M/S. V3S INFRATECH LTD.,NEW DELHI vs. ACIT, NEW DELHI

PER SUDHANSHU SRIVASTAVA, J.M.: This is an appeal filed by the assessee against order dated

06.01.2015 passed by the Ld. CIT (Appeals)-XXX, New Delhi for

assessment year 2004-05.

that there was a delay of 13 days in filing this appeal. Our

attention was drawn to the delay-condonation application

submitted in this respect wherein it has been pleaded that the

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delay occurred on account of appeal papers having been kept in

the wrong file. An affidavit has also been filed by the assessee in

this regard. It was prayed that the delay was unintentional and

that there was no negligence on the part of the assessee in filing

the appeal but since the papers could not be traced due to having

been kept in the wrong file, the delay be condoned.

submitted that the appeal should be dismissed at the very

threshold.

that the delay of 13 days deserves to be condoned as the assessee

would not stand to gain by intentionally delaying the filing of

appeal. Accordingly, the delay stands condoned.

filed for the year under consideration declaring income of Rs.

29,041/- on 01.11.2004. There was a search and seizure action

u/s 132(1) of the Income Tax Act, 1961 (hereinafter referred to call

‘the Act’) on 01.09.2005. Assessment was framed u/s 153A/143(3)

of the Act on 26.12.2007 and the income was assessed at Rs.

3,96,76,291/- after making additions on account of receipt of

share capital and estimated commission paid for arranging

accommodation entries. The Ld. CIT (Appeals), vide order dated

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03.03.2010, deleted the entire addition. The ITAT in ITA no.

2701/Del/2009, vide order dated 23.03.2011, upheld the order of

the Ld. CIT (Appeals) and, thus, the income shown in the original

return at Rs. 29,041/- stood restored.

5.1 Meanwhile on 19.01.2009, a second search was carried out

u/s 132 of the Act. In compliance to the notice u/s 153A of the

Act, return declaring income of Rs. 29,041/- was again filed on

16.02.2010. The assessment was completed on 30.12.2010 at an

income of Rs. 4,31,76,291/- by making a further addition of Rs. 35

lakhs to the income assessed earlier. This addition was also on

account of share capital. The Ld. CIT (Appeals), vide order dated

21.01.2013, deleted the addition.

5.2 In between, on 30.03.2011 notice u/s 148 was issued and in

response the assessee submitted that the original return filed on

01.11.2004 be treated as the return filed in compliance to notice

u/s 148. The assessee also requested for copy of reasons recorded

for reopening the assessment. The reasons were provided to the

assessee. The reasons inter alia mentioned that during the course

of survey in the premises of one Shri SK Gupta, several ledger

accounts were found to be maintained in Tally software besides

other documents and accounts. It was also stated that Shri SK

Gupta had admitted during the survey proceedings that he used to

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provide accommodation entries to various perons/beneficiaries. It

was also stated in the reasons that as per the information received

from the ACIT, Central Circle -19, New Delhi, the assessee was the

recipient of Rs. 20 lakhs through three different cheques from M/s

Chanderprabhu Financial Services and M/s Chanderprabhu

Finance & Securities Ltd which were companies floated/controlled

by Shri SK Gupta. The assessee objected to the validity of initiation

of proceedings u/s 147 of the Act and the objections were disposed

of by the AO on 12.09.2011. On 01.11.2011, the assessee

requested for inspection of assessment records and also requested

for being provided with the copies of the relevant documents which

were provided to the assessee though inspection of file was not

allowed. On 13.12.2011, the assessee demanded an opportunity to

cross examine Mr. S.K. Gupta on whose statement the reopening

was said to be based. The assessment was completed u/s 143(3) /

153(A) / 147 of the Act on 29.11.2011 at an income of Rs.

4,51,76,290/- after making a further addition of 20 lakhs to the

income determined earlier vide assessment order u/s 153A/143(3)

dated 31.12.2010. Aggrieved, the assessee carried the matter

before the Ld. CIT (Appeals) and challenged the addition on merits

as well as challenged the initiation of reassessment proceedings

but the Ld. CIT(A), vide the impugned order, dismissed the

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assessee’s appeal. Now the assessee is before the ITAT and has

raised the following grounds of appeal:-

“1. Because learned CIT (A) has erred in law on facts in sustaining the reopening of assessment made twice u/s 143(3)/153A after the lapse of four years from the end of assessment year. WITHOUT PREJUDICE TO THE AFORESAID 2. Because learned CIT (A) has erred in law and facts in not adjudicating the Ground no. 3.1 wherein the appellant has challenged the adoption of earlier assessed income under section 153A vide order dated 31.12.2010 instead of returned income. 3. Because learned CIT (A) has erred in law and on facts in sustaining the addition of Rs. 20,00,000 under section 68 on account of share capital issued particularly when no contrary evidence or incriminating material was ever confronted to the appellant during reassessment proceedings and very same transaction stood verified and assessed twice. 4. Because the order appealed against is contrary to the facts, law and principles of natural justice.”

6.0 At the outset, the Ld. Authorised Representative submitted

that ground no. 2 was not being pressed. Accordingly, this ground

stands dismissed as not pressed.

7.0 The Ld. Authorised Representative submitted that the

reopening in this case was bad in law as all the relevant facts were

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already before the assessing officer during the course of earlier

assessment proceedings and further the AO had duly examined

the increase in share capital and had made an addition which was

deleted by the Ld. CIT (Appeals) and the order of the Ld. CIT

(Appeals) was upheld by the ITAT. He drew our attention to the

copy of reasons supplied and placed at page 24 of the paper book

filed by the assessee. It was submitted that as per the reasons

recorded, the reopening was entirely based on information received

from Central Circle as well as the statement of Shri S.K.Gupta

recorded during the course of Survey in Sh. S.K.Gupta group of

cases. It was also submitted that no incriminating document

pertaining to the assessee was found during the course of survey

in S.K. Gupta group of cases. It was also submitted that the

assessee had specifically asked for cross examination of Sh. S.K.

Gupta which was not afforded and, thus, the reassessment based

on such statement was bad in law. Reliance was placed on the

judgment of the Hon’ble Apex Court in the case of M/s. Andaman

Timber Industries in Civil Appeal no. 4228 of 2006 and it was

submitted that in absence of opportunity of cross-examination

being provided to the assessee, the impugned addition could not

have been made. The Ld. Authorised Representative also argued at

length and contended that the reassessment in this case was

7 ITA NO. 3853/Del/2015 (V3S Infratech Ltd.)

beyond 4 years and, therefore, in absence of any fresh material

having come in possession of the Assessing Officer, the

reassessment proceedings were bad in law. The Ld. Authorised

Representative also argued that the impugned addition was

wrongly made and further confirmed as the assessee was not

confronted with any contrary evidence or incriminating material

prior to making the addition. It was also submitted that the

impugned transaction pertaining to share capital already stood

verified and assessed twice and, therefore, no addition can be

made on this account as there was no failure on the part of the

assessee to disclose fully and truly all material facts necessary for

its assessment. The Ld. AR also cited numerous judicial

precedents in support of his contention and it was prayed that the

reassessment be quashed.

8.0 In response, the Ld. Sr. Departmental Representative

submitted that it is not the assessee’s case that all the information

was already in possession of the AO at the time of first assessment

proceedings because the department had received fresh

information only subsequent to the survey in the premises of Sh.

S.K. Gupta which was conducted on 20.11.2007. It was submitted

that the receipt of Rs. 20,00,000/- as share capital from Chander

Prabhu Financial Services and Chander Prabhu Finance &

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Securities Ltd. was fresh information before the Assessing Officer

and, therefore, the reopening was valid in law. It was also

submitted by the Ld. Sr. DR that Sh. S.K. Gupta had accepted

that Chander Prabhu Financial Services was an entry operating

company through his group of companies and, therefore, the AO

cannot be held to be at fault for initiating the reassessment

proceedings. It was also submitted that failure to provide cross

examination will not invalidate the re-assessment proceedings.

9.0 We have heard the rival submissions and have also perused

the material on record. We first take up the assessee’s plea that

the reassessment proceedings cannot be sustained as the

reassessment was based on the statement of Shri SK Gupta, who

the assessee was not allowed the opportunity to cross examine.

From the perusal of the reasons recorded, it is very much evident

that the statement of Shri SK Gupta was only one of the factors

responsible for the initiation of reassessment proceedings. Apart

from the statement of Shri SK Gupta, the AO also had information

which had been received from the Central Circle that the assessee

was in receipt of Rs. 20 lakhs from two concerns namely M/s

Chanderprabhu Financial Services and M/s Chanderprabhu

Finance & Securities Ltd which were companies floated/controlled

by Shri SK Gupta. The information duly mentioned the name of

9 ITA NO. 3853/Del/2015 (V3S Infratech Ltd.)

the bank as well as the cheque numbers through which the

impugned transaction/s of Rs. 20 lakhs had taken place. Thus, it

cannot be said that the foundation for the initiation of re-

assessment proceedings was only the statement of Shri SK Gupta.

The department also had other corroborative evidences in this

regard. During the survey operation under Section 133A of the Act

at the premises of Shri SK Gupta, a laptop was found the content

of which was made Annexure A-14. The said laptop contained

ledger accounts from F.Y. 2003-04 to 2007-08. At pages 739,

875-876 of the ledger for F.Y. 2003-04 there was an account

namely ‘Loan July 03 to July 04 Premium’ in the name of one Mr.

Suresh Garg. Scanned Copy of these pages have also been

reproduced in the assessment order in Para 2.3.3. As per the

noting in the said Premium account, these is an entry of premium

(Commission) received from Mr. Suresh Garg on account of cheque

no. 778923 Dt. 30.8.2003 drawn on Federal Bank from Chander

Prabhu in favour of the assessee for Rs. 15,000/-. Similarly, the

ledger of Mr. Suresh Garg showed that on 28.9.2003 and

29.9.2003, cash of Rs. 10 lacs was received and cheque was given

to M/s Gahoi Buildwell Pvt. Ltd. through Chander Prabhu

Financial Services Ltd. for Rs. 10 lacs (two cheques of Rs 5 lacs

each.). It is also not the case of the assessee that the assessee was

10 ITA NO. 3853/Del/2015 (V3S Infratech Ltd.)

not confronted with the documents/entries as found in the lap top

found in the premises of Shri SK Gupta. A perusal of the

assessment order shows that the entire statement of Sh. S. K.

Gupta, reproduced in the assessment order along with the

evidences, were given to the assessee for rebuttal as is evident

from Para 1.3 of the assessment order on 11.11.2011. Thus, it is

very much apparent that the statement of Shri SK Gupta was not

the sole foundation for the initiation of re-assessment proceedings

and, therefore, we are afraid that the assessee’s reliance on the

judgment of the Hon’ble Apex Court in the case of M/s. Andaman

Timber Industries (supra) will not come to the aid of the assessee

on the facts of this case. The department also had sufficient

corroborative evidence/s as found in the lap-top found during the

course of survey at the premises of Shri SK Gupta to proceed

against the assessee by issuing notice u/s 148 of the Act.

Therefore, we are dismiss the assessee’s plea that the re-

assessment proceedings stand vitiated as the assessee was denied

the opportunity to cross examine Shri SK Gupta.

9.1 The assessee has also challenged the re-opening on the

ground that no fresh material had come into existence and the

issue of share capital had already been examined in the earlier

assessment proceedings. However, this contention of the assessee

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also does not hold much ground. The Hon’ble Gujarat High Court,

in the case of Yogendra Kumar Gupta vs. ITO reported in (2014)

366 ITR 186 (Guj), has held assumption of jurisdiction u/s 147 of

the Act by the ITO based on fresh information to be valid. In this

case, the assessee had filed return of income declaring a certain

income. During the course of assessment proceedings, the AO

noticed that the assessee had taken loans and advances but since

the loans and advances were entered through cheques and drafts,

the AO accepted the validity of these transactions and completed

the assessment u/s 143(3) of the Act. Subsequently, a search was

carried out in the premises of a third party in course of which it

was found out that this third party was running twenty dummy

companies which provided accommodation entries to various

beneficiaries. The list of the twenty dummy companies included

the name of the company from which the assessee had taken

loans/advances. On the basis of the said investigation report, the

AO took the view that the loan transactions were bogus and re-

assessment proceedings were initiated. The Hon’ble Gujarat High

Court, on assessee’s appeal, held that the assumption of

jurisdiction on the part of the AO was based on fresh information

and upheld the validity of the re-assessment proceedings. The

Hon’ble Apex Court subsequently dismissed the assessee’s Special

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Leave Petition. In the present case also, the re-opening was based

on information collected during the course of survey at the

premises of a third party and this, in our considered opinion,

constitutes fresh information. Therefore, we reject the contention

of the assessee that the information from the investigation wing

could not be treated as fresh material for the purpose of initiating

re-assessment proceedings.

9.2 The Ld. AR had also argued that the assessee was not

confronted with any incriminating material or contrary evidence

with respect to the impugned addition. In this regard, we have

perused the assessment order and we note that the entire evidence

has been reproduced in the assessment order and it has been

stated by the AO that the same was given by way of show cause to

the assessee for rebuttal. The AO has also mentioned that the

assessee chose not to offer its comments on the same. Therefore,

this argument of the Ld. AR also cannot be accepted and the same

is rejected.

9.3 It has also been argued by the Ld. AR that since the

impugned transaction pertaining to share capital already stood

verified and assessed twice and, therefore, no addition could have

been made on this account as there was no failure on the part of

the assessee to disclose fully and truly all material facts necessary

13 ITA NO. 3853/Del/2015 (V3S Infratech Ltd.)

for its assessment. However, the fact remains that although the

issue of share capital was examined by the AO on earlier two

occasions, this time, fresh information, gathered during the course

of survey proceedings, added an entirely new dimension to the

impugned transaction. The AO simply could not be expected to put

blinkers on his eyes and ignore the information just for the reason

that the impugned transaction was a part of the share capital

which had been examined on two earlier occasions. One may, at

this stage, refer to the Full Bench judgment of the Hon’ble Delhi

High Court in the case of CIT vs. Usha International (2012) 348

ITR 485 (Del FB). The Full Bench was constituted to consider the

meaning of the expression “change of opinion” for purposes of

section 147 and whether, in the light of the judgment in the case

of Kelvinator reported in 256 ITR 1 (Del FB) and as approved by

the Hon’ble Apex Court in 320 ITR 521 (SC), in a case where the

assessee has furnished full and true particulars at the time of

original assessment with reference to the income alleged to have

escaped assessment, the AO, even within 4 years from the end of

the AY, could be said to have formed an opinion and to have no

jurisdiction to reopen the assessment even though he had not

raised any query with respect to the issue. HELD by the Full

Bench:

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(i) The expression “change of opinion” postulates formation of opinion and then a change thereof. The question of “change of opinion” arise only when the AO at the s. 143(3) stage forms an opinion and accepts the assessee’s stand. There is a difference between “change of opinion” and failure to “form an opinion“. However, for determining whether or not there is “change of opinion“, the fact that the assessment order is silent is not relevant because the assessee has no control over the way the order is written. There may also be cases where though the AO has not raised a query, the issue may be so apparent and obvious that to say that the AO has not formed an opinion would be contrary and opposed to normal human conduct; XXX “15. Here we must draw a distinction between erroneous application/ interpretation/understanding of law and cases where fresh or new factual information comes to the knowledge of the Assessing Officer subsequent to the passing of the assessment order. If new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record and available at the time of the assessment order, the principle of "change of opinion" will not apply. The reason is that "opinion" is formed on facts. 9.4 Therefore, “opinion" formed or based on wrong and incorrect

facts or which are belied and untrue do not get protection and cover

under the principle of "change of opinion". Factual information or

material which was incorrect or was not available with the Assessing

Officer at the time of original assessment would justify initiation of

15 ITA NO. 3853/Del/2015 (V3S Infratech Ltd.)

reassessment proceedings. The requirement in such cases is that the

information or material available should relate to material facts. The

expression material facts' means those facts which if taken into

account would have an adverse affect on the assessee by a higher

assessment of income than the one actually made. They should be

proximate and not have remote bearing on the assessment. The

omission to disclose may be deliberate or inadvertent. The question of

concealment is not relevant and is not a precondition which confers

jurisdiction to reopen the assessment. In the appeal before us, the AO

has recorded a clear finding in the “reasons recorded” that there was

a failure on the part of the assessee to disclose fully and truly all

material facts necessary for assessment within the meaning of section

147 of the Act. It has been contended by the Ld. AR that the AO has

simply stated that there was a failure on the part of the assessee to

fully and truly disclose all the material particulars and the AO has

not stated as to which material the assessee had failed to disclose

and, therefore, the re-opening was bad in law. However, the

contention of the Ld. AR regarding full and true disclosure has to be

rejected in terms of explanation 1 to Section 147 which reads as

under:

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“Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.”

9.5 In our considered opinion, on the facts of the present case, the

explanation supports the case of the Revenue that mere submission

of documents like income returns, copy of PAN cards, copy of bank

statements, confirmation from the share applicants etc by itself would

not amount to proper disclosure by the assesesse as the very material

fact that the impugned transaction/s related to accommodation

entries was not disclosed by the assessee. In the case of Honda Siel

Power Products Limited v. Deputy Commissioner of Income Tax

(2012) 340 ITR 0053, a Division Bench of the Hon’ble Delhi High

Court held as under:

“The law postulates a duty on every assessee to disclose fully and truly all material facts for its assessment. The disclosure must be full and true.

Material facts are those facts which if taken into accounts they would have an adverse effect on assessee by the higher assessment of income than the one actually made. They should be proximate and not have any remote bearing on the assessment.

17 ITA NO. 3853/Del/2015 (V3S Infratech Ltd.)

Omission to disclose may be deliberate or inadvertent. This is not relevant, provided there is omission or failure on the part of the assessee. The latter confers jurisdiction to reopen the assessment.”

9.6 In the light of the aforesaid, it has to be held that the

requirement of full and true disclosure by the assessee is not satisfied

in the present case. The Hon’ble Delhi High Court has observed in the

case of M/s OPG Metals & Finsec Ltd. vs. Commissioner of Income

Tax & Anr. In Writ Petition (Civil) No. 8283/2010 that “full and true

disclosure cannot be garbed or hidden behind the cervices of the

documentary material. The assessee must act with candour and there

cannot be suppression of facts. The disclosure must be truthful and fair

in all respects and assessee who seeks the benefit of the proviso to

Section 147 must make a full and true disclosure of all primary facts.”

9.7 In view of the above stated judicial precedents and on the

specific facts of this case, we are unable to find ourselves in

agreement with the averments of the Ld. AR. We also note that the

judicial precedents relied upon by the Ld. AR also do not come to the

rescue of the assessee as the facts in those cases are entirely

distinguishable from the facts of the case. Accordingly, we uphold the

validity of the re-assessment proceedings. Ground Nos. 1, 2, 3 and 4

of the assessee’s appeal are, accordingly, dismissed.

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Order pronounced in the open court on 27.02.2019.

Sd/- Sd/- (O.P.KANT) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 27.02.2019 *BR*