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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 ..... reopen the assessment of the assessee on the ground that the assessee had deposited huge cash to the tune of Rs. 4,70,11,830/- for the period from 1st April, 2003 to 25th April, 2008 in its accounts maintained with the ICICI bank. With a view to verifying the genuineness of the sources of such huge transactions, the Assessing Officer reopened the assessment. Pursuant thereto, the Assessing Officer framed assessment under section 143 (3) read with section 147 of the Act on 24th March, 2014 determining the total income as per the return at Rs. 3,41,930/-. Thereafter, by the impugned notice dated 30th March, 2015, the respondent seeks to once again reopen the assessment of the petitioner for assessment year 2008-09. Being aggrieved, the petitioner has filed the present petition. 3. Mr. J.P. Shah, learned counsel for the petitioner assailed the impugned order by submitting that the main ground for reopening of the assessment is huge cash deposits in the bank accounts. It was submitted that this aspect has duly been explained by the petitioner in the earlier assessment and the then Assessing Officer had in depth verified the same with reference to the cash book and supporting eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account and the very information was there with them at the time of the first assessment, which they reopened on the basis of the cash deposits in the ICICI account and now on the basis of the investigation made by the ADIT, the assessment is sought to be reopened again. It was submitted that the petitioner has disclosed the names of the beneficiaries in the original assessment and that the respondent Assessing Officer without verifying the record of the earlier assessment has erroneously contended that the names of the beneficiaries were not disclosed. It was pointed out that during the course of the first reassessment proceedings, the Assessing Officer had issued notices under section 142(1) of the Act and had called upon the petitioner to inter alia furnish copies of bank statements of bank accounts maintained by it. That the petitioner had also been called upon to explain the source of cash deposits with complete supporting evidence in respect of total cash of Rs. 4,70,11,830/- in its bank account with ICICI bank and was also called upon to produce complete books of accounts and vouchers for verification. It was submitted that the Assessing Officer examined the cash d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 133A of the Act, it was pointed out that a survey can be carried out by an income tax authority as contemplated under section 116 of the Act and the information may be used in any proceeding. Thus, the power of survey is conferred on an income tax officer for use in any proceedings under the Act including section 147 thereof and hence, the information received from the ADIT (Inv) during the course of survey under section 133A can be used for the purpose of reopening assessment under section 147 of the Act. Reliance was placed upon the decision of the Supreme Court in the case of Commissioner of Income Tax v. P. Mohanakala, (2007) 291 ITR 278, to submit that the onus is on the assessee to establish the genuineness of a transaction. Referring to the reasons recorded for reopening the assessment, it was pointed out that the second part of the reasons recorded relates to section 68 of the Act namely, that the beneficiaries of the cash deposits having not been disclosed by the assessee, the same are required to be added as the unaccounted income of the assessee which is chargeable to tax. It was submitted that in the second survey, there was an onus on the petitioner u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruly disclosed all material facts does not merit acceptance. 4.3 Reliance was also placed upon the decision of the Supreme Court in the case of Kantamani Venkatanarayana & Sons v. First Additional Income-Tax Officer, Rajahmundhry, (1966) 62 ITR 35, wherein the court has held that the assessee does not discharge his duty to disclose fully and truly all material facts necessary for the assessment of the relevant year by merely producing the books of account and other evidence. He has to bring to notice of the Income Tax Officer particular items in the books of account or portions of documents which are relevant. Even if it is assumed that, from the books produced, the Income Tax Officer, if he had been circumspect, could have found out the truth, he is not on that account precluded from exercising the power to assess the income which has escaped assessment. It was submitted that in the facts of the present case, merely because the cash book was already on record, would not mean that the Income Tax Officer is not precluded from exercising the power to assess the income which has escaped assessment. It was submitted that it is settled legal position that if there are, in fact, some re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Supreme Court in the case of Sri Krishna Pvt. Ltd. v. Income-Tax Officer and Others, (1996) 221 ITR 538, for the proposition that the enquiry at the stage of finding out whether the reassessment notice is valid is only to see whether there are reasonable grounds for the Income Tax Officer to believe and not whether the omission/failure and the escapement of income is established. It was submitted that once the Assessing Officer holds that there is non-disclosure, the same amounts to a finding of fact. Reliance was placed upon the decision of the Supreme court in the case of Raymond Woollen Mills Ltd. v. Income-Tax Officer, (1999) 236 ITR 34, wherein the court observed that it did not have to give a final decision as to whether there is suppression of material facts by the assessee or not. The court has only to see whether there was prima facie some material on the basis of which the Department could reopen the case. Sufficiency or correctness of the material is not a thing to be considered at this stage. 4.6 Reliance was also placed upon the decision of this court in the case of Dishman Pharmaceuticals and Chemicals Limited v. Deputy Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that in the facts of the present case, the fresh material is in the form of the investigation report which the Assessing Officer bonafide believed to be correct and accordingly assumed jurisdiction. 4.7 Reliance was placed upon the decision of the Delhi High Court in the case of Honda Siel Power Products Limited v. Deputy Commissioner of Income-Tax and Another, (2012) 340 ITR 53 (Delhi), for the proposition that whether or not there is a failure or omission to disclose fully and truly all material facts, is essentially a question of fact. The term "failure" on the part of the assessee is not restricted only to the income-tax return and the columns of the incometax return or the tax audit report. This is the first stage. The expression "failure to fully and truly disclose material facts" also relates to the stage of 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 assessment proceedings. This can happen when the assessee does not disclose or furnish to the Assessing Officer complete and correct information and details. The burden is on the assessee to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of assessment, all the requirements of section 68 of the Act are required to be satisfied and hence, the proviso to section 147 of the Act would apply and the onus is on the assessee to establish the genuineness of the transaction. The Assessing Officer is, therefore, wholly justified in exercising powers under section 147 of the Act by issuing the impugned notice and that the petition being devoid of merits deserves to be dismissed. 5. In rejoinder, Mr. J.P. Shah, learned counsel for the petitioner, submitted that in the present case, the assessment is sought to be reopened on the basis of a survey under section 133A of the Act whereas section 68 does not apply in case of survey but applies in case of an assessment. It was submitted that in any case, the address and the PAN number of a party is not a primary fact. It was submitted that primary facts are those that are necessary for the Income Tax Officer to decide whether an income is chargeable to tax. It was submitted that if called upon, the assessee would have discharged 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truly all material facts. 8. Section 139 of the Act places an obligation upon every person to furnish voluntarily a return of his total income if such income during the previous year exceeds the minimum amount which is not chargeable to income tax. The obligation so placed involves a further obligation to disclose all material facts necessary for his assessment for that year fully and truly. If at any subsequent point of time, it is found that either on account of an omission on the part of the assessee to file the return or on account of his omission to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, the Assessing Officer is entitled to reopen the assessment in accordance with the procedure prescribed in the Act. The Assessing Officer can issue the notice under section 148 of the Act proposing to reopen the assessment beyond a period of four years from the end of the relevant assessment year only when he has reason 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 4,70,11,830/- during the period from 01-04-2003 to 25- 4-2008 in its accounts maintained with the ICICI Bank. The genuineness of the sources of such huge cash transactions requires to be verified. Since no regular assessment was made in the instant case, I have reasons to believe that the genuineness of sources of cash deposits of Rs. 4,70,11,830/- and its taxability has escaped the assessment. Therefore, I propose to assess the income of the assessee for A.Y. 2008-09 as per the provisions of section 147 of the income tax Act subject to the provisions of section 148 to 153 of the Income Tax Act, 1961." In those proceedings, the Assessing Officer issued a notice dated 27th September, 2013 under section 142(1) of the Act inter alia calling upon the petitioner to furnish copies of bank statements of all the bank accounts maintained by it with narration of debit and credit entries exceeding Rs. 50,000/-. The petitioner was also called upon to furnish the complete accounts of all FDRs shown in the balance sheet. It was further stated that the petitioner had deposited total cash of Rs. 4,70,11,830/- in its bank account with ICICI bank during the period from 1st April, 2003 to 25th A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts we are enclosing herewith copy of bank statement and also copy of certain pages of our cash book, from this your good self verify that we have received cash from our various clients and it is deposited in our bank accounts as per need. We have mention cash book pages number on bank statement for your verification. We are enclosing some vouchers of cheque discounting demand draft issuing for verification of your good self. (4) Hence our cash deposited in bank accounts are properly account for and commission income of above transaction properly shown in our books of accounts. As we are doing business of shroff cash deposits in our bank accounts is part of our business." 11. The Assessing Officer thereafter framed assessment under section 143(3) read with section 147 of the Act on 24th March, 2014 recording that a notice under section 142(1) had been issued on 27th September, 2013, 5th November, 2013, 4th December, 2013, 6th January, 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, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o hereinabove and issued the impugned notice seeking to reopen the assessment. 14. It may be noted that in the affidavit-in-reply filed by the respondent, it is the case of the respondent that the petitioner is engaged in the business of cheque discounting and shroff. The firm charges commission for cheque discounting facility provided to its customers. The firm receives cash from the beneficiary and gives cheque in lieu thereof. The cheque is drawn in favour of the beneficiary. For arranging this transaction, the firm charges commission. Reference has been made in the reply to instances where the petitioner has received cash from parties and has issued cheques in lieu thereof which were deposited by such parties in its account and the cheques were cleared at Rajkot. Based on this, the Assessing Officer had stated that she had reason to believe that income chargeable to tax has escaped assessment on account 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 bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer now deems it fit to examine all the cash deposits. 15. As noticed earlier, in the present case, since the assessment is sought to be reopened beyond a period of four years from the end of the relevant assessment year, it is the case of the Assessing Officer that the petitioner has failed to disclose fully and truly all material facts necessary for its assessment. As to what are the facts which the petitioner has failed to disclose, according to the Assessing Officer, these are the addresses and the Permanent Account Numbers of the beneficiaries of the cash deposits. In this regard, it may be noted that the petitioner maintains a cash book wherein the names of the parties, the date, the amount, the cheque number, the bank account, etc. are reflected. The question that, therefore, arises for consideration is as to whether the petitioner is required to show the addresses and PAN of the parties 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the survey warranting any further inquiry by the survey party. If consequent upon the survey, the survey party discovers any incriminating material, it may call upon the assessee to explain the same, but when no incriminating material is found, the survey party cannot assume the jurisdiction of the Assessing Officer and call for information in relation to the material which is already on record. In case any concealed income has been discovered, it may justify reopening the assessment. In the present case, no concealed income has been discovered by the survey party, but the assessment is sought to be reopened for the purpose of verification of facts. 16. On behalf of the respondent, it has been contended by the learned counsel that the petitioner has failed to disclose primary facts like addresses and PAN of persons who made cash deposits and the persons in whose favour cheques came to be issued. 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" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply to the facts of the case as the alleged escapement of income for assessment had not resulted from failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that year." 18. Thus, it is the statutory duty of the assessee to record all its transactions in the books of account to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. In the present case, it is not the case of the respondent that the petitioner had not recorded all the transactions in the books of account. It is the case of the respondent that the petitioner in its cash book has not noted the addresses and the Permanent Account Numbers of the parties who made the cash deposits. In the present case, as noted hereinabove, the Assessing Officer reopened the assessment by issuing notice 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Wing, inasmuch as, if she had ascertained the facts from the record, she would have found that certain cash deposits have already been examined at the time of assessment under section 143 (3) read with section 147 of the Act and had been accepted while framing assessment under section 143 (3) read with section 147 of the Act and would not have sought to reopen the assessment in respect of total amount of cash deposits recorded in the cash books. It is not the case of the respondent that the cash deposits of Rs. 96,85,63,426/- in respect of which the assessment is sought to be reopened are in addition to the cash deposits of Rs. 4,70,11,830/- in respect of which the assessment was reopened on the earlier occasion and the cash deposits which the Assessing Officer had examined while framing the assessment under section 143(3) read with section 147 of the Act. 19. 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 Rs. 4,70,11,830/- had escaped assessment in the earlier proceedings under section 147 of the Act. In the said proceedings, the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned counsel for the respondent, in Kantamani Venkatanarayana and Sons (supra), it is held that even if it is assumed that, from the books produced, the Income Tax Officer, if he had been circumspect, could have found out the truth, he is not on that account precluded from exercising the power to assess the income which has escaped assessment. In the present case, apart from the fact that the cash book was already on record, the Assessing Officer examined the same and made inquiry in respect thereof, to the extent he so deemed fit. This is not a case where the Assessing Officer has not looked into the cash book and has not applied his mind to the contents thereof. Hence, this decision does not in any manner support the case of the respondent. For the same reason, the decision of the Supreme Court in Malegaon Electricity Co. P. Ltd. (supra) would 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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