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2013 (9) TMI 129 - HC - Income TaxNotice u/s 148 - Notice based on information from investigation wing - full and true disclosure of all material facts - whether a chart giving details during earlier re-assessment proceedings would amount to disclosure of all material facts - Held that - The reasons are fairly detailed and refer to comprehensive investigation carried out by the Investigating Wing for identification of entry operators engaged in money laundering - the information regarding these transactions were not the subject matter of the earlier re-assessment proceedings and details provided fresh material for the Assessing Officer to initiate second reassessment proceedings. Neither are we inclined to accept the argument that there was no due application of mind by the Assessing Officer or that the reasons to believe do not constitute live link with the formation to believe that the income has escaped assessment. In view of the position explained above, these contentions are baseless. Merely furnishing details or disclosing that the five companies had entered into some transactions itself would not meet the requirement of full and true disclosure. As noted above, the disclosure was neither full nor true. Full and true disclosures cannot be garbled or hidden behind the cervices of the documentary material. The assesse must act with candor and there cannot be suppression of facts. The disclosure must be truthful and fair in all respects and assessee who seeks the benefit of the proviso to Section 147 must make a full and true disclosure of all primary facts.
Issues Involved:
1. Change of Opinion 2. Full and True Disclosure 3. Jurisdiction of Reassessment 4. Validity of Second Reassessment Notice 5. Impact of CIT(A) Order Detailed Analysis: Change of Opinion The petitioner contended that the reassessment notice dated 25th March 2010 under Section 148 of the Income Tax Act was a case of change of opinion. They argued that during the first reassessment proceedings, the Assessing Officer (AO) had already examined the share transactions and did not find it fit to make any additions regarding those transactions. The petitioner cited the case of Haryana Acrylic Manufacturing Co. v. Commissioner of Income-tax, emphasizing that for reopening assessments beyond four years, it must be shown that the assessee failed to disclose fully and truly all material facts necessary for assessment. The court, however, found that during the first reassessment, the AO had only examined transactions related to Om Sons Wire Industry Pvt. Ltd. and not the other five companies. Thus, it was not a case of change of opinion. Full and True Disclosure The petitioner argued that all material facts were fully and truly disclosed during the first reassessment. The court examined the details of long-term and short-term capital gains transactions and found that the petitioner had not disclosed transactions involving the other five companies with MKM Finsec Pvt. Ltd. The court referred to the explanation under Section 147, which states that mere production of account books or other evidence does not amount to full disclosure if material facts are embedded in that evidence. The court concluded that the petitioner had not made a full and true disclosure of all material facts necessary for assessment. Jurisdiction of Reassessment The petitioner challenged the jurisdiction of the second reassessment notice, arguing that the AO had no new material facts to justify reopening the case. The court found that the AO had received fresh information from the Investigating Wing regarding transactions involving the other five companies, which were not examined in the first reassessment. The court cited CIT v. Usha International, stating that if new factual information comes to the AO's knowledge, the principle of "change of opinion" does not apply. The court held that the AO had jurisdiction to issue the second reassessment notice based on new material facts. Validity of Second Reassessment Notice The petitioner argued that the second reassessment notice was invalid as it was based on conjectures and surmises. The court examined the reasons recorded by the AO for issuing the second notice and found them to be detailed and specific. The court noted that the AO had conducted a comprehensive investigation and had identified entry operators engaged in money laundering. The court held that the reasons to believe recorded by the AO constituted a live link with the formation of the belief that income had escaped assessment. Therefore, the second reassessment notice was valid. Impact of CIT(A) Order The petitioner relied on the order passed by the CIT(A), which had deleted the additions made by the AO in the first reassessment. The court examined the CIT(A) order and found that it was based on procedural lapses and lack of proper inquiry by the AO. The CIT(A) had not given a clean chit to the transactions with MKM Finsec Pvt. Ltd. The court held that the CIT(A) order did not preclude the AO from initiating the second reassessment based on new material facts. The court emphasized that at the stage of issuing a notice under Section 148, only a prima facie view is required, and the final opinion is formed when the assessment order is passed. Conclusion The court dismissed the writ petition, upholding the validity of the second reassessment notice. The court found that the AO had jurisdiction to issue the notice based on new material facts and that the petitioner had not made a full and true disclosure of all material facts necessary for assessment. The court also imposed costs of Rs. 10,000 on the petitioner.
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