2014 (7) TMI 391 - HC - Income Tax

Reopening of assessment u/s 148 of the Act Full disclosure of material facts not made - Held that - The scrutiny of return of income filed for the AY 2006-07 was undertaken - It was also noted during such scrutiny that the assessee was engaged in the business of trading in shares, securities and future option - The assessee also showed income from other sources i.e. from dividend - In respect of unsecured loans, various queries were raised and they have been also answered - there was disclosure and the occasion would not arise to term this as the assessee not having disclosed fully and truly all the material facts necessary for assessment - the AO when forms his belief on the basis of subsequent new and specific information that the income chargeable to tax has escaped assessment on account of omission on the part of the assessee to make full and true disclosure of primary facts, he may start reassessment proceedings as fresh facts revealed the non-disclosure full and true - Such facts were not previously disclosed or it can be said that if previously disclosed, they expose untruthfulness of facts revealed. The Assessing Officer required jurisdiction to reopen u/s 147 r.w. section 148 of the Act, where the information must be specific and reliable Relying upon Phool Chand Bajrang Lal And Another Versus Income-Tax Officer And Another 1993 (7) TMI 1 - SUPREME Court - since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but is open to an assessee to establish that there exists no belief or that the belief is not at all a bona fide one or based on vague, irrelevant and non-specific information - To that limited extent, the Court may look at the view taken by the Income-tax Officer and can examine whether any material is available on record from which the requisite belief could be formed by the AO and whether that material has any rational connection or a live link with the formation of the requisite belief - It is also immaterial that at the time of making original assessment, the AO could have found by further inquiry or investigation as to whether the transactions were genuine or not - If on the basis of subsequent valid information, the AO forms a reason to believe on satisfying twin conditions prescribed u/s 147 of the Act that no full and true disclosure of facts was made by the assessee at the time of original assessment - the income chargeable to tax had escaped assessment, his belief and the notice of reassessment based on such belief/ opinion needs no interference. The information furnished at the time of original assessment, when by subsequent information received from the DCIT, Kolkata, itself found to be controverted, the objection to the notice of reassessment u/s 147 of the Act must fail - at the time of scrutiny assessment, a specific query was raised with regard to unsecured loans and advances received from the said company namely, Basant Marketing Pvt. Ltd. based at Kolkata - These being the transactions through the cheques and drafts, there would arise no question of the AO not accepting such version of the assessee and not treating them as genuine loans and advances - Furnishing the details of names, addresses, PANs, etc. also would lose its relevance if subsequently furnished information, which has been made basis for issuance of notice impugned, concludes that Basant Marketing Pvt. Ltd. is merely a dummy company of one Shri Arun Dalmia, which provided the accommodation entries to various beneficiaries. The Joint Director, CBI, Mumbai, intimated to the DIT (Investigation), Mumbai - From the analysis of details furnished and the beneficiaries reflected, which are spread across the country, the CIT, Koklata, suspected the accommodation entry related to the AY 2006-07 as well, this information has been provided to Director General of Income-tax, Kolkata, who in turn, communicated to the Chief Commissioner of Income-tax, Ahmedabad - revelation of investigation as could be noticed from the record examined (file) deserves no reflection in this petition - Insistence on the part of the petitioner to provide any further material forming the part of investigation carried out against Dalmias also needs to meet with negation, as the law requires supply of information on which AO recorded her satisfaction, without necessitating supply of any specific documents - The proceedings initiated u/s 147 of the Act would not be rendered void on non-supply of such document for which confidentiality is claimed at this stage the decision in Acorus Unitech Wireless Private Limited Versus Assistant Commissioner of Income Tax 2014 (3) TMI 154 - DELHI HIGH COURT followed - assumption of jurisdiction on the part of the AO is based on fresh information, specific and reliable and otherwise sustainable under the law, challenge to reassessment proceedings warrant no interference Decided against Assessee.

Issues Involved:
1. Validity of the notice of reopening issued under section 148 of the Income-tax Act, 1961.
2. Whether the petitioner failed to disclose fully and truly all material facts necessary for assessment.
3. Applicability of section 68 of the Income-tax Act, 1961 regarding cash credits.
4. Sufficiency of the reasons to believe that income had escaped assessment.
5. Jurisdiction of the Assessing Officer to reopen the assessment beyond four years.

Detailed Analysis:

Issue 1: Validity of the notice of reopening issued under section 148 of the Income-tax Act, 1961
The petitioner challenged the notice of reopening issued under section 148 on the grounds that it was issued beyond the period of four years from the end of the relevant assessment year. The court noted that for reopening an assessment beyond four years, it must be shown that the assessee failed to disclose fully and truly all material facts necessary for the assessment. The court examined whether the Assessing Officer had valid reasons to believe that income had escaped assessment and found that the notice was based on specific and reliable information received from the DCIT, Kolkata, indicating that the petitioner had obtained accommodation entries in the form of loans and advances from Basant Marketing Pvt. Ltd., which was a dummy company.

Issue 2: Whether the petitioner failed to disclose fully and truly all material facts necessary for assessment
The court observed that during the original assessment, the petitioner had provided details of unsecured loans, including addresses, PANs, and confirmation letters. However, the subsequent information from the DCIT, Kolkata, revealed that Basant Marketing Pvt. Ltd. was a dummy company providing accommodation entries. The court held that mere disclosure of transactions at the time of the original assessment does not constitute full and true disclosure if the transactions are later found to be bogus. The court cited the Supreme Court's decision in Phulchand Bajranglal, which held that subsequent specific and reliable information exposing the falsity of the original disclosure justifies reopening the assessment.

Issue 3: Applicability of section 68 of the Income-tax Act, 1961 regarding cash credits
The court noted that the Assessing Officer issued a show-cause notice to the petitioner to explain why the amount received from Basant Marketing Pvt. Ltd. should not be treated as cash credit under section 68. The court found that the information received from the DCIT, Kolkata, and the material found during the CBI search indicated that Basant Marketing Pvt. Ltd. was a dummy company providing accommodation entries. Therefore, the court held that the Assessing Officer had valid grounds to treat the amount as cash credit under section 68.

Issue 4: Sufficiency of the reasons to believe that income had escaped assessment
The court emphasized that the sufficiency of the reasons recorded by the Assessing Officer is not to be judged by the court. The court's role is limited to examining whether there was any material available on record from which the requisite belief could be formed and whether that material had a rational connection or live link with the formation of the belief. The court found that the reasons recorded by the Assessing Officer were based on specific and reliable information from the DCIT, Kolkata, and the material found during the CBI search, which provided a valid basis for reopening the assessment.

Issue 5: Jurisdiction of the Assessing Officer to reopen the assessment beyond four years
The court held that the Assessing Officer had jurisdiction to reopen the assessment beyond four years as the conditions prescribed under section 147 were satisfied. The court noted that the Assessing Officer had received specific and reliable information indicating that the petitioner had not disclosed fully and truly all material facts necessary for the assessment. The court also found that the Commissioner had applied his mind and granted sanction for reopening the assessment as required under section 151.

Conclusion:
The court dismissed the petition, holding that the notice of reopening issued under section 148 was valid and the Assessing Officer had jurisdiction to reopen the assessment. The court found that the petitioner had failed to disclose fully and truly all material facts necessary for the assessment, and the reasons recorded by the Assessing Officer were based on specific and reliable information. The court also upheld the applicability of section 68 regarding cash credits and emphasized that the sufficiency of the reasons recorded by the Assessing Officer is not to be judged by the court.

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