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TMI Blog2025 (4) TMI 1496X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income under Section 139 of the Act. The said return of income was selected for scrutiny assessment vide notice under Section 142 (1) of the Act. In the said notice dated 5 October 2011, confirmation for the unsecured loan was called for. The Petitioner vide letter dated 10 October 2011, responded to the said requisition regarding the query relating to loan confirmation. The Petitioner filed a copy of a letter dated 24 August 2011 issued by the Reserve Bank of India (RBI). Vide letter dated 17 October 2011, the Petitioner, with respect to fully convertible debenture (unsecured loan) amounting to Rs. 403,67,44,471/- enclosed copy of Foreign Inward Remittance Certificate (FIRC) issued by the HDFC Bank and confirmation letter from the RBI. The Petitioner further filed, vide letter dated 8 November 2011, copy of the agreement with Flirasca Holding Company Limited towards the aforesaid debenture issue. Based on these documents filed during the assessment proceedings, an assessment order under Section 143 (3) of the Act was passed accepting the return income of the Petitioner. 5. In the assessment order under Section 143 (3) dated 23 November 2011, the Assessing Officer (AO) has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prima facie indicates that the transaction is not genuine. He, therefore, submitted that the condition of first proviso to Section 147 of the Act, namely failure to disclose truly and fully all material facts necessary for the assessment is not satisfied in the present case. He further submitted that although the reasons recorded may not allege any failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment, the same can be culled out on a reading of the reasons recorded. He, therefore, submitted that the proceedings have been validly initiated. He relied upon the decision in the case of Crompton Greaves Ltd. vs. Assistant Commissioner of Income-tax, Circle 6(2) (2015) 55 taxmann.com 59 (Bombay) and the decision of the Supreme Court in the case of Phool Chand Bajrang Lal vs. Income-tax Officer (1993) 69 Taxman 627 (SC). 9. He submitted that the facts in the case of NDTV (supra) is distinguishable and, therefore, the said decision is not applicable to the facts of the present case. He further submitted that the Petitioner could establish the genuineness of the transaction in the reassessment proceedings, and if the officer is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures (CCD) of Rs. 403.45 Cr. in FY 2008-09. M/s Flora Enterprises received the funds from Ace Mauritius Ltd. The facts indicate that the money received by M/s Suryakrupa Farms & Construction Pvt. Ltd. in F.Ys. 2008-09 at Rs 403,45,97,439/ is through layering through various offshore entities. Intelligence available suggests that the offshore entities through which the funds are received by M/s Suryakrupa Farms & Construction Pvt. Ltd. are located in tax havens and have intimate connection with the assessee company through its Director. Information suggests that the undisclosed funds have been routed by M/s Suryakrupa Farms & Construction Pvt. Ltd. through layering via offshore entities in tax havens as discussed. In view of the above, I have reasons to believe that Rs. 403,45,97,439/- being unexplained cash credit which was income chargeable to tax has escaped assessment for AY 2009-10 within the meaning of Section 147 r.w.s. 148 of the IT Act, 1961. [Emphasis supplied] 13. Section 147, as it stood at the relevant time, read as under : "147. Income escaping assessment. - If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment. 16. Mr. Suresh Kumar, learned counsel for the Respondent, is justified in relying upon paragraph 10 of the decision in the case of Crompton Greaves Ltd. (supra) of the Coordinate Bench of this Court to which one of us (M. S. Sonak, J.) was a party. The relevant paragraph 10 reads as under: - "10. It is significant to note that neither the impugned notice dated 29 March 2006 nor the reasons supplied in support thereof specifically state that there was any failure on the part of the petitioner to disclose fully and truly all the material facts necessary for its assessment for the relevant assessment year. No doubt, Mr. Suresh Kumar is right in his submission that the mere failure to incant the words or phrases employed in the statute with regard to failure to disclose fully and truly all material facts, is not necessarily fatal to the assumption of jurisdiction under Sections 147 and 148 of the Act. However, this is subject to the rider that there must be cogent and clear indication in the reasons supplied, that in fact there was failure on the part of the Assessee to disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hore entities, and based on the intelligence available, these tax haven entities have an intimate connection with the Petitioner and its Director, and undisclosed funds have been routed by the Petitioner itself through layering via various offshore entities in tax haven countries. 20. In our view, based on these reasons, which are recorded, it can very well be culled out that there is a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment. The circuitous movement of funds through various companies located in tax havens have not been disclosed in the course of the original assessment proceedings Therefore, in our view, even though there is no statement of any allegation of failure to disclose fully and truly all material facts necessary for the assessment, same can be culled out on a reading of the reasons recorded. Therefore, the contention raised by the Petitioner that in the absence of any statement in the reasons recorded that there is any failure to disclose fully and truly all material facts necessary for the assessment the impugned proceedings are bad is to be rejected. 21. In the extraordinary jurisdiction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained money of the petitioner being routed through various companies located in tax haven countries. This information was not available at the time of the assessment proceedings and, therefore, was not examined during the original assessment proceedings. In the original assessment proceedings, what was perhaps examined was only receipt of money from Flirasca Holding Company Limited and not the routing of the said money through various layered companies which, according to the information received, is the unexplained money of the Petitioner. Further, it is important to note that this information was received post conclusion of the assessment proceedings, as evident from the letter dated 28 March 2016. 25. We now propose to address the submission of the learned counsel for the Petitioner that the Petitioner has disclosed all primary facts with respect to the transactions during the course of the original assessment proceedings, and therefore, there cannot be any allegation of any failure to disclose fully and truly all material facts necessary for assessment. In our view, this submission based on the facts of the present case must be rejected. There is no dispute that in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. For the purpose of assumption of jurisdiction, certainly the submission made by the Petitioner cannot be accepted. This is more so, looking at the purport and objective of the reassessment proceedings to bring to tax income which has escaped assessment and any interpretation which would be contrary to such an objective is required to be rejected in the facts of the present case. 28. First proviso to Section 147 of the Act provides that reassessment cannot be initiated after a period of 4 years if an assessee disclosed fully and truly all necessary facts for the assessment. The proviso protects an assessee only in those cases where the fact of disclosure is in question but, where the disclosed fact itself is questionable, the same is not protected by first proviso to Section 147 of the Act. 29. Based on the objection raised by the Petitioner, a feeble attempt was also made before this Court that in the proceedings before the Income-tax Settlement Commission (ITSC), the said authority had observed that no further enquiry is needed on the loan transaction of Rs. 403 crore from Flirasca Holding Company Limited. In the objection, the Petitioner had admitted that the application be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e placed is misconceived. In the case of NDTV (supra) the reassessment proceedings were initiated for AY 2008-2009 with respect to transaction of issue of step-up coupon bonds amounting to US dollar 100 Million. These step-up coupon bonds were issued by NNPLC and the assessee agreed to furnish corporate guarantee for this transaction. However, these bonds were redeemed in advance at a discounted price in November 2009. However, during the proceedings for subsequent assessment year i.e. AY 2009-2010, DRP proposed addition of Rs.642 crores on account of funds raised by the assessee through its subsidiaries which included NNPLC. The addition in AY 2009-2010 was proposed on the ground that money raised during the said assessment year from its subsidiaries were sham and bogus transactions and these transactions were done with a view to get the undisclosed income by round tripping. Based on these findings for the AY 2009-2010, assessment for AY 2008-2009 was reopened proposing to treat the transaction of issue of step-up coupon bonds as undisclosed income. The Hon'ble Supreme Court held that based on the findings of the AY 2009-2010, reassessment proceedings can be initiated for AY 2008- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, based on the facts of the NDTV (supra), which are different from the present facts, concluded that the assessee disclosed all primary facts necessary for the assessment. It is also important to note that the Supreme Court also records that in the case of NDTV (supra), the Revenue was not relying upon non-disclosure of facts to initiate reassessment proceedings. In contrast, in the present case, the Revenue is relying upon the same as can be culled out from the reasons as recorded. The facts in the case of NDTV (supra) being different from the facts of the present case on the above-referred crucial aspects, the reliance ruling cannot assist the petitioner's cause. There is no dispute regarding the ratio or the principle but applying such ratio to the facts of the present case, the reopening cannot be stalled at the very threshold. There are several distinguishing features, and they cannot be simply overlooked before applying the ratio. 35. The next decision in the compilation of the Petitioner is of the Coordinate Bench of this Court in the case of Teofilo Fernando Antonio Pinto vs. Union of India (2023) 155 taxmann.com 620 (Bombay). In this case, in the reasons recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no information subsequent to the conclusion of the assessment proceedings which would suggest that the transaction was bogus. Furthermore, the decision in the case of Crompton Greaves Ltd. (supra) was also not brought to the notice of the Court. Therefore, on these grounds the reliance placed in the case of Bombay Stock Exchange Ltd. (supra) is distinguishable on facts and in law. 39. In the case of S. S. Landmarks vs. Income-tax Officer, Ward-2(2) Pune (2020) 117 taxmann.com 825 (Bombay) the issue whether completion certificate was not obtained on or before 31 March 2012 was a subject matter of consideration while passing the assessment order and there were no new reasons prior to the issue of notice under Section 148 of the Act. In the instant case before us, the information which is recorded in the reasons for opening was not the subject matter of investigation in the course of the original assessment proceedings, but same constitutes fresh tangible material and, therefore, the said decision cannot be made applicable to the facts of the present case. 40. In the case of Aroni Commercials Ltd. vs. Deputy Commissioner of Income-tax-2(1) (2014) 44 taxmann.com 304 (Bombay) the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l opportunity during the reassessment proceedings to present its version or to establish how the allegation of layering, etc, is incorrect. But to say that no case is made out, even to examine such matters, despite the revenue securing prima facie credible information post the initial assessment proceedings, may not be proper. Decision relied upon by the Respondents:- 44. Mr. Suresh Kumar, learned counsel for the Respondents, is justified in relying on the Supreme Court's decision in the case of Phool Chand Bajrang Lal (supra). In this case, before the Supreme Court, the AO, during the course of the assessment proceedings for AY 1963-1964, after perusing the documents filed on the loan transaction, accepted the same and allowed the claim of interest made by the Assessee. However, subsequent thereto on enquiry, it was found that the lender advanced no such loan to any party and he was only a name lender. Based on this information, case of the assessee was reopened on the ground of non-disclosure of the primary facts. The issue of challenge to the jurisdiction to reopen the case reached the Supreme Court and the Supreme Court held that, where the transaction itself based on sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in section 147(a), 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. The High Courts which have interpreted Burlap Dealers Ltd. 's case (supra)as laying down law to the contrary fell in error and did not appreciate the import of that judgment correctly. 21. We are not persuaded to accept the argument of Mr. Sharma that the question regarding truthfulness or falsehood of the transactions reflected in the return can only be examined during the original assessment proceedings and not at any stage subsequent thereto. The argument is too broad and general in nature and does violence to the plain phraseology of sections 147(a) and 148 and is against he settled law by this Court. We have to look to the purpose and intent of the provisions. One of the purposes of section 147, appears to us to be, to ensure that a party cannot get away by willfully 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'. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .8.2013 in which there was specific mention of the details of a sum of Rs. 3 crore having been paid by M/s. Prabahv Industries for purchase of 1500 shares. The Assessee was asked to provide the identity of such investor, its creditworthiness and genuineness of the transaction. The Assessee having replied to such queries raised in the order of assessment, the Assessee made no additions. 7. It is because of this, the Assessee contended that the Assessing Officer is precluded from raising same question all over again by way of reassessment. The impugned notice having been issued beyond the period of four years from the end of relevant assessment year, the question of true and full disclosure by the Assessee would also be an additional factor. However, when the Revenue suggests that the Assessee had indulged in the bogus accommodation entries and therefore, said amount of Rs. 3 crore was nothing but the assessee's unexplained cash credit, the issue of change of opinion and true and full disclosure would merge almost to the extent of overlapping. In other words, if the Revenue can prima facie show on the basis of additional material available with the Assessing Officer after compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 one 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. The High Courts which have interpreted Burlop Dealer's case (Supra) as laying down law to the contrary fell in error and did not appreciate the import of that judgment correctly. 26. We are not persuaded to accept the argument of Mr. Sharma that the question regarding truthfulness or falsehood of the transactions reflected in the return can only be examined during the original assessment proceedings and not at any stage subsequent thereto. The argument is too broad and general in nature and does violence to the plain ph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al establishing prime facie that the disclosures made by the Assessee were not true. If the entire claim is bogus and so established to be, the Assessee would fail the test of true and full disclosure. Requirement of true and full disclosure runs through the entire assessment and it does not end on filing of return. The search action against Shirish C, Shah provided certain information which was also processed by the Assessing Officer before forming the belief that income chargeable to tax had escaped assessment. 10. Secondly, the entire reasons when read as a whole, more than sufficiently demonstrate the belief of the Assessing Officer that the entire assessment goes on bogus claim of share application money having been received by the Assessee company. Therefore, lack of true disclosures is writ large on the face of the reasons. Mere non recitation of such expression would not invalidate the reasons or the fact that the reasons are based on allegations of lack of true and full particulars. 11. Learned counsel for the Petitioner submitted that the Assessing Officer had issued notice to Prabhav Industries under Section 133 (6) of the Act which was replied and had not remained u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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