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TMI Blog2021 (7) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,385/- claiming the long term capital gain as exempt income. and same was processed under Section 143(1) of the Act and no scrutiny assessment was being undertaken, however, the reopening of the assessment sought to be reopened by issuing notice dated 14.03.2017 under Section 148 of the Act, on the ground that the assessee had taken entry of bogus long term capital gain to the tune of Rs. 1,31,04,599/- through the scrip of M/s KGN Industries during the AY 2011-12. The assessee had submitted objections against the reasons recorded for the impugned notice dated 14.3.2017 which came to be rejected by the revenue and during the course of assessment proceedings, the Assessing Officer had called details of long term capital gain earned by the assessee vide notice dated 142(1) and same was complied and after considering the material, the assessment was completed under Section 143 (3) on 26.12.2017, whereby, the amount of Rs. 22,72,895/- claimed as LTCG for the sales of shares of M/s. KGN Enterprise Ltd. was treated as bogus and same was added to the total income under Section 68 of the Act, determining the total taxable income at Rs. 30,10,285/- 2.2 Thereafter, the Assessing Officer reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fundamentals of the company. Both purchase and sale of the shares are concentrated within few persons/entities. The exit providers do not have creditworthiness. They are either non-filers or have filed nominal return of income..." 4. On verification of the details, it is seen that during the year under consideration, assessee has shown Long Term capital gain from Kuvam International Fashion Limited earlier known as Arya Global Shares and Securities) to the tune of Rs. 1,80,52,878/- during the year under consideration. 5. As per the information received, the above named assessee is one of the beneficiary who has taken entry of bogus long term capital gain to the tune of Rs, 1,80,52 878/- through the scrip of M/s Aarya Global Shares and Securities Limited (now known as Kuvam International Fashions Limited) during the F.Y. 2010-11 relevant to A.Y. 2011-12. 6. On the basis of the above tangible material available on record and after analyzing it, I have reason to believe that income chargeable to tax, as indicated by the accommodation entry of LTCG on sale of script of M/s. Arya Global Shares and Securities Limited (now known ax Kuvam International Fashions Limited) amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20), to submit that the entire exercise of reopening of the assessment is lacking jurisdiction since enquiry was already made on the subject matter of capital gain as there was full and true disclosure of the transaction during the course of filing of the return as well as original assessment framed under Section 143(3) of the Act and therefore, the action on the part of the revenue to reopen the concluded assessment beyond period of 4 years from the end of the assessment year is contrary to law and assumption of jurisdiction by the Assessing Officer is invalid. 6. In the aforesaid contentions, the learned counsel would submits that the impugned notice is bad in law and it has been issued in contravention of Section 147 of the Act, which deserves to be quashed and set aside. 7. On the other hand, Mr. Manish Bhatt, the learned Senior Counsel appearing for the revenue, reiterate the stand adopted by the revenue in the affidavit in reply as well as in the order disposing of the objections, would submit that the action by the Assessing Officer is just, legal and proper and do not warrant any interference. It was submitted by the learned Senior Counsel that in the case on hand, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he concluded assessment. 9. We have considered the submissions advanced by the learned counsel for the respective parties and perused the case records. 10. Before adverting to the issues, we may briefly refer to the relevant legal provisions. 11. Section 147 of the Act deals with "income escaping assessment". Section 147 says that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to provisions of Section 148 to 153, assess or reassess such income and also any other income chargeable to tax, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under Section 147 of the Act. The first proviso to Section 147 is important. As per this proviso, where an assessment under sub-section (3) of Section 143 or Section 147 has been made for relevant assessment year, no action shall be taken under Section 147 after the expiry of 4 years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. 9. There can be no doubt that the duty of disclosing all theprimary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer 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 these particular items in the account books, or the particular portions of the documents, which are relevant, amount to " omission to disclose fully and truly all material facts neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the revenue that the information was received with respect to penny stock company and bogus claim of LTCG on 26.03.2018 i.e. after framing of assessment order dated 26.12.2017 and therefore, in the previous proceedings, no such information was available with the office and thus, based on the tangible material, the Assessing Officer was justified to reopen the assessment. 15. After scrutiny of the reasons recorded for reopening of the assessment and case records, it appears that for the AY 2011-12, the notice dated 14.07.2017 under Section 148 of the Act was issued and reassessment proceedings had been initiated by the revenue. Notices under Section 142(1) were issued and accordingly, the assessee had complied the same by furnishing necessary details as called for by the revenue. It is pertinent to note that the Assessing Officer was not satisfied with the material furnished by the assessee and had issued another notice dated 05.12.2017 under Section 142(1) of the Act and claimed the further details with regard to transaction of sales and purchase of the shares and particulars of claim with respect to LTCG during the year under consideration. The para -10 of the notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction of purchase and sales of M/s. Aarya Global Shares and Security Ltd. and amount of LTCG earned during the year under consideration, at the time of assessment framed under Section 143(3) of the Act, in the case of KGN Industries Ltd, and the Assessing Officer had applied his mind to the relevant facts. Under the circumstances, it cannot be said that the Assessing Officer had not examined the issue raised in the reasons recorded for reassessment. In our view, the issue with regard to M/s. Aarya Global was being raised and answered by the assessee. Despite the query being answered by the assessee, the Assessing Officer did not find any ground or reason to make addition. In the context, reference can be made to the case of Commissioner of Income Tax Vs. Usha International Ltd, Full Bench of Delhi High Court in ITA No. 2026 of 2010, wherein, it is held as under: "13. It is, therefore, clear from the aforesaid position that: (1) Reassessment proceedings can be validly initiated incase return of income is processed under Section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion; (2) Reassessment proceedings will be invalid in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction and therefore the disclosure whatever made in the previous proceeding cannot be said to be a disclosure of material facts and therefore, the reopening of the assessment on the basis of tangible material is permissible. In this context, the learned counsel Mr. R.K. Patel, appearing for the assessee has relied on the case of New Delhi Televisions Ltd (Supra), to submit that the identical issue raised before the Apex Court, wherein, it was held that the impugned notice to the assessee shows sufficient reason to believe on the part of the Assessing Officer to reopen the assessment but since the revenue has failed to show the non-disclosure of facts, the notice having been issued after period of 4 years is required to be quashed. Considering the facts and circumstances of the case, we are of the view that the assessee had disclosed all material facts at the time of previous assessment proceedings and all the relevant facts with regard to transaction alleged in the reasons recorded were duly within the knowledge of the Assessing Officer. After disclosure of primary facts with regard to purchase and sales of scrip of M/s. Aarya Global, the Assessing Officer, could have made fur ..... 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