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TMI Blog2022 (6) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... tice 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. Sanction u/s 151 - As approving authority under Section 151 of the Act has been placed on record by the Department and the detailed reasons recorded by the A.O. have been annexed to, and made a part of the order. 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. 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 recording a reason to believe that the petitioner did not truly and fully disclose all the material facts, becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a return of its income declaring a total income of Rs.8,27,370/- plus interest income amounting to Rs.97,352.00. The Petitioner s case was selected for scrutiny under CASS. The A.O. sought some details under different heads in the assessment proceedings, which were duly provided by the Petitioner. During the hearing of the assessment proceedings held on 12.02.2015, the A.O. raised a specific query with regard to reconciliation of gross receipts as per 26AS and P L Account. The Petitioner submitted the requisite details vide its reply dated 20.02.2015 stating that the difference was due to TDS deducted by the principal on service tax @ 12.36 per cent included in the bill raised by the Petitioner. The A.O. did not raise any further query and passed an Assessment Order on 25-03-2015 assessing the petitioner s total income at Rs.9,23,250/- after adding back Rs.95,880/- to the returned income of Rs.8,27,370.00 towards expenses disallowed. 5. On 26-03-2021, the A.O. issued a notice under Section 148 of the Act for the Assessment Year 2013-14, stating that he had reason to believe that the petitioner s income chargeable to tax has escaped assessment within the meaning of Section 147 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional CIT and the notice under Section 148 was issued in contravention of CBDT Instruction no. 07 of 2017 dated 21-07-2017, through which the CBDT has strictly prohibited the remedial action if audit objection has not been accepted; ii. the notice has been issued without bringing any tangible material on record, on the basis of same set of documents, which were already on record; and iii. The case cannot be reopened for the matters already discussed. 9. On 18.02.2022, the National Faceless Assessment Centre passed an order on the petitioner's objection, stating that immediately after receipt of the notice under Section 148 of the Act, the petitioner had filed a return of income and had raised objection on the ground that reasons recorded were not provided to it; no inquiry was conducted before issuing the notice as required under Section 148A of the Act and the action of the A.O. is based on a change of opinion. The said objections had been disposed of and intimated to the petitioner by means of a letter dated 16.12.2021. Notwithstanding the aforesaid facts, the petitioner had moved another objection on 28.01.2022 repeating the issues raised earlier and also stating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions and the objections raised by the petitioner after receipt of a copy of the reasons have not been dealt with and the approving authority has not recorded his detailed satisfaction on the reasons recorded by the A.O. 12. Before proceeding to examine the rival contentions advanced on behalf the parties, it would be appropriate to have a look at the relevant provisions of the Act and refer to some pronouncements of the Hon ble Supreme Court explaining the scope of interference under Article 226 of the Constitution of India while examining the validity of a notice issued under Section 148 of the Income Tax Act. 13. The relevant provisions of Sections 147 and 148 of the Act, as those stood at the relevant time, are being reproduced below: - 147. Income escaping assessment. 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 the provisions of Sections 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 this section, or recomput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 148 of the Income Tax Act, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have to see only whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 16. In light of the aforesaid pronouncements of the Hon ble Supreme Court we proceed to examine the rival submissions advanced on behalf of the parties for ascertaining as to whether there was prima facie some material on the basis of which the Department could reopen the case, without going into the sufficiency or correctness of the material. 17. Mr. Desh Deepak Chopra, the learned Senior Advocate appearing for the petitioner, has submitted that in the present case there was a discrepancy in 26 AS and Profit Loss account due to TDS having been deducted on expenses paid to the petitioner. The Revenue Audit team had informed that some income had escaped assessment, but the A.O. had rejected the audit objection. However, the Commissioner of Income Tax has ordered reassessment solely on the basis of the audit objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment, thereby necessitating reassessment under Section 147 of the Act. 19. It is also evident from the original record produced before the Court that on the basis of the abovementioned reasons recorded by the A.O. proposing issuance of a notice under Section 148 of the Act, the Additional CIT, Range 3, Lucknow made a recommendation for issuance of a notice under Section 148 of the Act and the Principal Commissioner of Income Tax 1, Lucknow granted his approval by recording his satisfaction with the reasons recorded. 20. In reply to the first submission made on behalf of the petitioner, that the A.O. had rejected the audit objection by means of his letter dated 07-02-2020, Sri. Manish Misra has submitted that Clause 5.2 of the CBDT Instructions 07 of 2017 dated 21-07-2017 provides that the PCIT shall, after calling for the report from the A.O. and the Range Head, if needed, take a decision as to whether or not the objection is acceptable. Thus the authority to accept or reject the Revenue audit objection vests in the Commissioner of Income Tax. By means of the letter dated 07-02-2020 the A.O. had merely sent a report to the CIT (Audit) and he did not have the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt of Rs.2,61,28,435/-, including commission income of Rs.2,50,58,983/-, and interest income of Rs.10,69,452/-. However, as per 26 AS its total receipt under Sections 194 A, 194 C, 194 H, 194 I and 194 J is Rs.5,23,84,738/-. Hence there is a difference of Rs.2,62,56,303/- in the receipts shown by the petitioner, which income has escaped assessment. During the assessment proceedings, the petitioner was asked to explain the discrepancy and it stated that at the time of reimbursing the expenses, some of its principals are deducting TDS under Section 194 C and some are deducting under Section 194 H and, therefore, these receipts are not reflecting in its income. However, the petitioner has received payments under Sections 194 I and 194 J also, but it did not show the above receipts and gave no explanation for the same. It did not produce any ledger, bills and vouchers of expenses incurred by it on behalf of the principal companies. Thus the petitioner has not truly and fully disclosed all material facts necessary for the assessment thereby necessitating reassessment under Section 147 of the Act. 25. From the reasons recorded by the A.O. for initiating the process of re-assessment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 27. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilure 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 (Emphasis supplied) 28. As all material facts relevant for the assessment on the issues under consideration were not produced d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erify 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) 30. 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 (1) receipt of payments under Sections 194 I and 194 J by the petitioner, which had not been shown in its P L account, (2) non-disclosure of the amount of reimbursement of expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 34. Keeping in view the scope 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 petitioner or not, as the sufficiency or correctness of the material is not required 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 recording a reason to believe that the petitioner did not truly and fully disclose all the material facts, because of which income amounting to Rs. 2,62,56,303/- has escaped assessment. We are satisfied that there was pri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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