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TMI Blog2023 (5) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... iso. Importantly, such failure of the assessee to disclose material facts contemplated in first proviso to S. 147 has to be judged in the context of proceedings of the same year i.e. AY 2009-10 and not with reference to some enquiry in subsequent AY 2010-11. Any alleged failure in some other assessment year would not meet the requirement of first proviso to S. 147 with reference to reopening of some other year. From the body of reasons recorded for AY 2009-10 in question, it can not be deciphered as to what material facts in relation to share application money were withheld by the Assessee in AY 2009-10 in question. An alleged non-compliance of summons issued in some other years cannot be reckoned as 'failure on the part of assessee' and that too in some other assessment year. An enquiry was made in relation to share application money recd. while framing regular assessment of AY 2009-10 and assessment was framed taking note of outcome of such enquiry. Hence, mere reproduction of statutory language of first proviso would not meet the requirement of law for extension of limitation period beyond 4 years. When seen holistically, the conclusion is inescapable that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has challenged the jurisdiction assumed by the Assessing Officer under Section 147 r.w. Section 148 of the Act and claimed that notice was issued for reopening the assessment without meeting the prerequisites of Section 147 to Section 151 of the Act. The assessee also challenged the merits of the additions. The CIT(A) however dismissed the grounds taken on both counts, i.e., lack of jurisdiction and lack of merits towards additions. 5. Aggrieved by the denial of relief by the CIT(A), the assessee preferred appeal before the Tribunal. 6. When the matter was called for hearing, the ld. AR for the assessee referred to the reasons recorded and challenged the validity of assumption of jurisdiction under Section 147 of the Act. 6.1. The ld. AR for the assessee submitted that the Assessing Officer has wrongly usurped jurisdiction under Section 147 of the Act contrary to the mandate of law for more than one reason. (i) the notice for reopening has been issued beyond four years from the end of assessment year 2009-10 in question and the assessment in this case was earlier framed under Section 143(3) of the Act and therefore, the reopening notice is clearly time barred for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llotted to the subscribers at premium are bona fide and carried commercial substance. We shall deal with the arguments canvassed on merits at appropriate place. 7. The ld. DR for the Revenue, on the other hand, pointed out that all the conditions prescribed for conferment of powers under Section 147 r.w. Section 148 of the Act to re-assess the income of the assessee has been duly met before issuance of notice and also while framing the re-assessment order which has thus been rightly upheld by the CIT(A). The ld. DR for the Revenue also contended that the primary onus which lay upon the assessee to justify the bona fide of share application money received has not been discharged as contemplated in law and therefore, the only recourse available to the Revenue to make additions under Section 68 has been rightly adopted. The ld. DR for the Revenue thus relied upon the assessment order and the first appellate order and submitted that no interference thereto is called for. 8. We have heard both the sides in length and also perused the re-assessment order and the first appellate order in question. We have also carefully perused the material referred to and relied upon filed by way o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further furnish following information: Complete accounts of all the applicants in respect of share application. Details of distinctive numbers issued to each applicant. Furnish copy of annual return submitted to the ROC showing details about holders of share capital as on 31.03.2010. Produce all, the person who have contributed towards share capital of Rs. 20000/-and above for examination and verification of genuineness of share capital received. Details in respect of equity share capital holding of key management personals and promoters of the company. Details of share holding by the other companies in which the prompters have substantial interest of 100% holding of share capital. Details of investment made by the promoters and their associates, in the regard a date-wise amount should be furnished in respect of allotment of share capital. it is further iterated that complete details should be supported by documents showing of investments in equity share capital. Produce records of dispatch of share certificate to the share holders. In this regard also submit records showing genuineness of source of funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussed by the Assessing Officer which is reproduced as under: a) The set of papers w.r.t all the companies contain application al confirmation affidavit (Photocopy), share certificate (photocopy) and copy of cheque; exactly in the same sequence. b) All the application for shares and confirmation are printed in similar fonts, in similar manner, on similar quality of paper, c) Even the stamps affixed on the application for shares and confirmations are bearing similar fonts and finish. d) All the application for shares and confirmations are purportedly signed by similar persons who had signed the share application money cheques. However the difference in the signatures on cheque viz a viz, the application/confirmations file now are clearly noticeable. All the signatures have been attempted to be imitated though this misadventure on the part of the assessee clearly established the manipulative tactics followed by the assessee. e) All the affidavits are photocopies of stamp papers without ant serial number, typed in similar fashion in same fonts without mention of date and place do not bear the stamp of notary; and last but not the least; purportedly signed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uine and as per the normal course of business practice. The Assessing Officer found that it is a matter of record that the assessee company grossly failed to produce the books of accounts and answers! explanations/justification in context of the points raised in the questionnaire as well as show cause notice. The assessee has failed to substantiate the claim made by it and rather there is ample evidence on record to implicate the assessee on various aspects and the assessee has not been able to rebut the same when it was confronted vide the show cause notice dt. 28.02.2013. the vague and evasive replies have been filed by the assesses and the assessee has evaded to answer the question in the specified manner despite in the face of specific queries raised during the course of assessment proceedings, the source of funds and nature of receipts of the assessee are mostly unexplained and marred by suspicious and bogus transactions which have been given another colour/device to mischievously evade the rowing eyes of Revenue. The assessee has not been able to explain the basics of its existence/operation/funding. The assessee company has kept mum in response to the queries as raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd have been done with an object to dissect various parts of reasons for nuanced understanding of challenge to basis of reopening. 10. To begin with, it may be pertinent to observe that S. 147 is a substantive provision vesting jurisdiction to reopen a concluded assessment and therefore conditions stipulated for assumption of jurisdiction are required to be adhered strictly. Section 147 is structured with inbuilt safeguards. The AO is not permitted to exercise the powers under S. 147 arbitrarily or mechanically. The reasons for reopening (extracted above) are the fulcrum for formation of belief towards alleged escapement. On appraisal of the reasons so recorded for exercise of drastic powers conferred under S. 147 for reopening of assessment for AY 2009-10 in question and having regard to stance taken on behalf of the assessee, it emerges that the solitary cause for formation of belief towards purported escapement is the observations made by the AO adverse to Assessee while making assessment of subsequent Assessment Year 2010-11 and a consequent 'note' prepared by the AO while making assessment for AY 2010-11. The consequential note so prepared as a result of subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars. 13. We shall now advert to test the reasons for reopening on the touchstone of main provision of S. 147 of the Act. The main provision essentially provides that belief must be built on some material or reasons which are specific in nature and reliable in character. In the present case, the basis for formation of belief is the 'Note' culminated from the assessment proceedings in subsequent assessment year. 13.1. To reiterate, the observations culled out in subsequent year as recorded in second part of reasons are very general and vague and are predominantly in the nature of opinion and inferences owing to inadequacies in the documents and alleged inability of AO to gather adequate information to his satisfaction in that year to which the transaction did not actually belong. In the instant case, the assessment was earlier carried out under S.143(3) of the Act after requisite enquiries under S. 133(6) were carried out with the investors/subscriber of the shareholdings. The assessment so made has been reopened. In this backdrop, the reasons on record do not indicate any specific material against the assessee to dislodge the bona fides set up by the assessee. Succinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which note, in turn, only suggests a case for 'scrutiny' into the impugned transactions. A proposed scrutiny to find out whether any escapement exists is at best a case of 'reasons to suspect'. It is well settled that the notice of reopening can be supported within the confines of reasons recorded by the AO. The AO cannot supplement the reasons. Other principle which is equally well settled and which would apply to present case is that reopening of the assessment would not be permitted for a fishing or a roving inquiry. This can, as well, be seen as part of requirement of main provision of S. 147 of the Act. The reopening is not permissible merely to launch verification of transactions to find out whether any income has actually escaped assessment or not as echoed in long line of judicial precedents. 13.3. In totality, the purported belief in the instant case is thus premised on wholly tentative grounds and thus a mere pretense. Such action does not pass the test of 'reason to believe'. We thus see no semblance in the action of the AO on the touchstone of main provisions of S. 147. 14. The reopening in the instant case is also governed by the fetters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re on the part of the assessee to disclose material facts qua AY 2009-10 in question. There is no allegation in the reasons recorded that onus cast upon the assessee in the original assessment was not discharged or any fact was not disclosed which the assessee was aware of and ought to have disclosed. Needless to say, the onus of disclosure does not extend beyond the full and truthful disclosure of all primary facts. Once, all such facts are disclosed, the onus stands discharged and it is not for assessee to tell the assessing officer, what inferences, whether of facts or law, should be drawn by him on these facts. This is the view expressed by Hon'ble Supreme Court in Calcutta Discount Co. Ltd. (1961) 41 ITR 191. 14.3. In the light of allegation recorded, it is manifest that the requirement of first proviso are not met for multiple reasons namely, the allegation of failure to disclose facts of material nature is non-descript and obscure and is merely an iteration of statutory language; it is not known what primary facts of substantive nature were not 'disclosed' which were in the knowledge of the Assessee; which specific fact disclosed were found to be untrue later ..... X X X X Extracts X X X X X X X X Extracts X X X X
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