SHRI COIMBATORE JEWELLERS INDIA PRIVATE LTD.,SALEM vs. DCIT, CIRCLE 1(1), SALEM, SALEM
What did the Tribunal hold?
The Tribunal held that the reopening of the assessment was bad in law as the Assessing Officer failed to satisfy the conditions precedent under the first proviso to Section 147. Consequently, the reassessment order was quashed.
What were the facts?
The assessee company's original assessment for AY 2012-13 was completed without additions. Later, the assessment was reopened under Section 147, and a significant addition was made under Section 68 for unexplained share capital. The assessee had also declared income under the Income Declaration Scheme, 2016.
What were the issues?
Whether the reopening of assessment beyond four years was valid when the original assessment was completed under Section 143(3) and the assessee had disclosed all material facts. Whether the addition under Section 68 was justified based on the reasons for reopening.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & MS. PADMAVATHY.S
आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), Chennai-20 (hereinafter referred to as ‘Ld.CIT(A)‘), Delhi, dated 20.11.2025 for the Assessment Year (hereinafter referred to as ‘AY‘) 2012-13 u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘).
The brief facts of the case are that, the assessee is a private limited company which is engaged in the business of a manufacture and trading
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 2 :: of gold, silver, diamond and platinum jewellery. The assessee company had filed its return of income (RoI) on 28.09.2012 declaring total income of Rs.3,26,02,370/-. Later, the Income Tax Return (ITR) was picked up for scrutiny and notice u/s.143(2) of the Act was issued on 08.08.2013. It was shown that, the AO had issued notice u/s 142(1) of the Act dated 11.06.2014 wherein he had inter alia called for details of share capital/ any introduction of shares and details of bank account of the assessee for FY 2011-12. In response, the assessee had furnished the complete list of shareholders, which is noted to be as follows:- # Name PAN No. No. of Amount Premium shares Rs. Rs. 1. K. Ramanathan ACCPR2202H 26,12,800 2,61,28,000 2. K. R. Premnath ADIPP1683K 10,00,000 1,00,00,000 3. R. Srinath AGUPS1535J 13,83,300 1,38,33,000 4. AA Plus Share AAHCA2831P 5,500 5,50,000 49,50,000 Broker Private Limited 5. Acacio Trade Link AAICA0609G 2,00,000 20,00,000 1,80,00,000 Pvt. Ltd., 6. Ailish Traders Pvt. AAICA1021G 1,00,000 10,00,000 90,00,000 Ltd., 7. Avance technologies AAECA5763B 50,000 5,00,000 45,00,000 Ltd 8. Dhanus AABCD3429L 2,20,000 22,00,000 1,98,00,000 Technologies Ltd 9. Diyash Infra AACCD8661R 95,000 9,50,000 85,50,000 Developer Pvt Ltd 10. EmporisProjects Ltd AABCN0273G 10,000 10,00,000 90,00,000 11. Krishiv AADCK5155G 3,70,000 37,00,000 3,33,00,000 Infrastructures
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 3 :: Private Limited 12. Mainak Comtrade AAGCM5750N 3000 3,00,000 27,00,000 Pvt Ltd 13. N.J. Gosai, Prop: AJKPG5881E 50,000 5,00,000 45,00,000 Jitenderkumar and sons 14. Parth Fine Stocks AABCP8561B 85,000 8,50,000 76,50,000 Limited 15. P. Rajeshwari, ACFPR4207B 31,000 3,10,000 27,90,000 (share Capital A/c.) 16. Prraneta Industries AABCP4155F 5,30,000 53,00,000 4,77,00,000 Ltd 17. Sahkar Battery AAKCS6066P 1,15,000 11,50,000 1,03,50,000 Private Limited 18. Secandarabath AACCS8246B 50,000 5,00,000 45,00,000 Health care Ltd 19. Speciality Papers Ltd AAECS0861Q 50,000 5,00,000 45,00,000 20. Super Creative AAJCS5184P 1,15,000 11,50,000 1,03,50,000 Spares P Ltd Total 72,42,100 7,24,21,000 20,21,40,000
It was brought to our notice that, the assessee had also submitted confirmation letters from the shareholders, (copy of which are found placed at Pages 28-43 of the paper book). The AO thereafter passed the order u/s 143(3) of the Act dated 16.02.2015 assessing the total income at the same sum as returned by the assessee. Later on, the assessee is found to have opted for the Income Declaration Scheme, 2016, for AY 2012-13 and had offered income to the tune of Rs.7,70,00,000/- by way of share capital in Form No.1 filed with the AO. The Ld. AR has also placed on record Form No. 3 issued by the PCIT wherein the disclosure was accepted by the Revenue.
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 4 :: 4. Subsequently, the assessee was in receipt of notice u/s 148 of the Act dated 19.03.2019 and in response, the assessee filed return of income on 29.03.2019. The assessee is noted to have requested the AO to furnish the reasons recorded for reopening the assessment by their letter dated 01.04.2019, to which partial extract of the reasons were provided, which was subsequently supplied by the Ld. DR to the assessee during the appellate proceedings before us. The assessee had objected to the partial reasons supplied to him. The AO is however noted to have proceeded with the reassessment and called for the details of the shareholders, which were supplied by the assessee. The AO issued summons to all the shareholders, out of which six came back un-served and, except one (M/s Speciality Papers Ltd), others did not comply with the same. On further notice, the assessee supplied the details of four individual shareholders mentioned at Sl Nos. 1-3, 15 in the Table above. The AO is found to have accepted the identity, genuineness and creditworthiness of M/s Speciality Papers Ltd and the four individual shareholders, which aggregated to Rs.5,80,61,000/-. Allowing credit for the income of Rs.7,70,00,000/- offered under the IDS Scheme, 2016, the AO treated the balance share capital of Rs.13,94,39,000/- (27,45,61,000 minus 5,80,61,000 minus 7,70,00,000) to be unexplained and added the same u/s 68 of the Act.
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 5 :: 5. Aggrieved by the above assessment order, the assessee preferred appeal before the Ld. CIT(A) challenging the legal validity of reopening and the addition made on merits, both of which were dismissed by the Ld. CIT(A). Being aggrieved with the action of the Ld. CIT(A), the assessee is now in appeal before us.
Referring to the first proviso to Section 147 of the Act, the Ld. AR submitted that, where an assessee had filed a return of income and thereafter the assessment was completed either under section 143(3) or under section 147 of the Act, then in such case no notice under section 147 of the Act could have been issued beyond four years from expiry of relevant assessment year, unless the AO demonstrates in the recorded reasons that income had escaped assessment as a consequence of assessee's failure to disclose truly and fully all facts necessary for his assessment. According to the Ld. AR, in the present case, all the relevant information and details concerning the share capital issued during the year were made available at the time of original assessment and therefore it was not a case that the assessee had failed to disclose truly and fully all material facts necessary for assessment for that year and in that view of the matter, the AO could not have validly reopened the assessment for AY 2012-13 after the expiry of four years. According to the Ld. AR therefore, the AO's action of re-opening the assessment completed u/s. 143(3) after four years, deserves to be struck down for
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 6 :: not satisfying the condition precedent set out in the first proviso to Section 147 of the Act.
The Ld. AR further argued that even the reasons recorded by the AO did not contain any tangible material which would suggest escapement of income. He pointed out that, the AO had merely stated that a search operation was carried out at the various premises of Mr. Shirish C Shah, who was supposedly engaged in providing accommodation entries, but the reasons did not specify the linkage between Mr. Shah and M/s Ailish Traders Pvt Ltd, whose transactions with the assessee were alleged to be accommodation entries. Taking us through Para 6.4.5 of the Ld. CIT(A)’s order, he argued that, it was not in dispute that there was no adverse statement of Shri Shirish Shah implicating the assessee or alleging that the transactions with M/s Ailish Traders Pvt Ltd was bogus. He further showed us that, there was no cash or money trail brought on the reasons recorded which would suggest that the transaction was an accommodation entry. The Ld. AR further submitted that, even the reassessment order didn’t divulge any such independent tangible material. He contended that, the AO ultimately made the addition due to alleged non-compliance of summons and not on the basis of any tangible material or information received by him. He thus submitted that, the reference to the search conducted upon Mr. Shah was a mere ruse to
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 7 :: reopen the assessment and that on the given facts there was no fresh tangible material in the possession of the AO to justify reopening of a concluded assessment beyond four years.
The Ld. AR also pointed out several fundamental defects and factual inaccuracies in the reasons recorded, which according to him, denoted that the same was recorded without basic application of mind and upon borrowed satisfaction. Relying upon the decisions of PCIT vs. Shodiman Investments (P.) Ltd[2020] 422 ITR 337 (Bom) and PCIT vs. Meenakshi Overseas (P.) Ltd.[2017] 395 ITR 677 (Del), he submitted that, the impugned reopening was invalid. He also showed us that, the objections filed by the assessee hadn’t been disposed-off by way of speaking order, which in his view, rendered the reopening bad in law.
Per contra, the Ld. DR appearing for the Revenue submitted that, Shri Shah was controlling over 200 companies including M/s Ailish Traders Pvt Ltd and therefore the information received by the AO led him to record valid reasons to believe that income chargeable to tax had escaped assessment. She submitted that, the assessee was unjustified in questioning the sufficiency of the reasons recorded for reopening of the assessment. She further supported the findings of the Ld. CIT(A) holding that, there was failure on the assessee’s part to disclose full particulars in original assessment and thus the extended time limit of six years was
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 8 :: applicable. The Ld. DR relied on the decision of Hon’ble Delhi High Court in the case of Multiplex Trading &Industrial Co. Ltd [2015] 378 ITR 351 (Delhi). She further submitted that, though the objections filed by the assessee to the recorded reasons were not disposed by the AO, but it did not cause any prejudice to the assessee and that the latter had participated in the reassessment proceedings and therefore according to her, there was no violation of law by the AO. She thus urged us to uphold the legal validity of the reopening of assessment.
We have heard the rival submissions of both the parties. Before we advert to the facts in this case, let us first look into the well settled principles regarding reopening of assessment. To begin with, it should be kept in mind that the concept of assessment is governed by the time barring Rule, and the assessee acquires a right as to the finality of proceedings. Quietus of the completed assessment is the Fundamental Rule and exception to this rule is re-opening of assessment by AO under section 147 or exercise of Revisional jurisdiction by CIT under section 263 of the Act. Therefore, the Parliament in its wisdom has provided safeguards for exercise of the reopening of assessment jurisdiction to AO; and revisional jurisdiction of CIT by providing condition precedent which is sine qua non for assumption/usurpation of jurisdiction. In the case of reopening of assessment, section 147 provides that where the Assessing Officer has reason to believe escapement of income [is the jurisdictional
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 9 :: fact & law] he shall record his reasons for doing so and issue notice u/s 148 of the Act and thereafter, assess or reassess the income which has escaped assessment; and for exercising revisional jurisdiction u/s. 263 the CIT has to find the assessment order of the AO to be erroneous as well as prejudicial to the revenue. Unless the essential condition precedent is satisfied, the AO or the CIT can’t exercise their reopening jurisdiction or revisional jurisdiction respectively. The legislative history is that in respect to the reopening u/s. 147 of the Act, the Parliament by Direct Tax Laws (Amendment) Act 1987 w.e.f. 01.04.1989 had substituted “for reason to believe escapement of income” to “for reasons to be recorded by him in writing, is of the opinion’’ which gave unbridled subjective satisfaction to the AO was later substituted back to “reason to believe escapement of income’’, by the Direct Tax Laws (Amendment)Act, 1989. The Hon’ble Apex Court as well as the Hon’ble jurisdictional High Court as well as other Hon’ble High Courts have already held in plethora of cases the test of a prudent person instructed in law inunderstanding jurisdictional fact & law (mixed question of fact and law) the reason to believe escapement of income (supra).
As noted, the AO, who is a quasi-judicial authority is empowered to reopen the assessment only in a given case wherein there is reason to believe escapement of chargeable income to tax, which he has to record
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 10 :: before issuing notice u/s 148 of the Act. In this regard, it must be borne in mind that reasons to believe postulates foundation based on information, and belief based on reason. After a foundation based on information, is made, there still must be some reason, which should warrant the holding of a belief that income chargeable to tax has escaped assessment. It has to be kept in mind that the Hon’ble Supreme Court in Ganga Saran & Sons P. Ltd. Vs. ITO (1981) 130 ITR 1 (SC) heldthat the expression “reason to believe” occurring in sec. 147 “is stronger” than the expression “if satisfied” and such requirement has to be met by the AO in the reasons recorded before usurping the jurisdiction u/s. 147of the Act. At this stage, authorities must understand the fine distinction between “reason to suspect” & ‘reason to believe”. Adverse information against an assessee may trigger “reason to suspect,” then the AO is duty bound to make reasonable enquiry to collect material which would make him form a belief that there is an escapement of income. And on satisfaction of such an event, then proceed to reopen the assessment and not before that event, because ‘reason to believe’ escapement of income, is the jurisdictional requirement u/s 147 of the Act, and not the ‘reason to suspect’ escapement of income. This subtle distinction should be borne in mind while adjudicating the legal issue raised by assessee. 12. And further, the reason to believe escapement of income should be that of AO, and not that of any other authority, because then it will be
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 11 :: against one of the basic feature of the Constitution of India i.e., the Rule of Law, wherein the Parliament has empowered this reopening jurisdiction only to that of Assessing Officer and that is why if the reason to believe escapement of income is not that of AO, the assumption of jurisdiction to re-open, is vitiated; and resultantly bad in law, because assumption of jurisdiction to reopen will be on the basis of borrowed satisfaction.
And, if the AO intends to re-open the assessment [scrutinized u/s 143(3)] after four years from the relevant assessment year, then as per first proviso to section 147 of the Act, an additional safeguard or condition that escapement of income was due to fault of the assessee, in not fully and truly disclosing the material facts at the time of original assessment needs to be satisfied. In this context, it is gainful to refer to the Hon’ble Supreme Court decision endorsing the Full Bench decision of the Hon’ble Delhi High Court in CIT vs. Kelvinator of India Ltd. [320 ITR 561] wherein inter-alia, it was held that Assessing Officer has no power to review; and emphasized that AO in absence of “tangible material” should not resort to reopening. The Hon’ble Supreme Court held that merely on “change of opinion” the AO should not re-open the assessment because he doesn’t enjoy the power to review his own order.
Thus, as noted before the AO assumes jurisdiction to re-open it is necessary that the conditions laid down in the said section 147 has to be
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 12 :: satisfied viz., AO should record “reason to believe” that the income chargeable to tax for that assessment year has escaped assessment. And, if the AO intends to re-open an assessment [scrutinized u/s 143(3)] after four years from the relevant assessment year, then an additional condition needs to be satisfied viz escapement of income was due to fault of the assessee, in not fully and truly disclosing all the material facts necessary at the time of original assessment. If the conditions stipulated by statute are not satisfied at the first place, then it cannot be said that AO has validly assumed jurisdiction u/s.147 of the Act. Therefore, the question for consideration is whether on the basis of the reasons recorded by the AO, he could have validly reopened the assessment. For that, it has to be seen as to whether the AO on the basis of whatever material before him, [which he had indicated in his “reasons recorded”] had reasons warrant holding a belief that income chargeable to tax has escaped assessment. At this stage, it is also important to bear in mind that the reasons recorded by AO to reopen has to be evaluated on a stand-alone basis and no addition/extrapolation can be made or assumed, while adjudicating the legal issue of AO’s usurpation of jurisdiction u/s.147 of the Act. The Hon’ble Bombay High Court, in the case of Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR 332], has, inter alia, observed that "………. It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 13 :: or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons."Their Lordships added that "The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence….” Therefore, the reasons are to be examined only as they were recorded by the AO before the issue of the notice.
Hence, in all cases where assessment is completed under section 143(3) or under section 147 of the Act and such concluded assessment is being sought to be reopened beyond four years, it is not only necessary for the AO to form reasonable belief that income had escaped assessment as envisaged in Section 147 of the Act but additionally he has to show that such escapement occurred as a result or consequence of assessee's failure to disclose truly and fully all facts necessary for assessment. The AO after obtaining information and documents from the assessee cannot supplement his conclusion about assessee's failure to disclose truly and fully material facts, if the recorded reasons do not refer to such failure. In the circumstances, where the AO initiates the reassessment proceedings beyond four years from the end of the relevant assessment year, then the
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 14 :: AO is duty bound to demonstrate in his reasons recorded prior to issue of notice, the failure on the assessee's part to truly and fully disclose all material facts in the course of original assessment.
This legal principle has been reiterated by the Hon'ble Supreme Court in the case of New Delhi Television Ltd. [NDTV] v. Dy. CIT[2020] 424 ITR 607 wherein it was held that, the Revenue can take the benefit of extended period of limitation beyond four years and up to six years only if the Revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. In this case (NDTV), we note that the assessee had issued step-up convertible bonds to its subsidiary based in the United Kingdom (UK)named NDTV Network Plc. (hereinafter referred to as the 'NNPLC'). At the time of original assessment, the assessee had disclosed the issue of step-up coupon bonds for US$ 100 million to NNPLC. The assessee had also disclosed the details of entities who subscribed to this issue and also the fact that the bonds were discounted at a lower rate, before the assessment was finalized. Subsequent to completion of the original assessment, the AO was in receipt of information that the assessee had undertaken round tripping of funds and that these funds raised by way of issue of bonds to group entities actually represented the unaccounted funds belonging to the assessee. The AO accordingly reopened the concluded assessment
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 15 :: after expiry of four years and within six years. On these facts the question posed by the assessee before the Hon'ble Apex Court was, whether the assessee did not disclose fully and truly all material facts during the course of original assessment which led to the finalisation of the assessment order and undisclosed income escaping detection. Answering this question in favour of the assessee, the Hon'ble Apex Court held as under:
"24. Coming to the second question as to whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts. The case of the assessee is that it had disclosed all facts which were required to be disclosed. 25. The revenue has placed reliance on certain complaints made by the minority shareholders and it is alleged that those complaints reveal that the assessee was indulging in round tripping of its funds. According to the revenue the material disclosed in these complaints clearly shows that the assessee is guilty of creating a network of shell companies with a view to transfer its un-taxed income in India to entities abroad and then bring it back to India thereby avoiding taxation. We make it clear that we are not going into this aspect of the matter because those complaints have not seen light of the day either before the High Court this Court and, therefore, it would be unfair to the assessee if we rely upon such material which the assessee has not been confronted with. 26. Even before the assessment order was passed on 3-8-2012, the assessing officer was aware of the entities which had subscribed to the convertible bonds. This is apparent from the communication dated 8-4- 2011. The case of the revenue is that the assessee did not disclose the amount subscribed by each of the entities and furthermore the management structure of these companies. We are not in agreement with this submission of the revenue. It is apparent from the records of the case that the revenue was aware of the entities which subscribed to the convertible bonds. It has been urged that these are bogus companies, but we are not concerned with that at this stage. The issue before us is whether the revenue can take the benefit of the extended period of limitation of 6 years for initiating proceedings under the first proviso
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 16 :: section 147 of the Act. This can only be done if the revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. The assessee, in our view had disclosed all the facts it was bound to disclose. If the revenue wanted to investigate the matter further at that stage it could have easily directed the assessee to furnish more facts. 27. The High Court held that there was no "true and fair disclosure" in view of the law laid down by this Court in Phool Chand BajrangLal's case (supra), and the judgment of the Delhi High Court in Honda Siel Power Products Ltd. v. Dy. CIT [2011] 110 taxmann.com 2/197 Taxman 415/[2012] 340 ITR 53 (Delhi). We have already referred to the judgment in Phool Chand's case (supra), wherein it was held that where the transaction of a particular assessment year is found to be a bogus transaction, the disclosures made could not be said to be all "true" and "full". Relying upon the said judgment the High Court held that merely because the transaction of convertible bonds was disclosed at the time of original assessment does not mean that there is true and full disclosure of facts. 28. We are unable to agree with this reasoning given by the High Court. The assessee as mentioned above made a disclosure about having agreed to stand guarantee for the transaction by NNPLC and it had also disclosed the factum of the issuance of convertible bonds and their redemption. The income, if any, arose because of the redemption at a discounted price. This was an event which took place subsequent to the assessment year in question though it may be income for the assessment year. As we have observed above, all relevant facts were duly within the knowledge of the assessing officer. The assessing officer knew who were the entities who had subscribed to other convertible bonds and in other proceedings relating to the subsidiaries the same assessing officer had knowledge of addresses and the consideration paid by each of the bondholders as is apparent from assessment orders dated 3-8-2012 passed in the cases of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. Therefore, in our opinion there was full and true disclosure of all material facts necessary for its assessment by the assessee." 17. Before the Hon'ble Apex Court, the Revenue had argued that, it was to avoid detection of the actual source of funds of its subsidiaries, that the assessee did not disclose the complete details of the subsidiaries at the time of original assessment. It was further contended that certain documents concerning the bond issue were also not furnished at the time
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 17 :: of the original assessment which amounted to failure on the part of the assessee to fully and truly disclose all material facts. Moreover, complaints had been filed by shareholders against the assessee subsequent to completion of assessment, which according to Revenue, also showed that there was non-disclosure of facts. However, the Hon'ble Supreme Court rejected all these contentions raised by the Revenue, by observing as under:
"29. The fact that step-up coupon bonds for US$ 100 million were issued by NNPLC was disclosed; who were the entities which subscribed to the bonds was disclosed; and the fact that the bonds were discounted at a lower rate was also disclosed before the assessment was finalised. This transaction was accepted by the assessing officer and it was clearly held that the assessee was only liable to receive a guarantee fees on the same which was added to its income. Without saying anything further on merits of the transaction we are of the view that it cannot be said that the assessee had withheld any material information from the revenue. 30. According to the revenue the assessee to avoid detection of the actual source of funds of its subsidiaries did not disclose the details of the subsidiaries in its final accounts, balance sheets, and profit and loss account for the relevant period as was mandatory under the provisions of the Indian Companies Act,1956. It is not disputed that the assessee had obtained an exemption from the competent authority under the Companies Act, 1956 from providing such details in its final accounts, balance sheets, etc. As such it cannot be said that the assessee was bound to disclose this to the Assessing Officer. The Assessing Officer before finalising the assessment of 3-8-2012 had never asked the assessee to furnish the details. 31. The revenue now has come up with the plea that certain documents were not supplied but according to us all these documents cannot be said to be documents which the assessee was bound to disclose at the time of assessment. The main ground raised by the revenue is that the assessee did not disclose as to who had subscribed what amount and what was its relationship with the assessee. As far as the first part is concerned it does not appear to be correct. There is material on record to show that on 8-4- 2011 NNPLC had sent a communication to the Deputy Director of Income Tax(Investigation), wherein it had not only disclosed the names of all the
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 18 :: bond holders but also their addresses; number of bonds along with the total consideration received. This chart forms part of the assessment orders dated 3-8-2012 in the case of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. The said two assessment orders were passed by the same officer who had passed the assessment order in the case of the assessee on the same date itself. Therefore, the entire material was available with the revenue.
A number of decisions have been cited as to what is meant by true and full disclosure. It is not necessary to multiply decisions, as law in this regard has been succinctly laid down by a Constitution Bench of this Court in Calcutta Discount Co. Ltd. v. ITO AIR 1961 SC 372, wherein it was held as follows:--
'(8)...The words used are "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year". It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise -- the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be.
(9) There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income- tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example
-- "I have produced the account books and the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account-books and the
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 19 :: documents." His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, will amount to "omission to disclose fully and truly all material facts necessary for his assessment." Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them -- including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed.
(10) Does the duty however extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else -- far less the assessee -- to tell the assessing authority what inferences -- whether of facts or law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences-- whether of facts or law -- he would draw from the primary facts.
(11) If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority.
How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn?' A careful analysis of this judgment indicates that the Constitution Bench held that it is the duty of the assessee to disclose full and truly all material facts which it termed as primary facts. Nondisclosure of other facts which may be termed as secondary facts is not necessary. In light of the above law, we shall deal with the facts of the present case.
In our view the assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. We are of the view that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 20 :: the assessing officer at this stage to decide what inference should be drawn from the facts of the case. In the present case the assessing officer on the basis of the facts disclosed to him did not doubt the genuiness of the transaction set up by the assessee. This the assessing officer could have done even at that stage on the basis of the facts which he already knew. The other facts relied upon by the revenue are the proceedings before the DRP and facts subsequent to the assessment order, and we have already dealt with the same while deciding Issue No. 1. However, that cannot lead to the conclusion that there is non-disclosure of true and material facts by the assessee."
From the above binding ratio of decision of the Hon'ble Apex Court, the principle which thus emerges is that, the Revenue can take the benefit of the extended period of limitation of 6 years for initiating proceedings under the first proviso to Section 147 of the Act only if the Revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. The requirement of law in this regard is that, the assessee must disclose the primary facts before the AO and the assessee is not required to give any further assistance to the AO by disclosure of other facts. Thereafter, it is for the AO to decide as to what inference should be drawn from the primary facts disclosed and, the non-disclosure of other facts which may be termed as secondary facts is not necessary, so as to empower the AO to assume jurisdiction u/s 147/148 of the Act to reopen the concluded assessment in terms of the first proviso to Section 147 of the Act.
From the aforesaid understanding of law governing the issue at hand, we have to examine the reasons recorded by AO to reopen the
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 21 :: assessment, and test whether the condition precedent necessary to usurp the re-opening jurisdiction as required u/s. 147 of the Act is satisfied or not ? And in the present case, since four years have elapsed from the end of the relevant AY and original assessment has been completed u/s. 143(3) of the Act, it needs to be examined as to whether the addition condition precedent as laid down in first proviso to section 147 of the Act is also satisfied or not ? For doing that we have to examine on a standalone basis the reasons recorded by the AO to reopen the assessment, which reads as under: “1. The assessee firm M/s. Shri Coimabatore jewellers India Pvt Ltd (PAN: AAECC3342C) is a Manufacturer and Trader of Gold, Silver, Diamond and Platinum. There are 6 partners of the firm. The assessee M/s. Shri Coimabatore jewellers India Pvt. Ltd., had filed its return of income for the A.Y. 2012-13 on 28.09.2012 admitting income of Rs.3,26,02,370. This return of income was subjected to scrutiny assessment proceedings with the assessed income of Rs. 3,26,02,370. 2. A search operation u/s 132 of the IT Act 1961, was carried out at the various premises of Shri. Shirish C Shah who happened to be the main person engaged in providing bogus accommodation entries like LTCG, Share Capital with huge share premium, turnover, loans etc. He directly or indirectly controlled more than 200 companies. 3. On verification of the bank statement of Ailish Traders P Ltd with the Bharat Co-operative (Mumbai) Ltd having the account number 121/2916, it is seen that the assessee M/s. Shri Coimabatore jewellers India Pvt Ltd had received Rs. 1 crore from Shri. Shirish C Shah. Since Shri.Shirish C Shah is engaged in providing accommodation entries, the payments so received by the assessee M/s. Shri Coimabatore jewellers India Pvt Ltd is nothing but an accommodation entry. 4. Further, on verification of the details, the assessments of the companies providing accommodation entries have since been completed wherein it had been held that impugned companies were engaged in providing accommodation entries
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 22 :: 5. Thus from the aforementioned details and the material evidences available, it is evident that income chargeable to tax amounting to Rs. 1,00,00,000 had escaped assessment for the AY 2012-13 6. Having perused the material evidences available, I am satisfied that the income of the assessee chargeable to tax had escaped assessment within the meaning of provisions of section 147 of the I.T. Act 1961 for the AY 2012-13. 7. Based on the materials evidences available and figures admitted in the Return of Income, the requirements to initiate proceedings u/s 147 of the IT Act are clearly attracted in the assessee's case since the assessee had not fully declared its true and correct income. For the AY 2012-13, there is a suppression of income by the assessee to the extent of Rs. 1,00,00,000 as discussed supra. Therefore, this is a clear case of failure on the part of the assessee to disclose the true and correct income and hence, I have the reason to believe that income taxable under Income Tax Act, 1961 had escaped Assessment within the meaning of provisions of section 147 of the I.T. Act 1961 for the AY 2012-13 and it necessitates reopening of the assessment u/s 147 of the I. T. Act.”
On perusal of the recorded reasons, it is noted that, firstly, the AO had recorded a mistaken fact that the assessee is a firm, consisting of 6 partners. Admittedly, the assessee is a company and even the issue in question relates to share capital infused by shareholders. This apparent factual fallacy in the recorded reasons raises doubt as to whether the AO had applied his mind before recording the same or not. Now, Para 2 of the recorded reasons reveals that, there was a search action conducted upon one Mr. Shirish C Shah who was found to be an entry operator controlling over 200 companies. The Ld. AR has rightly pointed out that, the date of search, premises searched, name and/or details of the 200 companies were conspicuously absent in the recorded reasons. This is found to be of relevance in the given facts before us, as because in Para 3, the AO states
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 23 :: that, the verification of bank statement of M/s Ailish Traders P Ltd showed that, the assessee had received sum of Rs.1 crores from Mr. Shirish C Shah. Now, admittedly, the assessee did not receive any sum from Mr.Shirish C Shah and therefore this observation is also factually incorrect. The Ld. DR had contended that the AO intended to refer to the amount received from M/s Ailish Traders P Ltd. There is however nothing brought on record before us that M/s Ailish Traders P Ltd had sourced the payments made to the assessee from Mr. Shirish Shah. In our opinion, it was imperative for the AO to speak through his reasons and provide the linkage between Mr. Shirish Shah and M/s Ailish Traders P Ltd before alleging that the amount received from M/s Ailish Traders P Ltd represented income escaping assessment of the assessee, particularly when the former was neither shareholder or director of M/s Ailish Traders P Ltd. This assumes importance in light of the categorical finding recorded by the Ld. CIT(A) that, there was also no statement recorded from Mr. Shah against the assessee. The Ld. CIT(A) had observed at Para 6.3.5 that, “…Furthermore, it is also noted from the assessment order that the AO had neither used any statement recorded from Mr Shirish C Shah against the appellant nor Mr Shirish C Shah had given any specific statement against the appellant, which was used by the AO against the appellant. Therefore, it is held that the claim of the appellant that the statement recorded from Mr Shirish C Shah was not provided to the
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 24 :: appellant is devoid of any merits.” It is thus observed that, the allegation leveled against the assessee in the recorded reasons was not backed by any tangible material but was simply lifted from the bald observations made by the DCIT, CC-2(2), Mumbai in his letter addressed to the AO.
The Ld. AR also brought to our notice that, ultimately the AO in the impugned order did not rely on the purported information received from DCIT, CC-2(2), Mumbai or any search-related material/statement in the case of Mr. Shah before making the addition u/s 68 of the Act. Instead, the addition was shown to have been made on the ground of non- compliance of summons by the shareholders. These contemporaneous facts further supports the contention of the Ld. AR that, the reasons recorded by the AO was devoid of cogent tangible material and also there was no valid linkage between the purported information received from the office of DCIT, CC-2(2), Mumbai with the addition(s) made by the AO. The Ld. CIT(A) is found to have referred to the letters addressed by DCIT, CC- 2(2), Mumbai to the AO to justify the reasons recorded by the AO. As already held above, the reasons are required to be tested as recorded by the AO on stand-alone basis and no one can supplement the same with new words or information or any other reports / letters, at a later stage. Hence, we are unable to countenance such an approach of the Ld. CIT(A). Overall therefore, we observe that the reasons recorded showed lack of
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 25 :: application of mind and there is no tangible material discernible there from which would have led any prudent person properly instructed in law to form a reasonable belief that income chargeable to tax had escaped assessment.
Now, admittedly the assessment for AY 2012-13 was reopened by the AO, beyond four years. Therefore, apart from the requirement of law to form a reasonable belief that income otherwise chargeable to tax had escaped assessment, it was also incumbent upon the AO to satisfy the condition precedent set out in the first proviso to Section 147 of the Act. From the facts as available on record, we note that the AO in his requisition issued u/s 142(1) of the Act had inter alia called for the details of the share capital from the assessee along with their bank account / bank statements. It is seen that, the assessee had furnished the relevant details of shareholders along with the PANs. The assessee had also furnished the bank account details showing that the amounts were received through banking channel along with the third party confirmations. The assessee is thus found to have furnished the primary facts before the AO in the original assessment to substantiate its initial burden of satisfying the three ingredients laid down in Section 68 of the Act. According to us, therefore, there was no failure on the assessee’s part to disclose the relevant material facts truly or fully in the original
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 26 :: assessment completed u/s 143(3) of the Act. We find that the AO was also unable to demonstrate as to which relevant material fact did the assessee fail to declare truly or fully in the assessment completed u/s 143(3) of the Acton 16.02.2015, based on which the AO had usurped jurisdiction u/s 147 to reopen the assessments beyond four years. We are therefore inclined to hold that the AO did not satisfy the condition precedent in the first proviso to Section 147 of the Act for reopening of the assessment of AY2012-13 beyond four years.
The case of the assessee is found to be squarely supported by the decision of the Hon’ble Delhi High Court in the case of SABH Infrastructure Pvt Ltd Vs ACIT [2018] 398 ITR 198 in which on similar facts and circumstances, the Hon’ble High Court quashed the reopening of concluded assessment undertaken beyond four years. In the decided case also, the assessee had furnished the details of the shareholders and provided their confirmations in the original assessment. The AO being satisfied with the details and information provided by the assessee, completed the original assessment u/s 143(3) of the Act. Later on, the assessee was reopened on the basis of statement of entry operator that the shareholders were shell entities. On appeal, the Hon’ble High Court held the assumption of jurisdiction under sections 147 and 148 of the Act to be untenable as there was no failure on the part of the
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 27 :: assessee to disclose the facts in the original assessment. The relevant findings are noted to be as follows:- “12. In the present case, the reasons to believe contained the names of the very same five companies which were initially disclosed by the petitioner during the assessment proceedings. The number of shares subscribed by the said companies is the same and the amount received has been disclosed by the assessee. There is no new material which has been found or mentioned in the reasons to believe which were not contained in the information provided by the assessee prior to the conclusion of assessment under section 143(3) of the Act.
In fact, the petitioner, after initially submitting the details of the companies and the shares subscribed to, further provided confirmations from the said companies. The petitioner also submitted copies of the balance-sheets of the said companies for the relevant assessment years showing that these amounts were duly reflected therein. The said companies were also assessed to tax. Thus, it appears that the Assessing Officer was satisfied with the details and information provided by the petitioner.
A perusal of the order disposing of the objections reveals that it proceeds on the basis that the information sought by the petitioner which formed the basis for the reasons to believe, including the evidence collected, was required to be provided only in the further assessment proceedings. The said order overlooks the fact that the reasons for reopening do not mention as to what fact or information was not disclosed by the petitioner. This is very vital and in fact goes to the root of the matter. An allegation that the companies are "paper companies" without further facts is by itself insufficient to reopen assessments that stand closed after passing of orders under section 143(3) of the Act.
The assessment proceedings, especially those under section 143(3) of the Act, have to be accorded sanctity and any reopening of the same has to be on a strong and sound legal basis. It is well-settled that a mere conjecture or surmise is not sufficient. There have to be reasons to believe and not merely reasons to suspect that income has escaped assessment. In this case, the reasons failed to mention what facts or information was withheld by the petitioner. Merely relying upon the statement of Mr. Navneet Kumar Singhania that the companies in question were "paper companies", by itself, is insufficient to reopen the assessment, unless the Assessing Officer had further information that these companies were non- existent after making further inquiries into the matter. It is clear that the Assessing Officer did not make any inquiry or investigation, if these companies were in fact "paper companies". No effort has been made to
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 28 :: establish the connection between the statement of Mr. Navneet Kumar Singhania and the five companies.
Mr. Chaudhary's submission that this court cannot dictate the manner and content of what is to be written in the reasons to believe is correct as a legal proposition. However, the court has to examine the reasons to believe to see if it satisfies the rigour of the provisions. The observations of this court in Multiplex Trading & Industrial Co. Ltd. (supra) are relevant in this respect and are set out below:
"In our view, the question whether the assessee could have been stated to disclose fully and truly all material facts have to be examined in the light of facts of each case and also the reasons that led the Assessing Officer to believe that income of an assessee has escaped assessment. In a case where the primary facts have been truly disclosed and the issue is only with respect to the inference drawn, the Assessing Officer would not have the jurisdiction to reopen assessment. But in cases where the primary facts as asserted by the assessee for framing of assessment are subsequently discovered as false, the reopening of assessment may be justified."
In the facts of this case, the primary facts have not been shown to be false. The five companies do exist. They did subscribe to the share capital of the petitioner. They did pay the money to the petitioner. All the five companies are assessed to tax. These are the primary facts. The reasons to believe rely upon a letter received from the Investigation Wing and Mr. Chaudhary submits that this letter was in fact an investigation report. The report does not form part of the reasons and neither was it annexed to the reasons. Interestingly, even the counter-affidavit is silent as to the material which has not been disclosed by the petitioner. The counter- affidavit merely states that the information was specific and the information would be provided to the petitioner during the assessment proceedings. Thus, if the Revenue had any basis to show that the primary facts were incorrect, the same ought to have been set out in the reasons to believe. That has not been done in the present case. 18. Thus, the petitioner cannot be said to have failed to disclose fully and truly all the material facts. This being a jurisdictional issue, the assumption of jurisdiction under sections 147 and 148 of the Act was erroneous. The notice dated March 20, 2015 and the subsequent order dated February 1, 2016 deserve to be and are hereby quashed.”
The SLP preferred by the Revenue is found to have been dismissed by the Hon’ble Supreme Court.
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 29 ::
The above decision is noted to have been followed with approval by the Hon’ble Delhi High Court in the case of PCIT Vs K.R. Pulp and Papers Ltd[2025] 175 taxmann.com 278, whose relevant portion is as under:-
“12. It was further submitted that although the original assessment for AY 2009-10 was completed under Section 143(3) of the Act on 22.11.2011, the AO, at that stage, had only examined the details of share capital and premium received on a test-check basis. The Assessee had submitted certain documents including share application forms, bank statements, and PAN of the investing companies, which were accepted at face value, were without any suspicion on the nature of those transactions. 13. It is was submitted that during the post-search enquiries, the Investigation Wing found that the Assessee had received share capital with exorbitant premium amounting to Rs. 36,64,35,000/- from a large number of Kolkata and Delhi-based companies which, upon enquiry, were found to be non-existent or operating as accommodation entry providers. The search and investigation revealed that the Directors of these companies admitted in their statements that they were engaged in the business of providing accommodation entries including share capital, unsecured loans, and other similar transactions in exchange for commission. These statements were recorded and analysed, and the trail of funds was also traced. It was found that the supposed investing companies had weak financials, negligible or nil income, and that the share capital received by the Assessee was routed through multiple layering of bank accounts after initial cash deposits. …… 19. The learned Counsel for the Assessee submitted that the assumption of jurisdiction under Section 147 of the Act in the present case does not satisfy the conditions laid down in the first proviso to Section 147 of the Act, and accordingly, the reassessment proceedings are liable to be held as void ab initio. The Assessee had filed its return of income for AY 2009- 10 on 26.09.2009 declaring income of Rs. 1,95,97,146/-. During the original assessment proceedings, the AO had called for details of subscribed and paid-up capital vide questionnaire dated 21.06.2011. In response, the Assessee had submitted the details of subscribed and paid-
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 30 :: up share capital as on 31.03.2009, share application forms, bank statements, PAN, Income Tax Return ['ITR'] acknowledgments and proof of identity of the shareholders. Based on this, the assessment was completed and the AO did not make any addition on account of share capital. The order of assessment was framed under Section 143(3) of the Act on 22.11.2011, wherein the income was determined at Rs. 5,84,39,170/- against the returned income of Rs. 1,95,97,146/-, by disallowing deductions claimed under Section 80IA of the Act. Upon appeal, this addition was deleted by the CIT(A) and the learned ITAT had also affirmed the said decision of the CIT(A).
It was submitted that nearly 6 (six) years later, the notice dated 29.03.2016 under Section 148 of the Act was issued pursuant to a search conducted under Section 132 of the Act on 08.07.2015. It was further submitted that no incriminating material was found during the search in respect of the share capital transactions now sought to be reopened. While relying on the deletion of the addition by the CIT(A), it was submitted that the reasons for addition did not disclose how the Assessee failed to disclose relevant material facts during the original assessment. The documents and details forming the basis of the original assessment that had been duly submitted and stood accepted in the order under Section 143(3) of the Act.
It was further submitted that certain references were made in the reasons recorded for various enquiries, but the same were never confronted to the Assessee despite specific requests made vide letters dated 11.11.2016 and 29.12.2016.
The learned Counsel for the Assessee placed reliance on the decision of the Supreme Court in New Delhi Television Ltd. v. Dy. CIT [2020] 116 taxmann.com 151/271 Taxman 1/424 ITR 607 (SC), to submit that where the assessee had disclosed all primary facts and the AO had formed his view, subsequent proceedings on the same material are not sustainable merely because the revenue now seeks to draw a different inference.
The learned Counsel for the Assessee submitted that the reasons for reopening must specify which fact or information was not disclosed. Reliance is placed on the judgment of this Court in Sabh Infrastructure Ltd. v. ACIT [2018] 99 taxmann.com 409/398 ITR 198 (Delhi), affirmed by the Supreme Court in ACIT v. Sabh Infrastructure Ltd. [2024] 159 taxmann.com 184/297 Taxman 374/461 ITR 339 (SC), for the same.
The Assessee further submitted that during the original assessment proceedings, all relevant documentation was submitted and verified by the AO. In particular, the Assessee had provided confirmations, PAN, bank statements, and identity documents of all 58 shareholders. It is urged that
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 31 :: these facts were never disputed during the original assessment and no material has been brought on record by the Revenue to suggest that the disclosures were false or incomplete at that stage.
…..
The limited question before this Court for determination is - whether the learned ITAT was correct in ruling that the Assessment Order passed by the AO was void ab initio even though the AO had formed his reason to believe for escapement of income based on enquiries conducted by the Income Tax Department and the statements of the Directors of the investors' companies.
….
In the present case, the reasons recorded by the AO did not specify the names of any particular share applicants, the details of the cheques or the amount paid. It is also necessary to note that issue of share capital, and the details of various share holders had already been examined during the assessment proceedings. Therefore, the AO was required to have some additional information, beyond what had already been examined, in order to form reasons to believe that the Assessee's income had escaped assessment.
….
As noted above, the CIT(A) also faulted the AO for drawing an adverse inference against the Assessee on the basis of certain statement without confronting the Assessee with the statements of 3 (three) persons recorded by the Investigation Wing. It is material to note that the said statements were not recorded during the assessment proceedings and the Assessee had no opportunity to cross examine those 3 (three) persons.
The AO was also persuaded to take an adverse inference on the basis that some of the share applicants had not responded to notice under Section 133(6) of the Act. However, the learned counsel for the Revenue fairly conceded that the Assessee had pointed out that summons under Section 133(6) of the Act had been issued at incorrect addresses and had also furnished the correct addresses, but no further summons were sent at that addresses.
….
In the above conspectus of facts as obtaining in the present case, the learned ITAT concluded that there was no failure on the part of the Assessee in disclosing fully and truly all material facts necessary for
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 32 :: completion of the assessment. In the given facts, there was no explanation recorded as to how the Assessee failed to make full, true and all material disclosure of all the facts, and therefore, upheld the impugned order passed by the CIT(A). The conclusion of the learned ITAT must be read in the context that the fact the Assessee had furnished all information including the details of the share applicants, PAN number as well as their ITRs to establish the genuineness and creditworthiness of the entities. The reassessment proceedings would indicate that same was examined during the original assessment proceedings. The learned ITAT's finding regarding the requirement of clear recording as to how the Assessee had failed to truly disclose all material facts, is required to be understood in the aforesaid context. 47. In view of the above and the concurrent findings of the CIT(A) as well as the learned ITAT, the question is answered in favour of the Assessee and against the Revenue.”
The case of the assessee is also supported by the decision of the Hon’ble Delhi High Court in the case of PCIT Vs South Delhi Promoters Ltd[2023] 469 ITR 567, which also involved similar factual matrix as involved in the present case before us. In the decided case also, the Hon’ble High Court upheld the order of Tribunal quashing the reopening of concluded assessment beyond four years, by observing as under:- “13.1 The reasons for reopening the assessment furnished by the AO did not record that there was a failure on the part of the respondent/assessee to disclose, truly and fully, all material facts necessary for carrying out the assessment. 13.2 That enquiries had been made relating to infusion of share capital including share premium and unsecured loans taken by the respondent/assessee during period in consideration. 14. Based on these findings of facts which are now assailed before us, the Tribunal concluded that the prerequisite for jurisdiction under section 147 of the Act with regard to a case falling under the first proviso was not fulfilled. 14.1 In other words, since more than four years had passed from the end of the relevant AY, reassessment proceedings could not have been
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 33 :: triggered unless there was a demonstrable failure on the part of the respondent/assessee to disclose, truly and fully, all material facts. 15. It was also the view of the Tribunal that this was a case of change of opinion concerning the assessment which had already been concluded. 16. Insofar as the failure on the part of the AO is concerned, the Tribunal notes that even according to the respondent/assessee, as indicated hereinabove, accommodation entries had been received by the respondent/assessee from one of the accommodation entry providers, i.e., S.K. Jain Group, amounting to Rs. 5.65 Crores. 17. In this context, the Tribunal again returned a finding of fact that none of the 99 share capital applicants were found in the list of accommodation entry providers. As per the Tribunal, the AO had not applied his mind as to how the assessee was linked to the accommodation entry provider. 18. Therefore, the Tribunal's view was that the AO failed to apply its mind independently and that it reopened the concluded assessment based on directions of Director of Investigation (DIT), Delhi and he did not form his own reasons to believe that income chargeable to tax had escaped assessment. The Tribunal's concern was that had the AO applied its mind, he would have noticed that during the period under consideration, the respondent/assessee had received Rs. 16.88 crores towards share capital and Rs. 10.63 crores towards unsecured loans, the documents qua which had been placed on the record. Given this position, the cross objections of the assessee were allowed. Thus, having concluded that the cross objections of the respondent/assessee were viable, the Tribunal did not think it necessary to go into the merits of the case. 19. We have closely examined the record. None of the findings of the fact recorded by the Tribunal have been assailed before us. We have no difficulty in agreeing with the Tribunal that the respondent/assessee was put to scrutiny with regard to the infusion of share capital and had furnished the relevant information sought by the AO when the initial assessment order was framed under section 143(3) of the Act. The Tribunal, therefore, was right in reaching the conclusion that this was a case of change of opinion, and therefore, the first proviso to section 147/148 was applicable, the prerequisites of which having not been fulfilled, re-assessment proceedings could not have been triggered.”
For the above reasons and following the law laid down by the Hon'ble Supreme Court in the case of NDTV Ltd. (supra), and other case
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 34 :: laws, we hold that the reopening of the assessment for AY 2012-13 was bad in law in as much as the AO did not satisfy the condition precedent in first proviso to Section 147 of the Act which was sine qua non for usurping jurisdiction u/s 147 of the Act. As a consequence thereto, the order passed u/s 147/143(3) dated 20.12.2019for AY 2012-13 is held to be ab initio void and is therefore quashed.
Since the assessee has succeeded on the legal issue discussed supra, the other grounds raised, both on legal issues as well as on merits are not being separately adjudicated upon and the same are left open, which may be decided, if need so arises in future.
In the result, the appeal of the assessee is allowed.
Order pronounced on the 17th day of September, 2026, in Chennai.
Sd/- Sd/- (पदमावती यस) (एबी टी. वक�) (Padmavathy. S) (ABY T. VARKEY) लेखा सद�/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai, Digitally signed �दनांक/Dated: 17th September, 2026. YASHVI by YASHVIR SINGH R SINGH Date: 2026.09.23 MM 05:20:24 -07'00' आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR
No.3604/Chny/2025 (AY 2012-13) Shri Coimbatore Jewellers India Pvt Ltd :: 35 :: 5. गाड�फाईल/GF
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