TMI Blog2022 (8) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... of the facts available on record at that time and the A.O. could not examine the facts which were discovered later on and, therefore, the case has been re-opened on the basis of fresh material on record. Whether initiation of the proceedings under Sections 147 / 148 of the Act is based on a review of the existing material, which is not permissible in law? - From the discussion made above, it is clear that during investigation carried out subsequent to the limited scrutiny assessment, it was found that all the companies through which the entire share business has been dealt with by the petitioner, are bogus shell companies, through which the operators provide accommodation entries for routing the unaccounted money of the petitioner company through banking channels, thereby causing taxable income escaping assessment. This fact could not be examined by the AO during the original assessment for want of a full and true disclosure of facts by the petitioner. Therefore, the A.O. did not examine the aforesaid issues and he did not form an opinion regarding the same during the limited scrutiny assessment proceedings. In such a situation, it is not a case of change of opinion or the dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money was received. The present case falls within the exception carved out in the First proviso, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assesse to disclose fully and truly all material facts necessary for his assessment, for that assessment year and the bar of initiating re-assessment proceedings after a lapse of four years since the original assessment contained in the First Proviso appended to Section 147 of the Act, would not apply to the present case. Therefore, the submission to this effect made by the learned Counsel for the petitioner cannot be accepted. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after receipt of information and conducting an investigation and after forming a reason to believe that the petitioner did not truly and fully disclose all the material facts at the time of limited scrutiny assessment, and it has been discovered subsequently during investigation that all the companies through which the entire share business has been dealt with by the petitioner, are bogus shell companies, through which the opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and nothing adverse came out from the information submitted in response to the questionnaire. By means of an order dated 01-06-2017, the petitioner was assessed for a total income of Rs.3,49,140/-. 4. On 30-03-2021, the A.O. issued a notice under Section 148 of the Act for the Assessment Year 2015-16, stating that he had reason to believe that the petitioner s income chargeable to tax has escaped assessment within the meaning of Section 147 of the Act. 5. It is stated in the reasons provided for re-opening of assessment that an information was flagged by the Directorate of Income Tax (System) on the Insight Portal that the petitioner has allotted 1,20,000 equity shares to the shareholders @100 per share (face value Rs.10/- and premium Rs,90/-) during F.Y. 2014-15 and has collected a premium of Rs.1,08,00,000/-. The petitioner did not provide the details of shareholders even though several opportunities were granted to it. After completion of assessment proceedings, information was received from I CI Wing, on the basis whereof the A.O. had reason to believe that the premium of Rs.1,08,00,000/- collected by the petitioner was chargeable to tax but it has escaped assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-16 was only a limited scrutiny assessment to verify the applicability of Section 56 (2) (vii b) of the Act, which means to verify any difference in aggregate consideration received on issue of shares when compared with Fair Market Value of the shares and consider the same as income under Section 56 of the Act. There is no scope for verifying the identity, genuineness and creditworthiness of the shareholders in a limited scrutiny assessment. As was mentioned in the notice under Section 148, an information was given by the Directorate of Income Tax (System) on the Insight Portal, that the petitioner had allotted 1,20,000 equity shares to the shareholders @ Rs.100/- per share (face value Rs.10/- and premium Rs.90/-) during F.Y. 2014-15 and it had collected a premium of Rs.1,08,00,000/-. In spite of being granted several opportunities, the petitioner did not provide the details of shareholders and, therefore, the genuineness and creditworthiness of the shareholders could not be established and hence appropriate remedial action as per the provisions of the Act was recommended. 9. The order further stated that in the letter of ITO (I CI) dated 04-06-2019, it has been stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the petitioner, has submitted that after completion of assessment for the A.Y. 2015-16 on 01-06-2017, no new or fresh tangible material had come to knowledge of the A.O. for initiating the proceedings under Section 147 / 148 of the Act and, therefore, the initiation of the proceedings after expiry of more than four years from the end of the Assessment Year is illegal and beyond jurisdiction. He has further submitted that the petitioner had duly replied the questionnaire issued by the A.O on 20-04-2017 and had submitted all the necessary documents in reply to the queries raised by the A.O. The initiation of re-assessment proceedings amount to a review of the existing material. Section 148 uses the words reasons to believe and not reasons to suspect and the provisions of Section 147 / 148 cannot be used for making a roving or fishing enquiry on a vague or remote information in absence of any specific averment that the income has escaped assessment. 14. The petitioner also submitted that similar nature of transactions with the same parties were conducted in A.Y. 2012-13 by M/s Arohul Foods Pvt. Ltd., a sister concern of the petitioner, and the proceedings under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He 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 vag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that we are at the stage of reopening only. The question is whether, in the above circumstances, the assessee can say, with any justification, that he had fully and truly disclosed the material facts necessary for his assessment for that year. Having created and recorded bogus entries of loans, with what face can the assessee say that he had truly and fully disclosed all material facts necessary for his assessment for that year? True it is that Income Tax Officer could have investigated the 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 Rs 3,80,000 out of the total hundi loans of Rs 8,53,298) were established to be bogus persons or mere name-lenders in the assessment proceedings relating to the subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PAN Amout Received Mode of Receipt Date of Receipt Account Number in which the money was received No. of equity shares allotted during F.Y. 2014-15 A copy of the reply sent by the petitioner has also been annexed with the Writ Petition, in which the following details have been furnished: - Sl Name and occupation of allottee Address of allottee Nationality of allottee Number of shares allotted Total amount paid (Including premium) (In Rs.) Total amount to be paid on calls (Including premium outstanding) (In Rs.) 1 Bluefox Merchants (P) Ltd. 2A, Ganesh Chandra Avenue, 7 th Floor, Room No. 11, Kolkata 700013 Indian 45,000 45,00,000 Nil 2 Bluefox Dealtrade (P) Ltd. 42, B. B. Ganguly Street, 1 st Floor, Kolkata 700012 Indian 25,000 25,00,000 Nil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt with by the petitioner, are bogus shell companies, through which the operators provide accommodation entries for routing the unaccounted money of the petitioner company through banking channels, thereby causing taxable income escaping assessment. This fact could not be examined by the AO during the original assessment for want of a full and true disclosure of facts by the petitioner. Therefore, the A.O. did not examine the aforesaid issues and he did not form an opinion regarding the same during the limited scrutiny assessment proceedings. In such a situation, it is not a case of change of opinion or the drawing of a different inference from the same facts as were earlier available but the A.O. has acted on fresh information and it is not a review of the existing material. 23. The learned Counsel for the petitioner has placed reliance upon a judgment of the Hon ble Supreme Court in the case of CIT v. Marico Ltd., (2020) 16 SCC 354 and has contended that if the query raised by the A.O. is replied and is not rejected in the assessment order, it would mean that the A.O. has accepted the view and the notice issued on the same issue would amount to have been issued on a mere c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esulting 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 and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Assessee did not make a full and true disclosure on certain other facts. We are of the view that the assesse had disclosed all primary facts before the Assessing Officer and it was not required to give any further assistance to the Assessing Officer any disclosure of other facts. It was for the Assessing Officer at this stage to decide what inference whould 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. We are clearly of the view that the Revenue in view of its Counter Affidavit before the High Court that it was not relying upon the non disclosure of facts by the Assessee could not have been permitted to orally urge the same. Even otherwise we find that the Assessee had fully and truly disclosed all material facts necessary for its assessment and, therefore, the Revenue cannot take the benefit of the exgtended period of limitation of 6 years. Revenue has failed to show non disclosure of facts the notice having been issued after a period of four years is required to be quashed. 26. However, in the same judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f original assessment on the basis of the material placed before him by the assessee relating to the loan from the Calcutta Company and which he failed to draw at that time. Acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment which goes to expose the falsity of the statement made by the assessee at the time of original assessment is different from drawing a fresh inference from the same facts and material which was available with the ITO at the time of original assessment proceedings. The two situations are distinct and different. Thus, where the transaction itself on the basis of subsequent information, is found to be a bogus transaction, the mere disclosure of that transaction at the time of original assessment proceedings, cannot be said to be disclosure of the true and full facts in the case and the ITO would have the jurisdiction to reopen the concluded assessment in such a case. It is correct that the assessing authority could have deferred the completion of the original assessment proceedings for further enquiry and investigation into the genuineness to the loan transaction but in our opinion his failure to do s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under 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 : Explanation 1. -Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. (Emphasis supplied) 31. As is evident from the discussions made in the preceding paragraphs of this judgment, the facts regarding the petitioner s dealings with shell companies for routing its own unaccounted money into its books of accounts had not been truly and fully disclosed by the petitioner during the original assessment and scrutiny assessment. The petitioner did not furnish complete information regar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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