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TMI Blog2017 (5) TMI 1801X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3)? ii) Whether the Income Tax Appellate Tribunal was right in law in reversing the order of the Commissioner of Income Tax (Appeals) in respect of genuineness of the security/trade credit of Rs. 4,00,000/-." In DBITA No. 99/2006 "i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in sustaining the addition for Security/trade deposit with interest amounting to Rs. 2,79,890/- from M/s Magadh Medicos and in holding it as bogus?" 3. The facts of the case are that the assessee is pharmaceutical manufacturer and assessed for the year 1994-95 on 19th October, 1995. Notice u/s 263 was issued on 31st March, 1998 and the order came to be passed on 29th February, 2000. The assessment order for the year 1995-96 is done on 8th February, 2001 and reassessment for the year 1994-95 was done on 28th March, 2001. 4. Counsel for the appellant has mainly taken us to para 3 of the assessment order which reads as under:- "The assessee vide her letter dated 11.2.2000 submitted that he had received a letter from ACIT, Range-5, Patna wherein it is mentioned that M/s Medicana Agencies, Patna had deposited a sum of Rs. 4 Lacs d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts" as contained in section 34(1)(a) of the IT Act, 1922, the court observed that it refers only to the primary facts and the duty of the assessee is to disclose such primary facts. The court further observed that there is no duty cast on the assessee to indicate or draw the attention of the Income Tax Officer to what factual or legal or other inferences can be drawn from the primary facts disclosed. There is not a word in the order of assessment if the respondent assessee omitted to disclose any material fact. 12. It has been contended by the assessee that during the course of original assessment proceedings the assessee has duly filed confirmation from the party with regard to the trade deposit and the said confirmation is lying in the assessment record. M/s Medicana Medical Agencies from whom the trade deposit of Rs. 4.00 lacs have been received have duly confirmed about the deposit having been made by them. It is seen that this deposit was accepted by the Assessing Officer while making the original assessment made u/s 143(3) dated 19.10.1995." 6. The Tribunal without considering the reasoning adopted by the CIT(A) has reversed its finding and appeals of the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment 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. A plain reading of the said proviso makes it more than clear that where the provisions of Section 147 are being invoked after the period of four years from the end of the relevant assessment year, in addition to the Assessing Officer having reason to believe that any income chargeable to tax has escaped assessment, it must also be established as a fact that such escapement of assessment has been occasioned by either the assessee failing to make a return under Section 139 etc. or by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In the present case, the question of making of a return is not in issue and the only question is with regard to the second portion of the proviso, which relates to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147 (a). It there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to he struck down as invalid." 4. In Phool Chand Bajrang Lal and another Vs. Income Tax Officer and another, 203 ITR 456 the Supreme Court held:- "From a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that the initiation of proceedings under Section 148 was barred by limitation." 11. He has also relied upon the two decisions of the Gujarat High Court in the case of Shree Sidhnath Enterprise vs. Assistant Commissioner of Income Tax reported in [2016] 240 Taxman 631(Gujarat) wherein para 18, 19 & 20, it has been held as under:- 18. Thus, it is the statutory duty of the assessee to record all its transactions in the books of account to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. In the present case, it is not the case of the respondent that the petitioner had not recorded all the transactions in the books of account. It is the case of the respondent that the petitioner in its cash book has not noted the addresses and the Permanent Account Numbers of the parties who made the cash deposits. In the present case, as noted hereinabove, the Assessing Officer reopened the assessment by issuing notice under section 148 of the Act on 31st March, 2008 in respect of cash deposits made by the assessee in its ICICI bank account. During the course of the assessment proceedings, the Assessing Officer had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over, the Assessing Officer while recording the reasons, does not appear to have applied her mind to the information furnished by the Investigation Wing, inasmuch as, if she had ascertained the facts from the record, she would have found that certain cash deposits have already been examined at the time of assessment under section 143(3) read with section 147 of the Act and had been accepted while framing assessment under section 143(3) read with section 147 of the Act and would not have sought to reopen the assessment in respect of total amount of cash deposits recorded in the cash books. It is not the case of the respondent that the cash deposits of Rs. 96,85,63,426/- in respect of which the assessment is sought to be reopened are in addition to the cash deposits of Rs. 4,70,11,830/- in respect of which the assessment was reopened on the earlier occasion and the cash deposits which the Assessing Officer had examined while framing the assessment under section 143(3) read with section 147 of the Act. 19. In the opinion of this court, in the present case on the self same material, namely, the entries made in the cash book, the Assessing Officer had formed the belief that income to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l material facts, therefore, cannot be sustained." 12. Another decision of Gujarat High Court in case of Commissioner of Income Tax vs. Ankit C. Maheshwari reported in [2014] 48 taxmann. com 147 (Gujarat) wherein it has been held as under:- 9. We have heard Mr. Sudhir Mehta, learned advocate appearing on behalf of the appellant-Revenue and have gone through the orders passed by the learned Commissioner of Income-tax (Appeals) and the learned Income-tax Appellate Tribunal. We have also gone through the reasons recorded by the Assessing Officer for reopening the assessment under section 148 of the Act, which are reproduced hereinabove. Considering the above, it is required to be noted that, as such, in the reasons recorded by the Assessing Officer for reopening the assessment under section 148 of the Act, it was not the contention of the Assessing Officer that there was any failure on the part of the assessee to disclose the material facts truly and correctly. At this stage, it is required to be noted that, as such, there are concurrent findings recorded by both the authorities below that the reassessment proceedings were initiated/assessment was reopened beyond a period of four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinction has now been taken away by the Amendment Act. Previously, the line of distinction was a limitation period of four years and the limitation period exceeding four years. The assessing officer would reopen a back assessment within a period of four years as long as he had reason to believe in consequence of any information, that income has been under-assessed or income has escaped assessment. In the case of limitation, providing for a period exceeding four years, there should have been a failure on the part of the assessee to disclose fully and truly all material facts leading to the escapement of income. But as a result of the amendment brought with effect from 1- 4-1989, the above distinction had been obliterated and the assessing officer could reassess the income as long as he had reason to believe that income chargeable had escaped assessment. The new law has inserted a proviso to Section 147 in the following words: Provided that where an assessment under Subsection (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll time. But law is not an antique to be abroad, dusted and put back on the shelf. It is dynamic in nature. It is often difficult to describe with exactitude the correct position of law at a given point of time. Till the time apex body determines the correct position things go as per the interpretation of law made by competent courts. At time there may arise cleavage of judicial opinion. But matter gets settled when Supreme Court adjudicates it. Inability to anticipate the view to be taken by the Apex Court cannot be termed as failure on the part of the assessee. Previous knowledge never becomes non-existent it goes on developing in the lap of time. Human knowledge is always improving and progressing. The world was assumed to be flat until it became known that the world is found. That does not mean that gravitation did not exist before Newton's discovery of the law of gravitation. Human knowledge is never static. Theory of evolution of Darwin does not make the previous knowledge non-existent. Human knowledge, as we have mentioned, is always progressing. So relativity was always there but we became aware only after Einstein. This is the basic difference between discovery and inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At notice stage no final finding of the fact is necessary that the transaction was not genuine. If, on the material information, prima facie view can be taken regarding escapement of income, the AO is well within his jurisdiction to issue the show-cause notice for reopening of the assessment. 11. In the case of Rattan Gupta v. Union of India and Ors. : [1998]234ITR220(Delhi) , Delhi High Court has considered the similar issue. The Delhi High Court has occasioned that- what is the condition precedent for reopening of the assessment. The Delhi High Court has taken the view that the letter and the appraisal report constituted the relevant material for formation of belief 'that the assessee's income had escaped assessment and notice under Section 147 r/w Section 148 for reopening of the assessment is valid. 12. In the case of Phool Chand Bajiang Lal and Anr. v. ITO and Anr. : [1993]203ITR456(SC) , the facts before their Lordships are that after completion of the assessment, subsequent information has been received from the AO that company's that its managing director had confessed that company had not advanced any loan to any person during period covering the date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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