Case Law Details
Ambuj Foods Pvt. Ltd. Vs PCIT (Allahabad High Court)
In the present case, during the original assessment the A.O. had not formed any opinion in respect of the facts regarding routing of funds in the garb of share premium, which surfaced from the information received from the ADIT (Inv.), Unit – 6, Kolkata, the ACIT, Circle – 3 (2), New Delhi and the ITO (Inv.), Unit – 4, Kolkata. It was after receipt of this information, that the A.O. examined the records and found that the petitioner had received funds to the tune of Rs.95,00,000/- by way of routing funds materialized by M/s Radha Fincom Pvt. Ltd. & others, which were found to be merely paper concerns having no existent and real business. In this way, the unaccounted money of the petitioner amounting to Rs.95,00,000/-was routed to its books of accounts.
Regarding the submission of the learned Counsel for the petitioner, that assessment of the petitioner as well as that of M/s Arohul Foods Pvt. Ltd., which is a sister concern of the petitioner, was re-opened under Section 148 of the Act for A.Y. 2012-13 on similar issue, where re-opening of the case in the matter of M/s Arohul Foods Pvt. Ltd. was quashed by the ITAT, Lucknow Bench vide order dated 11-08-2021, it has been stated in the Counter affidavit that the department has not accepted the order of the ITAT and has challenged the order by filing an appeal under Section 260 A of the Act. Even otherwise, an order passed by the ITAT would not be relevant when the validity of the re-assessment is being examined by this Court in a Writ Petition.
Regarding the petitioner’s submission that the proceedings initiated after a lapse of more than four years are barred by the First Proviso appended to Section 147 of the Act, we find that Section 147 of the Act, as it stood at the relevant time, was as follows: –
“147. Income escaping assessment.— If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year):
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 year:
…………
Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.”
(Emphasis supplied)
As is evident from the discussion made in the preceding paragraphs of this judgment, the facts regarding the petitioner’s dealings with shell companies for routing its own unaccounted money into its books of accounts had not been truly and fully disclosed by the petitioner during the original assessment and scrutiny assessment. Therefore, the present case falls within the exception carved out in the First proviso, “unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assesse to disclose fully and truly all material facts necessary for his assessment, for that assessment year and the bar of initiating re-assessment proceedings after a lapse of four years since the original assessment contained in the First Proviso appended to Section 147 of the Act, would not apply to the present case. The information was embedded in the records produced before the A.O. and could be found on a detailed scrutiny and investigation, it would not make it a true and full disclosure and as per the Explanation 1 appended to Section 147 of the Act. Therefore, the submission to this effect made by the learned Counsel for the petitioner cannot be accepted.
Keeping into view the scope of power of judicial review while scrutinizing a notice issued under Section 148 of the Act as explained in Raymond woolen Mills Ltd. (1) and (2) and Phool Chand Bajarang Lal and Srikrishna (Supra), we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not and the sufficiency or correctness of the material need not be considered at this stage. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after receipt of information and conducting an investigation and after forming a reason to believe that the petitioner did not truly and fully disclose all the material facts because of which income amounting to Rs. 95,00,000/- has escaped assessment. We are satisfied that there is prima facie material available on record before the assessing officer for issuing a notice for reassessment. Thus, the notice under Section 148 as well as the order dated 03-03-2022 passed by the National Faceless Assessment Centre rejecting the petitioner’s objections against issuance of the notice, do not suffer from any such illegality as to warrant interference by this Court in exercise of its Writ Jurisdiction.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Sri Pradeep Agarwal assisted by Sri. Amar Mani Tiwari, Advocate, the learned Counsel for the petitioner and Shri Manish Misra, learned Counsel for the respondents.
2. By means of this Writ Petition filed under Article 226 of the Constitution of India, the petitioner has challenged the validity of a notice dated 31.03.2021 issued by the DCIT Circle Faizabad under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) proposing to assess/reassess the petitioner’s income/loss for the assessment year 2013-14 and directing the petitioner to submit a return for the said assessment year. The petitioner has also challenged the order dated 03-03-2022 passed by the National Faceless Assessment Centre, rejecting the objections filed by the petitioner in response to the aforesaid notice.
3. The petitioner’s case is that, it had filed its return for the Assessment Year 2013-14 on 05-08-2013 declaring a total income of Rs.3,65,440/-, which was processed on 19-05-2014 under Section 143 (1) of the Act. The case was selected for scrutiny and notices under Section 143 (2) and Section 142 (1) were issued alongwith a questionnaire asking for certain details. The questionnaire inter alia demanded production of all the share capital details of the petitioner’s share-holders alongwith PAN and mode of payment for obtaining shares in his name or in the name of family members, and also the details of share premium receipts. The petitioner submitted a reply giving statement of income and complete address of sundry creditors alongwith the details of all investor companies to whom shares were allotted. The petitioner stated that shares were allotted at a premium to some companies. There is no bar in the Companies Act against issuance of shares at a high premium, and there was no such bar in the Income Tax Act.
4. The petitioner submitted that if the shares were issued at fair market value, there was no question of any addition and there was no contravention. The fair market value of the shares could be calculated as per formula given in Rule 110 A of the Act, as per which, the fair market value of the company’s share works out to be Rs.206.50. The shares were issued at the fair market value and, therefore, there was no contravention of law.
5. It has also been submitted by the petitioner that the matter of increase in share capital was examined during assessment proceedings under Section 143 (3) of the Act and by means of an order dated 1011-2014, the petitioner was assessed for a total income of Rs.3,75,440/-. Nothing adverse came out from the information submitted in response to the questionnaire and an addition of Rs.10,000/- only was made to the petitioner’s income on account of internally vouched expenses debited in Profit & Loss account.
6. On 31-03-2021, the A.O. issued a notice under Section 148 of the Act for the Assessment Year 2013-14, stating that he had reason to believe that the petitioner’s income chargeable to tax has escaped assessment within the meaning of Section 147 of the Act.
7. The reasons for re-opening of assessment states that on the basis of information received from the ADIT (Inv.), Unit – 6, Kolkata, the ACIT, Circle – 3 (2), New Delhi and the ITO (Inv.), Unit – 4, Kolkata, regarding routing of funds in the garb of share premium, the A.O. examined the returns of other assesses and found that the petitioner had received funds to the tune of Rs.95,00,000/-(Rs.4,75,000/- towards share capital and Rs.90,25,000/- towards share premium thereon) by way of routing funds materialized by M/s Radha Fincom Pvt. Ltd. & others in A.Y. 2013-14 As per the departmental database of bogus shell companies, accommodation entry providers and operators, the company was merely a paper concern having no existent and real business. Finally the cases of these assessees for A.Y.2012-13 were re-opened under Section 147 of the Act and after a detailed and in-depth analysis of the information in possession of the office, it was established that the petitioner had routed its own money in the garb of shares application money and share premium through a number of shell companies operating from Kolkata.
8. In the course of analysis, the financial data of succeeding years was also examined, which revealed that all these shares were transferred in the names of the Directors and Institutions related to the Directors of the petitioner company in F.Y. 2015-16, as per details tabulated below: –
| Date of Allotment | Company name |
Shares issued | Transferred on | Transferred to | |
| 1 | 30-03-2013 | Truthful Dervcon Pvt. Ltd. |
12,50 0 | 18-08-2014 | Rahul Dalmia Beneficiary Trust |
| 2 | 30-03-2013 | Welkin Investments Pvt. Ltd. |
12,50 0 | 18-08-2014 | Rahul Dalmia Beneficiary Trust |
| 3 | 30-03-2013 | Punam Chand Modi Paints Pvt. Ltd. | 7,500 | 18-08-2014 | Rahul Dalmia Beneficiary Trust |
| 4 | 30-03-2013 | Gyan Darshan Comodeal Pvt. Ltd. | 2,500 | 01-12-2014 | Rahul Dalmia Beneficiary Trust |
| 5 | 30-03-2013 | Radha Fincom Ltd, | 12,500 | 01-12-2014 | Rahul Dalmia Beneficiary Trust |
| Total | 47,500 |
9. From the detailed discussion made in the assessment order of the petitioner for the A.Y. 2012-13, it was established that the companies listed at sl. nos. 3 to 5 are shell companies used solely for providing accommodation entries and during the A.Y.2013-14, the petitioner had routed its undisclosed funds amounting to Rs.95,00,000/- through entry providers and absorbed it in its books of accounts. It is amply evident that the transactions shown by the petitioner as given in the above chart are not genuine transactions and accommodation entries of pre-arranged share application money and share premium aggregating to Rs.95,00,000/- was obtained by the petitioner with the help of a syndicate of operators by way of loopholes of the system in A.Y. 2013-14. In this way, the unaccounted money of the petitioner amounting to Rs.95,00,000/-was routed to its books of accounts.
10. On 01-09-2021, the petitioner submitted its objections against the notice under Section 148 of the Act mainly on the grounds that the assessment was completed under Section 143 (3) and more than four years have passed from the end of the relevant assessment. Therefore, as per the Proviso appended to Section 147 of the Act, no action under Section 147 of the Act could be initiated unless any income chargeable to tax has escaped assessment because of the fault of the assesse to disclose truly and fully all material facts necessary for the assessment. The issue of share capital had already been examined by the A.O. in depth and no adverse inference could be drawn. Therefore, the notice was barred by the first Proviso to Section 147 of the Act. The petitioner further stated that its case was completed under Section 143 (3) and the replies and supporting documents of the petitioner were already submitted during scrutiny. The assessment cannot be re-opened on the basis of re-examination of the documents already on record, as it would amount to a change of opinion.
11 The petitioner also submitted that the case of the petitioner as well as that of M/s Arohul Foods Pvt. Ltd., which is a sister concern of the petitioner, was re-opened under Section 148 of the Act for A.Y. 2012-13 on similar issue, where re-opening of the case in the matter of M/s Arohul Foods Pvt. Ltd. was quashed by the ITAT, Lucknow Bench vide order dated 11-08-2021.
12. On 03-03-2022, the National Faceless Assessment Centre passed an order rejecting the petitioner’s objections stating that in the assessment order, the A.O. has not mentioned anything about the verification of the issue of introduction of new share capital and share premium. Subsequently, based on the information gathered during the course of assessment for A.Y. 2012-13, on examination of the petitioner’s balance sheet for A.Y. 2013-14, it was found that the petitioner had received funds to the tune of Rs.95,00,000/- as given in the chart below, by way of routing of funds materialized by M/s Radha Fincom Pvt. Ltd. and others: –
| Sl | Name of share holder | Address | Shares issued | Amount received |
| 1 | Truthful Dervcon Pvt. Ltd. | 7, Ganesh Chandra Avenue | 12,500 | 25,00,000/- |
| 2 | Welkin Investments Pvt. Ltd. | P-38, Princep Street, 1st Floor, Room No. 1, Kolkata |
12,500 | 25,00,000/- |
| 3 | Punam Chand Modi Paints Pvt. Ltd. | 71, Canning Street, Kolkata – 700001 | 7,500 | 15,00,000/- |
| 4 | Gyan Darshan Comodeal Pvt. Ltd. | 133, Canning Street, Kolkata, 700001 | 2,500 | 5,00,000/- |
| 5 | Radha Fincom Ltd, | 133, Canning Street, Kolkata, 700001 | 12,500 | 25,00,000/- |
| Total | 47,500 | 95,00,000/- |
13. It was also stated in the order rejecting objections that during A. Y. 2013-14 the petitioner had received Rs.25,00,000/- from M/s Radha Fincom Pvt. Ltd. as share capital and share premium. It was reported from the end of the ADIT (Inv.) Unit-6, Kolata that M/s Radha Fincom has generated funds mainly from Ankush Sales Pvt. Ltd., the core company, which was the main distributor of funds after receiving it through channel of companies, which at terminal deposited the amount in their accounts in cash. It was revealed in examination of documents submitted during assessment proceedings that M/s Radha Fincom had also received funds from M/s Ankush Sales Pvt. Ltd. Thus, there was tangible material in possession of the A.O. with regard to transactions entered into by the petitioner with bogus shell companies providing accommodation entries in guise of share capital and share premium. For the aforesaid reasons, the petitioner’s objections against the notice under Section 148 of the Act have been rejected by the National Faceless Assessment Centre.
14. Before proceeding to examine the rival contentions advanced on behalf the contesting parties, it would be appropriate to have a look at some pronouncements of the Hon’ble Supreme Court explaining the scope of interference while examining the validity of a notice issued under Section 148 of the Act in a Writ Petition under Article 226 of the Constitution of India. In Raymond Woolen Mills Ltd. Versus I.T.O., (1999) 236 ITR 36 (SC), the Hon’ble Supreme Court has held that at the stage of the notice of reopening of the assessment, the Court has only to see whether there is prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage.
15. Again, in Raymond Woollen Mills Ltd. v. ITO, (2008) 14 SCC 218, the Hon’ble Supreme Court reiterated that while examining the validity of a notice issued under Section 148 of the Income Tax Act, “we do not have to give a final decision as to whether there is a suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage.”
16. In light of the aforesaid pronouncements of the Hon’ble Supreme Court we proceed to examine the rival submissions advanced on behalf of the parties so as to ascertain as to whether there was prima facie some material on the basis of which the Department could reopen the case, without going into the sufficiency or correctness of the material.
17. mr. Pradeep Agrawal, the learned Counsel representing the petitioner, has submitted that the petitioner had fully and truly disclosed the entire material during the assessment proceedings and there is no fresh material for initiation of the proceedings. Drawing attention of the Court to the averments made in paragraph 5 of the order disposing off the petitioner’s objection, wherein it is stated that the A.O. has not mentioned anything about the verification on the issue of introduction of new share capital and share premium, he has submitted that the A.O. committed an error, for which the petitioner is being penalized by making the re-assessment. The initiation of the proceedings under Sections 147 / 148 of the Act is based on a review of the existing material, which is not permissible in law. The proceedings initiated after a lapse of more than four years are barred by the First Proviso appended to Section 147 of the Act. The provisions of Sections 147 / 148 of the Act cannot be invoked for making a roving or fishing inquiry on a vague or a remote information pertaining to the earlier year in absence of any specific averment that the income has escaped assessment.
18. Per contra, Sri. Manish Mishra, the learned Counsel for the Income Tax department, has submitted that the petitioner had not made true and full disclosure of all material facts and a mere production of the account books and other material before the A.O., from which the material facts could be discovered by the A.O., would not necessarily amount to full and true disclosure within the meaning of Explanation 1 appended to Section 147 of the Act. The Directorate of Income-tax (System) flagged an information on the insight portal of the A.O. that the petitioner had routed its own money in the garb of share application money and share premium through a number of shell companies operating from Kolkata. From an examination of the petitioner’s balance sheet for the A.Y. 2013-14, it was found that the company had received funds to the tune of Rs.95,00,000/- by way of routing of funds materialized by M/s Radha Fincom Pvt. Ltd., which was one among the shell companies through which the share capital and share premium had been collected by the petitioner and which transaction was proved as bogus during the previous A.Y. Although the issue of share capital was examined by the A.O. during scrutiny, but some facts emerged subsequently, upon the information received from the I & CI wing after completion of the assessment proceedings under Section 143 (3) of the Act. The A.O. has issued the process of re-assessment under Section 147 / 148 of the Act as on the basis of information received subsequent to the original assessment, he had reason to believe that the amount of Rs.95,00,000/- received by the petitioner, which was chargeable to tax, had escaped assessment.
19. The reasons recorded by the A.O. for initiating the process of re-assessment state that on the basis of information received from the ADIT (Inv.), Unit – 6, Kolkata, the ACIT, Circle – 3 (2), New Delhi and the ITO (Inv.), Unit – 4, Kolkata, regarding routing of funds in the garb of share premium, the A.O. examined the returns of other assessees and found that the petitioner had received funds to the tune of Rs.95,00,000/- by way of routing of funds materialized by M/s Radha Fincom Pvt. Ltd. & others in A.Y. 2013-14 As per the departmental database of bogus shell companies, accommodation entry providers and operators, the company was merely a paper concern having no existent and real business. Finally the case of these assessees for A.Y.2012-13 were re-opened under Section 147 of the Act and after a detailed and in-depth analysis of the information in possession of the office, it was established that the petitioner had routed its own money in the garb of shares application money and share premium through a number of shell companies operating from Kolkata.
The reasons supplied further state that from the detailed discussion made by in the assessment order of the petitioner for the A.Y. 2012-13, it was established that the companies listed at sl. nos. 3 to 5 in the chart given in para 8 above, are shell companies used solely for providing accommodation entries and during the A.Y.2013-14, the petitioner had routed its undisclosed funds amounting to Rs.95,00,000/- through entry providers and absorbed it in its books of accounts. It is amply evident that the transactions shown by the petitioner as given in the chart given in para 8 are not genuine transactions and accommodation entries of pre-arranged share application money and share premium aggregating to Rs.95,00,000/-was obtained by the petitioner with the help of a syndicate of operators by way of loopholes of the system in A.Y. 2013-14. In this way, the unaccounted money of the petitioner amounting to Rs.95,00,000/- was routed to its books of accounts.
21. In Phool Chand Bajrang Lal v. ITO, (1993) 4 SCC 77, the Hon’ble Supreme Court held that: –
“25. From a combined review of the judgments of this Court, it follows that an Income Tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of the Income Tax Act, 1961 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 by reason of 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. 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 on fresh information. Since, 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. To that limited extent, the Court may look into the conclusion arrived at by the Income Tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income Tax Officer and further 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 on 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.”
(Emphasis supplied)
22. In Srikrishna (P) Ltd. v. ITO, (1996) 9 SCC 534, the Hon’ble Supreme Court held that: –
“Now, what needs to be emphasised is that the obligation on the assessee to disclose the material facts — or what are called, primary facts — is not a mere disclosure but a disclosure which is full and true. A false disclosure is not a true disclosure. The disclosure must not only be true but must be full — “fully and truly”. A false assertion, or statement, of material fact, therefore, attracts the jurisdiction of the Income Tax Officer under Sections 34/147. Take this very case: the Income Tax Officer says that on the basis of investigations and enquiries made during the assessment proceedings relating to the subsequent assessment year, he has come into possession of material, on the basis of which, he has reasons to believe that the assessee had put forward certain bogus and false unsecured hundi loans said to have been taken by him from non-existent persons or his dummies, as the case may be, and that on that account income chargeable to tax has escaped assessment. According to him, this was a false assertion to the knowledge of the assessee. The Income Tax Officer says that during the assessment relating to subsequent assessment year, similar loans (from some of these very persons) were found to be bogus. On that basis, he seeks to reopen the assessment. It is necessary to remember that we are at the stage of reopening only. The question is whether, in the above circumstances, the assessee can say, with any justification, that he had fully and truly disclosed the material facts necessary for his assessment for that year. Having created and recorded bogus entries of loans, with what face can the assessee say that he had truly and fully disclosed all material facts necessary for his assessment for that year? True it is that Income Tax Officer could have investigated the truth of the said assertion — which he actually did in the subsequent assessment year — but that does not relieve the assessee of his obligation, placed upon him by the statute, to disclose fully and truly all material facts. Indubitably, whether a loan, alleged to have been taken by the assessee, is true or false, is a material fact — and not an inference, factual or legal, to be drawn from given facts. In this case, it is shown to us that ten persons (who are alleged to have advanced loans to the assessee in a total sum of Rs 3,80,000 out of the total hundi loans of Rs 8,53,298) were established to be bogus persons or mere name-lenders in the assessment proceedings relating to the subsequent assessment year. Does it not furnish a reasonable ground for the Income Tax Officer to believe that on account of the failure — indeed not a mere failure but a positive design to mislead — of the assessee to disclose all material facts, fully and truly, necessary for his assessment for that year, income has escaped assessment? We are of the firm opinion that it does. It is necessary to reiterate that we are now at the stage of the validity of the notice under Sections 148/147. The enquiry at this stage is only to see whether there are reasonable grounds for the Income Tax Officer to believe and not whether the omission/failure and the escapement of income is established. It is necessary to keep this distinction in mind.
10. A recent decision of this Court in Phool Chand Bajrang Lal v. ITO, we are gratified to note, adopts an identical view of law and we are in respectful agreement with it. The decision rightly emphasises the obligation of the assessee to disclose all material facts necessary for making his assessment fully and truly. A false disclosure, it is held, does not satisfy the said requirement. We are also in respectful agreement with the following holding in the said decision”
(Emphasis supplied)
23. From the reasons for initiating the process of re-assessment, we find that the aforesaid facts regarding the petitioner’s dealings with shell companies for routing its own unaccounted money into its books of accounts had not been truly and fully disclosed by the petitioner during the original assessment and scrutiny assessment, though the information was embedded in the records produced before the A.O. and could be found out on a detailed scrutiny and investigation. On the basis of information received subsequently, the A.O. has formulated a reason to believe that the petitioner’s income amounting to Rs.95,00,000/- has escaped assessment and this reason cannot be said to have been formulated on the basis of information already available before the A.O. Therefore, the submission to this effect made by the learned Counsel for the petitioner cannot be accepted.
24. Now we consider the next submission made on behalf of the petitioner, that the initiation of the proceedings under Sections 147 / 148 of the Act is based on a review of the existing material, which is not permissible in law. From the discussion made above, it is clear that the fact that the petitioner had routed its undisclosed funds amounting to Rs.95,00,000/- through entry providers and absorbed it in its books of accounts by way of accommodation entries of prearranged share application money and share premium with the help of a syndicate of operators and thus an unaccounted money of the petitioner amounting to Rs.95,00,000/- was routed to its books of accounts, had not been examined by the AO during the original assessment for want of a full and true disclosure of facts by the petitioner. Therefore, the A.O. did not examine the aforesaid issues and he did not form an opinion regarding the same during the original assessment proceedings.
25. The meaning of the expression “change of opinion” has been explained by the Hon’ble Supreme Court in CIT v. Techspan India (P) Ltd., (2018) 6 SCC 685, in the following words: –
“16. To check whether it is a case of change of opinion or not one has to see its meaning in literal as well as legal terms. The words “change of opinion” imply formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by an assessing officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection.
17. It is well settled and held by this Court in a catena of judgments and it would be sufficient to refer to CIT v. Kelvinator of India Ltd. wherein this Court has held as under: (SCC p. 725, para 5-7)
“5. … where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words “reason to believe”…. Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of “mere change of opinion”, which cannot be per se reason to reopen.
6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place.
7. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the assessing officer. Hence, after 1-41989, assessing officer has power to reopen, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.”
18. Before interfering with the proposed reopening of the assessment on the ground that the same is based only on a change in 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. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the reassessment proceedings.”
(Emphasis supplied)
26.In the present case, during the original assessment the A.O. had not formed any opinion in respect of the facts regarding routing of funds in the garb of share premium, which surfaced from the information received from the ADIT (Inv.), Unit – 6, Kolkata, the ACIT, Circle – 3 (2), New Delhi and the ITO (Inv.), Unit – 4, Kolkata. It was after receipt of this information, that the A.O. examined the records and found that the petitioner had received funds to the tune of Rs.95,00,000/- by way of routing funds materialized by M/s Radha Fincom Pvt. Ltd. & others, which were found to be merely paper concerns having no existent and real business. In this way, the unaccounted money of the petitioner amounting to Rs.95,00,000/-was routed to its books of accounts.
27. Regarding the submission of the learned Counsel for the petitioner, that assessment of the petitioner as well as that of M/s Arohul Foods Pvt. Ltd., which is a sister concern of the petitioner, was re-opened under Section 148 of the Act for A.Y. 2012-13 on similar issue, where re-opening of the case in the matter of M/s Arohul Foods Pvt. Ltd. was quashed by the ITAT, Lucknow Bench vide order dated 11-08-2021, it has been stated in the Counter affidavit that the department has not accepted the order of the ITAT and has challenged the order by filing an appeal under Section 260 A of the Act. Even otherwise, an order passed by the ITAT would not be relevant when the validity of the re-assessment is being examined by this Court in a Writ Petition.
28. Regarding the petitioner’s submission that the proceedings initiated after a lapse of more than four years are barred by the First Proviso appended to Section 147 of the Act, we find that Section 147 of the Act, as it stood at the relevant time, was as follows: –
“147. Income escaping assessment.— If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year):
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 year:
…………
Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.”
(Emphasis supplied)
29. As is evident from the discussion made in the preceding paragraphs of this judgment, the facts regarding the petitioner’s dealings with shell companies for routing its own unaccounted money into its books of accounts had not been truly and fully disclosed by the petitioner during the original assessment and scrutiny assessment. Therefore, the present case falls within the exception carved out in the First proviso, “unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assesse to disclose fully and truly all material facts necessary for his assessment, for that assessment year and the bar of initiating re-assessment proceedings after a lapse of four years since the original assessment contained in the First Proviso appended to Section 147 of the Act, would not apply to the present case. The information was embedded in the records produced before the A.O. and could be found on a detailed scrutiny and investigation, it would not make it a true and full disclosure and as per the Explanation 1 appended to Section 147 of the Act. Therefore, the submission to this effect made by the learned Counsel for the petitioner cannot be accepted.
30. Keeping into view the scope of power of judicial review while scrutinizing a notice issued under Section 148 of the Act as explained in Raymond woolen Mills Ltd. (1) and (2) and Phool Chand Bajarang Lal and Srikrishna (Supra), we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not and the sufficiency or correctness of the material need not be considered at this stage. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after receipt of information and conducting an investigation and after forming a reason to believe that the petitioner did not truly and fully disclose all the material facts because of which income amounting to Rs. 95,00,000/- has escaped assessment. We are satisfied that there is prima facie material available on record before the assessing officer for issuing a notice for reassessment. Thus, the notice under Section 148 as well as the order dated 03-03-2022 passed by the National Faceless Assessment Centre rejecting the petitioner’s objections against issuance of the notice, do not suffer from any such illegality as to warrant interference by this Court in exercise of its Writ Jurisdiction.
31. The Writ Petition lacks merits and is, accordingly, dismissed. However, there will be no order as to costs.
Order Date:-11-04-2022
