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TMI Blog2022 (5) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... of opinion and challenge to the notice under Section 148 of the Act on the ground that it seeks to initiate reassessment on the ground of change of opinion, cannot be accepted. The approving authority the PCIT, has stated that he agrees with the comments of the A.O., which were annexed with the order, and has recorded his satisfaction that it was a fit case for issuance of the notice under Section 148 of the Act. The aforesaid order does not indicate non-application of mind by the PCIT to the proposal made by the A.O. and we are not able to accept the submission that the PCIT has granted approval without application of mind to the proposal put up by the A.O. Keeping in view the scope of power of judicial review while scrutinizing a notice issued under Section 148 of the Act as explained in Raymond woolen Mills Ltd. [ 1997 (12) TMI 12 - SUPREME COURT] and Phool Chand Bajarang Lal [ 1993 (7) TMI 1 - SUPREME COURT] and Srikrishna [ 1996 (7) TMI 2 - SUPREME COURT] , we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not as the sufficiency or correctness of the material cannot a thing to be considered at this stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.3,59,59,861/- in its Profit and Loss (P L) Account, which comprised of commission income of Rs.3,47,58,295/- and interest income of Rs.12,01,566/-. The amount of TDS as per the statement in Form 26 AS was Rs.32,14,869/-. The petitioner filed its return for a total income of Rs.9,77,090/-. 5. During scrutiny, the Assessing Officer raised a query regarding high ratio of refund to TDS and the petitioner was asked to reconcile 26 AS with gross receipts as per P L Account. 6. On 12-02-2015, the petitioner submitted a reply stating that it is making several expenses on behalf of the Principal Companies. The agreements are in the nature of a contract and hence TDS should be deducted @ 2% under Section 194 C of the Act. However, the nomenclature used for payments made to the petitioner is commission and, therefore, the Companies are deducting TDS @ 10% under Section 194 H. After taking into account all the expenses, the petitioner s net margins are such that the tax accrued is much less than the TDS and hence a heavy refund results. Every year the petitioner gets a certificate for lower deduction of TDS, but for the relevant year they got it very late and this was the reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Revenue. Secondly, the notice under Section 148 of the Act has been issued without bringing any fresh tangible material on record, on the basis of information which was already available on record, whereas the reassessment cannot be done for matters already discussed. The reasons recorded are based on a mere change of opinion, which is not permissible in law. The approval under Section 151 of the Act has been given by the PCIT in a routine manner, without application of mind and without seeing the records and the correspondence made with the revenue authorities, which is not as per the law. 11. On 16-02-2022, the National Faceless Assessment Centre has passed an order rejecting the petitioner s objections stating that there is no material to establish that the case has been re-opened on the basis of audit objections. Moreover, the A.O. has no authority to accept or reject the audit objection and the same has to be decided by the Principal Commissioner of Income Tax after taking into consideration the recommendations of the Joint Commissioner of Income Tax, as provided in the Standard Operating Procedure for handling audit cases contained in CBDT Instruction no. 7 of 2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year): 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 will not necessarily amount to disclosure within the meaning of the foregoing proviso. 148. Issue of notice where income has escaped assessment .- (1) Before making the assessment, reassessment or recomputation under Section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the income of the petitioner has escaped assessment. In the letter dated 07-02-2020 addressed to the CIT (Audit), the A.O. had himself refused to accept the audit para. Relying upon a decision of the Bombay High Court in CIT versus Rajan, 403 ITR 30, he has submitted that if the A.O. has rejected the audit objection, subsequent re-opening on the same ground of audit objection will not be valid, unless the A.O. shows that there was separate application of mind, which is not found in the present case. 21. Per contra, Sri. Manish Mishra, the learned Counsel for the Income Tax department, has submitted that as per the circular dated 21-07-2017 issued by the CBDT, the authority to accept or reject the Revenue audit objection vests in the Commissioner of Income Tax and the A.O. had no power to reject the audit objection. Therefore, the letter dated 07-02-2020 written by the A.O. to the CIT (Audit) Revenue stating that the audit objection was not acceptable to him, was not of any consequence. 22. It is settled law that the validity of any order has to be adjudged on the basis of the reasons mentioned in the order itself and additional reasons, which are not mentioned in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount and has not given any explanation for the same. The petitioner has not disclosed the amount of reimbursement of expenses claimed by it and the actual amount received by it towards reimbursement. It has not submitted the details of expenses incurred by it for verification during the assessment proceedings. It did not produce any ledger, bills and vouchers of expenses incurred on behalf of the Principal Companies. As per 26 AS, the total receipts of the assesse under Sections 194 A, 194 C, 194 H and 194 J is Rs.4,66,84,247/- and TDS is Rs.32,14,869/-, whereas it has shown its income at Rs.3,59,59,861/-. Thus the petitioner has shown its income short by Rs.1,07,24,386/- and this income has escaped assessment. Although the assesse had produced the books of account, annual report, P L account and balance sheet, but the requisite material facts mentioned above were embedded in such a manner that the material facts could not be discovered by the A.O. This material which came to light upon investigation conducted subsequent to passing of the assessment order, would certainly amount to a fresh tangible material giving rise to reason to believe that certain income has escaped assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income Tax 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. It would be immaterial whether the Income Tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if on the basis of subsequent information, the Income Tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment. 29. In Srikrishna (P) Ltd. v. ITO, (1996) 9 SCC 534, the Hon ble Supreme Court held that: - Now, what needs to be emphasised is that the obligation on the assessee to disclose the material facts - or what are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year. Does it not furnish a reasonable ground for the Income Tax Officer to believe that on account of the failure - indeed not a mere failure but a positive design to mislead - of the assessee to disclose all material facts, fully and truly, necessary for his assessment for that year, income has escaped assessment? We are of the firm opinion that it does. It is necessary to reiterate that we are now at the stage of the validity of the notice under Sections 148/147. The enquiry at this stage 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 is necessary to keep this distinction in mind. A recent decision of this Court in Phool Chand Bajrang Lal v. ITO, we are gratified to note, adopts an identical view of law and we are in respectful agreement with it. The decision rightly emphasises the obligation of the assessee to disclose all material facts necessary for making his assessment fully and truly. A false disclosure, it is held, does not satisfy the said requirement. We are also in respectful agreement with the following holding in the said decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterfering with the proposed reopening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the reassessment proceedings. (Emphasis supplied) 32. In the present case, at the time of making the assessment originally, the Assessing Officer had not formed any opinion regarding the reasons on which the notice under Section 148 of the Act has been issued. To say it more particularly, the A.O. had not formed any opinion regarding receipt of payments by the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the comments of the A.O., which were annexed with the order, and has recorded his satisfaction that it was a fit case for issuance of the notice under Section 148 of the Act. The aforesaid order does not indicate non-application of mind by the PCIT to the proposal made by the A.O. and we are not able to accept the submission that the PCIT has granted approval without application of mind to the proposal put up by the A.O. 36. Keeping in view the scope of power of judicial review while scrutinizing a notice issued under Section 148 of the Act as explained in Raymond woolen Mills Ltd. (1) and (2) and Phool Chand Bajarang Lal and Srikrishna (Supra) , we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not as the sufficiency or correctness of the material cannot a thing to be considered at this stage. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after conducting an investigation and going through the income tax return and other related documents of the petitioner and after forming reason to believe that the petitioner did not truly and fully disclose all the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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