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TMI Blog2022 (8) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,91,99,987/- by making additions towards disallowance under section 14A of the Act, long term capital gains, short term capital gain (non-STT) and STCG (STT). 2.1 Subsequently, the Assessing Officer has reopened the assessment under section 147 of the Act by issuing notice under section 148 of the Act dated 27.02.2015 on the ground that there is an escapement of income to the extent of Rs..1,32,10,438/- has escaped assessment, i.e., business income earned on sale of shares and mutual funds was taxed under the head of income from capital gain and it has to be taxed as business income. On the request of the assessee, reasons for reopening were furnished by the Assessing Officer. Further, notice under section 143(2) of the Act dated 24.08.2015 was also duly served on the assessee. In response to the same, the assessee filed its objection to the reopening of the assessment. After considering the objections of the assessee, the Assessing Officer has observed that the assessee has purchased the shares and mutual funds with an intention of realizing the profit out of it and not with an intention of enjoying the property by itself. Thus, the intention is that of outright sale of shares a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een observed that ... (quote) 'True and full disclosure contemplated in the first proviso to s. 147 is that "all material facts" and not of a legal provision. If an assessee has disclosed all material facts truly and fully, but has made a claim which is wrong in law, the same cannot amount to failure to disclose in terms of the first proviso to s.147'. (unquote). 14. Several case-laws on the issue have been discussed in paragraph 38 to 45 to exemplify what constitutes material facts. It flows that legal interpretation to any set of facts which include claims or interpretation of law which can be, either or will not constitute non-disclosure of material facts. Further, in a case as this, the transactions arising from the mutual fund units and the investment schedules were material facts which were disclosed by the appellant in its return and computation of income on which the AO had framed the assessment originally u/s 143(3) of the Act on 31.12.2010. The subsequent reopening on the same set of facts with no failure on the part of the appellant to disclose material facts would tantamount to mere "change of opinion". In this regard, the Hon'ble Supreme Court in CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad capital gains has been considered by the Assessing Officer in the original assessment order passed under section 143(3) of the Act dated 31.12.2010 by considering all the materials furnished by the assessee. It was further submission that there was no failure on the part of the assessee to disclose any material. Subsequently, the assessment was reopened by the Assessing Officer based on the same material and there was no new tangible material and thus, the ld. Counsel has submitted that it was only a change of opinion and the judgement of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. (supra) applies. He further argued that the assessment was reopened by issuing notice dated 27.02.2015 under section 148 of the Act is beyond four years from the end of the relevant assessment year under consideration and submitted that the Assessing Officer has to establish that there is a failure on the part of the assessee to disclose fully and truly all material facts to complete the assessment. In this case, the Assessing Officer has failed to establish that there is a failure on the part of the assessee and therefore the reopening of the assessee is invalid and bad i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed accordingly. As the assessee has failed to disclose fully and truly all material facts necessary for the assessment, I have reasons to believe that income chargeable to tax has escaped assessment within the meaning of section u/s 147 of the Income Tax Act." 7. We have also gone through the assessment order and find that after considering all the details furnished by the assessee, the Assessing Officer came to a conclusion that the total capital gain of the assessee is Rs..1,95,78,283/-. Subsequently, the Assessing Officer, by issuing notice under section 148 of the Act, he wanted to treat the entire income as business income and not as capital gain as computed by the Assessing Officer in the original assessment order under section 143(3) of the Act dated 31.12.2010. We find that the assessee has fully and truly furnished all the details before the Assessing Officer and by considering the details filed by the assessee, the assessment was completed under section 143(3) of the Act dated 31.12.2010 and the Assessing Officer has accepted the claim of the assessee in respect of capital gains. Subsequently, the Assessing Officer wanted to treat the very same capital gain as busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Marico Ltd. v. ACIT, the Department preferred SLP (Civil) before the Hon'ble Supreme Court and the Hon'ble Supreme Court dismissed the SLP vide order dated 01.06.2020 in Diary No. 7367/2020 and confirmed the Hon'ble Bombay High Court decision in which it was held that once the opinion is formed during the regular assessment proceedings, bars the Assessing Officer to reopen the same only on account of a different view. Admittedly, in the present case in hand, without any new tangible material, the Assessing Officer reopened the assessment to treat the very same capital gain as business income on the basis of the same material available on record. 7.3 Apart from the above, in this case, the assessment was reopened beyond four years from the end of the relevant assessment year under consideration, the provisions of section 147 of the Act applies. Once the proviso to section 147 of the Act applies, it is the duty of the Assessing Officer to prove that the assessee has failed to furnish fully and truly all material facts to complete the assessment. In this case the Assessing Officer was not able to establish that there is failure on the part of the assessee to disclose fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ension on the part of the Assessing Officer in understanding the details placed before him cannot confer a justification for reopening the assessment, long after the period of four years had expired. By notice dated December 18, 1996, the Assessing Officer reopened the assessment of the petitioner for the assessment year 1989-90, for the following reasons: (a) that excessive deduction had been allowed under section 80HHC; (b) that excessive allowance had been granted under section 32AB; and (c) that adjustment from the Modvat account had wrongly been allowed as deduction as payment of excise duty. On a unit petition: Held, that the reasons recorded by the Assessing Officer did not establish, even prima facie, a failure on the part of the assessee to fully and truly disclose the material facts for the assessment, because: (a) the assessee had placed before the Assessing Officer all statements, a perusal of which clearly showed that all the materials required for calculating the extent of benefits under sections 80HHC and 32AB and the actual calculation had been placed before the officer, The mistake, if any, was solely due to the mistake made by the officer and was not a mista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to be quashed." 7.6 Further, in the case of Sadbhav Engineering Ltd. v. DCIT [2011] 333 ITR 483 (Guj), the Hon'ble Gujarat High Court has held as under: "Held, allowing the petitions, that on a plain reading of the reasons recorded, it was apparent that they were totally silent as regards any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessments for the relevant assessment years. Whether or not there was any failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment, was a matter of fact and there could be no deemed failure as was sought to be contended on behalf of the income-tax authorities. Therefore, in the absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment years 2003-04 and 2004-05, the notices under section 148 having been issued after the expiry of period of four years from the end of the relevant assessment years, the very initiation of proceedings under section 147 stood vitiated and could not be sustained." 7.7 In the case of CIT v. Sil Investments Ltd. 339 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for re-opening the assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922 at one time before its amendment in 1948 are not there in section 147 of the Act of 1961 would not lead to the conclusion that action can now be taken for reopening the assessment even if the information is wholly vague, indefinite, far-fetched and remote, The reason for the formation of the belief must be held in good faith and should not be a mere pretence. The original assessment for the assessment year 1958-59 was made on the respondent after allowing deduction of a sum of Rs. 10,494 'towards interest to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, viz., (i) the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee (a) to make a return under section 139 for the assessment year to the Income-tax Officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist to confer jurisdiction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148(2). Another requirement is that before notice is issued after the expiry of Jour years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. The duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence could with du ..... X X X X Extracts X X X X X X X X Extracts X X X X
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