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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 ..... sactions 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. - Writ Petition (Civil) No. 8283/2010 - - - Dated:- 30-8-2013 - Sanjiv Khanna And Sanjeev Sachdeva,JJ. For the Petitioner : Mr. Salil Kapur, Mr. Vikas Jain, Mr. Sanat Kapur Mr. Ankit Gupta, Advocates. For the Respondents : Mr. Kamal Sawhney, Advocate. ORDER Sanjiv Khanna, J. OPG Metals and Finsec Ltd. by this writ petition challenges reassessment notice dated 25th March, 2010 under Section 148 of the Income Tax Act (the Act), which relates to assessment year 2003-04 and the order dated 4th October, 2010 passed by the Assessing Officer dismissing their objections to the reassessment notice. CONTENTIONS OF THE PETITIONER 2. The petitioner‟s first contention is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied, the bar would operate and no action under Section 147could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade Private Ltd. (supra) we had agreed with the view taken by the Punjab Haryana High Court in the case of Duli Chand Singhania (supra) that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing officer under Section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated 29.03.2004 under Section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 02.03.2005 are without jurisdiction as no action under Section 147 could be taken beyond the four year period in the circumstances narrated above. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation received from Investigating Wing issued the first reassessment notice dated 7th November, 2006 under Section 148 of the Act recording the following reasons: The Principal Officer M/s OPG Metals Finsec Ltd. (formerly known as M/s Om Sons Wire Industry Pvt. Ltd.) 5440, Basti Harphol Singh, Sadar Thana Road, Delhi 110 006 Sir, Sub: Request for reasons recorded for initiating assessment proceedings u/s 148 of the I.T. Act for the A.Y. 2003-04 reg. With reference to the above mentioned subject please refer to your letter dated 18.12.2006. As requested by you the reasons recorded for reopening the case u/s 148 are reproduced as hereunder: The Investigating Wing, New Delhi has sent detailed information. As per information, the assessee company‟s name appears in the list of beneficiaries who have obtained accommodation entries from the following parties:- BENEFINICIARY BANK NAME BENEFICIARY BRANCH VALUE OF ENTRY TAKEN DATE ON WHICH ENTRY TAKEN NAME OF ACCOUNT HOLDER OF ENTRY GIVING ACCOUNT BANK FROM WHICH ENTRY GIVEN OBC Azadpur 602250 29 April, 2002 MKM Finsec P. Ltd. Ratnaka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer had duly applied his mind during the first reassessment proceeding regarding the subject matter of bogus sales through accommodation entries or credits. However, in the peculiar facts of the present case we are inclined to accept that during the earlier proceeding the Assessing Officer had not applied his mind and had not formed any opinion regarding the transactions in question. There are various reasons and grounds for the same and we shall be elucidating upon them below. 12. From the chart submitted by the petitioner giving details of long term capital gains/short term capital gains in respect of five companies, it does not transpire that the transactions were brokered or the sale consideration was received from MKM Finsec Pvt. Ltd. There was no reason or cause for the Assessing Officer to assume that these transactions of long term/short term capital gains were with MKM Finsec Pvt. Ltd or there were also bogus sales much like the case of Om Sons Wire Industry Pvt Ltd. In fact, order sheet notings recorded in the first round reveal that the petitioner was asked to furnish details vide noting dated 11th July, 2007 and by letter of the same date, information relating to tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w facts, material or information comes to the knowledge of the Assessing Officer, which was not on record and available at the time of the assessment order, the principle of "change of opinion" will not apply. The reason is that "opinion" is formed on facts. "Opinion" formed or based on wrong and incorrect facts or which are belied and untrue do not get protection and cover under the principle of "change of opinion". Factual information or material which was incorrect or was not available with the Assessing Officer at the time of original assessment would justify initiation of reassessment proceedings. The requirement in such cases is that the information or material available should relate to material facts. The expression _material facts' means those facts which if taken into account would have an adverse affect on the assessee by a higher assessment of income than the one actually made. They should be proximate and not have remote bearing on the assessment. The omission to disclose may be deliberate or inadvertent. The question of concealment is not relevant and is not a precondition which confers jurisdiction to reopen the assessment. 16. Correct material facts can be ascerta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer in the first round as three letters had been written by the Investigating Wing of the Department. The letter dated 2nd March, 2006 was followed by letters dated 16th June, 2006 and 5th February, 2007. These letters were written by Directorate of Income Tax (Investigation) to the Chief Commissioner of Income Tax, Delhi/Commissioner of Income Tax, Delhi-V, enclosing therewith, a compact disc. The disc had data that had to be scanned, sifted through and then the details of alleged transactions, including company name, persons involved etc., had to be fully ascertained. The assessing officers were required to scan through thousands of entries to discern and determine which of their assessee, if any, has been a beneficiary of an accommodation entry. From these letters, it is not possible to know that the Assessing Officer i.e. the Income Tax Officer, Ward 13(4) had information in his possession and was aware that the five other companies had also entered into transactions with MKM Finsec Pvt. Ltd. but he has chosen to ignore and had deliberately not gone into the said aspect. The petitioner cannot point out any other information or detail available in the original file whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. on 28/11/2003 vide ack. No. 1351000562 after consolidating the accounts of 6 transferor companies, i.e., (i) Kriti Metal Agencies P Ltd., (ii) Sanjay Wire Industries P. Ltd. (iii) Bimla Wire Industries P. Ltd. (iv) Rohan Enterprises P. Ltd. (v) Omsons Wire Industry P. Ltd. and (iv) OPEE Finance Co. Ltd. merged with the assessee company w.e.f 1-4-2002 in view of the approval granted by Hon‟ble High Court of Delhi vide its order dated 25-11-2002. The case was processed u/s 143(1) on 25/03/2004. Thereafter this case was reopened u/s 147 of the Income Tax act, 1961 after recording the reasons in writing in respect of one of the transferor company named M/s Om Sons Wire Industry P. Ltd. that this company has taken accommodation entries to the tune of 11,66,382/-. While making the assessment u/s 147 entries related to M/s Om Sons Wire Industry P Ltd. were only considered and assessment was made on 28/11/2007. A comprehensive investigation was carried out by the Investigation wing for identification of entry operators engaged in the business of money laundering for the beneficiaries and on the basis of investigation carried out and evidences collected, a report has been for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RITI METAL AGENCIES PVT. LTD. OBC RATNAKAR KAROL BAGH MKM FINSEC P LTD. 40 5-Mar-03 Kriti Metal Agencies 299,536 KRITI METAL AGENCIES PVT. LTD. OBC RATNAKAR KAROL BAGH MKM FINSEC P LTD. 40 8-Mar-03 Kriti Metals agencies 221,069 KRITI METAL AGENCIES PVT. LTD. OBC SBH KB MKM FINSEC P LTD. 50037 6-Feb-03 CLG: 11505 BIMLA WIRE 152,409 BIMLA WIRE INDUSTRIES PVT. LTD. BHAR AT OVEASEAS BANK SBH KB MKM FINSEC P LTD. 50037 10-Mar-03 CH: 12589 ROHAN ENTERPRI 390,831 ROHAN ENTERPRISES PVT LTD. BHAR AT OVEASEAS BANK From the above facts it is clear that the assessee has received unexplained sums from the entry operators as per the above details as per information available with the undersigned. As explained above, the identity, creditworthiness and genuineness of transactions with the persons found to be entry operators cannot be established. The facts about the transactions made by the aforesaid transferor company and transferee companies with MKM F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.6,66,382/- made by Assessing Officer on the sale transactions relating to shares which were purportedly sold by Omsons Wire Industries Pvt. Ltd. to MKM Finsec Pvt. Ltd. We have examined the said order passed by the CIT (Appeals). The appellate authority has referred to the failure of the Assessing Officer to conduct a full and proper enquiry because he had issued notices for appearance of Directors of MKM Finsec Pvt. Ltd. but failed to produce them for cross-examination, though the said company had written a letter testifying that they are not doing any business but were merely providing accommodation entries. The appellate authority felt that right of cross-examination was mandatory and there was violation of principles of natural justice. Reference was made to the decision of Delhi High Court in CIT vs. Pradeep Gupta (2008) 303 ITR 095 (Del). Similarly reference was made to another judgment of Delhi High Court in J.T. (India) Exports and anr. Vs. UOI Anr. (2003) 262 ITR 269 (Del-FB), wherein it has been held that Assessing Officer must pass a speaking order by giving reasons for the conclusions arrived at and an opportunity for hearing must be given. The appellate authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue that mere submission of the chart that the five other companies had entered into sale transactions by itself would not amount to disclosure. Decision in the case of Income Tax Officer vs. Madani Engineering Works Ltd. (supra) relates to the assessment year 1959-60 and the reassessment notice was issued on 25th January, 1968. In the said case the Supreme Court had followed decisions in CIT v. Burlop Ltd. 1971 79 ITR 609 (SC) and had affirmed the view of the division bench of the High Court quashing the reassessment proceedings, after noticing that the hundis on the strength of which loans were obtained had been produced in the original assessment proceedings. The decision in the case of CIT v. Burlop Ltd (supra) has been considered in Sri Krishna Pvt. Ltd v. Income Tax Officer, Cal (1996) 221 ITR 538. The Supreme Court held that it must be confined to factual scenario of the particular case and observed: Learned counsel for the assessee, Sri Gupta placed strong reliance upon the decisions of this court in Chhugamal Rajpal v. S. P. Chaliha [1971] 79 ITR 603 ; ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 and CIT v. Burlop Dealers Ltd. [1971] 79 ITR 609 as laying down proposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see to disclose fully and truly all material facts for its assessment. The disclosure must be full and true. Material facts are those facts which if taken into accounts they would have an adverse effect on assessee by the higher assessment of income than the one actually made. They should be proximate and not have any remote bearing on the assessment. Omission to disclose may be deliberate or inadvertent. This is not relevant, provided there is omission or failure on the part of the assessee. The latter confers jurisdiction to reopen the assessment. 22. In the light of the aforesaid, it has to be held that the requirement of full and true disclosure at the time of first reassessment is not satisfied in the present case. 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. However, here the assessee has not specifically pointed out at the time of the first reassessment that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however extend beyond the full and truthful disclosure of all primary facts ? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else - far less the assessee - to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law - he would draw from the primary facts. If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn ? It may be pointed out that the Explanation to the sub-section has nothing t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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