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TMI Blog2011 (9) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... SANJIV KHANNA, J.: The petitioner is a company and for the assessment year 2003-2004 had filed its return of income tax declaring loss of Rs.29,68,536/-. The case was taken up for scrutiny and vide assessment order dated 27th March, 2006, the total income of the petitioner was assessed at a positive figure of Rs.2,19,80,970/-. 2. In the balance sheet enclosed with the original return, the petitioner had shown sundry creditors at Rs. 1,66,37,402/-. The Assessing Officer made an addition of Rs. 19,86,551/- under Section 41(1) of the Income Tax Act, 1961 (for short, the Act‟) in respect of the seven parties, who had not filed confirmations out of the said sundry creditors. The relevant portion of the original assessment order is as under:- 1. Sundry Creditors : Sundry Creditors have been show at Rs.1,66,37,402/-. Vide this office letter dated 14th October, 2005, the assessee company was asked to furnish complete details/confirmations with respect to the Sundry Creditors . Such details were submitted by the assessee company vide letter dated 10/2/06. However, confirmations were submitted with respect to only the following parties vide letter dated 03/03/06. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particulars as discussed. (DISALLOWANCE: 19,86,551/-). 3. For the reasons recorded below, the Assessing Officer issued notice under Section 147/148 of the Act, dated 4th September, 2009 ;- The assessment of the company M/s Dalmia (Bros) Pvt Ltd for the A.Y. 2003-04 was completed on 27.03.2006 at 2,19,80,970/- vide order dated 27.03.2006 u/s 143(3) of the IT Act. It has been gathered that the assessee company having creditors amount of Rs.166.33 lakh against loss/expenditure/trading liability incurred by the assessee company in previous years. These amounts has been obtained by the assessee company during the year by way of remission or cessation and therefore this amount being deemed income of the assessee company should have been disclosed by the assessee company in which the company failed. The Assessee failed to discharge his duties by not adding back the same into his computation of income as per the IT Act. Thus the income chargeable to tax has escaped assessment and to reassess such income chargeable to tax which has come to notice now and was of the failure on the part of the assessee by not adding back the same into the computation of income along with return filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings are thus an attempt at double taxation and betray non application of mind. iv) Second and more importantly, the notice under Section 148 of the Act (dated 4.9.2009) is based on a mere change of opinion on the same set of facts, without any failure on the part of the Assessee in disclosing full facts at the stage of the original assessment proceedings. The notice under Section 148 of the Act is thus void ab-initio and wholly without jurisdiction and is liable to be withdrawn. The Assessee places reliance on the following judgments; inter alia; in support of its submissions:- a. CIT v. Kelvinator India Ltd. 320 ITR 561(SC) affirming the full bench judgment of the jurisdictional High Court in the same case reported in 256 ITR 1 as also the judgment of the same Court in CIT v. Eicher Ltd, 294 ITR 310(Delhi). b. CIT v. Foramer France 264 ITR 566(SC) affirming the judgment of the Allahabad High Court in the same case reported in (2001) 119 Taxman 61(All.) c. Idea Cellular v. DCIT 301 ITR 407 (Bombay) d. Hynoup Food and Oil Industries Ltd. V. ACIT 307 ITR 115(Guj.) B. Reopening after 4 years from the end of the relevant assessment year-proviso to Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase laws relied upon in your letter details with a situation where inspite of full and true disclosure of all material facts the reassessment proceedings were held to be a case of change in opinion by various courts. However there case laws do not have applicability to the facts of the present case since here there is a gross and wilful omission on your part in making full and true disclosure of material facts as discussed above. The failure on your part has resulted in escapement of income to the tune discussed in above said para. 3 x x x x x x 4. If the Assessing Officer has cause or justification to know or suppose that income has escaped assessment, it can be said to have reasons to believe that an income has escaped assessment. The said expression cannot be read to mean that that the Assessing Officer should have finally ascertained the fact by legal evidence or inclusion. The function of the Assessing Officer is to administer the statue with solicitude for the public exchequer with an in-built idea of fairness to taxpayer (CIT V Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 161 Taxman 316 (SC). In determining whether commencement of reassessment proceedings is valid, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in the assessment order of a subsequent year. The Assessee can not take shelter under plead that the return did not required a particular fact to be setout and therefore failure to disclose facts would provide immunity to assessee from any notice being issue u/s 148 after a period of four years. Further in the case of Asstt CIT Vs. Sarvamangdala Properties (2002) 257 ITR 722 (Cal) it was held that the duty of disclosing primary facts relevant to the decision of the question before the assessing authority lies on the assessee and it is not for the assessee to tell the assessing authority what inference, whether of facts or law should be drawn. In view of the above facts, the objection raised by you is no force and it may treated as dispose off the objection raised by you in the letter referred above. Your are therefore, requested to provide the details of creditors as discussed in para 1 of this letter. Kindly noted that since the case has to be disposed off at the earlies therefore, you are requested to comply properly by 03.09.2010 otherwise the inference will be draw that you have nothing to say and the case will be decided on merits. 7. The two contentions, change o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt was outstanding. What is available on record and what was submitted by the assessee-petitioner as per the reassessment notice, were details or confirmations to the extent of Rs.1,13,53,344/-. No other details and particulars were available. This was noticed in the audit objection/note. Inspite of this, an addition of Rs.19,86,551/- was made in the original assessment order under Section 41(1) of the Act, but there is no explanation why no addition was made in respect of Rs.32,97,507/- 10. We have reproduced above the reasons recorded before issue of reassessment notice. We will like to reproduce, excerpts from a note that were prepared and recorded by the authorities before the reasons were recorded. The note records:- The assessee was asked to furnish complete details/confirmations with respect to sundry creditors amounting to Rs.166.37 lakh. Out of the above amount, the assessee could submit confirmation only in respect of creditors amounting to Rs.113.53 lakh and balance amount of Rs.52.84 lakh remained unconfirmed. The assessing officer held that provisions of section 41(1) were attracted as the above liabilities remained unpaid and ceased to exist. However unconfirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consolidated Photo And Finvest Ltd. Vs. Assistant Commissioner of Income Tax, (2006) 281 ITR 394(Del) it has been held:- 9. The above would show that cases falling in clause (c) of Explanation 2 in which income chargeable to tax has been underassessed or assessed at too low a rate or cases in which income has been made the subject of excessive relief under the Act or where excessive loss or depreciation allowance or any other allowance under the Act has been computed, would constitute cases of income escaping assessment. There is considerable authority for the proposition that the jurisdiction of the Assessing Officer to initiate proceedings would depend upon whether he has reasons to believe that any income chargeable to tax has escaped assessment. A long string of decisions rendered by the Supreme Court have emphasized that the belief of the Assessing Officer must be in good faith and must not be a mere pretence. The apex court has further held that there must be a nexus between the material before the Assessing Officer and the belief which he forms regarding the escapement of the assessee‟s income. A writ court, therefore, is entitled to examine whether the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the Income-tax Officer to issue a notice for reopening the assessment, the High Court was only concerned with examining whether the conditions which invested the Income-tax Officer with the powers to reopen the assessment existed. It is not, observed the court, within the province of the High Court to record a final decision about the failure to disclose fully and truly all material facts bearing on the assessment and consequent escapement of income from assessment and tax. The court also held that from a mere production of the books of account, it could not be inferred that there had been full disclosure of the material facts necessary for the purposes of assessment. The terms of the Explanation, declared the court, were too plain to permit an argument that the duty of the assessee to disclose fully and truly all material facts would stand discharged when he produces the books of account or evidence which has a material bearing on the assessment. The court observed (page 644) : It is the duty of the assessee to bring to the notice of the Incometax Officer particular items in the books of account or portions of documents which are relevant. Even if it be assumed that fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g would cover a case where income had escaped assessment due to the oversight, inadvertence or mistake was too widely stated and, therefore, did not lay down the correct law. This was stated in the context of reappreciation or reconsideration of the same material. It was clarified and stated as under (at page 1005):- A further submission raised by the revenue on s. 147(b) of the Act may be considered at, this stage. It is urged that the expression " information " in s. 147(b) refers to the realisation by the ITO that he has committed an error when making the original assessment. It is said that, when upon receipt of the audit note the ITO discovers or realizes that a mistake has been committed in the original assessment, the discovery of the mistake would be " information " within the meaning of s. 147(b). The submission appears to us inconsistent with the terms of s. 147(b). Plainly, the statutory provision envisages that the ITO must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment. The realisation that income has escaped assessment is covered by the words " reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asked to furnish names and addresses of the sundry creditors and since when the amount was outstanding. The petitioner was also asked to explain details of each creditor. There is nothing on record and it is not even the stand of the petitioner that those details in respect of all parties were furnished. If there is no disclosure and details were not furnished, there cannot be full and true disclosure. In W.P.(C) No. 9036/2007, Honda Siel Power Products Ltd. vs. The Deputy Commissioner of Income Tax and Anr., decision dated 14th February, 2011, we had held: 10. ......The term failure on the part of the assessee is not restricted only to the income-tax return and the columns of the income-tax return or the tax audit report. This is the first stage. The said expression failure to fully and truly disclose material facts also relate to the stage of the assessment proceedings, the second stage. There can be omission and failure on the part of the assessee to disclose fully and truly material facts during the course of the assessment proceedings. This can happen when the assessee does not disclose or furnish to the Assessing Officer complete and correct information and details i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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