TMI Blog2022 (8) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years, no separate findings are being given on another ground raised by the assessee on merits. Appeal of assessee allowed. - I.T.A. Nos. 427 & 428/Chny/2021 - - - Dated:- 3-8-2022 - Shri V. Durga Rao , Judicial Member And Shri Manoj Kumar Aggarwal , Accountant Member Assessee by : Shri D. Palanivel , Advocate Department by : Ms. L. Jancy Elizabeth Rani , JCIT ORDER PER V. DURGA RAO , JUDICIAL MEMBER : Both the appeals filed by the assessee are directed against the order of the ld. Commissioner of Income Tax (Appeals) 18, Chennai, both dated 31.08.2021 relevant to the assessment years 2011-12 and 2012-13. Besides challenging reopening of assessment under section 147 of the Income Tax Act, 1961 [ Act ], the assessee has also disputed the confirmation of disallowance of purchase on merits in both the assessment years under consideration. 2. Brief facts of the case are that the assessee is a manufacturer and dealer of gold and silver jewellery, filed its return of income for the assessment year 2011-12 on 27.09.2011 declaring a total income of ₹.13,72,03,900/-. A search and seizure action was conducted at the premises of the assessee on 02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal before the Tribunal. The ld. Counsel for the assessee has submitted that the Assessing Officer issued notice under section 148 of the Act, being served after the expiry of four years from the end of the relevant assessment years. The Assessing Officer has also furnished reasons for reopening of the assessment under section 147 of the Act, wherein what material facts had been suppressed by the assessee was not mentioned. In fact, it was submitted that the assessee has furnished full and true particulars during the assessment proceedings under section 143(3) of the Act and relied upon the decision of the Hon ble Supreme Court in the case of CIT v. Foramer France [2003] 264 ITR 566. It was further submitted that when there was no failure on the part of the assessee to fully and truly disclose all material facts, reopening of assessment merely on a change of opinion, which is not permissible as per the law laid down by the Hon ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. 320 ITR 561 (SC). The ld. Counsel for the assessee has further submitted that no incriminating materials relating to third party found during the course of search in the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s India Pvt. Ltd is one of the beneficiaries, who have taken accommodation entries of bogus purchases to the tune of Rs.22,851100/- from M/s. Millennium Stars and Rs.86,22,5607- from M/s. Pankaj Exports which are among the concerns of Sri. Bhanwarlal Jain and family. In view of the above, I have reason to believe that income of Rs.1,09,07,660/- chargeable to Income Tax has escaped assessment within the meaning of explanation to section 147 of the IT Act, 1961. 5.1 From the above reasons furnished for reopening of assessment under section 147 of the Act, it is amply clear that the assessment was reopened purely based on the information received by the Assessing Officer in view of the search and seizure action under section 132 of the IT Act, 1961 conducted on 03.10.2013 by DDIT (Inv.) Unit IX(2) Mumbai, in the case of Bhanwarlal Jain Group. 5.2 However, if the assessment is reopened after a period of four years and after completion of scrutiny assessment, it is incumbent on the part of the Assessing Officer to satisfy the stipulation of first proviso of section 147 of the Act by establishing failure on the part of the assessee to disclose truly and fully all material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT. 5.4 In view of the above judgement of the Hon ble Supreme Court in the case of CIT v. Odeon Builders Pvt. Ltd. (supra), the reassessment order passed under section 143(3) r.w.s. 153B(1)(b) r.w.s. 147 of the Act is bad in law and the same is liable to be quashed. 6. 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 and truly all materials. Therefore, in our opinion, the reopening is invalid beyond four years from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice was not valid and was liable to be quashed. 6.3 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. 6.4 In the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the income of the assessee from assessment in the particular year 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, farfetched 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 aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of Jour years but within a period of eight years from the end of the relevant 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 Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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