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TMI Blog2013 (9) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... it fit and appropriate to make any addition in respect of share transactions which are subject matter of the present reassessment notice. Thus it is a case of change of opinion after application of mind by the Assessing Officer. At the time of first reassessment, the details of the questioned share transactions/consideration were specifically enclosed in form of a chart with the return of the income and also filed with the Assessing Officer, with letter/objections raised before the Assessing Officer. The Investigating Wing of the Department had furnished lists of beneficiaries of accommodation entries ascertained from the account of the alleged operators vide letters dated 2nd March, 2006, 16th June, 2006 and 5th February, 2007. Therefore, petitioner submits that this information regarding alleged dubious transactions, which is made subject matter of the second reassessment notice, was already available with the Assessing Officer when he had passed the first reassessment order on 28th December, 2007. In the present case there has been full and true disclosure of all material facts. Reliance is placed upon Income Tax Officer vs. Madani Engineering Works Ltd. [1979] 118 ITR 1 (SC) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have been made during the first round of the reassessment proceedings. Judgment in the case of Jai Bharat Maruti v. Commissioner of Income Tax (2010) 324 ITR 289 (Delhi) on the point that Assessing Officer can reopen proceedings based on particular items and cannot proceed to bring to tax items which are not connected with what was initially indicated in the reasons disclosed under Section 148 (2) of the Act was pronounced on 20th October, 2010 and is therefore later in point of time. Thus, the assessing officer could have examined all transactions/credits in books, including cases not mentioned in the reasons to believe recorded on the first occasion, when the first re-assessment order was passed on 28th December, 2007. 4. It is also submitted that Commissioner of Income Tax (Appeals) by order dated 16th March, 2009, has accepted the appeal of the petitioner and deleted the additions made by the Assessing Officer vide reassessment order dated 28th December, 2007. Revenue had accepted the said decision and, therefore, the present reassessment proceedings are based on surmises and conjectures. They are liable to be quashed, since the CIT(Appeals) has held that the share transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the notice was issued specifically in respect of the company formerly known as Om Sons Wire Industry Pvt. Ltd., one of the six companies/concerns which merged with the petitioner‟s company, and there were three transactions dated 29th April, 2002 and 11th February, 2003 regarding which, on the basis of information made available by the Investigating Wing, the assessing officer had formed a prima facie view that these were accommodation entries. The first two entries related to account holder M/S MKM Finsec Pvt. Ltd. and mentions the bank and branch name from where the money was received. 9. In the assessment order dated 28th December, 2007, the Assessing Officer examined three entries and addition of Rs. 6,66,382 was made in respect of the alleged transaction with M/S MKM Finsec Pvt. Ltd. He did not make any addition in respect of entry No. 3 i.e. transaction of Rs.5,00,000/- dated 29th April, 2002 i.e. money received from Sashi Sales & Marketing Pvt. Ltd. DECISION 10. The short question is whether at that time and before passing the assessment order dated 28th December, 2007, the Assessing Officer had applied his mind in respect of sale transactions made by the othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioners kept silent on the numerous transactions made through five other companies with MKM Finsec Pvt. Ltd. and no details of these transactions were furnished. The documents i.e. the chart, placed on record and on which assessee excessively relies prove that the petitioner had furnished the relevant information but was cautious and careful not to mention about any other transactions of MKM Finsec Pvt. Ltd. From these documents it is not possible to discern involvement of MKM Finsec Pvt Ltd. in any of the transactions made by the five companies. Neither did the petitioner mention or state that there were other sale transactions with MKM Finsec Pvt. Ltd. in any of the letters, communications and correspondence with the Assessing Officer. Had that been the case, the position would have been different. 13. The Assessing Officer i.e. the Income Tax Officer, Ward 23, was equally clear. In the office note to the assessment order, he has mentioned and recorded as under: "The case was reopened on the basis of information in respect of M/s Omsons Wire Industry Pvt. Ltd. and, therefore, in assessment also issues relating to M/s Omsons Wire Industry Pvt. Ltd. only have been examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined to determine whether the stand of the Revenue is correct. Decision of this Court in Writ Petition (Civil) No. 6205/2010, Dalmia Private Limited versus Commissioner of Income Tax Delhi 10 and Another, dated 26th September, 2011 and decision of Bombay High Court in Writ Petition No. 1017/2011, The Indian Hume Pipe Company Limited versus The Assistant Commissioner of Income Tax, dated 8th November, 2011 are two such cases. In the first case, the Assessing Officer in the original assessment had made additions of Rs. 19,86,551/- under Section 40(1) on account of unconfirmed sundry creditors. The reassessment proceedings were initiated after noticing that unconfirmed sundry creditors, of which details etc. were not furnished, were to the extent of Rs. 52,84,058/- and not Rs. 19,86,551/-. In Indian Hume Pipe Company Limited (supra), after verification the claim under Section 54EC was allowed but subsequently on examination it transpired that the second property was purchased prior to the date of sale. The aforesaid decisions/facts cases must be distinguished from cases where the material facts on record are correct but the Assessing Officer did not draw proper legal inference or did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced is not relevant but what is relevant is whether or not the Assessing Officer had examined the transactions subject matter of the second reassessment orders. The decision in Jai Bharat Maruti (supra) pronounced on a later date does not mean that the Assessing Officer while passing the first reassessment order on 28th December, 2007 could not have accepted the plea of the assessee and had examined and gone beyond the items or subject matter of the reassessment notice. The said assumption is ill founded. 16. The contention of the petitioner that the issue or subject matter of the first reassessment was broad enough and included the transactions which are subject matter of the second reassessment proceedings, is incorrect. The first reassessment notice was very specific and related to shares which were procured by Omsons Wire Industry Pvt. Ltd and had been sold to MKM Finsec Pvt. Ltd. Two transactions with the said company were specifically mentioned and third transaction was with Sashi Sales & Marketing Pvt. Ltd. The third transaction appeared to be fair transaction. The Assessing Officer could not have presumed that there were other transactions in respect of shares purchased by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinitive analysis of their identity, creditworthiness and the source of the money ultimately received by the beneficiaries. These entry operators are found to be mostly absconding/non-complying after the unearthing of the „Money Laundering Scam‟ leaving the said money at the disposal of the beneficiaries without any associated cost or liability. The details received from Investigation wing were in 2-3 parts. Therefore the following entry too related to the assessee company (tranferee and transferee companies) were not considered while opening and completion of assessment proceedings u/s 147 was inserted by the Finance (No.) 2 Act, 2009 the information received after reopening g of assessment was not examined as the same were not in the reasons so recorded:- BANK FROM WHICH ENTRY GIVEN BRANCH OF ENTRY GIVING BANK NAME OF ACCOUNT HOLDER Account No. of entry operator DATE ON WHICH ENTRY TAKEN Instrument no. by which entry taken Amount of entry Beneficiary name Beneficiary bank account RATNAKAR KAROL BAGH MKM FINSEC P LTD. 40 13-Mar-03 Opec Finance Co. 200,000 OPEE FINANCE CO LTD. LAKSHMI VILAS BANK RATNAKAR KAROL BAGH MKM FINSEC P LTD. 40 18-Mar-03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation carried out by the Investigating Wing for identification of entry operators engaged in money laundering. It is mentioned that the details were received from the Investigating Wing in parts, on two or three occasions and provides details of the account number of MKM Finsec Pvt. Ltd. and individuals with whom transactions were made. In respect of the entries, the reasons record that the transactions between the transferor company i.e. the assessee and the transferee company, i.e. the MKM Finsec Pvt. Ltd. who was an entry operator, was not disclosed during the first round of reassessment proceedings and the prima facie conclusion that income on account of the said bogus transactions had escaped assessment. Thus, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision according pristine approval to the bonafides of the transactions. At the stage of issue of notice under Section 148 only formation of tentative, prima facie view is required. The final opinion and authoritative opinion is formed when the assessment order is passed. We do not think that the order passed by the CIT (Appeals) authoritatively records or proves that transactions with MKM Finsec Pvt. Ltd. were genuine business or commercial transactions. There is no such finding recorded or pronounced. The said order refers to the failure of the assessing officer in the said proceedings and effect thereof which can by no stretch of imagination be construed that the petitioner did not indulge in bogus sales transactions, especially in case of the five companies involved in the present reassessment, on which the CIT (Appeals) did not dwell into and neither had the relevant material, at the time, to examine the same. 20. The contention regarding full and true disclosure has to be rejected in terms of explanation 1 to Section 147 which reads as under: "Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly disclosed all material facts necessary for his assessment for that year and not to others. All the decisions relied upon by Sri Gupta have been elaborately discussed and distinguished in Phool Chand Bajrang Lal's case [1993] 203 ITR 456 (SC) and we fully agree with the same. We think it unnecessary to repeat those reasons. In particular, we agree with the reasons given in Phool Chand Bajrang Lal's case [1993] 203 ITR 456 (SC) for holding that the decision of this court in Burlop Dealers' case [1971] 79 ITR 609 (SC) must be confined to the particular fact-situation of that case and that it cannot be construed to be of universal application irrespective of the facts and circumstances of the case before the court." Therefore, 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 (see paragraphs 12, 16 and 19 above). In the case of Haryana Acrylic (supra), a Division Bench of this court has followed the dictum and the ratio of Madani Enterprises (supra). In the case of Honda Siel Power Products Limited v. Deputy Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example - "I have produced the account books and the documents : You, the assessing officer examine them, and find out the facts necessary for your purpose : My duty is done with disclosing these account-books and the documents." His omission to bring to the assessing authority's attention those particular items in the account books, or the particular portions of the documents, which are relevant, amount to "omission to disclose fully and truly and truly all material facts necessary for his assessment." Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessor's duty to disclose all of them - including particular entries in account books, part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a fact, it is the duty of the assessee to disclose it. The evidence which is produced by the assessee discloses only primary facts, but to interpret the evidence, certain other facts may be necessary. Thus, questions of status, agency, the benami nature of transactions, the nature of trading and like matters may not appear from the evidence produced, unless disclosed. If it be merely a question of interpretation of evidence by an Income-tax Officer from whom nothing has been hidden and to whom everything has been fully disclosed, then the assessee cannot be subjected to section 34, merely because the Income-tax Officer miscarried in his interpretation of evidence. But it is otherwise, if a contention which is contrary to fact, is raised and the Income-tax Officer is set to discover the hidden truth for himself. In the latter case, there is suppression of material fact, or, in other words, that lack of full and true disclosure which would entitle action under section 34 of the Act." We record that Hidayatullah, J. had not ultimately agreed with the majority opinion but we do not find any real conflict between majority opinion and the elucidation of Hidayatullah, J. recorded a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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