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TMI Blog2024 (9) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... ruthfulness of those facts. Had it been a case where some fresh facts which come to light were not previously disclosed or some information with regard to the facts previously disclosed coming into possession of the AO which tends to expose the untruthfulness of those facts, in such situation, it would not be a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Undoubtedly, the belief is that of the Income Tax Officer, the sufficiency of reasons for forming the belief is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. We are not persuaded by the arguments of Revenue that the assessee had not made full and true disclosure of the material facts at the time of the original assessment and therefore the income chargeable to tax has escaped assessment. Large cash deposits made in the accounts of the assessee which appear to be on account of unauthorized transactions of forex which are made without requisite KYC of the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment, review would take place. Thus, we are satisfied that in the facts and circumstances of the present case, in the garb of reopening the assessment, the review would take place. The petition therefore succeeds and is accordingly allowed. - M.S KARNIK AND VALMIKI MENEZES, JJ. For the Petitioner : Mr. Parag Rao and Mr. Akhil Parrikar, Advocates. For the Respondent No. 3 : Ms Amira Razaq, Standing Counsel. JUDGEMENT PER (M.S. KARNIK, J) 1. Heard learned counsel for the parties. 2. Rule. The rule is made returnable forthwith at the request and with the consent of the learned counsel for the parties. 3. The challenge in this petition under Article 226 of the Constitution of India is to the impugned notice dated 31.03.2022 issued by the Income Tax Officer, Ward-I, Margao under Section 148 of the Income Tax Act, 1961 (the Act for short). 4. The facts in a nutshell are thus: The petitioner-assessee is a full-fledged money changer pursuant to a fulLfledged money changer's license issued by the RBI under the Foreign Exchange Management Act, 1999. The assessee undertakes the sale and purchase of foreign currency and makes a profit only on the basis of the commission it earns. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on 31.03.2022 based on the report of the DDIT (INV) Unit -1 Panaji, which stated that the net profit declared by the assessee was 0.05% of the turnover and felt that in the line of business of forex dealers in Goa, the average gross profit would be 0.50% of the turnover. The report referred to NP/GP ratio. Simultaneously, Respondent No. 3 issued notice under Section 148 of the Act on 31.03.2022 for assessment/re-assessment of the income of the assessee for the Assessment Year 2018-19. SUBMISSIONS OF THE PETITIONER 9. Mr Parag Rao, learned counsel for the assessee in challenge to the impugned notice submitted that in the absence of information, the issuance of the impugned order and notice dated 31.03.2022 is illegal and without satisfaction of the jurisdictional requirement. Assuming without admitting that the cash deposits would classify as information under (i) to Explanation 1 to Section 148 of the Act, in the absence of fresh tangible information, the re-opening sought to be carried out is in the nature of change of opinion and/or review. Respondent No. 2 could not have taken resort to GP/NP ratio and in any case the approach adopted of going by GP/NP ratio was misconceived. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , however, was found not tenable as no substantial supporting documents/details have been filed by the assessee with respect to the total cash deposited during the Financial Year 2017-2018 of Rs. 65,41,72,500/-. The Assessing Officer finally directed issuance of notice under Section 148 of the Act for reopening of the assessment for the Assessment Year 2018-19 with prior approval of the Principal CIT. 11. The issue on which notice under Section 148A (b) issued was the large cash deposits for which the assessee was directed to produce its response with supporting documents. The issue under consideration in 148A proceedings was totally different from the one verified/discussed in the scrutiny proceedings and the order passed under Section 143 (3) of the Act. Although the assessee was directed to submit records pertaining to the cash transactions, the assessee merely relied upon its own cash registers containing quantity based records of the transactions made with unknown persons. Our attention is drawn to paragraphs 223 to 337 of the compilation submitted. No further or supporting documents as asked for by the department in the notice under Section 148A (b) were produced by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntentions of the respondent that this is not a case of change of opinion or review. At the preliminary stage of Section 148A, the information is merely suggestive of escapement of income. No conclusive finding need be arrived at by the Assessing Officer of such escapement. The assessee has failed to produce any cogent evidence or material of KYC or other documents of the parties to whom foreign exchange was sold despite opportunity to show that all cash deposits were made with due satisfaction of the RBI Guidelines, despite a clear request to produce supporting documents vide notice under Section 148A (d). 14. It is not for the Assessing Officer to demand for each and every document in connection with the cash deposited by the assessee. The legal obligation to produce this primary evidence is upon the assessee. The assessee having failed to do so, the Assessing Officer cannot be faulted with for the order directing reopening of the assessment for the Assessment Year in question. The impugned order is well within the framework of law and jurisdiction. The issue of change of opinion would also not arise as demonstrably from the record, the question of genuineness or identity of parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forth such other particulars as may be prescribed. 24.1. Since reference was made to sub-section (9) (f) of Section 139, both in the pleadings and in the oral hearing, we may mention that under sub-section (9) of Section 139, where the assessing officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period, the assessing officer may in his discretion allow. If the defect is not rectified within the specified period or within the further period as may be allowed, the return shall be treated as an invalid return. In such an eventuality, it would be construed that the assessee had failed to furnish the return. There is an Explanation below sub-section (9) which clarifies that a return of income shall be regarded as defective unless all the conditions mentioned thereunder are fulfilled. Clause (f) says that where regular books of account are not maintained by the assessee but the return is accompanied by a statement indicating the amounts of turnover or gross receipts, gross pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the claim made by the assessee. 26.2. As per sub-section (3) of Section 143, after hearing such evidence as the assessee may produce and such other evidence as the assessing officer may require on specified points and after taking into account all relevant material which he has gathered, the assessing officer shall make an assessment of the total income or loss of the assessee by an order in writing. In the said exercise, he shall determine the sum payable by the assessee or refund of any amount due to him on the basis of such assessment. 27. Section 144 provides for best judgment assessment. It says that if any person fails to submit a return under sub-section (1) of Section 139 or fails to comply with the terms of a notice under sub-section (1) of Section 142 or having made a return fails to comply with all the terms of a notice issued under sub-section (2) of Section 143, the assessing officer after taking into account all relevant materials and after giving the assessee an opportunity of being heard make the assessment to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment. 28. This brings us to the pivotal section i.e. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that income chargeable to tax had escaped assessment for any assessment year, the income tax officer could reopen an assessment. But with effect from 01.04.1989, the requirement of law underwent a change. It was sufficient if the assessing officer for reasons to be recorded by him in writing was of the opinion that any income chargeable to tax had escaped assessment for any assessment year, he could assess or reassess such income chargeable to tax which had escaped assessment and which came to his notice subsequently. Therefore, post 01.04.1989, the power to reopen an assessment became much wider. 28.3. It appears that a number of representations were received against the omission of the words reason to believe from Section 147 and their substitution by the word opinion of the assessing officer. It was pointed out by the representationists that the meaning of the expression reason to believe was explained in a number of judgments and was well settled. Omission of such an expression from Section 147 would give arbitrary powers to the assessing officer to reopen past assessments. To allay such apprehensions, Parliament enacted the Direct Tax Laws (Amendment) Act, 1989 again amendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Damani, (2003) 261 ITR 87 (Cal). The word true' qualifies a fact or averment as correct, exact, actual, genuine or honest. The word 'full' means complete. True disclosure of concealed income must relate to the assessee concerned. Full disclosure, in the context of financial documents, means that all material or significant information should be disclosed. Therefore, the meaning of 'full and true disclosure' is the voluntary filing of a return of income that the assessee earnestly believes to be true. Production of books of accounts or other material evidence that could ordinarily be discovered by the assessing officer does not amount to a true and full disclosure. 32. Let us now discuss some of the judgments cited at the bar. First and foremost is the decision of a constitution bench of this Court in Calcutta Discount Company Limited(supra). That was a case under Section 34 of the Indian Income Tax Act, 1922 which is in pari-materia to Section 147 of the Act. The constitution bench explained the purport of Section 34 of the Indian Income Tax Act, 1922 and highlighted two conditions which would have to be satisfied before issuing a notice to reopen an assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned that it would be a travesty of justice to allow an assessee such latitude. After adverting to various previous decisions, this Court held that an income tax officer acquires jurisdiction to reopen an assessment under Section 147 (a) read with Section 148 of the Act only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that due to omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. In the above context, Supreme Court has held as under: 25. .....He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Direct Tax Laws (Amendment) Act, 1987. This Court considered the changes made in Section 147 and found that prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under two conditions i.e., (a) the Income Tax Officer had reason to believe that by reason of omission or failure on the part of the assessee to make a return under Section 139 for any assessment year or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax had escaped assessment for that year, or (b) notwithstanding that there was no such omission or failure on the part of the assessee, the Income Tax Officer had in consequence of information in his possession reason to believe that income chargeable to tax had escaped assessment for any assessment year. Fulfilment of the above two conditions alone conferred jurisdiction on the assessing officer to make a re-assessment. But with effect from 01.04.1989, the above two conditions have been given a go-by in Section 147 and only one condition has remained, viz, that where the assessing officer has reason to believe that income has escaped assessment, that would be enough to confer jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Private Limited (supra) observed that to check whether it is a case of change of opinion or not one would have to see its meaning in literal as well as legal terms. The expression change of opinion would imply formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by the assessing officer resulting from what he thinks on a particular question. Therefore, before interfering with the proposed reopening of the assessment on the ground that the same is based only on a change of 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. (emphasis supplied) 18. The principle is well settled by the Supreme Court that a mere change of opinion cannot be a basis for reopening completed assessments and would be applicable only to situations where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en concluded by the statutory authority, the writ Court should not interfere at such a pre-mature stage. Moreover it is not a case where from bare reading of notice it can be axiomatically held that the authority has clutched upon the jurisdiction not vested in it. The correctness of order under Section 148A(d) is being challenged on the factual premise contending that jurisdiction though vested has been wrongly exercised. By now it is well settled that there is vexed distinction between jurisdictional error and error of law/fact within jurisdiction. For rectification of errors statutory remedy has been provided. In the light of aforesaid settled proposition of law, we find that there is no reason to warrant interference by this Court in exercise of the jurisdiction under Article 226/227 of the Constitution of India at this intermediate stage when the proceedings initiated are yet to be concluded by a statutory authority. Hence the writ petition stands dismissed. 21. In Export Credit Guarantee Corporation of India Vs Additional Commissioner of Income Tax (2013) 30 taxmann.com 211 (Bombay), this Court held that tangible information need not be new or from an external source. The fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as we have noted earlier, in respect of one of the grounds, ground (ii), the reasons which have been disclosed to the assessee would indicate that reliance has been placed on paragraph 6.1 of the Notes forming part of the accounts in Schedule 17. Paragraph 6.1 posits that an amount of Rs. 27.96 crores is the estimated amount of recovery expected out of the claims paid or payable by the assessee which had been recognized on an individual assessment/estimate basis on the basis of the accounting practice followed by the assessee. During the year in question, there was a change in accounting policy as a result of which the provision for estimated recovery in respect of claims paid and outstanding for recovery for a period of three years or more as on the balance-sheet date has been estimated at Rs.100/- for each claim in substitution of the individual assessment/estimate made earlier. The assessee has stated that the change in policy has the effect of the existing provision for estimated recovery being written off by about Rs.20 crores to the revenue account and reducing the profit of the accounting year consequently. Evidently the Assessing Officer had not considered paragraph 6.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC OnLine Bom 221 considered the broad parameters to be considered while dealing with the reopening of assessment completed under Section 143 (3) of the Act. In Paras 12 to 14, it is observed as follows: 12. In this case we are dealing with the reopening of assessment completed by order dated 12 October 2010 under Section 143 (3) of the Act. The law with regard to reopening of assessment is fairly settled by decisions of Courts. The power of the Assessing Officers under Sections 147 and 148 of the Act to reopen an assessment is classified into two :- (a) Reopening of assessment within a period of 4 years from the end of the relevant assessment year and (b) Reopening of assessment beyond a period of 4 years from the end of the relevant assessment year. 13. The common jurisdictional requirement for reopening of assessment both within and beyond a period of 4 years has to be on the basis of reason to believe that income chargeable to tax has escaped assessment and the reason for issuing a notice to reopen are recorded before issuing a notice. However, there is one additional jurisdictional requirement to be satisfied while seeking to reopen the assessment beyond the period of 4 years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer issuing the notice. At the stage of issuing notice under Section 148 of the Act to reopen a concluded assessment the satisfaction of the Assessing Officer issuing the notice is of primary importance. This satisfaction must be prima facie satisfaction of having a reason to believe that income chargeable to tax has escaped assessment. At the stage of the issuing of the notice under Section 148 of the Act it is not necessary for the Assessing officer to establish beyond doubt that income indeed has escaped assessment. 23. In the present case, the assessee filed income tax returns for the Assessment Year 2018-2019 disclosing the total taxable income of Rs. 3,50,100/- on 24.09.2018. Notice was issued under Section 143 (2) of the Act for completing scrutiny on 22.09.2019. A notice was also received by the assessee under Section 142 (1) of the Act on 10.12.2020 calling upon the assessee to submit various documents and to answer various questions concerning the transactions. In the Annexure to the notice under Section 142 (1) of the Act, it was specifically mentioned that complete scrutiny was initiated, major issue being high risk transactions. The assessee was called upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NP/GP in this line of business. In this line of business as per the details of the GP/NP ratio of other forex dealers in Goa, it is seen that the average gross profit in this business will be around 0.50% of the turnover and The Sete Mares Global Forex Pvt. Ltd., declared its net profit as 0.05% of the turnover. Hence, GP/NP ratio for the assessee company should be 10/01. Further, the large cash deposits being made in the accounts of the assessee appear to be on account of unauthorized transaction of forex which are made without requisite KY C of the forex purchasing party. 26. The order thus proceeds on the footing that the assessee declared its net profit as 0.05% of the turnover whereas in this line of business as per the details of the GP/NP ratio of other forex dealers in Goa, the average gross profit in this business is seen to be around 0.50% of the turnover. It is pertinent to note that in terms of Section 143 (2) of the Act, a complete scrutiny was done by the Assessing Officer. In terms of Section 143 (2) of the Act, the Assessing Officer has to ensure that the assessee has not stated the income or not computed excessive loss or not underpaid the tax in any manner. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation. We are not persuaded by the arguments of the learned counsel for the Revenue that the assessee had not made full and true disclosure of the material facts at the time of the original assessment and therefore the income chargeable to tax has escaped assessment. 27. The second reason for reopening assessment is the large cash deposits made in the accounts of the assessee which appear to be on account of unauthorized transactions of forex which are made without requisite KYC of the forex purchasing party. The Annexure to the notice states that cash deposits made in various bank accounts by the assessee company during the Financial Year 2017-18 (Assessment Year 2018-19) of Rs. 65,41,72,500/- . We find that this information of cash deposits made in various bank accounts to the tune of Rs. 65,41,72,500/- was already available with the Assessing Officer when the assessment was concluded. Not only that but by the Assessment order dated 12.05.2021, the Assessing Officer added the income of Rs.91 ,800/-. All the relevant registers indicating the cash deposits were placed before the Assessing Officer. In the order under clause (d) of Section 148A, it is mentioned that these cash d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material facts at the time of the original assessment and therefore, the income chargeable to tax has escaped assessment, we are not persuaded to accept this argument in the facts of the present case. 30. The Supreme Court has explained that the purpose and intent of Sections 147 (a) and 148 of the Act is to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say ' you accepted my lie, now your hands are tied and you can do nothing . No doubt, it would be travesty of justice to allow the assessee that latitude. 31. Let us deal with Ms Razaq's submission that there should be no difficulty for the assessee to produce KYC documents as in any case he will be given full opportunity to establish his case that the assessment proceedings were rightly concluded. We agree with Ms Razaq about the consistent view that where the statutory authority has not even concluded the proceedings, the writ Court should not interfere at such a pre-mature stage. It is also well settled that at this stage, the test to be applied is as to whether there was reason to believe tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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