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TMI Blog2017 (12) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... firmity with the impugned reassessment notices. - W.P.(C) 2697/2015 W.P.(C) 10904/2016 & CM No.42721/2016 (stay) - - - Dated:- 8-12-2017 - MR. S. RAVINDRA BHAT MR. SANJEEV SACHDEVA JJ. Petitioner Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate Mr. Rahul Kaushik, Advocate with Mr. Dhanesh Kumar, Advocate Respondent Through: Mr. Ruchir Bhatia, Advocate S. RAVINDRA BHAT, J. 1. In both these writ petitions, by the assessee, the relief claimed is a direction to quash the reassessment notices issued by the income tax department (hereafter the revenue ). The assessee is aggrieved, and submits that the reassessment notices under Sections 147/148 of the Income Tax Act, 1961 (also the Act ) are vitiated and unsupportable in law. 2. The brief facts are that the assessee filed its return of income for the assessment year (AY) 2007-08 declaring an income of ₹ 20,26,22,6051-. After selection of its case for scrutiny, the assessing officer completed the assessment, bringing to tax ₹ 70,47,44,252/- by assessment order dated 24.12.2010. It is alleged that the petitioner received notice on 11 April, 2014, under Section 142 (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 ITR 536 (Delhi). Counsel also relied on Apollo Tyres Ltd vs. CIT 255 ITR 273 to say that once returns are filed and the company s accounts are audited and accepted as long as they conform to schedule VII of the Companies Act, 1956 (also the Companies Act ), the revenue cannot question them, under Section 115J of the Income Tax Act. It is urged that the AO s power is to satisfy himself if the accounts were accepted by the authorities and certified; the only scope for adjustment is outlined in Explanation to Section 115J (1A). Beyond that the AO cannot question the net profit. 5. It is submitted that Accounting Standard 14 is appropriate and applicable for the facts. It provides, inter alia, that, 37. Any excess of the amount of the consideration over the value of the net assets of the transferor company acquired by the transferee company should be recognised in the transferee company's financial statements as goodwill arising on amalgamation. If the amount of the consideration is lower than the value of the net assets acquired, the difference should be treated as Capital Reserve. 38. The goodwill arising on amalgamation should be amortised to income on a sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of the accounting standard AS-14 which reads as follows: The object of the purchase method is to account for the amalgamation by applying the same principles as are applied in the normal purchase of assets. This method is used in accounting for amalgamation in the nature of purchase. 9. On the other hand in the 'pooling of interest' method of amalgamation the transferor s assets, liabilities and reserves are recorded by the transferee at the relevant carrying amounts, i.e. points. The criteria applicable, it is urged is 'pooling of interests method' in para 3 (e) of AS-14. On the other hand the reason recorded for issue of notice u/s 148 indicate that while the assessee maintains this de jure position but actually the merger/amalgamation has de facto followed the 'pooling of interests method' by which there could not have been accounting for goodwill. It is contended that the assessee in effect did not disclose full and true facts in its return of income. 10. Counsel for the revenue argues that the assessee also annexed the order of the Company Court when it has recognized and approved the scheme of amalgamation under sections 391 and 39 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure within the meaning of the foregoing proviso. Reliance is also placed on Explanation 2(c) to section 147 of the Act, which states as follows: Explanation 2- For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (c) Where an assessment has been made but- (i) Income chargeable to tax has been under assessed; or... The revenue also cites Sri Krishna (P) Ltd. (1996) 221 ITR 538(SC) where it was held that: Every disclosure is not and cannot be treated to be a full and true disclosure. A disclosure may be a false one or true one. It may be a full disclosure or it may not be. A partial disclosure may often be a misleading one. What is required is a full and true disclosure of all material facts necessary for making assessment for that year. This calls for examination of the decisions of the court analyzing and elucidating section 147 and 148. The obligation on the assessee to disclose the material facts or what are called primary facts- is not a mere disclosure but a disclosure which is full and true. A false disclosure is not a true disclosure. The disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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, particular portions of documents, and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed. Does the duty 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non- specific information. To that limited extent, the court may look into the conclusion arrived at by the Incometax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. 17. It is therefore clear that if the rationale for re-opening is purely factual, unless fresh facts or material having a live link with the issue, that can lead to inference of concealment of material facts cannot be gone into; the earlier assessment order becomes conclusive. However, if the AO comes across material subsequently, such as fresh facts, or materials which pertain to a previous assessment or assessment orders (as in the present case) where it is felt that returns were dressed up or improper claims were made, that escaped inquiry, reassessment is warranted. In such cases, the materials can a ..... 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