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TMI Blog2024 (5) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 147 of the Act. Thus we do not find any merit in the arguments put forth by the petitioner and consequently, the petition stands dismissed. These observations have been made only for the purpose of deciding the challenge which stands raised before us; they should not be construed to be an expression on the merits of the case or otherwise. - HON'BLE MR. JUSTICE YASHWANT VARMA AND HON BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV For the Petitioner Through: Mr. Salil Aggarwal, Sr. Adv. with Mr. Mahir Aggarwal and Mr. Umashankar,Advocates. For the Respondent Through: Mr. Shlok Chandra, Sr. Standing Counsel along with Ms. Priya Sarkar, Ms. Madhavi Shukla, Jr. Standing Counsels and Mr. Ujjawal Jain, Adv. JUDGMENT PURUSHAINDRA KUMAR KAURAV, J. 1. The present writ petition has been filed at the instance of the assessee challenging the notice dated 31 March 2018 issued under Section 148 and subsequent order dated 25 September 2018 under Section 148A(d) of the Income Tax Act, 1961 [ Act ], disposing of the petitioner s objections against the impugned notice for Assessment Year [ AY ] 2011-12. 2. At the threshold, it appears from record that the petitioner is a private limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a total transaction of ₹9,50,00,000/- with Mr. Manoj Sethi, which according to the Assessing Officer [ AO ] had escaped assessment on account of failure on the part of the petitioner to fully and truly disclose all material facts in the assessment proceedings. 9. Mr. Salil Aggarwal, learned counsel appearing on behalf of the petitioner submitted that the respondent has erroneously assumed jurisdiction under Section 147 of the Act on the wrong premise that the petitioner had entered into any cash transaction with Mr. Manoj Sethi. According to him, Mr. Manoj Sethi has no relation with the petitioner as he is neither a Director nor a shareholder of the petitioner and thus, there is no reason to draw any adverse inference regarding such cash deposits in the bank account of Mr. Manoj Sethi. He also submitted that the transactions pertaining to the loans advanced by the petitioner and four other merged companies to Mr. Manoj Sethi were carried out through account payee cheques and the same has already been repaid by him. 10. Learned counsel further submitted that the petitioner had duly supplied copies of bank account statements during the assessment proceedings and therefore, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure by the petitioner with respect to cash transactions pertaining to Mr. Manoj Sethi, there was no occasion for the AO to form an opinion. He, therefore, submitted that the instant reopening of the assessment cannot be said to be merely based upon the change of opinion. 16. Learned counsel also submitted that since the AO had initiated proceedings on the basis of fresh and tangible material received from Investigation Wing, Delhi, it has strictly acted in accordance with the tests laid down by the Hon ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. [2010 SCC OnLine SC 195]. 17. We have heard the learned counsels appearing on behalf of the parties and perused the record. 18. The primary issue which arises in the present petition pertains to whether the AO has correctly assumed jurisdiction under Section 147 of the Act on the ground of lack of full and true disclosure on the part of the assessee during the original proceedings. It is, therefore, beneficial to first take a glance at the mandate of Section 147 of the Act, which we had an occasion to deal with in our order dated 18 March 2024 in the case titled as S.B. Packagings Ltd v. Asstt./Dy. Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. *** Explanation 3. For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of Section 148. *** 19. It is seen that the aforesaid provision i.e., Section 147 of the Act empowers the AO to assess or reassess any income which has escaped assessment. However, the said authority is circumscribed with a predominant condition that the AO must be in possession of reasons to believe that any income chargeable to tax has escaped assessment for the relevant AY. Further, the first proviso to Section 147 of the Act stipulates that where the assessment has been done under Section 143(3) or Section 147 of the Act, no action shall be taken after the expiry of four years unless there exists inter alia, a failure of the assessee to fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Del 804] has held as under:- 12. The law postulates a duty on every assessee to disclose fully and truly all material facts for its assessment. The disclosure must be full and true. Material facts are those facts which if taken into accounts they would have an adverse effect on assessee by the higher assessment of income than the one actually made. They should be proximate and not have any remote bearing on the assessment. Omission to disclose may be deliberate or inadvertent. This is not relevant, provided there is omission or failure on the part of the assessee. The latter confers jurisdiction to reopen the assessment. [Emphasis supplied] 21. The decision relied upon by the petitioner in Calcutta Discount Company Ltd. (supra) also explicitly burdens the assessee with a responsibility to disclose fully and truly all the material facts. Thus, the ancillary question which arises at this juncture is what would constitute material facts for exercising jurisdiction under Section 147 of the Act. To answer this pertinent query, reference can be made to the decision in Honda Siel Power Products Ltd. (supra), as discussed above, which underscores that the material facts are those facts w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Pvt. Ltd. pursuant to Delhi High Court order dated 20.02.2018 (copy enclosed). 6. Basis of forming reason to believe and details of escapement of income: Shri Manoj Sethi could not furnish evidences in respect of identification creditworthiness and genuineness of the transactions in respect of entries in bank account. The assessee had total transaction of Rs. 9,50,00,000/- which has escaped assessment of income. 7. Findings of the AO on true and full disclosure of the material facts necessary for assessment under Proviso to Section 147: Based on above, I have reason to believe that assessee has failed to make true and full disclosure of the material facts and income amounting to Rs. 9,50,00,000/- has escaped assessment. 8. Applicability of the provisions of section 147/151 of the facts of the case: In this case a return of income was filed u/s 139 for the year under consideration and was processed u/s 143(1) 21.02.2012, Since, 4 year from the end of the relevant year has expired in this case, the requirements to initiate proceeding u/s 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue u/s 148 has to be obtained from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act which is being sent for approval. 23. It is thus seen that the debit and credit entries reflected in the form of a table above are the primary basis for proceeding with re-assessment. During the course of the hearing, the petitioner has undisputedly conceded that the said transactions have been carried out between the concerned parties mentioned therein. However, the petitioner contends that the said transactions are a part of the loan transactions between the petitioner including amalgamated companies and Mr. Manoj Sethi, which have been done via cheque/RTGS method of banking. 24. Further, the relevant extract of the letter dated 09 August 2018 sent by the petitioner to the respondent raising objections against the impugned notice and assumption of jurisdiction under Section 147 of the Act, particularly with respect to the cash transactions read as under:- iv) That there is no justification for drawing adverse inference against the assessee company and in reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cases where the order of assessment does not address itself to a given aspect sought to be examined in the reassessment proceedings. There may be cases where the material is available with the Assessing Officer but the same is either ignored or escapes his attention while making the assessment . There can be no legal impediment in the reopening of assessment in such cases, nor can it be said that the reassessment is based only on a change of opinion. A Division Bench of this court of which I was a member had in Consolidated Photo and Finvest Ltd. v. Asst. CIT disposed of on January 17, 2006 [2006] 281 ITR 394 , an occasion to deal with a somewhat similar situation. Relying upon the decisions of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 ;Kantamani Venkata Narayana and Sons v. First Addl. ITO [1967] 63 ITR 638 ; Malegaon Electricity Co. P. Ltd. v. CIT [1970] 78 ITR 466 and ITO v. LakhmaniMewal Das [1976] 103 ITR 437 and the decisions of the High Court of Gujarat in Praful Chunilal Patel v. M. J. Makwana, Asst. CIT [1999] 236 ITR 832 and Gruh Finance Ltd. v. Joint CIT (Assessment) [2000] 243 ITR 482, this court observed (page 406) : The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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