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February, 27th 2013
%                                 Judgment delivered on: 11.2.2013

+       ITA 271/2012

        CIT                                                    ..... Appellant

        PVT LTD.                                             ... Respondent

Advocates who appeared in this case:
For the Petitioner : Mr Karan Khanna, Sr.Standing counsel for the Revenue
                     Department of Income Tax with Ms Asmita Kumar,
For the Respondent : Mr S. Krishnan, Advocate.




        This appeal under Section 260A of the Income Tax Act, 1961 has

been filed by the Revenue being aggrieved by the order dated 18.11.2011

in ITA No.4652/DEL/2009 pertaining to the assessment year 2002-03.

These proceedings were initiated on the basis of a notice under Section

148 of the said Act issued by the Assessing Officer to the respondent-

assessee for re-opening of the assessment pertaining to the said

assessment year 2002-03. The said notice was issued on 30.07.2007

ITA 271/2012                                                        Page 1 of 9
beyond the period of four years and, therefore, the respondent-assessee

had raised the issue as to whether the Assessing Officer had jurisdiction

at all to issue the said notice inasmuch as the provisions of Proviso to

Section 147 would become applicable. One of the pre-conditions for

invoking Proviso is that there must be failure on the part of the assessee

to disclose fully and truly all material facts necessary for the purpose of

assessment. It was the case of the respondent-assessee that this pre-

condition had not been satisfied and, in fact, there was no mention of any

failure to disclose the material facts in the reasons which have been

recorded.      However, the Assessing Officer went ahead with the re-

assessment and completed the same on 30.12.2008 whereby he made an

addition of `77 lakhs on account of said amount having allegedly escaped

assessment in the first round when the assessment was originally framed

under Section 143(3) of the said Act on 22.12.2004.

2.      The respondent-assessee was aggrieved by the said addition, and,

therefore, filed an appeal before the Commissioner of Income Tax

(Appeals). The appeal was preferred both on the question of jurisdiction

as well as on merits. Insofar as the plea of jurisdiction taken by the

respondent-assessee was concerned, the Commissioner of Income-Tax

ITA 271/2012                                                     Page 2 of 9
(appeals) did not agree with the submissions of the respondent-assessee

and held that re-opening of the assessment was valid under Section 147 of

the said Act. However, on merits the Commissioner of Income Tax

(Appeals) held in favour of the respondent-assessment and deleted the

entire amount of `77 lakhs.

3.      The Revenue, being aggrieved by the decision on merits by the

Commissioner of Income Tax (Appeals) preferred the said appeal ITA

No.4652 (Del) of 2009 before the Tribunal on the question of deletion of

the addition of `77 lakhs.      The respondent-assessee preferred cross-

objection with regard to the jurisdictional issue. The cross-objection was

numbered as COA 29/Del/2010. The Tribunal has disposed of the said

appeal and the cross-objection by the common impugned order dated

18.11.2011. The Tribunal accepted the cross-objection of the respondent-

assessee on the point of jurisdiction and held the issuance of notice under

Section 148 of the said Act to be bad on account of the fact that there was

no failure to disclose fully and truly all material facts for the purposes of

assessment on the part of the respondent-assessee. Insofar as the question

of merits was concerned, the Tribunal did not examine the same

inasmuch as it had held the re-opening itself to be bad.

ITA 271/2012                                                      Page 3 of 9
4.      On going through the decision of the Tribunal we find that the

Tribunal was impressed by the fact that in the reasons there should have

been recorded that there was failure on the part of the assessee to disclose

fully and truly all the material facts necessary for the assessment. The

Tribunal followed the decisions of this Court in Wel Inter Trade P. Ltd.

& Anr. vs. ITO: 308 ITR 22 (Del.) and Haryana Acrylic Manufacturing

Company vs. CIT & Anr.: 308 ITR 38 wherein this Court held that in

situations where the reasons did not even contain and allegations that the

escapement of the income had been occasioned by failure on the part of

the assessee to disclose fully and truly all material facts necessary for his

assessment, the assessing officer would be barred from re-opening of the

assessment already done at an earlier stage. In Wel Inter Trade P. Ltd.

& Anr (supra) this Court has observed as under:-

        "A plain reading of the said proviso makes it more than clear
        that where the provisions of section 147 are being invoked
        after the period of four years from the end of the relevant
        assessment year, in addition to the Assessing Officer having
        reason to believe that any income chargeable to tax has
        escaped assessment, it must also be established as a fact that
        such escapement of assessment has been occasioned by
        either the assessee falling to make a return under section 139
        etc., or by reason of failure on the part of the assessee to
        disclose fully and truly all material facts necessary for his
        assessment, for that assessment year. In the present case, the
        question of making of a return is not in issue and the only

ITA 271/2012                                                      Page 4 of 9
        question is with regard to the second portion of the proviso,
        which relates to failure on the part of the assessee to disclose
        fully and truly all material facts necessary for assessment.
        Insofar as this pre-condition is concerned, there is not a
        whisper of it in the reasons recorded by the Assessing
        Officer. In fact, as indicated above, the Assessing Officer
        could not have made this a ground because the Assessing
        Officer had required the petitioner to furnish details with
        regard to loss occasioned by foreign exchange fluctuation
        which the petitioner did not by virtue of the reply dated
        5.2.2002. Since the petitioner had fully and truly disclosed
        all the material facts necessary for the assessment, the pre-
        condition for invoking the proviso to section 147 of the said
        Act had not been satisfied.

        10. In this connection, it may be relevant to note one
        decision, although there are several others. The said
        decision is that of the Punjab and Haryana High Court in the
        case of Duli Chand Singhania v. Asstt. CIT (2004) 264 ITR
        192. In the said decision, the High Court of Punjab and
        Haryana was faced with a similar situation. The court noted
        that there was not even a whisper of an allegation that the
        escapement in income had occurred by reason of failure on
        the part of the assessee to disclose fully and truly all material
        facts necessary for his assessment. The court observed that
        absence of this find, which is the sine qua non for assuming
        jurisdiction under section 147 of the Act in a case falling
        under the proviso thereto, makes the action taken by the
        Assessing Officer wholly without jurisdiction. We agree
        with these observations of the Punjab and Haryana High
        Court and are of the view that in the present case also, the
        Assessing Officer has acted wholly without jurisdiction.
        The invocation of section 147, the issuance of the notice
        under section 148 and the subsequent order on the objections
        are all without jurisdiction. The impugned notice as well as
        the proceedings pursuant thereto are quashed. ..."

ITA 271/2012                                                         Page 5 of 9
5.      We have considered these submissions and we are inclined to agree

with the learned counsel for the petitioner. The proviso to section 147

reads as under:

        "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 assessment 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 the assessment year. "

6.      In the present case the purported reasons to believe that income had

escaped assessment were as under:-

        "Reasons of the belief that income has escaped Assessemnt.

        In this case the assessment for the asstt. Year 2002-03 was
        made u/s 14(3) on 22.12.2004. A special information has
        been received from Director of Income Tax (investigation)-
        I, New Delhi vide letter dated 05.02.2007 that the assessee
        company has received a sum of `77,00,000/-from the
        companies as detailed below:-

ITA 271/2012                                                      Page 6 of 9
          S. Name       of      the Amount        Instrume   Name       &
          No. companies                           nt No. &   Branch     of
                                                  Dt.        Bank
          1.   Rabik Exports Ltd.      ` 400000   2258       Ratnakar
                                                  24.11.01   Bank, K.B.
          2.   -do-                    ` 300000   92420      Corpn. Bank,
                                                  21.02.02   Pas.V.
          3.   Mestrol Mktg.        & ` 500000    2156       Ratnakar
               Adg. (P) Ltd.                      28.11.01   Bank, K.B.
          4.   -do-                    ` 500000   2163       -do-
          5.   Vin       Fin    &      `50000     841908     KVB,     Karol
               Investment                         07.01.02   Bagh
          6.   Fair "N" Square         `200000    816168     Vijay Bank, R.
               Exports (P) Ltd.                   08.01.02   Nagar
          7.   Pololeasing & Fin.      ` 600000   162529     SB     Mysore,
               (P) Ltd.                           18.12.01   KB
          8.   -do-                    ` 350000   812701     Vijay Bank, R.
                                                  20.12.01   Nagar
          9.   -do-                    `500000    812722     -do-
          10. -do-                     ` 500000   812730     -do-
          11. -do-                     ` 300000   812723     -do-
          12. Satwant Singh Sodhi ` 100000        816140     -do-
              Const.(P) Ltd.                      18.01.02
          13. -do-                ` 300000        816144     -do-
          14. -do-                     ` 600000   816143     -do-
          15. -do-                     ` 500000   826823     -do-
          16. M.V. Mktg. (P) Ltd.      ` 300000   816086     -do-
          17. Ethnic Creation (P) ` 650000        816235     -do-
              Ltd.                                08.01.02
          18. -do-                ` 300000        816238     -do-
          19. SGC Publishing (P) ` 150000         162524     State   Bank,
              Ltd.                                08.01.02   Mysore
          20. Harpal Associates (P) ` 300000      803279     Vijay Bank, R.
              Ltd.                                20.12.01   Nagar

ITA 271/2012                                                           Page 7 of 9
          21. Arun Finvest (P) Ltd.   ` 300000    811672     -do-
                                      ` 7700000

        According to the special information received, the entries
        are in the nature of accommodation entries and in the reality
        it is the assessee's own unaccounted money which has been
        shown in the books of accounts as a receipt from aforesaid

        In view of the above, I have reason to believe that income to
        the extent of `77,00,000/- has escaped assessment."

7.      On going through the purported reasons we find that there is no

mention of the respondent-assessee not having made a full and true

disclosure of the material facts necessary for assessment. On the contrary

the purported reasons indicate that the amounts mentioned therein had

been shown in the books of accounts as receipts from the companies

mentioned therein.       We also note that at serial No.5 of the list of

companies from which amounts have been allegedly received, the name

of the assessee has been shown. This means that the assessee received

the received money from itself, which can hardly be an allegation in this


8.      For the foregoing reasons we feel that the Tribunal has approached

the matter in the correct perspective and has held the issuance of the

notice under Section 148 dated 30.7.2007 to be bad in law and so, too, all

ITA 271/2012                                                        Page 8 of 9
the proceedings pursuant thereto. There is no reason for us to interfere

with the impugned order inasmuch as no substantial question of law

arises for our consideration.

9.      The appeal is dismissed.

                                        BADAR DURREZ AHMED, J

                                                      R.V.EASWAR, J
FEBRUARY 11, 2013

ITA 271/2012                                                  Page 9 of 9
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