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TMI Blog2024 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in the reasons recorded for reopening would make the reopening invalid. In case, viz., Titanor Components Ltd. [ 2011 (6) TMI 138 - BOMBAY HIGH COURT] held that the AO cannot proceed with reassessment u/s 147 of the Act unless he records in the reasons that there was failure on the part of the assessee to disclose fully and truly all material facts. Since the assessing officer has not recorded in the reasons that there was failure on the part of the assessee to disclose fully and truly all material facts, the impugned reopening is bad in law and accordingly the impugned assessment order is liable to be quashed. Second round of reassessment proceedings - share premium received by the assessee company - The first reopening was completed by the AO by passing assessment order on 17-03-2015, wherein the AO accepted the receipt of share capital along with share premium and did not make any addition. Thereafter, on the basis of information from investigation wing and survey report, the AO again reopened the assessment in order to assess share capital/share premium. In view of the fact that the share capital/share premium received by the assessee was examined and accepted twice b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st take up the legal issue relating to validity of reopening of assessment The facts relevant there to are stated in brief. The assessee filed its return of income for the year under consideration on 26th September, 2009 declaring a total income of Rs. 48,722/- under normal provisions of the Act and book profit of Rs. 12.19 crores u/s 115JB of the Act. The original assessment u/s 143(3) was completed by the AO on 19-11-2011 by making certain additions. The assessee challenged the same by filing appeal before Ld CIT(A) and got partial relief. Consequent thereto the total income was determined at Rs. 4,03,058/- and book profit of Rs. 12.20 crores. 4. During the year relevant to the assessment year under consideration, the assessee has issued share capital to various parties at a share premium and collected aggregate amount of Rs. 7.65 crores. Hence, the AO reopened the assessment by issuing notice u/s 148 of the Act on 31.3.2014 for examining large amount of share premium collected on the shares so issued by the assessee. The AO, thereafter, completed the said reassessment on 17.03.2015 after verifying the details of share premium collected by the assessee and did not make any additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal at higher share premium by way of accommodation entries from the Kolkatta based companies. A list of Kolkatta based companies who have made investment through share premium entries is enclosed with the survey report. On further verification it was found that all these shares which were allotted to these companies at high premium were subsequently transferred back to directors of M/s Krishna Developers Pvt Ltd and their HUFs at face value of Rs. 10 and these Kolkatta based companies have booked losses in their books, which no prudent company will do on account of commercial expediency. 4. Further, during the survey proceedings statements of the director and other persons were recorded. They were confronted with various anomalies in documentation as share certificates. Further, directors could not give the details of intermediaries thorough which assessee was able to meet these investors. Also directors were not able to explain why suddenly very next year the share capital issued at very high premium was bought back at face value of Rs. 10/-. Also no valuation report was submitted about the valuation of shares at such a high premium. When all these were confronted to director Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. In that first reopening of assessment, the assessee furnished all the details relating to share capital received by it. The AO accepted the documents and explanations furnished by the assessee and completed the first reassessment without making any addition. It is pertinent to note that the said reassessment was completed after completion of survey action. Hence the second reopening of assessment is on account of change of opinion, which is not permitted. (c) In the reasons recorded for reopening for second time, the AO did not even refer to the first reopening at all. Further, no new tangible material has come to the notice of the assessing officer except the report of the survey officials. He further submitted that the director of the assessee company had agreed to surrender the share capital as the income of the assessee in the statement recorded u/s 133A of the Act. However, the statement given in the survey proceedings by the director does not have evidentiary value as held by Hon ble Supreme Court in the case of CIT vs. S Khader Khan (2013)(352 ITR480)(SC). Further, the assessee did not offer the share capital as its income in the return filed in response to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the record. We have gone through the reasons recorded by the AO before initiating the reopening of assessment for the second time. The assessment year under consideration is AY 2009-10 and the original assessment was completed u/s 143(3) of the Act on 19-11-2011. The notice u/s 148 of the Act was issued on 16.9.2016 for the present reassessment proceedings, i.e., after expiry of four years from the end of the assessment year. Hence, it is required for the AO to comply with the conditions prescribed in the first proviso to sec. 147 of the Act. The said proviso reads as under:- Provided that where an assessment under sub-section (3) of section- 143 or this section has been made for the relevant assessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, Explanation (1)(i) was inserted into the provisions of Section 115JB by the Finance (No. 2) Act, 2009 with retrospective effect from 1 April 2001. Clause (i) of 5 [2012] 18 taxmann.com 290 (Bom) Shivgan 10/10 412-oswp-243- 2022.doc Explanation (1) was introduced to include the amount or amounts set aside as provision for diminution in the value of investment. In view of the retrospective amendment of law by Parliament, the Assessing Officer may have reason to believe that income has escaped assessment. But that in itself is not sufficient for reopening an assessment beyond the period of four years. Beyond the period of four years when an assessment is sought to be reopened, there must be a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. In fact, the retrospective amendment of law by Parliament would negate the inference which is sought to be drawn of the failure to disclose material facts. In so far as the business development expenditure of Rs. 10.79 lakhs is concerned, here again it is evident from the order of assessment that the claim of the assessee was disallowed by the Assessing Officer and the amount wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim made by the assessee by withholding the material facts fully and truly. It is only in the latter case that the AO would be entitled to proceed under s. 147. 13. We may also gainfully refer to the decision rendered by Hon ble Madras High Court in the case of M/s Durr India Pvt Ltd vs. ACIT (W A No.1081 and 1083 of 2021 dated 29-08-2022), wherein host of decisions were considered by Hon ble Madras High Court on the very same issue. The relevant observations made by Hon ble Madras high Court are extracted below:- 11.3. In the present case, admittedly the extended period of six years is being invoked not under (a) or (b) set out above but only in view of (c) i.e., failure to disclose fully and truly all material facts necessary for assessment. It is submitted by the learned counsel for the appellant that while furnishing the reasons for reassessment vide its communication dated 05.11.2018, there is no finding that there was failure on the part of the appellant to fully and truly disclose all material facts necessary for assessment. It is submitted that in the absence of any finding on the above jurisdictional fact, the entire proceeding would be void and a nullity. We find there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a court, a tribunal or an authority. It is the fact upon which an administrative agency's power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess.'' 75. In Halsbury's Laws of England, it has been stated: Where the jurisdiction of a tribunal is dependent on the existence of a particular state of affairs, that state of affairs may be described as preliminary to, or collateral to the merits of, the issue. If, at the inception of an inquiry by an inferior tribunal, a challenge is made to its jurisdiction, the tribunal has to make up its mind whether to act or not and can give a ruling on the preliminary or collateral issue; but that ruling is not conclusive. 76. The existence of jurisdictional fact is thus sine qua non or condition precedent for the exercise of power by a court of limited jurisdiction. 14. Since the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. The Court held that only requirement is that AO ought to have considered the objections now raised in the grounds for issuing notice under Section 148 of the Act during the original assessment proceedings. If that has been done, it would follow that the reopening of assessment by impugned notice will merely be on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and that change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. 16. The survey operation was conducted in the hands of the assessee on the apprehension of the investigation wing that the assessee has availed accommodation entries. Even though the director of the assessee company had agreed to surrender the share capital/share premium as the income of the assessee, yet the same was not done. It is well settled proposition of law that the statement taken during the course of survey operations conducted u/s 133A of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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