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

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 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 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.

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 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 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 & 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 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 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 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 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 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:

(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 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:

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.

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.

Order pronounced in the open court on 27.02.2019.