2018 (8) TMI 1782 - HC - Income Tax

Reopening of assessment u/s 147 - Original assessment u/s 143(3) - full and material disclosure - so called fresh material is nothing but what existed on the record and was a subject matter of query by the AO - reason to believe - second chance to the Revenue to look into an assessments originally completed - deemed dividend addition - HELD THAT - The queries directed to the assessee, especially at Serial No.74 in the questionnaire to which reply was furnished soon thereafter, along with Annexure II of the letter (by the assessee) furnished the details of the amounts received in the Syndicate Bank account. A sum of ₹ 70 lakhs was credited to the account of the petitioner. AO appears to have proceeded with the inquiry even after being told that the petitioner was a substantial shareholder of M/s. Indo Nucleomet Pvt. Ltd. The inability of the AO to take appropriate action to bring to tax those amounts and (unlike in the case that the amounts credited in the PNB which was so brought to tax by addition in the final assessment), in the opinion of the Court would not afford the Revenue a second chance. The Supreme Court ruling in Commissioner Of Income Tax, Delhi v. M/s. Kelvinator Of India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA has stated that it is only tangible material outside the record based upon fresh information which can afford a window or a second chance to the Revenue, to look into an assessments originally completed. Calcutta Discounts Ltd. v. Income Tax Officer 1960 (11) TMI 8 - SUPREME COURT underlines that if full disclosure is made, the AO is under an obligation to bring to tax all amounts; his inability to do so, would not clothe the Revenue with the power to reassess the income which could and should have been brought to tax in first instance if such full disclosure were made. For these reasons the Court is of the opinion that the first explanation of Section 147 cannot be restored to by the Revenue in this case. - Decided in favour of assessee.

Summary

Issues:
Challenging reassessment notice for AY 2010-11 under Sections 147/148 based on undisclosed income received from a company.

Analysis:
The petitioner contested the reassessment notice, citing full disclosure of the amounts received, including the sum triggering the notice. The petitioner argued that the bank account statements were available to the Revenue during the initial scrutiny assessment and did not constitute fresh material. It was emphasized that the petitioner had disclosed being a shareholder of the company in question. The petitioner's counsel asserted that the AO's failure to tax the amounts earlier disclosed did not warrant a reassessment.

The Revenue's counsel contended that the reassessment notice should not be interfered with, highlighting the AO's focus on personal accounts with a specific bank during the previous assessment. Emphasizing proper disclosure and characterizing income correctly, the Revenue's counsel referenced Section 147(1) to argue that mere provision of account books does not absolve the assessee from disclosing taxable receipts.

The Court reviewed the submissions and evidence, noting that the petitioner had responded to queries and detailed amounts received in a specific bank account. Despite being informed of the petitioner's shareholding, the AO did not take action to tax the amounts in question. Citing legal precedents, the Court held that tangible fresh material outside the record is required for reassessment. The Court concluded that the Revenue's inability to tax disclosed amounts earlier did not justify a reassessment. Relying on established legal principles, the Court ruled in favor of the petitioner, quashing the reassessment notice and all related proceedings.

Therefore, the writ petition challenging the reassessment notice for AY 2010-11 under Sections 147/148 was allowed, and all subsequent proceedings were annulled based on the lack of tangible fresh material warranting reassessment.