplied) 11. As regards ground no.(ii) that it is subsequent to the assessment proceedings it was noticed that the assessee had wrongly claimed the deduction under Section 57 of the Act and that it went unnoticed by the Assessing Officer during the course of original assessment proceedings and hence, the jurisdictional requirement under Section 147 of the Act has been fulfilled, that is not the case made out in the reasons to believe. As held in First Source Solutions Limited (Supra), the reasons for reopening an assessment has to be tested/examined only on the basis of the reasons recorded at the time of issuing a notice under Section 148 of the said Act seeking to reopen an assessment. These reasons cannot be improved upon and/or supplemented much less substituted by affidavit and/or oral submissions. 12. As regards ground no.(iii) that the Assessing Officer had not made any discussion in respect of those points on which assessment is reopened and hence, he has not formed any opinion and thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose inferences to draw the proper inferences being the duty imposed on the Income Tax Officer. Therefore, it can be concluded that while the duty of the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this. The relevant portion of Calcutta Discount Co. Ltd. (Supra) reads as under : Before we proceed to consider the materials on record to see whether the appellant has succeeded, in showing that the Income-tax Officer could have no reason, on the materials before him, to believe that there had been any omission to disclose material facts, as mentioned in the section, it is necessary to examine the precise scope of disclosure which the section demands. The words used are omission or failure to disclose fully and truly all mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them-including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence 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 authority what inferences-whether of facts or law should be drawn. Indeed, when it is remembered that people often diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment that the Court ought not to investigate the existence of one of these conditions, viz., that the Income-tax Officer has reason to believe that under assessment has resulted from nondisclosure of material facts, cannot therefore be accepted. (emphasis supplied) 14 In Commissioner of Income Tax V/s. Bhanji Lavji (1971) 79 ITR 582 (SC), relied upon by Mr. Pardiwalla, the Apex Court has held as under : In our judgment, the High Court was right in holding that the Tribunal misconceived the nature of the proceedings and the duty imposed upon the assessee by Section 34(1) (a). It is not for the assessee to satisfy the Income-tax Officer that there was no concealment with regard to any question; it is for the Income-tax Officer, if that issue is raised, to establish that the assessee had failed to disclose fully and truly certain facts material to the assessment of income which had escaped assessment. Failure to disclose how the delivery of ghee was given at Porbandar was wholly irrelevant, and failure to furnish particulars in that behalf cannot assist the case of the Department. Observation relating to the failure to disclose the price of ghee supplied is not strict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emphasis supplied) Section 34 of the Indian Income Tax Act, 1922 corresponds to Section 147 of the Act then in force. 15. In Gemini Leather Stores V/s. Income Tax Officer (1975) 100 ITR 1 (SC), also relied upon by Mr. Pardiwalla, the assessee had not even disclosed the transactions evidenced by the drafts which the Income Tax Officer discovered. After discovery, the Income Tax Officer gave the partners of the firm opportunity to explain the drafts. The firm had utilised certain drafts for making purchases and those amounts were not recorded in the disclosed account of the firm. Despite that, the Court held that the assessment cannot be reopened by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts as the Income Tax Officer had material facts before him when he made the original assessment. The Court held that he cannot take recourse to reopen to remedy the error resulting from his own oversight. The relevant portions in this judgment of the Apex Court reads as under : . In the case before us the assessee did not disclose the transactions evidenced by the drafts which the IncomeTax Officer discovered. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me filed by the assessee. The Assessing Officer had in his possession all primary facts, and it was for him to make necessary enquiries and draw proper inference as to whether from the interest paid of ₹ 75,79,35,292/- an amount of ₹ 7,66,66,663/- has to be allowed as deduction under Section 57 of the Act or the entire interest expenses of ₹ 75,79,35,292/should have been capitalized to the work in progress against claiming ₹ 7,66,66,663/- as deduction under Section 57 of the Act. The Assessing Officer had had all materials facts before him when he made the original assessment. When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment. Even if the Assessing Officer, who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account the Assessing Officer, who has decided to reopen assessment, is not competent to reopen assessment proceedings. Where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to reopen the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reference was to be found, a Division Bench of this Court in 3i Infotech Limited V/s. Assistant Commissioner of Income Tax (2010) 192 Taxman 137 (Bombay) relied upon by Mr. Pardiwalla, in paragraph 12 held : 12. The record before the Court, to which a reference has been made earlier, is clearly reflective of the position that during the course of the assessment proceedings the assessee had made a full and true disclosure of all material facts in relation to the assessment. As a matter of fact, it would be necessary to note that the notice to reopen the assessment on the first issue is founded entirely on the assessment records. There is no new material to which a reference is to be found and the entire basis for reopening the assessment is the disclosure which has been made by the assessee in the course of the assessment proceedings. In Cartini India Limited V/s. Additional Commissioner of Income Tax [(2009) 314 ITR 275 (Bom.)], a Division Bench of this Court has observed that where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to the Assessing Officer to reopen the assessment based on the very sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that the condition precedent to the reopening of an assessment beyond a period of four years has been fulfilled. The statement in the reasons for reopening I have reasons to believe that income of ₹ 7,66,66,663/- which was chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all facts necessary .. is clearly made only as an attempt to take the case out of the restrictions imposed by the proviso to Section 147 of the Act. As observed in Parashuram Pottery Works Co. Ltd. (Supra), it would be in the interest of citizens of India or we should say, civilization that those who are entrusted with the task of calculating and realising the price that we pay for the civilization should familiarise themselves with the relevant provisions and become well versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. 20. Consequently, the petition is allowed. The notice dated 26th March 2019 issued by respondent no.1 under Section 148 of the Act seeking to reopen the assessment for the Assessment Year 2012-2013 an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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