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TMI Blog2016 (6) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... close fully and truly all material facts necessary for its assessment, the Assessing Officer lacks jurisdiction to reopen the assessment beyond a period of four years from the end of the relevant assessment year. The impugned notice which has been issued beyond a period of four years from the end of the relevant assessment year, without there being any basis for formation of the requisite belief that income chargeable to tax has escaped assessment on account of any failure on the part of the petitioner to disclose fully and truly all material facts, therefore, cannot be sustained. As this is not a case where the Assessing Officer has formed his belief on the basis of subsequent new and specific information that income chargeable to tax has escaped assessment on account of omission on the part of the petitioner to make full and true disclosure of primary facts. In this case apart from the fact that primary facts were already on the record, the Assessing Officer at the time of framing assessment under section 143(3) read with section 147 of the Act noticed the entries made in the cash book and called for details from the petitioner and formed an opinion thereon. Thus, this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the cash book and supporting evidences and confirmations of a few customers. After being satisfied that the petitioner was working as a Shroff and the cash deposited in the bank accounts belonged to customers who obtained cheques/drafts in lieu of such cash, the assessment was completed by the then Assessing Officer without making any variations in the returned income of the petitioner. It was submitted that, therefore, this is a patent case of reopening on the basis of change of opinion on the same set of facts. It was contended that in the present case, the impugned notice has been issued beyond a period of four years from the end of the relevant assessment year and hence, in view of the proviso to section 147 of the Act, there must be some failure on the part of the petitioner to fully and truly disclose all material facts. According to the learned counsel, since the petitioner had duly disclosed the receipt of cash from customers and its deposit in bank accounts in its books of accounts and the Assessing Officer had accepted the same after due verification thereof, it cannot be alleged that the petitioner has not fully and truly disclosed all material facts necessary for it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the Assessing Officer examined the cash deposits and that the assessee has complied with everything in the first reassessment. It was urged that all the facts were there in its books of account and hence, it cannot be said that there is any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment. It was submitted that apart from the fact that the impugned notice has been issued beyond a period of four years from the end of the relevant assessment year without there being any failure on the part of the petitioner to disclose fully and truly all material facts, even otherwise, the impugned notice is based upon a mere change of opinion and hence, the assumption of jurisdiction on the part of the Assessing Officer is without any authority of law. It was, accordingly, urged that the impugned notice deserves to be quashed and set aside. 4 Vehemently opposing the petition, Mr. M.R. Bhatt, Senior Advocate, learned counsel for the respondent, referred to the reasons recorded for the purpose of reopening the assessment on the earlier occasion to submit that the information which came to the knowledge of the Department was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that in the second survey, there was an onus on the petitioner under section 68 of the Act to explain the cash deposits and the petitioner having failed to do so, the same is required to be added under section 68 of the Act. Thus, there is a live link between the information and the formation of belief. 4.2 Mr. Bhatt further submitted that during the course of survey, the investigating agency had found that the petitioner is not maintaining complete records and that the petitioner has not disclosed the names of the beneficiaries of the cash transactions. It was submitted that in terms of the report submitted by the investigating agency, the petitioner had connection with Calcutta based parties; it did not disclose the names of the beneficiaries and that on the basis of the investigation report, the Assessing Officer has found that the petitioner was involved in money laundering and has not explained the names of the beneficiaries. It was submitted that the petitioner by not reflecting the addresses and the PAN numbers of the parties in its books of account, had not produced the primary facts on the record for the purpose of assessment. Reliance was placed upon the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was submitted that it is settled legal position that if there are, in fact, some reasonable grounds for the Income Tax Officer to believe that there has been any non-disclosure as regards any fact which would have a bearing on the question of under assessment, that would be sufficient to give jurisdiction to the Assessing Officer to issue notice under section 148. Whether these grounds are adequate or not is not a matter for the court to infer. 4.4 Reference was made to the decision of the Supreme Court in the case of Malegaon Electricity Co. P. Ltd. v. Commissioner of Income-Tax, Bombay, (1970) 78 ITR 466 , wherein the court had recorded that from the cryptic statement of the Income Tax Officer in the original assessment order that no adjustment is necessary , the Tribunal was not justified in drawing the inference that the Income Tax Officer had considered all the relevant facts. Reliance was placed upon the decision of the Supreme Court in the case of Indo- Aden Salt Mfg. Trading Co. P. Ltd. v. Commissioner of Income-Tax, Bombay, (1986) 159 ITR 624, for the proposition that it is well-settled that the obligation of the assessee is to disclose only primary facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of this court in the case of Dishman Pharmaceuticals and Chemicals Limited v. Deputy Commissioner of Income Tax, (2012) 346 ITR 228 , wherein the court had observed that from the return filed and the documents annexed with the return, nowhere it could be ascertained as to what was the holding of the assessee company in terms of voting power in SDBL. If, upon further inquiry by the Assessing Officer, such details could be gathered and the nature of payment received by the petitioner from SDBL could be ascertained, to find out whether the same should be treated as deemed dividend under section 2(22)(e) or not, the same would not satisfy the requirement of fully and truly disclosing all material facts necessary for assessment, particularly viewed from the expression given in Explanation (1) to section 147 of the Act, which provides inter alia, that production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of section 147 of the Act. It was submitted that the above decision would be squarely applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not disclose or furnish to the Assessing Officer complete and correct information and details. The burden is on the assessee to make full and true disclosure. The explanation to section 147 stipulates that mere production of books of account or other evidence is not sufficient. Merely because material lies embedded in material or evidence, which the Assessing Officer could have uncovered but did not uncover is not a good ground to deny and strike down the notice of reassessment. Reliance was also placed upon the decision of the Delhi High Court in the case of Remfry and Sagar v. Commissioner of Income-Tax, (2013) 351 ITR 75 (Delhi), for the proposition that it is not necessary for the Assessing Officer to list the documents that were required to be furnished, but not actually furnished by the assessee in the course of the original assessment proceedings. The primary condition for reopening assessment is that there should be reason to believe that income chargeable to tax has escaped assessment. In the facts of the said case the court held that the claim for deduction of licence fee payment undeniably was based on the terms and conditions of licence agreement. Neither th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged the onus of proving the genuineness of the transaction; however, the discharging of the onus has to be at the instance of the Assessing Officer alone. It was submitted that the Assessing Officer during the course of the assessment proceedings did not call upon the petitioner to discharge such onus and hence, there is no omission on the part of the petitioner. Reliance was placed upon the decision of this court in the case of Commissioner of Income-Tax, Gujarat-III v. Vinaychand Harilal, (1979) 120 ITR 752, to point out the scope of proceedings under section 68 of the Act. Reliance was also placed upon the decision of this court in the case of Ahmedabad Cotton Mfg. Co. Ltd. v. Union of India and Another, (1974) 95 ITR 639 , to submit that while examining as to whether any income is undisclosed income under section 68 of the Act, the focus is on the nature and the source of income and the addresses and PAN numbers are relevant only when the Assessing Officer further wants to check up and examine the depositors. It was submitted that this is a patent case of absence of any omission on the part of the petitioner and hence, in the absence of any failure on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to believe that on account of either the omission or failure on the part of the assessee to file the return, or on account of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year, income has escaped assessment. The existence of the reason to believe is supposed to be a check, a limitation, upon his power to reopen the assessment. The power conferred upon the Income Tax Officer by sections 147 and 148 is thus not an unbridled one. It is hedged in with several safeguards conceived in the interest of eliminating room for abuse of this power by the Assessing Officers. The idea was to save the assessees from harassment resulting from mechanical reopening of assessment but this protection avails only those assessees who disclose all material facts fully and truly. (See Sri Krishna Pvt. Ltd. v. Income Tax Officer, (1996) 221 ITR 538). 9. Adverting to the facts of the present case, as per the reasons recorded, a survey was carried out on the petitioner on 18th September, 2014 and it was found that the assessee had issued cheques, demand drafts to many parties in return for cash deposits made in it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all FDRs shown in the balance sheet. It was further stated that the petitioner had deposited total cash of ₹ 4,70,11,830/- in its bank account with ICICI bank during the period from 1st April, 2003 to 25th April, 2008 and the petitioner was called upon to explain the sources of these cash deposits with complete supporting evidences. The petitioner was also called upon to produce complete books of accounts and vouchers for verification. It appears that thereafter, the Assessing Officer had also called upon the petitioner to clarify the source of cash deposited in its Kotak Mahindra Bank account in response to which the petitioner submitted a letter dated 18th March, 2014 inter alia stating thus:- (1) Sir we are regularly assessed to tax since long. We have filed our Return of Income for the year under consideration with Income tax officer ward-2(1) Rajkot with declaring of Total Income ₹ 105657/-. Our firm s nature of business is cheque discounting, issuing cheque, demand draft issuing etc. we are doing business of shroff with name of M/s Sidhnath Enterprise 8-Chokhawala chambers, Danapith Rajkot. In our shroff business we have received cash from various par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anuary, 2014 and 7th March, 2014 and that in response to the notice of hearing the advocate duly authorised had attended from time to time and filed written submissions. The Assessing Officer observed that the assessee is engaged in the shroff business, wherein it discounts cheques, issues demand drafts, etc. Assessee had produced its cash book, wherein cash receipts were recorded, which were utilised to purchase demand drafts for parties who gave cash. Various issues were discussed at length during the assessment proceedings. After verification, the Assessing Officer determined the total income in terms of the returned income at ₹ 3,41,930/-. 12. Thus, the Assessing Officer had, on the previous occasion, reopened the assessment to verify the genuineness of the cash transactions. While in the reasons recorded reference is made to cash deposits of ₹ 4,70,11,830/- during the period 1st April, 2003 to 25th April, 2008, in the petitioner s accounts maintained with the ICICI bank, during the course of assessment, details of two other bank accounts were called and specific queries were made in respect of certain bank accounts like Kotak Mahindra Bank. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the failure on the part of the petitioner to disclose fully and truly all material facts. Thus, while it is the case of the respondent that it is the business of the petitioner to accept cash and issue cheques in lieu thereof, it is also the case of the respondent on the basis of the instances cited in the affidavit, that the cash deposits received by the petitioner are in the nature of undisclosed income, despite it being the specific case of the respondent that the petitioner had issued cheques in lieu of cash received by it which had been encashed by the concerned party by depositing the same in its bank account. It may be noted that it is not the case of the respondent that the beneficiary after encashing such amount had returned the same to the petitioner nor has any material been unearthed in this regard. Insofar as the petitioner is concerned, as stated in the affidavit-in-reply, it is its business to receive cash and issue cheques in lieu thereof for which it charges commission. Under the circumstances, in the absence of any material to show that the cash in respect of which the cheque had been issued travelled back to the petitioner, one fails to understand as to how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties in the cash book maintained by it. The learned counsel for the revenue has asserted that the petitioner is required to record the addresses and the Permanent Account Numbers of the parties in the cash book. He, however, is not able to point out any basis for saying so. In fact, on a plain reading of the reasons recorded for reopening the assessment, it is apparent that it is not the case of the Assessing Officer that there is any failure to disclose on the part of the petitioner because the addresses and the Permanent Account Numbers have not been disclosed in the cash book, but that the assessee has not disclosed the beneficiaries of cash deposits despite being given numerous opportunities to explain the same. As noticed earlier, in this case, a survey came to be carried out under section 133A of the Act wherein no incriminating material came to be found. But the survey party worked out the cash deposits recorded in the cash book and called upon the petitioner to disclose the identity of the beneficiaries. In the order rejecting the objections, the Assessing Officer has stated that the survey revealed cash deposits to the tune of ₹ 2998.56 crores in the petitioner s ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued. It is, therefore, necessary to examine as to what constitutes primary facts . In this regard, it may be apposite to refer to the decision of the Supreme Court in the case of Calcutta Discount Co. Ltd. (supra), wherein the court has held thus:- The expression material facts contained in section 34(1) (a) of the Income Tax Act, 1922 refers only to primary facts and the duty of the assessee is to disclose such primary facts. There is no duty cast on the assessee to indicate or draw the attention of the Income Tax Officer what factual or legal inference can be drawn from the primary facts disclosed. 17. The Supreme Court in the case of Income Tax Officer, Azamgarh v. Mewalal Dwarka Prasad, (1989) 2 SCC 279 held thus:- 8. With this conclusion the decision of the High Court would ordinarily have been reversed. As we have already stated, the assessee has also appealed against that part of the judgment of the High Court which was adverse to it. Mr. Manchanda contended that in this case the regular assessment had been made for the assessment year 1965- 66 on January 22, 1966. Notice under Section 148 of the Act was issued on March 7, 1973, i.e., more than seve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under section 148 of the Act on 31st March, 2008 in respect of cash deposits made by the assessee in its ICICI bank account. During the course of the assessment proceedings, the Assessing Officer had also called for details of all bank accounts and also had looked into the cash transactions recorded in the cash book. Thus, the primary facts regarding the transactions were before the Assessing Officer. He should, at the relevant time, have probed further before completing the assessment if he was of the view that the material provided by the petitioner was not sufficient for him to be satisfied that the petitioner s contention was correct. However, the Assessing Officer despite having all the transactions as recorded in the cash book before him, was satisfied with examining certain samples of the transactions and upon being satisfied with the genuineness of the same, did not deem it fit to look into each and every transaction recorded in the cash book. As held by the Supreme Court in the case of Income- Tax Officer, I Ward, Distt. VI. Calcutta and Others v. Lakhmani Mewal Das, (1976) 103 ITR 437 (SC), the duty is cast upon the assessee to make true and full disclosure of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the opinion of this court, in the present case on the self same material, namely, the entries made in the cash book, the Assessing Officer had formed the belief that income to the tune of ₹ 4,70,11,830/- had escaped assessment in the earlier proceedings under section 147 of the Act. In the said proceedings, the Assessing Officer called for details of all the bank accounts and after lengthy discussion, ultimately accepted the income as returned by the assessee. Now on the self same material, the Investigation Wing is of the opinion that the cash deposits need to be verified and on the basis of such information received from the Investigation Wing, the Assessing Officer has reopened the assessment. Prior to recording the reasons, it does not appear as if the Assessing Officer has verified the record of the case, else he would have found that in relation to part of the cash deposits, information had already been called for and that the Assessing Officer had been satisfied about the genuineness thereof. 20. Thus, it is apparent that at the time when the earlier assessment came to be framed under section 143(3) read with section 147 of the Act, all the primary facts were bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be applicable to the facts of the present case. In Income Tax Officer v. Selected Dalurband Coal Co. Pvt. Ltd. (supra), the Supreme Court found that the letter of the Chief Mining Officer could constitute the basis for forming the belief that income chargeable to tax has escaped assessment. In the present case, during the course of survey under section 133A of the Act, no incriminating material has been discovered, and on the basis of the self same material which the Assessing Officer had examined while framing assessment under section 143(3) read with section 147 of the Act, the assessment is sought to be reopened. Insofar as the decision of the Supreme Court in Raymond Woollen Mills Ltd. v. Income Tax Officer (supra) is concerned, this court has already expressed the opinion that there is prima facie no material on the basis of which the Assessing Officer could reopen the assessment. This decision also, therefore, does not carry the case of the respondent any further. The decision of this court in Dishman Pharmaceuticals and Chemical Limited v. Deputy Commissioner of Income Tax (supra) would also not be applicable as this is not a case where the reopening is based ..... X X X X Extracts X X X X X X X X Extracts X X X X
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