TMI Blog2022 (5) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration were not produced during the assessment proceedings and, therefore, in absence of the entire relevant material, the A.O. could not have examined the issues and could not have formed appropriate opinion regarding the same during the original assessment proceedings. Therefore, it is not a case of change of opinion and challenge to the notice under Section 148 of the Act on the ground that it seeks to initiate reassessment on the ground of change of opinion, cannot be accepted. Issue of presumptive income is purely a question of law on which no reassessment could have been done on the basis of audit objection - It is not the petitioner s case that its total turnover or gross receipts in the previous year did not exceed the amount of one crore rupees and, therefore, it does not fall within purview of an eligible assessee engaged in an eligible business and, therefore, Section 44 AD does not apply to the petitioner.Section 44 BBB of the Act contains Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects. Undisputedly, the petitioner is not a foreign compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eking certain further details and documents and directed the petitioner to produce the books of accounts, bills and vouchers on 20.08.2015. Amongst other things, the petitioner was directed to furnish the details of scheme wise collections, which were shown at ₹ 184,467,717,884/-, in digitized form in the given format. 3. The petitioner claims that on 18.01.2016, it had sent a reply to the aforesaid letter dated 04.08.2015 stating that it was filing the details of collections made from its members during the year as per the member ledger. Copies of the details in 50 ledgers were submitted and it was stated that the balance details were in the process of being printed and they would be submitted in due course of time. It appears that an objection was raised that the information given was not furnished in a systematic and chronological manner and ultimately on 02.02.2016, the petitioner sent a letter to the ITO Range 3 (4), Lucknow stating that details of scheme wise collections made from the members were being furnished in the desired format and details of all bank accounts maintained by the petitioner were also furnished. 4. On 31.03.2016, the ITO-3(4) passed an assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pened for want of verification and, thus, the provisions of Section 147 cannot be resorted only to verify or to further make inquiry. 8. On 25.01.2022, the National Faceless Assessment Centre passed an order disposing of the objections filed by the petitioner in response to the notice under Section 148 of the Act. 9. The petitioner has challenged the notice dated 22.03.2021 issued under Section 148 of the Act as also the order dated 25.01.2022 passed by the National Faceless Assessment Centre rejecting its objection against the aforesaid notice. 10. Before proceeding to examine the rival contentions advanced on behalf the parties, it would be appropriate to have a look at the relevant provisions of the Act and refer to some pronouncements of the Hon ble Supreme Court explaining the scope of interference under Article 226 of the Constitution of India while examining the validity of a notice issued under Section 148 of the Income Tax Act. 11. The relevant provisions of Sections 147 and 148 of the Act, as they stood at the relevant time, are being reproduced below: - 147. Income escaping assessment.- If the Assessing Officer, has reason to believe that any income cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of Section 148. Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended, by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. (Emphasis Supplied) 148. Issue of notice where income has escaped assessment .- (1) Befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.) No. of Depositors (from whom collection received in No.) Amount (in Rs.) 1 Upto ₹ 10 13449 116521 2 11 to 100 137823 8861543 3 101 to 1000 3371147 2204414914 4 1001 to 10000 15741780 63777944894 5 10001 to 50000 4183962 78114460242 6 50001 to 100000 233523 16306022592 7 10001 to 500000 99171 16191517732 8 Above 500000 2877 2172084087 Total 23783732 178775422525 15. During the year, the petitioner had collected the total deposits of ₹ 1,78,77,54,22,525/- from 2,37,83,732 persons and it had furnished KYC documents of 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. 20. In CIT v. P.V.S. Beedies (P) Ltd. , (1998) 9 SCC 272, the Hon ble Supreme Court held that: - 3. We are of the view that both the Tribunal and the High Court were in error in holding that the information given by internal audit party could not be treated as information within the meaning of Section 147(b) of the Income Tax Act. The audit party has merely pointed out a fact which has been overlooked by the Income Tax Officer in the assessment. The fact that the recognition granted to this charitable trust had expired on 22-9-1992 was not noticed by the Income Tax Officer. This is not a case of information on a question of law. The dispute as to whether reopening is permissible after audit party expresses an opinion on a question of law is now being considered by a larger Bench of this Court. There can be no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Reopening of the case on the basis of a factual error pointed out by the audit party is permissible under law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income Tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and nonspecific information. To that limited extent, the Court may look into the conclusion arrived at by the Income Tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income Tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income Tax Officer at the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 case, it is shown to us that ten persons (who are alleged to have advanced loans to the assessee in a total sum of ₹ 3,80,000 out of the total hundi loans of ₹ 8,53,298) were established to be bogus persons or mere name-lenders in the assessment proceedings relating to the subsequent assessment year. Does it not furnish a reasonable ground for the Income Tax Officer to believe that on account of the failure - indeed not a mere failure but a positive design to mislead - of the assessee to disclose all 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 Sections 148/147. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department, then, in the garb of reopening the assessment, review would take place. 28. The learned counsel for the petitioner has placed reliance on another decision of Hon ble Supreme Court in the case of New Delhi Television Ltd. Vs. DCIT, 2020 Scc Online SC 446, in which Hon ble Supreme Court has held as follows: - 36.In our view the assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. We are of the view that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case. In the present case the assessing officer on the basis of the facts disclosed to him did not doubt the genuineness of the transaction set up by the assessee. This the assessing officer could have done even at that stage on the basis of the facts which he already knew. The other facts relied upon by the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f opinion imply formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by an assessing officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection. 17. It is well settled and held by this Court in a catena of judgments and it would be sufficient to refer to CIT v. Kelvinator of India Ltd. wherein this Court has held as under: (SCC p. 725, para 5-7) 5. where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe . Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apter IV of the Income Tax Act with respect to computation of business income and Section 44 AD and 44 BBB of the Act defines the presumptive income in certain circumstances. The issue of presumptive income is purely a question of law on which no reassessment could have been done on the basis of audit objection. 34. To appropriately appreciate the aforesaid submission made by learned counsel for the petitioner, relevant provisions of Sections 44 AD of the Act, as it stood at the relevant time, is being reproduced below: - 44-AD. Special provision for computing profits and gains of business on presumptive basis .- (1) Notwithstanding anything to the contrary contained in Sections 28 to 43-C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and gains of business or profession . . Explanation.- Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year 40. As we have already held that the petitioner had failed to disclose fully and truly all material facts necessary for the assessment, the bar of four years would not apply. 41. The learned counsel for the petitioner next submitted that the notice under Section 148 of the Act was issued on 22.03.2021 by the DCIT/ACIT-3, Lucknow-New whereas the letter written by the member CIT-1/Lucknow to Additional CIT Range III (4), Lucknow communicating approval under Section 151 for issuance of notice under Section 148 of the Act was received by the A.O. on 24.03.2021. Thus on the date of issuance of notice i.e. on 22.03.2021, the A.O. was not having any approval/sanction of ACIT-1 Lucknow. 42. In reply to the aforesaid submission, Sri. Manish Misra has stated that PCIT-1, Lucknow had granted approval under Section 151 of the Act on 20-03-2020 and the approval was uploaded on the portal of the Department. Acting on the approval uploaded on the portal, the A.O. issued the notice under Section 148 of the Act on 22-03-2020, without wai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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