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TMI Blog2021 (12) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... igated further to examine as to whether these entities were entry providers or not. These documents also contain the fact that new shares of ₹ 10/- each were issued to new shareholders at a premium of ₹ 240/- each. The assessee during original assessment proceedings had filed copy of bank accounts of investors also and Assessing Officer could have examined bank accounts of such investors to examine as to whether any funds were rotated to make available funds in these bank accounts for making investment in the assessee s company. Nothing has been done by Assessing Officer and now it cannot be said that there was failure on the part of assessee to disclose full and true material facts - Decided in favour of assessee. - ITA No.324/Lkw/2020 And ITA No.236/Lkw/2020 - - - Dated:- 11-8-2021 - Shri A.D Jain, Vice President And Shri T.S. Kapoor, Accountant Member For the Appellant : Shri Rakesh Garg, Advocate For the Respondent : Mrs. Sheela Chopra, CIT, DR ORDER PER T.S. KAPOOR, A.M.: This is an appeal filed by the Revenue against the order of ld. CIT(A)-1, Lucknow dated 23.07.2020. The assessee has also filed cross appeal. The Revenue has chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the initial assessment being framed u/s 143(3) of the Income Tax Act, and all the desired necessary information with evidences having been furnished, there being no failure on the part of the assessee to disclose fully and truly all material facts necessary for making the assessment, the entire proceedings initiated u/s 147 are without jurisdiction, the CIT(A) has erred in law in upholding reassessment proceedings, the same be quashed. 3. Because there being neither reason to believe nor any satisfaction as contemplated u/s 147, nor there being any new material, the CIT(A) was not justified in upholding the initiation the proceedings u/s 147 of the Act, the order passed by the CIT(A) be quashed. 4. Because the approval given u/s 151 of the Act is purely mechanical without examining of facts, records and as such is a law the notice issued and the proceedings initiated thereafter are all void-ab-initio the order of the CIT(A) upholding the same be quashed. 5. Because the CIT(A) has failed to appreciate that initial assessment having being framed u/s.143(3) and the entire matter having being examined by the AO, the reassessment proceedings cannot be initiated on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,62,500/- on account of commission allegedly incurred at the rate of 2.5 percent for procuring the share capital amounting to ₹ 65,00,000/-, which addition is contrary to the provisions of law, totally unwarranted be deleted. 3. The ld. AR at the outset submitted that the assessee has challenged the findings of ld. CIT(A) on legal issue for reopening of the case u/s. 148 of the Income Tax Act, 1961 and our specific attention was invited to Grounds No. 1 2 of the cross appeal and it was prayed that since assessee has agitated the order of authorities below on legal issues he be heard first and on finding that assessee has challenged the reopening of the case itself therefore he was directed to proceed with his arguments. The ld. AR submitted that the original assessment in this case was completed u/s. 143(3) of the Act and all the information and material documents as required by A.O. were filed with the Assessing Officer and the Revenue has reopened the case of the assessee after completion of four years which is not permissible as per the provisions of law and as held by Hon'ble Supreme Court in the case of NDTV vs. DCIT, Civil Appeal No. 1008 of 2020 vide order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act and therefore, it was submitted that since the notice issued u/s. 148 of the Act is not sustainable as issued beyond the period of four years and therefore the assessment made therein is also bad in law and void ab initio and needs to be quashed and consequential CIT(A) s order is also bad in law. 4. The ld. CIT, DR, on the other hand, heavily placed reliance on the orders of authorities below and submitted that ld. CIT(A) has discussed this issue in detail and after considering the decision of the Hon'ble Supreme Court in the case of NDTV vs. DCIT (Supra) has distinguished it from the facts of the case of assessee by holding that in the present case the Assessing Officer had the fresh information and therefore the case of the assessee has been rightly reopened u/s. 148 of the Act. 5. We have heard the rival parties and have gone through the material placed on record. We find that the original assessment in this case was completed u/s. 143(3) of the Act vide order dated 07.03.2014 a copy of the assessment order is placed in P.B. pages 121 to 123. In the assessment order the Assessing Officer has not discussed the issue of fresh share capital. However in the annexur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year, no action shall be taken under this section after the expiry of four 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 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material facts during the course of original assessment which led to the finalization of the assessment order and undisclosed income escaping detection? 10. While answering this question the Hon'ble Supreme Court vide para 24 onwards held as under: 24. Coming to the second question as to whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts. The case of the assessee is that it had disclosed all facts which were required to be disclosed. 25. The revenue has placed reliance on certain complaints made by the minority shareholders and it is alleged that those complaints reveal that the assessee was indulging in round tripping of its funds. According to the revenue the material disclosed in these complaints clearly shows that the assessee is guilty of creating a network of shell companies with a view to transfer its un taxed income in India to entities abroad and then bring it back to India thereby avoiding taxation. We make it clear that we are not going into this aspect of the matter because those complaints have not seen light of the day either before the High Court or this Court and, therefore, it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because of the redemption at a discounted price. This was an event which took place subsequent to the assessment year in question though it may be income for the assessment year. As we have observed above, all relevant facts were duly within the knowledge of the assessing officer. The assessing officer knew who were the entities who had subscribed to other convertible bonds and in other proceedings relating to the subsidiaries the same assessing officer had knowledge of addresses and the consideration paid by each of the bondholders as is apparent from assessment orders dated 03.08.2012 passed in the cases of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. Therefore, in our opinion there was full and true disclosure of all material facts necessary for its assessment by the assessee. 29. The fact that step up coupon bonds for US$ 100 million were issued by NNPLC was disclosed; who were the entities which subscribed to the bonds was disclosed; and the fact that the bonds were discounted at a lower rate was also disclosed before the assessment was finalised. This transaction was accepted by the assessing officer and it was clearly held that the assessee was only liable to recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Another 5 , wherein it was held as follows : (8)The words used are omission or failure to disclose fully and truly all material facts necessary for his assessment for that year. It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. (11) 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? A careful analysis of this judgment indicates that the Constitution Bench held that it is the duty of the assessee to disclose full and truly all material facts which it termed as primary facts. Non disclosure of other facts which may be termed as secondary facts is not necessary. In light of the above law, we shall deal with the facts of the present case. 33. In our view the assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non disclosure of facts by the assessee could not have been permitted to orally urge the same. Even otherwise we find that the assessee had fully and truly disclosed all material facts necessary for its assessment and, therefore, the revenue cannot take benefit of the extended period of limitation of 6 years. We answer Question NO.2 accordingly. 11. In the above noted judgment the Hon'ble Supreme Court has clearly held that benefit of extended period of limitation can be extended to six years under the first proviso to Section 147 of the Act only if Revenue can establish that the assessee had failed to disclose fully and truly all primary material facts necessary for the assessment. We find that Hon'ble Court has also dealt with the explanation-1 to the said provisions of Section 147 of the Act wherein it has been stated that filing of documents and production of books of account before Assessing Officer does not necessarily amounts to disclosure within the meaning of section. The Hon'ble Supreme Court while commenting on Explanation-1 has held that the duty of the assessee is to provide and file primary information and non disclosure of orther facts which may be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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