9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 1496 - HC - Income TaxIncome escaping assessment u/s 147 - proceedings were initiated after the expiry of four years - Bogus loan transaction of debentures - information is received through FT TR that the loan received from Flirasca Holding Private Limited is located in Cyprus and Mauritius tax havens countries and on an analysis of the bank statement of these entities it is observed that funds have been transferred through circuitous route to the Petitioner-Company by way of loan. HELD THAT - Admittedly in the reasons recorded and reproduced above there is no statement alleging failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment. However merely because this statement is not there in the reasons recorded it does not mean that this condition is not satisfied if on a perusal of the reasons recorded it can be culled out that there is a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment. On a perusal of the reasons recorded and reproduced above the failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment can be culled out even in the absence of any statement to that effect in the reasons recorded. In the reasons recorded it is stated that information is received through FT TR that the loan received from Flirasca Holding Private Limited is located in Cyprus and Mauritius tax havens countries and on an analysis of the bank statement of these entities it is observed that funds have been transferred through circuitous route to the Petitioner-Company by way of loan. The money is received by the Petitioner through the layering of various offshore entities and based on the intelligence available these tax haven entities have an intimate connection with the Petitioner and its Director and undisclosed funds have been routed by the Petitioner itself through layering via various offshore entities in tax haven countries. In our view based on these reasons which are recorded it can very well be culled out that there is a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment. The circuitous movement of funds through various companies located in tax havens have not been disclosed in the course of the original assessment proceedings. Therefore in our view even though there is no statement of any allegation of failure to disclose fully and truly all material facts necessary for the assessment same can be culled out on a reading of the reasons recorded. Therefore the contention raised by the Petitioner that in the absence of any statement in the reasons recorded that there is any failure to disclose fully and truly all material facts necessary for the assessment the impugned proceedings are bad is to be rejected. In the extraordinary jurisdiction under Article 226 of the Constitution of India the Court is not required to examine the sufficiency of the reasons but whether the reasons prima facie indicate that any income has escaped assessment. In our view based on the reasons as recorded which in turn is based on information received post conclusion of the original assessment proceedings as reproduced above it cannot be said that no prudent person could have formed a belief that any income has escaped assessment by failure on the part of the Assessee to disclose fully and truly material facts necessary for the assessment. Since the petitioner had questioned the compliance with the jurisdictional parameters for reopening we directed the Respondents to place on record the precise information based on which the reopening was proposed. Therefore in our view no prejudice was caused to the Petitioner by our directions. In any case this direction was limited to ascertain whether the same was available at the time of the original assessment proceedings or was it post-conclusion of the original assessment proceedings. Merely because the date of receipt of information is not noted in the reasons recorded the assumption of jurisdiction cannot be faulted. The reopening as evident from the reasons recorded is initiated after conclusion of the assessment proceedings wherein the revenue has the information about unexplained money of the petitioner being routed through various companies located in tax haven countries. This information was not available at the time of the assessment proceedings and therefore was not examined during the original assessment proceedings. In the original assessment proceedings what was perhaps examined was only receipt of money from Flirasca Holding Company Limited and not the routing of the said money through various layered companies which according to the information received is the unexplained money of the Petitioner. Further it is important to note that this information was received post conclusion of the assessment proceedings as evident from the letter dated 28 March 2016. Condition specified in first proviso to Section 147 of the Act would not be applicable in a case where subsequently it is found that the transaction which was examined is non-genuine or bogus. For the purpose of assumption of jurisdiction certainly the submission made by the Petitioner cannot be accepted. This is more so looking at the purport and objective of the reassessment proceedings to bring to tax income which has escaped assessment and any interpretation which would be contrary to such an objective is required to be rejected in the facts of the present case. Based on the objection raised by the Petitioner a feeble attempt was also made before this Court that in the proceedings before the Income-tax Settlement Commission (ITSC) the said authority had observed that no further enquiry is needed on the loan transaction of Rs. 403 crore from Flirasca Holding Company Limited. In the objection the Petitioner had admitted that the application before the ITSC was not for AY 2009-2010. The present proceedings impugned in the petition relate to AY 2009-2010. Therefore the objection raised by the Petitioner on the basis of the ITSC order cannot prevent the revenue from initiating reassessment proceedings for AY 2009-2010. In any case we have not been shown any such order of ITSC and in what context the observations were made. Therefore based on such argument we cannot nip the proceedings at the threshold. Therefore in our view based on the above analysis and reasoning the present petition challenging the reassessment proceedings initiated by notice dated 30 March 2016 is required to be dismissed and is hereby dismissed.
Issues Presented and Considered
The core legal questions considered by the Court in this judgment are: 1. Whether the reopening of the assessment under Section 148 read with Section 147 of the Income Tax Act, 1961 (the Act) for the assessment year (AY) 2009-2010 was valid, particularly given that the original assessment was completed under Section 143(3) and the reopening notice was issued after the expiry of four years from the end of the relevant assessment year. 2. Whether the first proviso to Section 147 of the Act, requiring failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, was satisfied in the present case. 3. Whether the reasons recorded for reopening the assessment sufficiently indicate a failure to disclose material facts, even though no explicit statement to that effect was made. 4. Whether the subsequent information received after the original assessment proceedings justify reopening the assessment despite the original transaction having been examined and accepted. 5. The applicability and interpretation of relevant judicial precedents concerning reassessment proceedings initiated on the basis of subsequent information and the requirement of true and full disclosure by the assessee. 6. The effect of prior proceedings before the Income-tax Settlement Commission on the validity of reassessment proceedings for the same assessment year. Issue-wise Detailed Analysis Validity of Reopening After Four Years and the First Proviso to Section 147 The Court examined the legal framework under Section 147 of the Act, which permits reopening of assessment if the Assessing Officer (AO) has reason to believe that income chargeable to tax has escaped assessment. The first proviso to Section 147 restricts reopening beyond four years after the end of the relevant assessment year unless there is failure by the assessee to disclose fully and truly all material facts necessary for assessment. The original assessment for AY 2009-2010 was completed under Section 143(3), and the reassessment notice was issued on 30 March 2016, beyond the four-year period. Hence, the jurisdiction to reopen hinged on whether the assessee failed to disclose fully and truly all material facts. The reasons recorded for reopening did not explicitly state failure to disclose but alleged that the unsecured loan of Rs. 403.45 crore was routed through layering via offshore entities in tax haven countries and was unexplained money of the Petitioner, suggesting non-genuineness of the transaction. The Court held that failure to explicitly state failure to disclose in the reasons is not fatal if such failure can be inferred from the reasons themselves, relying on the precedent from Crompton Greaves Ltd. which clarified that the presence of cogent and clear indication of failure to disclose in the reasons suffices. The Court found that the reasons recorded, describing circuitous routing of funds and intimate connections of offshore entities with the Petitioner and its directors, prima facie indicate failure to disclose fully and truly all material facts necessary for assessment. The Petitioner's own objections admitted full disclosure but denied failure, which the Court held precludes raising the absence of explicit allegation in the reasons as a ground to quash proceedings. Subsequent Information as Tangible Material Justifying Reopening The reopening was based on information received post original assessment, specifically a letter dated 28 March 2016, which indicated that the loan transaction was routed through various offshore entities in tax havens and was unexplained money of the Petitioner. This information was not available during the original assessment proceedings. The Court emphasized that reassessment proceedings are intended to bring to tax income that escaped assessment and that subsequent credible information revealing the non-genuineness of a transaction examined in the original assessment justifies reopening. It rejected the Petitioner's argument that disclosure of primary facts during original assessment precludes reassessment, holding that disclosure cannot be considered full and true if subsequent information reveals the transaction to be bogus or non-genuine. The Court clarified that the first proviso to Section 147 does not protect the assessee where the disclosed fact itself is questionable or found to be bogus based on subsequent information. The Court further noted that the reopening notice need not refer explicitly to the date of receipt of such information, as long as the contents of the information are reflected in the reasons recorded and the Petitioner was given opportunity to contest. Applicability of Judicial Precedents The Petitioner relied heavily on the Supreme Court decision in New Delhi Television Ltd. (NDTV) and the Bombay High Court decision in Samson Maritime Limited. The Court distinguished these precedents on facts:
The Court also examined other decisions cited by the Petitioner, including Teofilo Fernando Antonio Pinto, Oxford University Press, Bombay Stock Exchange Ltd., S.S. Landmarks, Aroni Commercials Ltd., NuPower Renewables, First Source Solution Ltd., and Jainam Investments. It found these decisions distinguishable on facts because they either lacked subsequent information indicating non-genuineness or involved different factual matrices. Conversely, the Court found the Supreme Court decision in Phool Chand Bajrang Lal directly applicable. In that case, reassessment was upheld where the original loan transaction was accepted but later found to be bogus based on subsequent information. The Court quoted the principle that reassessment jurisdiction arises on subsequent reliable and relevant information indicating failure to disclose fully and truly all material facts, and that the sufficiency of reasons is not for the Court to judge, except to ensure a bona fide belief was formed. The Court also relied on coordinate bench decisions including Kalsha Builders Pvt. Ltd. and Indo European Breweries Ltd., which upheld reassessment based on subsequent tangible material indicating bogus transactions, even when original assessments had examined the transactions. Decisions of various High Courts (Allahabad, Gujarat, Delhi) upholding reassessment on similar facts were also noted. Effect of Prior Settlement Commission Proceedings The Petitioner contended that an order of the Income-tax Settlement Commission (ITSC) precluded reassessment. The Court rejected this argument because the ITSC order pertained to a different assessment year, and no such order was placed on record. Hence, the Settlement Commission proceedings do not bar reassessment for AY 2009-2010. Opportunity to the Petitioner and Merits of the Transaction The Court clarified that its decision was limited to the jurisdictional question of reopening and did not express any opinion on the merits of the transaction. The Petitioner would have full opportunity during reassessment proceedings to prove the genuineness of the transaction and contest the allegations. Significant Holdings "Merely because this statement is not there in the reasons recorded, it does not mean that this condition is not satisfied if on a perusal of the reasons recorded it can be culled out that there is a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment." "Based on these reasons, which are recorded, it can very well be culled out that there is a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment." "The first proviso to Section 147 of the Act cannot be construed in the facts of the present case to mean that subsequently information is received as recorded in the reasons then even though the transaction was examined in the course of the original assessment proceedings, when such information was not available, the proceedings under Section 147 would be barred by first proviso to Section 147 of the Act." "The proviso protects an assessee only in those cases where the fact of disclosure is in question but, where the disclosed fact itself is questionable, the same is not protected by first proviso to Section 147 of the Act." "An Income-tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 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." "One of the purposes of Section 147, appears to us to be, to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would be travesty of justice to allow the Assessee that latitude." "If the entire claim is bogus and so established to be, the Assessee would fail the test of true and full disclosure. Requirement of true and full disclosure runs through the entire assessment and it does not end on filing of return." "Mere non recitation of such expression [failure to disclose] would not invalidate the reasons or the fact that the reasons are based on allegations of lack of true and full particulars." "The reopening is based on information received post conclusion of the assessment proceedings which was not available at the time of the original assessment proceedings and which prima facie indicates that the transaction is not genuine." "The Petitioner would have ample opportunity during the reassessment proceedings to present its version or to establish how the allegation of layering, etc, is incorrect." "We have not made any comments on the transaction's merits since the only issue before us is challenge to the jurisdiction of the AO to reopen the case." Final Determinations The Court dismissed the petition challenging the reassessment proceedings initiated by notice dated 30 March 2016. It held that:
|
