TaxTMI 
TaxTMI 
2023 (10) TMI 460
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....gnoring that reassessment proceeding are based on fresh facts/information rather than change of opinion. 2. Whether on the fact and in the circumstances of the case in law, the Ld.CIT(A) erred in ignoring that confirmation of concealment of income/disclosure made in statement recorded during Survey u/s 133A of Act is an information, though not conclusive, which may be used in regular assessment or reassessment proceedings. 3. Whether on the fact and in the circumstances of the case in law, the Ld.CIT(A) has over relied upon the outcomes of original assessment and completely ignored the fact that assessee had not disclosed fully and truly all the necessary facts during scrutiny assessment. This becomes evident from the detailed findings of assessment order dated 30.12.2018 u/s 143(3) r.w.s. 147 of act which makes it amply clear that the lender companies are merely paper companies which lacks' commercial/financial substance and also appear in the SEBI's list of shell companies. 4. Whether on the fact an in the circumstances of the case and in law, The Ld. CIT(A) erred incompletely ignoring the decision of Hon'ble SC in the case of Bannalal Jat Construction (P) Ltd v....
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....funds received in the garb of share capital and by taking reference of the statements of Sri Shyam Sundar Agrawal held that the appellant failed to explain identity and credit worthiness of the investors as well as genuineness of the transaction. Therefore, the Ld AO after considering entire facts made addition in the hands of appellant on account of unexplained share application money under section 68 of the Act. Being aggrieved with the assessment order, the assessee preferred an appeal before Ld CIT(A), wherein the assessee succeeded to have its ground of appeal allowed, raised pertaining to legality of assessment passed u/s 147 r.w.s. 143(3) of the Act. Now the department is in appeal before us against the order of Ld CIT(A). 3. At the outset Ld CIT DR submitted that the case of the assessee was reopened u/s 148 of Act when the survey u/s 133A was conducted on the premises of the assessee company and it was noticed that the assessee has received an amount of Rs. 1,87,50,000/- in the form, of share application money from 19 Kolkata based companies, which are being identified as the paper / jamakhrchee companies with no creditworthiness of their own. During the reassessment proc....
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.... these impugned assessments are ab-initio-void; the substratum to give a reason to believe that income chargeable to tax has escaped assessment, is vitiated in this case; the impugned reassessment is not sustainable in law; once the statements said to have been recorded u/s 132(4)/133A were withdrawn then there existed no material on record to warrant reopening of the case against the assessee u/s 148; if the very basis on which reopening was ordered did not exist, there was no que for reopening of the case; this material aspect of the matter has not been considered by the AO, who proceeded to direct reopening of the case, without there being any legally admissible evidence available on record; thus, the very issuance of notice u/s 148 is found to be illegal and absolutely without jurisdiction; (B) no additions could be made on the basis of those retracted statements, when the ld AO himself has accepted the retraction as such and not made addition in AY 18-19 (i.e., the survey year) as per the survey statement; Dr J Mohan (2012) (Chen-Trib) dt.23-4-1221 taxmann.com 477 Dr N Thippa Setty (2010) (Kar HC) dt.9-4-08 322 ITR 525 Mono Orion Food India PL (2019) (Kol-Trib) dt.4-....
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....fficer only u/s 132(4) in the course of any search or seizure. Thus, the IT Act, whenever it thought fit and necessary to confer such power to examine a person on oath, as expressly provided for it, whereas sec133A does not empower any ITO to examine any person on oath. Thus, in contradistinction to the power u/s 133A, sec132(4) enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the IT Act. The Court held that whatever statement recorded u/s 133A is not given an evidentiary value. 12. S Khader Khan Son (2008) (Mad) had considered the very same issue. The hon'ble HC has laid down the principles relating to sec 133A as follows: "(i) An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts; (ii) in contradistinction to the power u/s 133A, sec132(4) enables the authorised officer to examine a person on oa....
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.... case, a statement was obtained in the course of survey and thereafter that was retracted and on that basis the Tribunal held that no addition can be made in the hands of the assessee. 15. Therefore, in the facts and circumstances of the case, we hold that the substratum to give a reason to believe that income chargeable to tax has escaped assessment, is vitiated in these cases. Therefore, the impugned reassessments are not sustainable in law. They are accordingly set aside." 2.2. It is submitted that Dr N Thippa Setty (2010) 322 ITR 525 (Kar) dt.9-4- 08, held as under: "39. It is further pertinent to mention here that once the statements said to have been recorded u/s 132(4) were withdrawn then there existed no material on record to warrant reopening of the case against the assessee u/s 148. If the very basis on which reopening was ordered did not exist, there was no que for reopening of the case. This material aspect of the matter has not been considered by the AO, who proceeded to direct reopening of the case, without there being any legally admissible evidence available on record. Thus, the very issuance of notice u/s 148 is found to be illegal and absolutely withou....
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.... and genuineness of a transaction cannot be proved in spot enquiry during survey. Hence, as in the case of reasons recorded for reopening for AY 09-10, the reopening of assessment for AY 10-11 is also bad in law. 23. We also find that there is no independent application of mind by the AO to the information received from the Inv. Wing. Suspicion cannot take place of proof or evidence. Though it is true that conclusive evidences need not be brought on record at the time of recording of reasons, there should be some verification which should lead to the formation of belief that income subject to tax has escaped assessment. Vague statement, wrong recording of facts in the reasons recorded for reopening, render the reassessment bad in law. Applying the propositions of law laid down in the case laws discussed while disposing off the case for AY 09-10 to the facts of the case for AY 10- 11, we hold that the reopening is bad in law." 5. With the aforesaid submission Ld AR of the assessee further drew our attention to the order of Ld CIT(A), wherein the order of the Ld AO was held to be illegal on the ground that it was not justified in making the additions under reassessment proceed....
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....name change certificate enclosed), which we also came to know when we enquired into the matter after we received your current notice. We are enclosing herewith a fresh list with current address of all the companies. We are also furnishing herewith a printout of master data from the website of ministry of company affairs and also a copy of the Income Tax Return of all the companies for A Y 2012-13. The documents as above sufficiently explain the identity of these companies and also prove beyond doubt that they are existent and functioning too. Hence, the amount of share capital subscribed by the company shall not be added to company. This view has been taken in a number of case by various courts including CG High Court in the case of Vankateshwar Ispat Ltd 319 ITR page 393 and Supreme Court in case of Lovely Exports (P) Ltd (2008) 216 CTR 195. Hence, in view of the above we hereby request you to please take a judicious view in the matter. It has been found that during original assessment proceedings the then AO vide order sheet entry dated 31.10.2014 after perusal of books of account of the appellant furnished by ld AR of the appellant require the appellant to furnish complete....
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....has already been retracted during assessment proceedings vide letter dated 31.10.2018 and affidavit dated 14.06.2018. During assessment proceedings statement of Shri Shyam Sunder Agrawal was again recorded on oath wherein he has admitted that the statement given during survey proceedings was under coercion and pressure. Thus, reassessment proceedings has been initiated merely on the basis of statement of Shri Shyam Sunder Agrawal and the documents relating to subject issue were already available on the record of the AO and no new tangible material has been brought on record by the AO. Statements of Shri Shyam sunder Agrawal, Director in the appellant company were recorded during the survey proceedings by issuing summons u/s . 131 of the Act which he at later stage retracted by filing an affidavit dated 14.06.2018 and letter dated 31.10.2018. On perusal of statements recorded / reasons recorded / assessment order, it has been found that the statements of Shri Shyam Sunder Agrawal were not based upon any evidence showing, the share capital received from 19 Kolkata based companies, bogus, recovered during the survey proceedings. The only basis of proceedings u/s . 147 of the Act was t....
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....ng the course of search &seizure and survey operation" which says that: "Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search &seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments " CBDT has again reiterated the same vide letter F.No. 286/98/2013-IT (Invil) 18.12.2014. It is evident from the record that in the case of the appellant, the statements taken on oath u/s . 131 of the Act were not based upon any evidence or fresh material found in the course of survey proceedings which ultimately, therefore, led to retraction. Statement taken even u/s . 132(4) of the Act cannot be used as a conclusive eviden....
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....he seized books of accounts, other documents, money, bullion, jewellery or other valuable articles or things. In view of the above discussion, the statement of Shri Shyam Sunder Agrawal cannot be treated as conclusive evidence which could be termed as fresh material on the record for the purposes of recoding reasons for reopening of assessment of the appellant under the provisions of section 147 of the Act. 3.1.4 The said transaction is fully recorded in audited books of account of the appellant and appellant has discharged its onus of proving identity & creditworthiness of the investors and genuineness of the transaction. Thus, as per appellant, there was no failure on the part of the assessee to disclose full and true material facts necessary for the assessment before the AO. As far as the observations of the AO are concerned, it has been observed by the AO that the all the investor companies are paper/shell companies and are involved in providing bogus accommodation entries by way of bogus share application money. the appellant has brought back its own unaccounted money in the form of share application money. Having arrived to this conclusion, AO formed his belief that the i....
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....e change of opinion and therefore would be completely without jurisdiction in the present facts. Accordingly, the impugned notice dated 27 March 2019 is quashed and set aside. In the circumstances, we see no reason to interfere in the matter. This Special Leave petition is, accordingly, dismissed" Thus, the view taken by Hon'ble Bombay High Court was affirmed. The operative portion of the decision of Hon'ble Bombay High Court is reproduced as under:- 6. We have considered the rival submissions. It is a settled position in law that the power to reopen an assessment within a period of four years from the end of the relevant assessment year, even when the assessment has been made under Section 143(3) of the Act, is not curtailed by the proviso to Section 147 of the Act. Therefore, even where an assessee has disclosed all material facts truly and fully for assessment and assessment is completed under Section 143(3) of the Act, the reopening is permissible within a period of four years from the end of the relevant assessment year. The only condition precedent for exercising the jurisdiction to reopen an assessment, is the Assessing Officer should have reasonable belief tha....
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....he Act. It was also explained that under subsection 6 of Section 211 of the Companies Act, reference to a balance sheet or profit and loss account would also include any notes thereto or documents annexed thereto. Thus the notes to the account should be taken into account to determine the net profits for working out the book profits in terms of Section 115JB of the Act. The Assessing Officer thereafter proceeded to pass an assessment order dated 30 January 2018 under Section 143(3) of the Act and did not make the proposed disallowance. 10. It is undisputed position before us, that query was raised on the very issue of reopening during regular Assessment proceedings. The parties have responded to it and the Assessment Order dated 30 January 2018 makes no reference to the above issue at all. However, once a query has been raised by the Assessing Officer during the assessment proceedings and the assessee has responded to that query, it would necessarily follow, as held by our Court that the Assessing Officer has accepted the Petitioner 's/Assessee 's submissions, so as to not deal with that issue in the assessment order. In fact, our Court in GKN Sinter Metals Ltd. V/s. Ms. ....
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....inion while passing the order dated 9th March, 2005. This Court in Aroni Commercials Ltd. v/s. Assistant Commissioner of Income Tax 367 ITR 405 had occasion to consider somewhat similar submission made by the Revenue and negatived the same by holding that when a query has been raised with regard to a particular issue during the regular assessment proceedings, it must follow that the Assessing Officer had applied his mind and taken a view in the matter as is reflected in the Assessment Order. Besides, the manner in which an Assessing Officer would draft/frame his order is not within the control of an assessee. Moreover, if every contention raised by the assessee which even if accepted is to be reflected in the assessment order, then as observed by the Gujarat High Court in CIT v/s. Nirma Chemicals Ltd. 305 ITR 607, the order would result into an epic tome. Besides, it would be impossible for the Assessing Officer to complete all the assessments which have to under gone scrutiny at its hand. In the above view, it is clear that once a query has been raised during the assessment proceedings and the Petitioner has responded to the query to the satisfaction of the Assessing Officer as is....
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....sessment proceedings were initiated were already examined in depth by the AO during original assessment proceedings. The AO was satisfied on this issue during the original assessment proceedings and therefore, no adverse view had been taken. In such a scenario, ld. AO not having any fresh information/material in his possession which could be formed his belief about escapement of income. In view of the above judgment of Hon'ble Supreme Court and many other judicial pronouncements, it is well settled position that mere fresh application of mind to the same set of facts does not confer jurisdiction on the AO to assume jurisdiction u/s 147 of the Act and to issue notice u/s 148 of the Act. This amounts to change of opinion on the basis of which any assessment cannot be reopened. In the light of these discussions the assessment framed u/s 143(3) r.w.s 147 of the Act is not sustainable in the eyes of law. 3.1.7 Another moot question which arises here is the applicability of first proviso to section 147 of the Act. As per the first proviso to section 147 of the Act, where an assessment under sub section (3) of section 143 or section 147 of the Act has been made for the relevant asse....
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....ressions were examined and interpreted in great detail by Hon'ble Supreme Court in ITO vs. Lakhmani Mewal Das, 103 ITR 437 (SC). Hon'ble Court in the said judgment has considered validity of notice u/s 148 of the Act in respect of an assessment beyond the period of four years but within a period of eight years (now six years) from the end of the relevant year, which is also a fact of the instant case. Hon'ble Court observed that in such a case, where notice was issued beyond four years but within period of eight years (now six years), two conditions would have to be satisfied by the AO before acquires jurisdiction to issue notice u/s 148 of the Act. These two conditions are conditions are (i) He must have reason to believe that income chargeable to tax has escaped assessment; and (ii) He must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to make a return under section 139 for the assessment year under consideration or to disclose fully and truly all material facts necessary for his assessment for that year. Both the requisite conditions must co-exit in order to confer jurisdiction by....
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.... Shri Shyam Sunder Agrawal and without having any positive evidence on record. No other/fresh material/evidence has been mentioned in the reasons recorded which conclusively suggest such claim of the assessee was bogus and hence, there was income escaped from assessment. As discussed earlier the statement of Shri Shyam Sunder Agrawal is not a fresh material unearth in the source of survey proceedings. Thus, the AO had no material to reason to believe that there was income escaped from the assessment. Hon'ble Bombay High Court in the case of Hindustan Liver Limited 268 ITR 332 has held as under: "The reason recorded for issuing notice provide the link between conclusion and evidence. The reason recoded must be based on evidence. The Assessing Officer in the event of challenge to the reason, must be able to justify the same based on material available on record. He must disclosed in the reason a to which fact or material not disclosed by the assessee fully and truly was necessary for assessment of that year, so as to establish the vital link between the reasons and evidence." Therefore, reasons recorded for reopening of completed assessment lead to the fact that the impugned ....
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..../s 147 r.w.s. 143(3) of the IT Act. The basis for reopening of assessment is vitiated since the statement recorded on oath u/s 132(4)/133A were withdrawn then there was no material on record exists to form the basis for initiating the reopening proceedings. It was further submitted by the Ld AR that as the reopening proceedings were initiated assessment beyond the period of four years but within a period of eight years (now six years) from the end of the relevant year but no fresh material have been brought on the record by the Ld AO with which it can be established that the Ld AO (i) have reason to believe that income chargeable to tax has escaped assessment; and, (ii) have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to make a return under section 139 for the assessment year under consideration or to disclose fully and truly all material facts necessary for his assessment for that year. On the contrary assessee had proved by showing order sheet entries and other supporting documents before the Ld CIT(A) that all the required documents pertaining to the transaction of Share Capital in question were duly ....
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....nd genuineness of transaction u/s 68 of the Act and Ld CIT(A) erred in ignoring that reassessment proceedings are based on fresh facts/ information rather that change of opinion cannot be subscribed to. The contention of the department that statement recorded during the survey u/s 133A of Act is an information, though not conclusive, which may be used in regular assessment or reassessment proceedings is worth consideration and in compliance of 1st Proviso to section 147 that the assessee was failed to disclose fully and truly all material facts necessary for assessment, however reopening entirely based on statement which were later retracted of the key person of the assessee company without any supporting evidences to dislodge the contentions of assessee under the retraction on statements during the survey operations. Under such circumstances the finding of the Ld CIT(A) supported with judicial pronouncements supra and Relevant circulars of CBDT 286/2/2003-IT (inv) dated 10.03.2003 regarding confession of the assessee during search and seizure and survey operations, if not based on credible evidence are later retracted do not serve any purpose. Another CBDT circular 286/98/2013-IT ....
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....e to make a return under section 139 for the assessment year under consideration or to disclose fully and truly all material facts necessary for his assessment for that year. In the present case since a new fact was admitted by the assessee by way of statement which was not there before the Ld AO when the original assessment u/s 143(3) was framed, thus, the twin conditions mandated in 1st proviso to section 147 are satisfied and we hold that reopening u/s 147 was validly initiated by the Ld AO. We therefore are not in concurrence with the finding of Ld CIT(A) on this aspect that the reopening was illegal as no fresh material was available with the AO to do so. In the result Ground no 2 of the revenue is allowed. 9. Coming to the issue of addition when the assessee had retracted from the statements given during the survey operations. In the present case for the relevant assessment year the assessee first admitted and surrendered a sum of Rs. 1,87,50,000/- as unexplained / undisclosed income. It was the submission of assessee that the combined retraction of the assessee for 3 AY's was accepted by the Ld AO which is evident from the assessment order for one of the AY i.e. 2018-19 whe....
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....sment based on the very same material with a view to take another view". 10. Under such scenario, we are of the considered opinion that the AO has failed to explain how the appellant has not discharged the onus cast upon it u/s 68 of Act, while the primary information was already made available by the assessee, no new fact could be brought on the record by the department, the basis for reopening i.e. statement of the assessee was available only till the assessee had retracted from the same. Departments plea, relying upon the judgment in the case of Bannalal Jat Constructions (P) Ltd Vs DCIT (2009) 106 Taxmann.com 128 (SC) that retraction of the assessee should be supported by strong evidence that the earlier statement was under duress and coercion cannot be accepted, when the department is obligated to follow circular of CBDT 286/2/2003-IT (inv) dated 10.03.2003 regarding confession of the assessee during search and seizure and survey operations, if not based on credible evidence are later retracted do not serve any purpose. Another CBDT circular 286/98/2013-IT (Inv.11) 18.12.2014 states that Statement taken even u/s . 132(4) of the Act cannot be used as conclusive evidence if it ....