2024 (5) TMI 169 - HC - Income Tax

Reopening of assessment - reason to believe - meaning of the phrase true and full disclosure - cash transactions unexplained - petitioner contends that the said transactions are a part of the loan transactions between the petitioner including amalgamated companies and Mr. Manoj Sethi, which have been done via cheque/RTGS method of banking - whether the AO has correctly assumed jurisdiction under Section 147 of the Act on the ground of lack of full and true disclosure on the part of the assessee during the original proceedings? - HELD THAT - In the instant case, the petitioner has not been able to allude to any enquiry either expressly or indirectly conducted by the respondent in the earlier assessment proceedings qua the issue under consideration, which could suggest that the present proceedings are merely based upon a change of opinion. Thus, the AO cannot be said to have traversed beyond its mandate to assume jurisdiction under Section 147 of the Act. Thus we do not find any merit in the arguments put forth by the petitioner and consequently, the petition stands dismissed. These observations have been made only for the purpose of deciding the challenge which stands raised before us; they should not be construed to be an expression on the merits of the case or otherwise.

Summary

Issues Involved:
1. Validity of notice u/s 148 of the Income Tax Act, 1961.
2. Assumption of jurisdiction by the Assessing Officer (AO) u/s 147 of the Act.
3. Requirement of "full and true disclosure" by the assessee.
4. Alleged cash transactions with Mr. Manoj Sethi.

Summary:

1. Validity of Notice u/s 148:
The petitioner, a private limited company in the real estate business, challenged the notice dated 31 March 2018 issued u/s 148 and the subsequent order dated 25 September 2018 u/s 148A(d) for AY 2011-12. The AO issued the notice to reassess the income based on information received from the Investigation Wing, Delhi, regarding transactions with Mr. Manoj Sethi.

2. Assumption of Jurisdiction by AO u/s 147:
The AO assumed jurisdiction u/s 147 on the grounds that the petitioner failed to fully and truly disclose material facts necessary for assessment. The AO cited transactions amounting to Rs. 9,50,00,000/- with Mr. Manoj Sethi, which were not adequately explained. The petitioner argued that the transactions were conducted via account payee cheques and were disclosed during the original assessment proceedings.

3. Requirement of "Full and True Disclosure":
The court examined the mandate of Section 147, emphasizing that the AO must have "reasons to believe" that income has escaped assessment due to the failure of the assessee to disclose fully and truly all material facts. The court referred to the Hon'ble Supreme Court's decision in *M/s. Mangalam Publications, Kottayam v. CIT, Kottayam* [2024 SCC OnLine SC 62], which clarified that mere production of books of accounts does not amount to true and full disclosure.

4. Alleged Cash Transactions with Mr. Manoj Sethi:
The AO's reasons for reopening the assessment included transactions with Mr. Manoj Sethi, who could not furnish evidence regarding the source of cash deposits. The petitioner contended that Mr. Manoj Sethi had no relation with the company and that all transactions were conducted through banking channels. The court noted that the AO's action was based on tangible material and not merely a change of opinion.

Conclusion:
The court dismissed the petition, holding that the AO had validly assumed jurisdiction u/s 147 based on the failure of the petitioner to make a true and full disclosure of material facts. The court emphasized that the observations were made solely for deciding the challenge raised and should not influence the merits of the case in subsequent proceedings. Pending applications were also disposed of.