TaxTMI 
TaxTMI 
2026 (5) TMI 999
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....red. 2. Ground No. 2 The Ld. Commissioner of Income Tax has erred in not considering that the re-opening of assessment u/s 147 was initiated merely on account of a "change of opinion" or for conducting "further enquiry" on facts that were already available and duly examined during the original assessment u/s 143(3). Therefore, the re-opening is invalid and liable to be quashed. 3. Ground No. 3 Without prejudice to Grounds 1 and 2, the Ld. Commissioner of Income Tax has erred in disregarding the detailed submissions placed on record and in treating genuine purchases amounting to Rs. 6,86,16,409/- as bogus, thereby making an unjustified and unwarranted disallowance. The said disallowance deserves to be deleted. 4. Ground No. 4 Without prejudice to the above grounds, the Ld. Commissioner of Income Tax has erred in making an addition of the entire purchase value instead of restricting the addition, if any, only to the profit element embedded therein. The excessive and unreasonable addition therefore requires to be deleted." 3. Brief facts of the case are that the assessee is a partnership firm and income of Rs. 34,77,401/- declar....
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....the Assessing Officer who after examining the same has accepted the transaction and has not made any addition. He further submitted that on the basis of very same information now the Assessing Officer has made addition for the bogus purchases which is a mere change of opinion and in light of the settled judicial precedents the same is uncalled for. Reliance placed on the various decisions including that of Hon'ble Jurisdictional High Court in the case of Lupin Limited Vs. DCIT - Writ Petition No.1530 of 2022 dated 18.02.2025. 6. On the other hand, ld. DR submitted that the objections raised by the assessee have been duly disposed of and since the assessee could not produce the bank statement of suppliers, their tax returns, purchases remained unverified and therefore the reopening is valid. 7. We have heard the rival contentions and perused the record placed before us. The legal issue has been raised by the assessee challenging the validity of reassessment proceedings carried out beyond four years from the end of relevant assessment year on the ground that without any independent investigation and new information, ld. Assessing Officer has carried out the reassessment proceed....
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.... has been incurring losses since its inception. The earnings per share (EPS) on the assessee company's shares for AY 2010-11 (Previous year) shows a loss of Rs. 392.48/- per share. There was hardly any networth in the company to justify such high Premium. Further, there has been no submission on the part of the assessee to explain the reason behind high Premium. If we consider the assessee's reserves, profits and earnings for the said AY, even they do not justify the huge Premium. Thus the Premium received is unreasonable. The Hon'ble Bombay High court in the case of Major Metals Ltd Vs Union of India (207 Taxmann.com 185) has upheld the addition of the entire amount of share capital on the ground that if the shares are issued at unjustifiable amount of premium the entire transaction is sham. In view of the above, I therefore have reasons to believe that the income chargeable to tax for AY 2011-12 has escaped assessment and is likely to amount to one lakh rupee or more for AY 2011-12 as per the provisions of section 147 of the Act. Requirements: 1. As per request the copy of the reasons is enclosed herewith for your information. 2. Pa....
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....iso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.] [Explanation 3.-For the purpose of assessment or reassessment under....
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....have been wrongly claimed by the assessee which have been wrongly considered for the set off of the unit of Kundaim which has resulted in escapement of income. Nowhere has the AO stated that there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Having regard to the purpose of the section, we are of the view that the power conferred by s. 147 does not provide a fresh opportunity to the AO to correct an incorrect assessment made earlier unless the mistake in the assessment so made is the result of a failure of the assessee to fully and truly disclose all material facts necessary for assessment. Indeed, where the assessee has fully disclosed all the material facts, it is not open for the AO to reopen the assessment on the ground that there is a mistake in assessment. Moreover, it is necessary for the AO to first observe whether there is a failure to disclose fully and truly all material facts necessary for assessment and having observed that there is such a failure to proceed under s. 147. It must follow that where the AO does not record such a failure he would not be entitled to proceed under s. 147. As observed earl....
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....er 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." 7. From the aforesaid, it is clear that where the assessment under sub section (3) of Section 143 of the Act has been made for the relevant assessment year, no action can be taken under Section 147 of the Act 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 respo....
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....o, the assessee has under stated its income amounting to Rs. 1,11,15,796/- under the book profit u/s. 115JA of the IT Act. Further it is seen that the assessee were debiting capital expenditure of various types such as loss on sale of assets, etc. which were inadmissible as per the normal provisions of the act and were added back for computing the income under the normal provisions of the Act. By debiting such excessive and inadmissible capital expenditure to the profit and loss accounts, the assessee's succeeded in declaring less net profit and there by less book profits. By doing so, the assessee has under stated its income under the book profit u/s 115JA of the IT Act. By doing so, the assessee understated the income under the book profit u/s 115JA of the IT Act to the above extent. I am, therefore, satisfied that this is a fit case to be re-opened u/s. 147 of the IT Act, 1961. Since, assessment u/s. 143(3) has been completed and a period of four years from the end of the relevant assessment year has lapsed, hence, the case needs to be approved by the Commissioner of Income tax, City-6, Mumbai under the provisions of section 151(1) of the I.T. Act, 1961. Theref....
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.... of concluded assessment. The reasons so recorded and disclosed, cannot even be supplemented by filing affidavits or making oral submissions. 12. In the context of the reasons recorded, it is to be noted that in the present case apart from there being no allegation therein that there was any failure on the part of the petitioner to fully and truly disclose all material facts necessary for assessment, even otherwise, the reasons as recorded give no clue whatsoever as to the alleged failure on the part of the petitioner in disclosing fully and truly, the material facts necessary for its assessment. The reasons as recorded, in any case, do not disclose any particular fact or material that was allegedly not disclosed by the petitioner during the regular assessment proceedings under Section 143(3) of the Act. Clearly, therefore, the jurisdictional parameter, for invoking the provisions of Section 147 of the Act is absent, in the present case on both the grounds mentioned in the reasons in support of the impugned notice. In fact, in the revised return of income filed by the petitioner on 31 March 2000 along with the profit and loss account are perused, it is evident that full an....
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....ed in the reasons recorded. Admittedly, assessee has filed regular return of income on 30.09.2011 declaring loss of Rs. 10.99 crore approx. which has been further revised on 22.03.2012 declaring the same amount of loss at Rs. 10.99 crore approx. and the regular assessment proceedings u/s. 143(3) of the Act concluded on 20.03.2014. 17. In the reasons recorded (referred supra), ld. Assessing Officer has referred to the transaction of issue of 1,95,589 Equity shares of face value of Rs. 10/- each at a premium of Rs. 1,584/- per share to three parties namely Ambit Pragma Fund Scheme-I at Rs. 5,85,41,244/-, Rainbow Ventures Limited, Mauritius at Rs. 24,18,57,910/- and Prasanna Patwardhan at Rs. 37,74,672/-. Ld. Assessing Officer thereafter has referred to the increase in the shareholder fund from Rs. 19.38 crore to Rs. 49.43 crore as on 31.03.2011. Reference has also been made to the earning per share of the company and there being no justification for the issue of shares at such a high premium. Apparently, in the reasons recorded, ld. Assessing Officer has not referred to any independent information or new documents which has come to the knowledge of the Assessing Officer post....
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....ssment records and apart from that there is no other new information regarding the share applicants namely Rainbow Ventures Limited and Ambit Pragma Fund Scheme-1 which could form a basis for reopening the completed assessment beyond four years. Certainly on the issue of change of opinion the tribunal has already decided against the assessee, however, for the second limb of legal argument it remains an admitted fact that ld. Assessing Officer has not referred to any other material information or document which has not been furnished by the assessee during the course of regular assessment proceedings or in the return of income filed by it. Therefore, in absence of any failure on the part of the assessee to disclose truly and fully all material facts relating to the reasons mentioned in the reasons recorded for reopening, we find that in the given case where a valid return of income with all supporting documents were filed and assessment proceeding u/s. 143(3) of the Act for the veery same assessment year stands concluded, therefore the alleged reopening of assessment u/s. 147 of the Act is bad in law and deserves to be quashed and for this we place reliance on the judgment of Hon'bl....
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....rchases by the assessee but accepted the contention that no disallowance is needed as the assessee could show correlation between the purchases and sales. In the case cited above as well as in many other cases tribunals and courts have accepted the fact that the assesse do buy goods in the grey market for considerable lower cost and then to regularized these purchase obtain accommodation invoices showing much higher value giving them advantage of not only booking the purchases as well as to lower their total taxable profit in them advantage of not only booking the books. Hence the courts have accepted the fact that in such cases the assessee will be able to show correlation between purchase and sales even when the invoices are not genuine and that the such non genuine parties may have accepted cheques in lieu of accommodation entries. It was seen that in this case that sale tax department had established the seller as Hawala dealers and had cancelled their sales tax registration. Further the department did not call for documents from any of the dealers who had given the invoice to establish the genuineness of the sellers and seeing whether the sellers had made any....
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....orded stating as under : "Nov, 19 2018 To, The Asst. Commissioner of Income Tax, Circle 14, Pune Subject: Income Tax Assessment Ref: Sri Sidhivinayak Marketing/PAN: ABGFS8797K/AY 2011-12 Sir. We have received the reasons recorded for the issue of notice u/s 148 of Income Tax Act. The assessee has gone through the reasons recorded for reopening of the assessment and the assessee objects to the reopening of the assessment for the following reasons: 1. The primary reason for the issue of notice has been mentioned as "purchases from dealers listed in the Hawala dealers list circulated by the Sales Tax Office". The Ld. Assessing Officer had verified the transactions at the time of the assessment as the list was available at the time of assessment. In fact specific questions were asked during the course of assessment on the same and the Ld. Assessing Officer verified the invoices, ledgers, confirmation, payments as well as stock register. Only after fully verifying the data, the assessing officer had treated the purchases as genuine and allowed the expenditure. Thus, any reopening on the verified fa....
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.... to the details available in the assessment records. Now to examine the contention of ld. Counsel for the assessee, we move on to deal with order sheet details filed during the course of regular assessment proceedings on 13.03.2013. Ld. Assessing Officer has observed that "Manish Somani, CA attended and submitted copy return along with financial statements, Audit report for last three years and balance details are required to be submitted on 22.03.2013. Further, the information regarding Hawala purchases have been received in this office for F.Y. 2008-09, at Rs. 4,60,98,114/-. He has to produce all purchase bills along with relevant documents for verification. Details should be submitted by 18.03.2013. 12. The above observation of the Assessing Officer clearly indicates that the issue of Hawala purchase has been taken up in the regular assessment proceedings itself and assessee was asked to produce the purchase bills along with the details. We further note that on 14.03.2013 ld. Assessing Officer observed that "Manish Somani, CA attended along with Shri Rajesh Baheti, partner of M/s. Sidhivinayak Marketing (which is one of the partner of the assessee firm). He was asked to submi....
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....eged three parties. This is a clear case of "change of opinion" and ld. Assessing Officer is not allowed to reassess the assessee on the very same issue on which the assessee has already passed through regular scrutiny proceedings and has furnished the relevant details to the satisfaction of the Assessing Officer. We also take note of the recent decision of Hon'ble Jurisdictional High Court in the case of Lupin Limited (supra) where the Hon'ble Court has held that even in a case where the reopening is within four years, still, in the absence of any fresh tangible material coming to the knowledge of the Assessing Officer, reopening of the assessment only on re-examination of the very same material based on which the original assessment order was passed cannot be permitted. Hon'ble Court has further held that on the ground that some other view was possible, the Assessing Officer could not have changed his earlier opinion and, based upon such change of opinion, issued the impugned notice seeking to reopen the assessment. Hon'ble Court thus held that for all these reasons, the impugned notice and the consequential orders will have to be set aside. Case of the assessee is on much strong....