TMI Blog2023 (10) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... failure on the part of the assessee to make a return under section 139 for the assessment year under consideration or to disclose fully and truly all material facts necessary for his assessment for that year. In the present case since a new fact was admitted by the assessee by way of statement which was not there before the Ld AO when the original assessment u/s 143(3) was framed, thus, the twin conditions mandated in 1st proviso to section 147 are satisfied and we hold that reopening u/s 147 was validly initiated by the Ld AO. We therefore are not in concurrence with the finding of Ld CIT(A) on this aspect that the reopening was illegal as no fresh material was available with the AO to do so. In the result Ground no 2 of the revenue is allowed. Addition when the assessee had retracted from the statements given during the survey operations - assessee first admitted and surrendered a sum as unexplained / undisclosed income - submission of assessee that the combined retraction of the assessee for 3 AY s was accepted by the Ld AO which is evident from the assessment order for one of the AY i.e. 2018-19 wherein no addition was made by the Ld AO on the basis of survey statements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to dislodge the retracted statement of assessee with the support of any fresh evidence or material, the addition made was bad in law. It is also the fact emanated from the order of Ld CIT(A) that the assessee had disclosed the true and primary facts during original assessment proceedings even when the subject issue on the basis of which reassessment proceeding were initiated was fully verified and examined by the AO during original assessment proceeding. Thus, there exists a serious lacuna in the findings of the AO. AO not having any fresh information/material in his possession, merely on retracted statement formed his belief about escapement of income which is not sustainable in law. With such observation, after a thoughtful consideration of all the material aspect of the case, in absence of any cogent evidence, addition made on the basis of statement of the assessee which have been retracted later, the additions made by the Ld AO do not hold good in the eyes of law. We therefore direct to vacate the addition made in terms of our observations herein above. Appeal of revenue is partly allowed. - Shri Ravish Sood, JM And Shri Arun Khodpia, AM For the Assessee : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an element of compulsion for assessee to make such statement. Whereas in the present case, the assessee failed to provide a reasoned explanation for retracting from the statement recorded during survey. 5. Whether on the fact and in the circumstances of the case and in law, while holding assessment passed u/s 147 r.w.s. 143(3) of act as invalid and void-ab-initio, the ld. CIT(A) has failed to allude to relevant facts brought on record by AO, misread the evidences and its probative value which itself gives rise to question of law in view of ratio of decision in the case of Sudarshan Silk and Sarees 300 ITR 205 (SC). 6. The order of the Ld CIT(A) is erroneous both in law and on facts. 7. Any other ground that may be adduced at the time of hearing of appeal. 2. The brief facts of the case are that the appellant is a Private Limited Company and derives income from Manufacturing and sale of Gold Ornaments/ Silver items. Regular return of income for assessment year 12- 13 was filed on 24.08.2012 declaring total income at Rs. 10,13,920/-. Assessment order under section 143(3) was passed on 23.03.2015 by making an adhoc disallowance of Rs. 1,00,000/- out of various expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the given address , in some cases neither the letter was received back nor desired information was received, only in 3 cases the information sought u/s 133(6) was received. Under such circumstances the Ld AO observed that the identity of the companies was not proved. Ld CIT DR further submitted that Ld AO had done further research and investigation pertaining to all the 19 companies and have framed an exhaustive order with respect to credit worthiness of the lenders and genuineness of the transactions. Ld AO finally concluded that the intent of the assessee and the process it has chosen to introduce its own unaccounted money in the form of share application money against which the shares were issued in the same year. The assessee has miserably failed to explain the credits appearing in its books as genuine and hence action u/s 68 is called for. Ld AO further reproduced the statement of Shri Shyam Sunder Agarwal, director of the company recorded u/s 131 of the Act, having no satisfactory explanation justifying the transactions of the assessee company with the 19 share applicants. With such submissions Ld CIT DR argued that the assessee company was unable to discharge its onus cast u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of sworn statements furnished by the assessees in the course of survey made u/s 133A. Ld counsel explained that it is not permissible to take sworn statements in action u/s 133A and any statement obtained- in the course of such survey does not have any evidentiary value and as such, the entire basis of reopening of the assessments vitiated and as such, all these impugned assessments are ab initio void in law. In support of his contentions, Id counsel has relied on Paul Mathews and Sons (2003) (Ker); S Khader Khan Son (2008) (Mad); and Ashok Manilal Thakkar (2005) (Ahd-Trib). 9. Shri Yogesh Kamat, the ld Jt.CIT appearing for the Revenue defended the income escaping assessment orders. He explained that the survey conducted by the Deptt has brought out materials towards certain items of income escaped in the hands of the assessees. Even if, the reasons relied on by the AO to reopen the assessments were later found to be unsustainable, still, the reopening of the assessments as such, does not have become vitiated. As far as these cases are concerned, the AO has proceeded strictly in accordance with law and, therefore, the legal objection raised by the assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer is not authorised to administer oath and to take any sworn statement which alone as evidentiary value as contemplated under law (iii) the material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment; (iv) the materials collected during the course of survey u/s 133A shall not have any evidentiary value. 13. Ashok Manilal Thakkar (2005) 97 ITD 361 (Ahd-Trib) has considered the same issue. In that case, there was a survey and certain disclosure was made in the statement at the time of survey and thereafter, the statement was retracted. The Tribunal held that there is no evidentiary value for the materials stated to be collected in the course of survey and especially when the statement is retracted and, therefore, any addition on the basis of such survey material cannot be justified. 14. As far as the facts of impugned cases are concerned, the statements are obtained in the course of survey made u/s 133A. Both the assessees have thereafter retracted the statements. When this is the case, no reliance can be placed on the statement obtained in the course of that survey as held b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for re-opening are extracted for ready reference: In the instant case, a survey u/s 133A(1) was conducted on 5- 7-16. The investigation revealed that the assessee has raised share capital amounting to Rs. 90 lakhs during the FY 09-10 pertaining to the AY10- 11. The share subscriber companies were found to be non-existent at their registered addresses. The cash trail information received from Inv. Wing, Kol revealed that the share capital was routed through accommodation entry providers. On the basis of survey findings, the CEO of the company was requested to offer his comments on routing of unaccounted cash amounting to Rs. 90 lakhs through paper/ shell companies under the garb of share capital. The CEO in his recorded statement stated that the Director would explain the same. Pursuant to survey operations, statement of the Director of the assessee-Co was recorded on 13-7-16, however, he was not able to prove the identity of the subscriber companies, their creditworthiness genuineness of the share transactions. Therefore, the s. 68 is required to be invoked in this case. In view of the above, I have reason to believe that Rs. 90 lakhs chargeable to tax has escaped a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the factual matrix of the case, plea raised by the appellant and findings of the AO. This is a matter of fact that this case of the appellant was scrutinized earlier u/s 143(3) of the Act, wherein the appellant has furnished all the desired documents by the AO and the same were taken into consideration by the then AO. It has been found that assessment order u/s 143(3) of the Act was passed on 23.03.2015 by making adhoc disallowance of Rs. 1,00,000/- out of various expenses claimed by the appellant. Certified copies of note sheet relating to original assessment proceedings have been furnished by the appellant. It reveals that the then AO had investigated the issue of share application money amounting to Rs. 1,87,50,000/-. During the assessment proceedings the appellant has discharged its onus u/s 68 of the Act by filing various documents in relation to investor companies such as copy of ITR, audit report, bank statement, copy of application for shares and disclosure regarding source of investment, their addresses etc. Further, the then AO also confronted a report dated 05.03.2015 of ITO (Inv) Unit-3, Kolkata, wherein, it had been mentioned that the companies who had invested in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction. In compliance on 07.11.2014, ld AR of the appellant and filed the desired details. The then ld AO for further verification issued notice u/s 133(6) to all share holding companies on 16.02.2015 and incompliance, as transpired from note sheet entry, all the investor companies compiled with the notice issued u/s 133(6) on 12.03.2015/ 13.03.2015/ 16.03.2015/ 17.03.2015/ 18.03.2015/ 19.03.2015/ 20.03.2015/ 23.03.2015. The ld AO further cross verified the transaction related to share application money being recorded in books of appellant with reply received from investor companies and found the same genuine and passed order u/s 143(3) on 23.03.2015. Thus, it is evident that during the original assessment proceedings the then AO investigated the issue under consideration in depth and found the share application money as genuine and therefore, did not make any addition u/s 68 of the Act on this account. 3.1.3 Thereafter, after a gap of three years, survey proceedings u/s 133A of the Act were carried out in the case of appellant on 29.01.2018. During the course of survey, statement of Shri Shyam Sunder Agrawal was recorded on oath wherein, he in order to buy mental pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dible evidence. Statement recorded u/s . 131 of the Act though binds the assessee, can not be independently used for making addition unless corroborated by evidences. As per section 31 of Indian Evidence Act, 1878, admissions are not conclusively proved as against admitted proof. In absence of rebuttable conclusion, admission bind the maker when these are not rebuttable or retracted. If the assessee contends that in making the ad mission , he had proceed ed on a mi stake n understanding or on misconception of facts or untrue facts or it was given under pressure, such admission cannot be relied upon without considering the aforesaid contention. Thus, the burden to prove 'admission' as incorrect in on the maker and in case of failure of the maker to prove that the earlier stated facts were wrong, these earlier statements are suffice to conclude the matter. If retraction is proved sufficiently, the earlier stated facts lose their effect and relevance as a binding evidence and the authorities cannot conclude the matter on the basis of the earlier statement alone. If the assessee proves that the statement recorded u/s . 131 was not voluntary and it was made under coercion, it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kerala 91 ITR 18 (SC) has held that an admission is an extremely important piece of evidence, but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect. Further in the case of Awad Kishore Dass AIR 1979 SC 861 has held that it is true that the evidentiary admissions are not conclusive proof of the facts admitted and may be explained or shown to be wrong. Hon'ble Madras High Court in the case of CIT Vs. Smt. Jaya Lakshmi Ammal reported in (2017) 390 ITR 189 (Mad), has held that we are of the considered view that, for deciding any issue, against the assessee, the authorities under the IT Act, 1961 have to consider, as to whether there is any corroborative material vidence. If there is no corroborating documentary evidence, then statement recorded under s. 132(4) of the IT Act, 1961, alone should not be the basis, for arriving at any adverse decision against the assessee. If the authorities under the IT Act, 1961, have to be conferred with the power, to be exercised, solely on the basis of a statement, then it may lead to an arbitrary exercise of such power. An order of assessment entails civil consequences. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce u/s 148 of the Act. 3.1.5 As evident from above discussion that the case of the appellant has been reopened on the basis of copy of statement of Shri Shyam Sunder Agrawal recorded during survey proceedings. As discussed above, Shri Shyam Sunder Agrawal admitted unaccounted income in the form of share application money. As a matter of fact, the issue in hand i. e. share application money received from Kolkata based companies was thoroughly examined and verified by the AO during original assessment proceedings by issuing notices u/s 133(6) of the Act to the investor companies and by requiring appellant to furnish documents to explain identity creditworthiness of the investors and genuineness of the transaction. Compliances were made by both the parties and the then AO after detailed enquiry found share application money as genuine and no adverse inference had been drawn during the original assessment proceedings on the issue of share application money. Apart from the above, no new material or evidence was available with the AO to form reason to believe as per the provisions of section 147 of the Act. The facts as discussed above reveals that the reopening of the case h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as escaped assessment should not be on the basis of change of opinion, as otherwise the power of reassessment would become a power of review, which it is not. 7. The Apex Court in Kelvinator of India Ltd. (supra), has while setting out the parameters for the exercise of powers of reopening an assessment had inter-alia observed as under :- However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, 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. We must also keep in mind the conceptual difference between power to review and power to reassess. But reassessment has to be based on fulfillment of certain pre-conditions 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 take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is tangib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asion to dealt with the similar/identical submissions on behalf of the Revenue viz. that an assessment order passed under Section 143(3) of the Act does not reflect any consideration of the issue, it must follow that no opinion was formed by the Assessing Officer in the regular assessment proceedings. This submission was negatived by this Court by observing as follows :- 14. According to the Revenue, it could only be when the assessment order contains discussion with regard to particular claim can it be said that the Assessing Officer had formed an opinion with regard to the claim made by the assessee. This Court in Idea Cellular Ltd. v/s. Deputy Commissioner of Income Tax 301 ITR 407 has expressly negatived on identical contention on behalf of the Revenue. The Court held that once all the material was placed before the Assessing Officer and he chose not to refer to the deduction/ claim which was being allowed in the assessment order, it could not be contended that the Assessing Officer had not applied his mind while passing the assessment order. Moreover in this case, it is evident from the letter dated 6th August, 2007 addressed by the Assessing Officer to the Petitioner con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner's claim for deduction under Section 80IA/IB of the Act. It must follow that there is due application of mind by the Assessing Officer to the issue raised. The above observations apply on all fours to this Petition, so far as the Revenue's submission of no change of opinion is concerned. 11. The further submission of Mr. Waive that in the absence of the Assessing Officer adjudicating upon the issue it cannot be said that the Assessing Officer had formed an opinion during the regular assessment proceedings leading to the order dated 30 January 2018. An adjudication would only be on such issue where the assessee 's submissions are not acceptable to the Revenue, then the occasion to decide a list would arise i.e. adjudication. However, where the Revenue accepts the view propounded by the assessee in response to the Revenue's query, the Assessing Officer has certainly to form an opinion whether or not the stand taken by the assessee is acceptable. Therefore, it must follow that where queries have been raised during the assessment proceedings and the assessee has responded to the same, then the non-discussion of the same or non-rejection of the respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter 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 of the Act or in response to a notice issued under sub-section (1) of section 142 of the Act or section 148 of the Act or to disclose fully and truly all material facts necessary for the reassessment, for that assessment year. Section 149 of the Act deals with time limit for notice under section 148 of the Act. As per clause (a) of sub-section (1), no notice under section 148 of the Act shall be issued for the relevant assessment year, if four years have elapsed from the end of the relevant assessment year unless the case falls under clause (b). Clause (b) says that no notice shall be issued if four years have elapsed but not more than six years have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. Insofar the present case is concerned, the assessment year is 2012-13. The assessment year ends ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cast upon the assessee to make a true and full disclosure of the primary facts at the time of the original assessment. Production of books of accounts before the AO or other evidence from which material evidence with due diligence could have been discovered by the AO will not necessarily amount to disclosure contemplated by law but the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once, the assessee has discharged its onus of furnishing true and primary facts, it is for the AO to draw the correct inference from the primary facts. Furthermore, the grounds or reasons which led to formation of the belief that income chargeable to tax has escaped assessment must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. The reasons for formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the AO and the formation of his be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses of making roving and fishing enquiry which is not permissible as per the provisions of section 147 of the Act. This view is also supported by various judicial pronouncements. In the case of Madhya Pradesh Industries Limited 57 ITR 637 (SC), Hon'ble Apex Court has held that fishing or roving enquiry with a hope that it might lined the AO somewhere assessment, is not permissible us 147 of the Act. In the instant case, in the reasons recorded, the AO has not referred any material which has come on the record subsequently, and has not mentioned as to which material fact were not disclosed by the assessee. Further, identity creditworthiness of the investors and genuineness of the transaction has already been explained by the appellant during assessment proceedings with supportive documentary evidences. Thus, there was no new material before the AO for making belief u/s 147 of the Act and thus, the assessment was reopened for nothing but to make roving and fishing enquiries for making addition of Rs. 1,87,50,000/-. This is not permissible u/s 147 of the Act and as per the judicial pronouncements mentioned above. In the facts and in the circumstances, the AO has failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted by the then Ld AO in the original assessment u/s 143(3) dated 23.03.2015 wherein no addition on this account was made by the Ld AO. With such submissions, it was the contention of Ld AR that the reopening of assessment u/s 147 was bad in law and Ld CIT(A) had rightly quash the assessment u/s 147 r.w.s. 143(3). 7. We have considered the rival contentions, perused the material on record and judicial pronouncements relied upon by the parties. De-facto, the assessee company was undergone with the regular scrutiny assessment u/s 143(3) for the relevant assessment year, the issue raised in the present appeal regarding bogus share capital was also show caused in the original assessment proceedings. Identity, Creditworthiness of the share applicants and Genuineness of the transitions were tested by the then Ld AO, notice u/s 133(6) were also issued to the parties concerned, response to 133(6) were received from all 19 applicants and finally on being satisfied with the response and explanations of the assessee, Ld AO chooses not to make any addition on this count, order u/s 143(3) was passed on 23.03.2015. Subsequently, a survey was conducted on 29.01.2018 on the premises of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon by Ld CIT(A) and observed that It is evident from the record that in the case of the appellant, the statements taken on oath u/s . 131 of the Act were not based upon any evidence or fresh material found in the course of survey proceedings which ultimately, therefore, led to retraction. Statement taken even u/s . 132(4) of the Act cannot be used as conclusive evidence if it is not backed by credible evidences. Ld CIT(A) further followed the ratio of law laid by the binding judgment by Hon ble Apex court in the case of Pullangode Rubber Produce Co Ltd Vs. State of Kerala 91 ITR 18 (SC) has held that an admission is an extremely important piece of evidence, but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect. Further in the case of Awad Kishore Dass AIR 1979 SC 861 has held that it is true that the evidentiary admissions are not conclusive proof of the facts admitted and may be explained or shown to be wrong. . It was therefore held that the statement recorded u/s 132(4)/133A cannot be termed as fresh material on record for the purpose of recording of reasons for reopening of assessment. We do not ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Ld AO on the basis of survey statements recorded on oath u/s 133A. Ld AR further submitted that according to Question No 8 of the statement dated 14.12.2018 u/s 131 of the Act of Shri Shyam Sunder Agarwal after retraction before the AO, it was the response of that the statement dated 30.01.2018 was under duress and coercion by the survey team. On perusal of such statement of Shri Shyam Sunder Agarwal during the assessment proceedings u/s 147, he categorically denied all the allegation pertaining to bogus share capital and receipt of the same from shell companies. As per answer to Question no 10, assessee produced documents pertaining to all investment companies on 08.12.2018 to prove the creditworthiness of companies and also requested the department to enquire with the said companies by using the powers income tax department has. Ld AO observed that the assessee company failed to substantiate its transactions with the share applicant companies despite being given repeated opportunities. It was the observation of Ld AO that primary onus u/s 68 to prove identity, creditworthiness of share subscribers and genuineness of the transaction could not be established by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible evidence. Since department was not able to dislodge the retracted statement of assessee with the support of any fresh evidence or material, the addition made was bad in law. It is also the fact emanated from the order of Ld CIT(A) that the assessee had disclosed the true and primary facts during original assessment proceedings even when the subject issue on the basis of which reassessment proceeding were initiated was fully verified and examined by the AO during original assessment proceeding. Thus, there exists a serious lacuna in the findings of the AO. In such a scenario, Id. AO not having any fresh information/material in his possession, merely on retracted statement formed his belief about escapement of income which is not sustainable in law. With such observation, after a thoughtful consideration of all the material aspect of the case, in absence of any cogent evidence, addition made on the basis of statement of the assessee which have been retracted later, the additions made by the Ld AO do not hold good in the eyes of law. We therefore direct to vacate the addition made for Rs. 1,87,50,000/- in terms of our observations herein above. 11. In the result appeal of reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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