MOHD HASAN ABDUL GAFOOR MOMIN,THANE vs. ITO WD 1(2), KALYAN

आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order

dated 17/02/2017 of the Ld. First Appellate Authority,

Mumbai. The assessee has filed revised ground/additional

ground. First, we shall deal with additional ground,

challenging reopening of assessment under section

147/148 of the Income Tax Act, 1961 (hereinafter the Act)

by placing reliance upon the decision from Hon'ble Apex

Court in NTPC Ltd. vs CIT 229 ITR 383 (Supreme Court)

and Hon'ble jurisdictional High Court in Ahmedabad

Electricity Company Ltd. vs CIT 199 ITR 351 (Bom.)(FB).

assessee, Shri K. Gopal along with Ms. Neha Paranjape,

contended that legal ground can be raised before this

Tribunal even for the first time. It was contended that

assessment under section 143(3) was passed on

23/09/2009 and notice under section 148 of the Act was

issued on 23/06/2014, thus, it is beyond four years. It was

pleaded that the provision of section 147 gets attracted

only if there is a failure on the part of the assessee. On the

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other hand, Shri Suman Kumar, Ld. DR, contended that

there is no full disclosure of material facts on the part of

the assessee. Our attention was invited to page-29 of the

paper book. It was contended that due permission was

taken from the ld. Commissioner, Thane, and the Ld.

Commissioner of Income Tax (Appeal) deleted the addition

due to low tax effect and thus appeal could not be filed.

2.1. We have considered the rival submissions and

perused the material available on record. So far as, raising

the legal ground is concerned, we find merit in the

contention of the Ld. counsel for the assessee as in view of

the decision from Hon'ble Apex Court in NTPC Ltd.

((Supra)), such legal ground can be raised even before

appellate proceedings. The Hon'ble Apex Court held as

under:-

“Under section 254, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the

4 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

Commissioner (Appeals). Both the assessee as well as the department have a right to file an appeal/cross objections before the Tribunal. There is no reason why the. Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) takes too narrow a view of the powers of the Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. In the instant case, therefore, the Tribunal had jurisdiction to examine a question of law which arose from the facts as found by the lower authorities and having a bearing on the tax liability of the assessee. Note: The case has been decided in favour of the assessee.” We note that while coming to the aforesaid conclusion,

the Hon'ble Apex Court relied upon the decision Jute

Corpn. of India Ltd. v. CIT [1991] 187 ITR 688 (SC) and also

considered the decisions in CIT v. Anand Prasad [1981]

128 ITR 388 (Delhi), CIT v. Cellulose Products of India

Ltd. [1985] 151 ITR 499 (Guj.) [FB] and CIT v. Karamchand

Premchand (P.) Ltd. [1969] 74 ITR 254 (Guj.). Thus, the

legal ground raised by the assessee is allowed.

reopening of assessment under section 147 of the Act,

beyond four years. The contention of the ld. counsel for the

assessee is that there was no failure on the part of the

assessee to disclose the material facts fully and truly.

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However, the Ld. DR strongly contended that there was no

full disclosure of material facts by the assessee for which

our attention was invited to page 29 of the paper book. It

was pleaded that the limit of four years will be applicable

only in a situation when there is full disclosure of material

facts. Our attention was invited to para-5 (page-6) and para

5.1 of the impugned order. In reply, the Ld. counsel for the

assessee, relied upon the decision in Hindustan Lever Ltd.

268 ITR 339 (Bom.) and CIT vs S Kader Khan 352 ITR 480

(Supreme Court).

3.1. We have considered the rival submissions and

perused the material available on record. The facts, in brief,

are that a survey action under section 133A of the Act was

carried out at the business premises of M/s M. H.

Corporation, sole proprietary concern of the assessee, on

25/01/2006. During the course of survey, the certain

discrepancies were found in the stock and other asset

belonging to the assessee, his wife and the accounts of his

children. A statement of the assessee was recorded, during

survey, where the assessee made disclosure of Rs.60 lakhs

by way of additional income which inter alia includes Rs.12

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lakhs on account of discrepancy in the stock. The assessee

also filed an affidavit in support of the said declaration. The

assessee declared Rs.60 lakhs, by way of statement, which

is summarized as under:

The following amounts were declared as additional

income which is also summarized hereunder:-

Sr. Names Amount (in Rs.) No. 1 Mohd. Hasan (Assessee) 12,40,000/- 2 Irshad (Son) 9,10,000/- 3. Arshad (Son) 9,35,000/- 4. Shah Alam (Son) 8,95,000/- 5. Shahid (Son) 1,11,000/- 6. Rehana (Wife) 9,10,000/- Total 60,00,000/-

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3.2. Before adverting further, we are reproducing

hereunder the observation made by the Ld. Commissioner

of Income Tax (Appeals):-

“5. I have carefully considered the facts of the case, findings of the AO in the assessment as well as re-assessment orders, submissions of the appellant and material placed on record. From the facts of the case, it is noticed that in this case a survey action u/s 133A of the Ac; was carried out or the business premises of the appellant on 25.01.2007. During the course of survey proceedings, the survey team found incriminating documents / unaccounted stock /assets and after considering/analyzing these discrepancies, the appellant had declared the unaccounted income of Rs 60 lakhs, under various heads, as stated in Para No 3 herein above, in the name of himself (Rs 12 lakhs) as well as family members (Wife -Mrs Rehana Rs 9.10 lakhs, Sons -- 1. Irshad Rs 9.10 lakhs, 2. .Arshad Rs 9.35 lakhs, 3. Shah Alam Rs 8.95 lakhs and 4. Shahid Rs 1.11 lakhs). During the course of survey proceedings, the appellant was in full control of the premises / managing the entire business for himself as well as for family members and accordingly declared the unaccounted income of Rs 60 lakhs, which was on account of unaccounted stock (Rs 12 lakhs), unexplained investment in shed (Rs 5 lakhs), undisclosed looms (Rs 17 lakhs), undisclosed car (Rs 2 lakhs), unexplained expenditure incurred in the extension / renovation of residential building (Rs 7.5 lakhs), undisclosed investment in interior / furniture (Rs 5 lakhs), unaccounted investment in jewellery (Rs 5 lakhs), two motor cycles (Rs 50,000/-) and expenditure in the construction / extension / renovation of shed (Rs 6 laid's), in his hands as well as in the hands of family members. From these details it is seen that it was the appellant, who had determined the above amount under various heads, on the basis of his oWn knowledge and accordingly offered the said income under various heads, in the different hands, as above. 5.1 From these facts it is seen that the appellant had tried to divide the above undisclosed income in different hands to avoid payment of taxes by claiming the basic exemption in different hands, as the appellant's wife and his children (4 sons) had declared meager incomes in the range of Rs 1 lakhs only. It is further observed that it was the appellant who had actually carried out the business of manufacturing/running of looms and against

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the same, he had earned unaccounted income, which was utilized /deployed in the purchase of unaccounted looms, car, motor cycles, ornaments, furniture, construction/ extension/ renovation of residence/sheds, etc. In order to avoid the payment of maximum tax rate of 30%, he had preferred to offer the said unaccounted income in the hands of his five family members, without their knowledge/consent and therefore, the same is to be taxed / assessed in his hands only and not in the hands of other family members, as has rightly been held by the then CIT(A), while finalizing the appeals in the case of family members. It is further held that since the AO has assessed the entire income in the hand of the appellant, therefore, the same cannot be assessed again in the hands of his wife and children, as has been argued by the Ld. AR. The A.O., therefore, is directed accordingly.”

3.3. In view of material available on record, it is our

bounded duty to examine the validity of reopening u/s 147

r.w.s 148 of the Act. Before adverting further we are

reproducing hereunder the relevant provision of section

147 of the Act for ready reference and analysis:-

“. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or

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to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. 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. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :— (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the

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income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.”

3.4. If the aforesaid provision of the Act is analyzed,

we find that after insertion of Explanation -3 to section 147

of the Act by the Finance (No.2) Act of 2009 with effect from

01/04/1989 section 147 has an effect that Assessing

officer has to assess or reassess income (such income)

which has escaped assessment and which was basis of

formation of belief and, if he does so, he can also assess or

reassess any other income which has escaped assessment

and which came to the notice during the course of

proceedings. Identical ratio was laid down by Hon’ble

jurisdictional High Court in CIT vs Jet Airways India Pvt.

Ltd. (2010) 195 taxman 117 (Mum.) and the full Bench

decision from Hon’ble Kerala High Court in CIT vs Best

Wood Industries and Saw Mills (2011) 11 taxman.com 278

(Kerala)(FB). A plain reading of explanation-3 to section

147 clearly depicts that the Assessing Officer has power to

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make addition, where he arrived to a conclusion that

income has escaped assessment which came to his notice

during the course of proceedings of reassessment u/s 148.

our view is fortified by the decision in Majinder Singh Kang

vs CIT (2012) 25 taxman.com 124/344 ITR 358 (P & H) and

Jay Bharat Maruti Ltd. Vs CIT (2010) Tax LR 476 (Del.) and

V. Lakshmi Reddy vs ITO (2011) 196 taxman 78 (Mad.).

The provision of the Act is very much clear as with effect

from 01/04/1989, the Assessing Officer has wide powers to

initiate proceedings of reopening. The Hon’ble Kerala High

Court in CIT vs Abdul Khadar Ahmad (2006) 156 taxman

206 (Kerala) even went to the extent so long as the AO has

independently applied his mind to all the relevant aspect

and has arrived to a belief the reopening cannot be said to

be invalid.

3.5. We are aware that “mere change of opinion”

cannot form the basis of reopening when the necessary

facts were fully and truly disclosed by the assessee in that

situation, the ITO is not entitled to reopen the assessment

merely on the basis of change of opinion. However, powers

under amended provision are wide enough where there is a

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reasonable belief with the Assessing Officer, that income

has escaped assessment, because the powers with effect

from 01/04/1989 are contextually different and the

cumulative conditions spelt out in clauses (a) and (b) of

section 147, prior to its amendment are not present in the

amended provision. The only condition for action is that

the Assessing Officer “should have reason to believe” that

income chargeable to tax has escaped assessment. Such

belief can be reached in any manner and is not qualified by

a pre-condition of faith and true disclosure of material facts

by an assessee as contemplated in pre-amended section

much wider under the amended provision. Our view is

fortified by the decision from Hon’ble Delhi High Court in

Bawa Abhai Singh vs DCIT (2001) 117 taxman 12 and

Rakesh Agarwal vs ACIT (1996) 87 taxman 306 (Del.). The

Hon’ble Apex Court in CIT vs Sun Engineering works Pvt.

Ltd. 198 ITR 297 (SC) clearly held that proceedings u/s

147 are for the benefit for the Revenue, which are aimed at

gathering the ‘escaped income’. At the same time, we are

aware that powers u/s 147 and 148 of the Act are not

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unbridled one as it is hedged with several safeguards

conceived in the interest of eliminating room for abuse of

this power by the AO. However, the material available on

record, clearly indicates that income chargeable to tax had

escaped assessment, therefore, the ld. Assessing Officer

was within his jurisdiction to reopen the assessment. The

Hon’ble Apex Court in Ess Ess Kay Engineering Co. Pvt.

Ltd. (2001) 247 ITR 818 (SC) held that merely because the

case of the assessee was correct in original assessment for

the relevant assessment year, it does not preclude the ITO

to reopen the assessment of an earlier year on the basis of

finding of his fact that fresh material came to his

knowledge.

3.6. Under section 147, as substituted with effect

from 01/04/1989, the scope of reassessment has been

widened. After such substitution, the only restriction, put

in that section is that “reason to believe”. That reason has

to be a reason of a prudent person which should be fair

and not necessarily due to failure of the assessee to

disclose fully and partially some material facts relevant for

assessment (Dr. Amin’s Pathology Laboratory vs JCIT

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(2001) 252 ITR 673, 682 (Bom.) Identical ratio was laid

down by Hon’ble Delhi High court in United Electrical

Company Pvt. Ltd. vs CIT (2002) 258 ITR 317, 322 (Del.)

and Prafull Chunnilal Patel vs ACIT 236 ITR 832, 838

(Guj.). The essential requirement for initiating

reassessment proceeding u/s 147 r.w.s 148 of the Act is

that the ld. Assessing Officer must have reason to believe

that any income chargeable to tax has escaped assessment

for any assessment year. The Hon’ble Gujara High Court in

Prafull Chunnilal Patel vs ACIT (supra) even went to the

extent that at the initiation stage formation of reasonable

belief is needed and not a conclusive finding of facts.

Identical ratio was laid down in Brijmohan Agrawal vs

ACIT (2004) 268 ITR 400, 405 (All.) and Ratnachudamani

S. Utnal vs ITO (2004) 269 ITR 272, 277 (Karnataka)

applying Sowdagar Ahmed Khan vs ITO (1968) 70 ITR

79(SC).

3.7. So far as, the meaning of expression, “reason to

believe” is concerned, it refers to belief which prompts the

Assessing Officer to apply section 147 to a particular case.

It depends upon the facts of each case. The belief must be

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of an honest and reasonable person based on reasonable

grounds. The Assessing Officer is required to act, not on

mere suspicion, but on direct or circumstantial evidence.

Our view find support from the ratio laid down in following

cases:-

i. Epica Laboratories Ltd. vs DCIT 251 ITR 420, 425-426 (Bom.), ii. Vishnu Borewell vs ITO (2002) 257 ITR 512 (Orissa), iii. Central India Electric Supply Company Ltd. vs ITO (2011) 333 ITR 237 (Del.), iv. V.J. Services Company Middle East ltd. vs DCIT (2011) 339 ITR 169 (Uttrakhand), v. CIT vs Abhyudaya Builders (P. ) Ltd. (2012) 340 ITR 310 (All.), vi. CIT vs Dr. Devendra Gupta (2011) 336 ITR 59 (Raj.), vii. Emirates Shipping Line FZE vs Asst. DIT (2012) 349 ITR 493 (Del.). viii. Reference may also made to following judicial decisions:- ix. Safetag international India P. Ltd. (2011) 332 ITR 622 (Del.), x. CIT vs Orient Craft Ltd. (2013) 354 ITR 536 (Del.) xi. Acorus Unitech Wirelss Pvt. Ltd. vs ACIT (2014) 362 ITR 417 (Del.). xii. Praful Chunilal Patel: Vasant Chunilal Patel vs Asst. CIT (1999) 832, 843-44, 844-45 (Guj.), xiii. Venus Industrial Corporation vs Asst. CIT (1999) 236 ITR 742, 746 (Punj.), xiv. Srichand Lalchand Talreja vs Asst. CIT (1998) 98 taxman 14, 19 (Bom.),

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xv. Usha Beltron Ltd. vs JCIT (1999) 240 ITR 728, 736-37, 739 (Pat.) xvi. Kapoor Brothers vs Union of India (2001) 247 ITR 324, 331, 332-33 xvii. Vippy Processors Pvt. Ltd. vs CIT (2001) 249 ITR 7, 8 (MP)

3.8. In Dilip S. Dahanukar vs Asst. CIT (2001) 248 ITR

147, 150-51 (Bom.). The Hon’ble jurisdictional High Court

held as under:-

“Held, that there was material on record on the basis of survey and statement of person to show that the assessee had wrongfully claim deduction u/s 80IA. Therefore, the Assessing Officer had reason to believe that income had escaped assessment for assessment year 1994- 95.”

Identically in the case of Srichand Lalchand Talreja v. Asst. CIT, (1998) 98 Taxman 14, 19 (Bom), where the information regarding acquisition of the asset was not available with the Assessing Officer during the relevant assessment year 1992-93 and such information was disclosed in the return for the assessment year 1995- 96, the Hon’ble jurisdictional High Court held that the Assessing Officer can form a bona fide belief that there was escapement of income in relation to assessment year 1992-93.

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3.9. The Hon’ble jurisdictional High Court in Export

Credit Guarantee Corporation of India Ltd. v. Addl. CIT,

(2013) 350 ITR 651 (Bom), where there had been no

application of mind to the relevant facts during the course

of the assessment proceedings by the Assessing Officer, the

reopening of the assessment was held to be valid.

3.10. The Hon’ble jurisdictional High Court in

Girilal & Co. v. S.L. Meena, ITO, (2008) 300 ITR 432

(Bom), held that in order to invoke the extraordinary

jurisdiction of the court the petitioner must also make

out a case that no part of the relevant material had

been kept out from the Assessing Officer). The

information was in the annexures and consequently

Explanation 2(c)(iv) of section 147 would apply. The

reassessment proceedings after four years were valid.

3.11. In the case of Deputy CIT v. Gopal Ramnarayan

Kasat, (2010) 328 ITR 556 (Bom), it was not the case of the

assessee that the notice issued was after the expiry of the

time limit provided in section 153(2). The reassessment

proceedings were held to be valid. In Indian Hume Pipe Co.

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Ltd. v. Asst. CIT, (2012) 348 ITR 439 (Bom), both in the

computation of taxable long-term capital gains in the

original return of income and in the computation that was

submitted in response to the query of the Assessing Officer

there was a complete silence in regard to the dates on

which the amounts were invested, as such there being a

failure to disclose fully and truly material facts necessary

for assessment. The reassessment proceedings were held to

be valid. This view was also confirmed in following cases:-

a. Dalmia P. Ltd. v. CIT, (2012) 348 ITR 469 (Del); b. CIT v. K. Mohan & Co. (Exports), (2012) 349 ITR 653 (Bom); c. Remfry & Sagar v. CIT, (2013) 351 ITR 75 (Del); d. OPG Metals & Finsec Ltd. v. CIT, (2013) 358 ITR 144 (Del).

3.12. In the case of Venus Industrial Corporation v.

Asst. CIT, (1999) 236 ITR 742, 746 (P & H) [Where initiation

was started within four years for re-examining the

deduction under section 80HHC, was held to be wrongly

allowed in the original assessment. Identically, in the case

of Happy Forging Ltd. v. CIT, (2002) 253 ITR 413,416-17 (P

& H), where excise duty paid in advance was shown as an

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asset in the balance sheet and was allowed as a deduction,

reassessment notice on the ground that excise duty was

shown as an asset in the balance sheet and was not routed

through the profit and loss account. The reopening at this

stage was held to be valid. In the case of Vipan Khanna

v. CIT, (2002) 255 ITR 220, 230 (P & H), where from the

facts it was clear that the assessee had claimed

depreciation in the return at the rate of 50 per cent and he

had nowhere disputed the fact that the admissible rate of

depreciation to him was 40 per cent., such fact alone was

sufficient to initiate reassessment proceedings under

section 147 and, therefore, such initiation was sustained.

The Hon’ble Punjab & Haryana High Court in Mrs. Rama

Sinha v. CIT, (2002) 256 ITR 481, 483, 486, where the

reassessment notice has been issued on the basis of

definite information from CBI regarding investments by the

assessee which had not been disclosed during the original

assessment proceedings, such initiation has been upheld.

3.13 In the case of Pal Jain v. ITO, (2004) 267 ITR

540, 544-45, 548, 549 (P & H), applying Phool Chand

Bajrang Lal v. ITO, (1993) 203 ITR 456 (SC), although the

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transaction of sale of shares was disclosed and accepted in

the original assessment, but the subsequent discovery by

the DDI (Investigation) revealed that the transaction was

not genuine, a reassessment notice after four years has

been held to be valid because there was no true disclosure

of the material facts. In this regard, the petitioner-assessee

cannot draw any support from the statement for

challenging the validity of the notice for reassessment. It

goes without saying that for the purpose of making the

assessment, the Assessing Officer shall have to confront the

petitioner with the entire material in his possession on the

basis of which he proposes to make the additions. In

Punjab Leasing Pvt. Ltd. v. Asst. CIT, (2004) 267 ITR 779,

781-82 (P & H), where depreciation was allowed to the

assessee, who was engaged in the business of financing of

vehicles and consumer durables on 'hire-purchase basis' as

well as on 'lease/rent basis', a reassessment notice issued

after four years has been held not to suffer from any

illegality as the same was based on the bona fide action of

the competent authority to determine whether or not the

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vehicles in respect of which the petitioner had been

claiming depreciation, were actually owned by it.

3.14. In Jawand Sons v. CIT(A), (2010) 326 ITR 39 (P &

H), in the initial assessment, the benefit of deduction of the

duty drawback and DEPB under section 80-IB was wrongly

granted to the assessee, for which it was not entitled.

Therefore, reassessment proceedings to withdraw the

deduction were held to be valid. Likewise, in CIT v.

Hindustan Tools & Forgings P. Ltd., (2008) 306 ITR 209 (P

& H), where, the assessee in the regular assessment had

been allowed deduction more than actually allowable under

section 80HHC. Therefore, the action initiated by the AO for

reassessment under section 147(b) could not be held to be

invalid.

3.15. In the case of Markanda Vanaspati Mills Ltd. v.

CIT, (2006) 280 ITR 503 (P & H), wherein, the information

furnished by the assessee gave no clue to the payment of

liability in regard of the sales tax collected in excess. The

Assessing Officer was held to be validly initiated the

reassessment proceedings under section 147 for both the

years under consideration. In the case of Sat Narain v.

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CIT, (2010) 320 ITR 448 (P & H), the document did not form

the sole basis for the Assessing Officer to initiate

reassessment proceeding but he also took into

consideration the letter written by the Assistant

Commissioner as well as the fact that no return had been

filed by the assessee for assessment year 1995-96. Thus, it

was held that the Assessing Officer had rightly invoked the

jurisdiction to initiate the reassessment proceedings under

section 147. In the case of CIT v. Hukam Singh, (2005)

276 ITR 347 (P & H), it was held that the respondents did

not have the locus standi to question the orders of

reassessment on the ground of lack of notice. Non-issuance

of notice to some of the legal heirs of the late P was merely

an irregularity and the same did not affect the validity of

the reassessment orders. Likewise, in Tilak Raj Bedi v.

Joint CIT, (2009) 319 ITR 385 (P & H), wherein, facts

coming to light in a subsequent assessment year could

validly form the basis for initiating reassessment

proceedings, in view of Explanation 2 to section 147. The

action of the income tax authorities in reopening the

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assessment of the assessee and restricting the deduction

under section 80-IB was held to be valid.

3.16. In the case of Smt. Usha Rani v. CIT, (2008) 301

ITR 121 (P & H), there was nothing on record to show the

relationship between the donor and the donee, capacity of

the donor to make gifts and the occasion therefore. The

assessee had failed to discharge the onus to prove the gifts.

The reassessment proceedings were held to be valid. In the

case of Usha Beltron Ltd. v. Joint CIT, (1999) 240 ITR 728,

736-37, 739 (Pat), where the investigation report indicated

that the Officer had reason to believe that on account of

failure on the part of the petitioner-assessee to disclose

true and full facts, income had been grossly under

assessed, reassessment proceedings were held validly

initiated.

3.17. In the case of Kapoor Brothers v. Union of India,

(2001) 247 ITR 324, 331, 332-33 (Pat), where the material

evidence for the purpose of reopening of the assessment

already completed has been brought to the notice of the

authority during the course of enquiry. The notice was held

24 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

to be valid by the Hon’ble High Court. In the case of Vippy

Processors Pvt. Ltd. v. CIT, (2001) 249 ITR 7, 8 (MP), where

the need to issue notice arose due to noticing of vast

difference in value of properties disclosed by the assessee

and that of the report of the Valuation Officer and the

reasons that led to the issue of the notice were duly

recorded and the same were also adequate and based on

relevant facts and material, initiation was upheld. In Triple

A Trading & Investment Pvt. Ltd. v. Asst. CIT, (2001) 249

ITR 109, 110-11 (MP), where the notice was issued after

recording reasons in that regard, initiation was upheld.

3.18. Likewise, Hon’ble Gujarat High Court in Garden

Finance Ltd. v. Add/. CIT, (2002) 257 ITR 481, 489, 494-

95, special leave petition dismissed by the Supreme Court:

(2002) 255 ITR (St.) 7-8 (SC), where the assessee was

holding shares in an amalgamating company and he was

allotted shares in the amalgamated company and such

shares were sold by him and he has disclosed the market

price of such shares as on the date of amalgamation as the

cost of acquisition of such shares and has not disclosed the

cost of acquisition of shares in the amalgamating company

25 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

in accordance with section 49(2) read with section 47(vii),

initiation of reassessment proceedings after four years has

been sustained because there was failure on the part of the

assessee to disclose material facts necessary for

assessment. Likewise, in Suman Steels v. Union of India,

(2004) 269 ITR 412,418-19 (Raj), where the return of the

assessee for assessment year 1995-96 was processed under

section 143(1)(a) accepting the net profit rate declared by

the assessee, who carried on con- tract business, initiation

of reassessment proceedings by issuing a notice dated 15-

5-2001 proposing to reassess petitioner-assessee at higher

rate in view of the presumptive rate prescribed under

section 44AD has been sustained. In the case of Dr. Sahib

Ram Giri v. ITO, (2008) 301 ITR 294 (Raj), the

reassessment proceedings were initiated after recording

reasons in writing by the AO. The non-availability of a few

documents demanded by the assessee would not make the

reassessment proceedings initiated for the reasons recorded

in detail illegal.

3.19. In the case of Desh Raj Udyog : Chaman Udyog

v. ITO, (2009) 318 ITR 6 (All), in the assessment years in

26 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

question, the matter was still to be decided finally by the

assessing authority whether the income should be treated

under the head 'Business income' or 'property income'. The

assessee would get opportunity to show sufficient cause to

the assessing authority during the course of assessment.

Thus, it could not be said that there was no relevant

material to initiate proceedings under section 147. In the

case of Kartikeya International v. CIT, (2010) 329 ITR 539

(All), in view of the matter, the petitioner was not entitled

for the deduction on the duty drawback amount under

section 80-IB and since it had been allowed in the

assessment order passed under section 143(1), it had

escaped assessment. On these facts the initiation of the

proceedings under section 147 read with section 148 for

assessment years 2005-06 and 2006-07 was legal and in

accordance with law.

3.20. Likewise, in the case of Sunil Kumar lain: Suresh

Chandra lain v. ITO, (2006) 284 ITR 626 (All),

notwithstanding the fact that the amount had been

assessed to tax in the hands of P, he had taken a stand

that the amount did not belong to him and instead

27 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

belonged to S. Thus, it was not clear as to in whose hands

the amount in question had to be assessed. The ITO was

justified in taking proceedings under section 147 for

assessing the amounts in the hands of the petitioners

according to the claim made by the petitioners. Likewise,

Hon’ble Kerala High Court in CIT v. Dr. Sadique Ummer,

(2010) 322 ITR 602 (Ker), where, the Assessing Officer

collected further information to complete the reassessments

which was also permissible under the Act. The finding of

the first appellate authority as well as the Tribunal, that

the Assessing Officer had no material to believe that the

income had escaped assessment was wrong and contrary to

facts. The assessee had not maintained any books of

account. Therefore, the reopening of assessments was held

to be valid and within time. In the case of CIT v. Uttam

Chand Nahar, (2007) 295 ITR 403 (Raj), the notice

requiring the assessee to file the return within 30 days was

in accordance with section 148 as it must be deemed to be

in force with effect from 1-4-1989, and in force as on the

date notice was issued. There was no violation of section

148 in respect of the specified period within which the

28 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

return is to be submitted. The reassessment proceedings

were held to be valid.

3.21. In the case of CIT v. C. V. layachandran, (2010)

322 ITR 520 (Ker), where, the assessee did not concede the

income on capital gain either under the un-amended

provision or un-der the amended provision, the recourse

open to the Department was to bring to tax income

escaping assessment under section 147 which was not time

barred or otherwise invalid. Likewise, in Atul Traders v.

ITO, (2006) 282 ITR 536 (All), the account books or record

and other material were all common which were being

considered by the CIT(A) in the proceedings relating to

three appeals. The petitioner had notice and opportunity of

being heard. The reassessment proceedings were held to be

validly initiated. In the case of Inductotherm (India) P. Ltd.

v. lames Kurian, Asst. CIT, (2007) 294 ITR 341 (Guj), the

Assessing Officer had found that there were errors in the

computation of allowances. The reassessment proceedings

were held to be valid. In the case of Papaya Farms Pvt. Ltd.

vs. DCIT, (2010) 323 ITR 60 (Mad), where the assessee had

29 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

furnished incorrect particulars and therefore, the reopening

of the assessment was held to be justified.

3.22. In the case of CIT v. Kerala State Cashew

Development Corporation Ltd., (2006) 286 ITR 553 (Ker),

wherein, the assessee was following the mercantile system

of accounting should not have claimed deduction of penal

interest which had accrued not in the previous year

relevant to the assessment year but in earlier years. This

the assessee had not disclosed. The reassessment was held

to be valid. Likewise, in Kusum Industries P. Ltd. v. CIT,

(2008) 296 ITR 242 (All), as the award had become final it

would be taken that the directors of the assessee had

accepted the factum of earning of secret profit not reflected

in the books of account, which was also binding on the

company. The non-appearance of one of the arbitrators and

one of the directors in respect of the summon issued under

section 131 would not make the reassessment invalid. The

Hon’ble Kerala High Court in CIT v. Indo Marine Agencies

(Kerala) P. Ltd., (2005) 279 ITR 372 (Ker), held that the

entry would amount to an order under section 144. The

mere fact that it was not communicated to the assessee

30 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

would not make such an assessment recorded in the order

sheet illegal and that would not bar further proceedings

under section 147. Thus, the assessment was held to be

validly reopened under Explanation 2(c) to section 147.

Likewise, in CIT v. N. Jayaprakash, (2006) 285 ITR 369

(Ker), where, the assessee could not, after having

persuaded the assessing authority to withdraw the notice

dated 1-10-1993, pointing out that it was not in conformity

with law, be allowed to contend that the notice was valid

due to the omission of the time-limit by the Finance (No.2)

Act, 1996, with effect from 1-4-1989. In the absence of

specific provision in the Finance (No. 2) Act, 1996,

invalidating proceedings initiated by the Income-tax Officer,

the action taken by him applying the then existing law

could not be said to be invalid.

3.23. Likewise, in CIT v. S.R. Talwar, (2008) 305 ITR

286 (All), the factum of taking advances or loan from T and

K, in which the assessee was one of the directors had not

been disclosed nor a copy of the ledger account of the

assessee maintained by the company filed. In view of the

absence of these details, the Assessing Officer could not

31 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

examine the taxability of advances or loan raised by the

assessee. There was failure to disclose material facts

necessary for assessment. The reassessment proceedings

were held to be valid. In another case, the Hon’ble

Allahabad High Court in Chandra Prakash Agrawal v. Asst.

CIT, (2006) 287 ITR 172 (All), wherein, the Income-tax

Department had sent a requisition on 27-3-2002, under

section 132A requisitioning the books of account and other

documents seized by the Central Excise Department. The

record of the proceeding dated 18-4-2002, showed that the

requisition was not fully executed as all the books of

account and other documents had not been delivered to the

requisitioning authority. The proceedings initiated under

section 147 was held to be valid.

3.24. In Ramilaben Ratilal Shah v. CIT, (2006) 282

ITR 176 (Guj), held that the noting in the diary

constituted sufficient information for the escapement

of income by either non-declaration of correct sale

consideration or furnishing of inaccurate particulars as

regards sale consideration. Thus, the Tribunal was

justified in holding that the assessee had failed to

32 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

disclose fully and truly all material facts necessary for

the assessment of the relevant assessment year. The

reassessment proceedings had been validly initiated.

3.25. Likewise, in CIT v. Abdul Khader Ahamed,

(2006) 285 ITR 57 (Ker), it was clear from the reasons

recorded by the Deputy CIT that he prima facie had reason

to believe that the assessee had omitted to disclose fully

and truly the material facts and that as a consequence

income had escaped assessment. The reassessment was

held to be valid. In the case of U.P. State Brassware

Corporation Ltd. v. CIT, (2005) 277 ITR 40 (All), the

principles laid down by the Calcutta High Court in CIT v.

New Central Jute Mills Co. Ltd. : (1979) 118 ITR 1005 (Cal)

did constitute information on a point of law which should

be taken into consideration by the ITO in forming his belief

that the income to that extent had escaped assessment to

tax and, the reassessment was held to be valid. In Sunder

Carpet Industries v. ITO, (2010) 324 ITR 417 (All), held that

the Departmental Valuer's Report constituted material for

entertaining a belief of escaped income in the years under

33 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

consideration. The reassessment proceeding was held to be

valid.

3.26. In Aurobindo Sanitary Stores v. CIT, (2005) 276

ITR 549 (Ori), there being a substantial difference between

the figures of liabilities towards sundry creditors in the

party ledgers of the assessee-firm and the figures of

liabilities towards sundry creditors in the balance-sheet of

the assessee-firm for the previous year relevant to the

assessment year 1989-90. These materials had a direct link

and nexus for formation of a belief by the Assessing Officer

that income of the assessee-firm had escaped assessment

because of failure of the assessee to disclose fully and truly

all material facts necessary for the assessment. In the case

of CIT v. Best Wood Industries & Saw Mills, (2011) 331 ITR

63 (Ker), the assessee challenged the validity of the

reassessment on the ground that the AO had exceeded his

jurisdiction under section 147 and both the first appellate

authority as well as the Tribunal accepted the contention of

the assessee holding that so far as the reassessments

related to assessment of unexplained trade credits, they

were invalid. On appeal, it has been held that the

34 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

reassessments were to be valid. In Honda Siel Power

Products Ltd. v. Deputy CIT, (2012) 340 ITR 53 (Del), there

being omission and failure on the part of the assessee to

disclose fully and truly material facts Thus reassessment

proceedings were held to be valid.

3.27. In Atma Ram Properties Private Ltd. v. Deputy

CIT, (2012) 343 ITR 141 (Del), as the books of account and

other material were not produced and no letter was filed,

the order passed by the Commissioner (Appeals) in the

assessment year 2001-02 would constitute 'information' or

material from any external source and, as such, the

reassessment proceedings for the assessment year 2000-01

were held to be valid. Likewise, in the case of CIT v. Smt.

R. Sunanda Bai, (2012) 344 ITR 271 (Ker), the

reassessment in question were held to be valid on the fact

that the assessee claimed and was given relief under

section 80HHA for the three preceding year which

disentitled her for deduction under section 80HH for the

assessment years 1992-93 and 1993-94.

35 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

3.28. In the case of Aquagel Chemicals P. Ltd. v. Asst.

CIT, (2013) 353 ITR 131 (Guj), since there being sufficient

material on record for the Assessing Officer to form a belief

as regards the escapement of income in relation to the

claim of depreciation in respect of the building of coal fire

boiler, the reassessment was held to be valid. In the case

of Convergys Customer Management v. Asst. DIT, (2013)

357 ITR 177 (Del), where there being prima facie material in

the possession of the Assessing Officer to form a tentative

belief that section 9(1)(i) held attracted, said reason by itself

constituted a relevant ground to reopen the assessment of

the assessee.

Reference may also be made to i. Ajai Verma v. CIT [(2008) 304 ITR 30 (All)]; ii. Ashok Arora v. CIT [(2010) 321 ITR 171 (Del)]; iii. CIT v. Chandrasekhar BaLagopaL [(2010) 328 ITR 619 (Ker)]; iv. Jayaram Paper Mills Ltd. v. CIT [(2010) 321 ITR 56 (Mad)]; v. Kerala Financial Corporation v. Joint CIT [(2009) 308 ITR 434 (Ker)]; vi. Mavis Satcom Ltd. v. Deputy CIT [(2010) 325 ITR 428 (Mad)]; vii. CIT v. Madhya Bharat Energy Corporation Ltd. [(2011) 337 ITR 389 (Del)];

36 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

viii. Kone Elevator India P. Ltd. v. ITO [(2012) 340 ITR 454 (Mad)]; ix. Vijay Kumar Saboo v. Asst. CIT [(2012) 340 ITR 382 (Karn)]; x. Siemens Information Systems Ltd. v. Asst. CIT [(2012) 343 ITR 188 (Bom)]; xi. I.P. Patel & Co. v. Deputy CIT [(2012) 346 ITR 207 (Guj)]; xii. Dishman Pharmaceuticals & Chemicals Ltd. v. Deputy CIT [(2012) 346 ITR 228 (Guj)]; xiii. Video Electronics Ltd. v. Joint CIT [(2013) 353 ITR 73 (Del)]; xiv. A G Group Corporation v. Harsh Prakash [(2013) 353 ITR 158 (Guj)]; xv. Inductotherm (India) P. Ltd. v. M. GopaLan, Deputy CIT [(2013) 356 ITR 481 (Guj)]; CIT v. Dhanalekshmi Bank Ltd. [(2013) 357 ITR 448 (Ker)]; xvi. Sitara Diamond Pvt. Ltd. v. ITO [(2013) 358 ITR 424 (Bom)]; xvii. Rayala Corporation P. Ltd. v. Asst. CIT [(2014) 363 ITR 630 (Mad)].

3.29. So far as, the decision in the case of CIT vs

Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) is

concerned, the Hon’ble Apex Court, while coming to a

particular conclusion, only in a situation, when not a single

piece of paper or document was recovered, therefore, the

Hon’ble Court held that since there was no tangible

material found and the addition was merely on the basis of

37 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

statement only then reopening of assessment u/s 147 of

the Act was not permissible. It is further noted that

retraction was made by the assessee, merely after a long

gap of more than two years and not at the earliest possible

time. It was merely as afterthought. There is a possibility

that the statement, if, recorded under duress and threat

(which is not the case in the present appeals) in that

situation, there is a less possibility of retraction during that

period, however, if the retraction is made within short span

of time then retraction carries more weight. The assessee

never alleged that the statement was recorded under

duress and threat. Likewise, in the case of CIT vs S. Khader

Khan Son (2012) 254 CTR 228 (SC), affirming the decision

of Madras High Court in (2008) 300 ITR 157 (Mad.), the

whole addition was made solely on the basis of statement

u/s 133A and no other material was found, in that

situation, it was held that the such statement has no

evidentiary value, thus, under the peculiar facts in the

present appeal, the cases relied upon by the assessee are

not of much help as is clearly oozing out from the contents

of the statement tendered by the assessee without duress

38 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

or threat, connecting the assessee of non-recording of

purchase and sale in the regular books of accounts.

3.30. If the material available on record and the

judicial pronouncements discussed hereinabove are kept in

juxtaposition with the facts of the present appeal, we find

that the First Appellate Authority in para-5.2 of the

impugned order, it has been uncontrovertedly mentioned

that the assessee along with other family members (wife

and sons) are residing at the same premises, having

common kitchen, at the time of survey and the business

was managed by the assessee himself with the assistance

of his children. In para 5.3., it has been observed that the

assessee intentionally declared his undisclosed income in

the hands of the family member just to avoid payment of

taxes and the assessee declared only Rs.12 lakhs out of the

unexplained income of Rs.60 lakhs in his income, filed with

the Department but did not offer the remaining amount of

Rs.48 lakhs in the hands of his wife and sons in spite of

the fact that he was a managing person for the business as

well as filing the return. In the light of the above factual

finding, contained in the impugned order, now question

39 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

arises whether the assessee made true disclosure of

material facts. The totality of facts, available on record

clearly establishes that there was no full disclosure of

material facts by the assessee, thus, considering the above

cited decisions from Hon'ble Apex Court and Hon'ble

various High Courts, we find no infirmity in the order of the

Ld. Commissioner of Income Tax (Appeal), consequently, we

affirm the reopening of assessment. This ground of the

assessee is dismissed.

Ld. counsel relied upon the decision from Hon'ble Apex

Court in CIT vs S Kader Khan 352 ITR 480 (Supreme

Court), whereas, the ld. DR defended the observation made

in para 5 onwards of the impugned order. It is noted that

during the course of survey proceedings, certain

incriminating documents, assets and unaccounted stock

was found and there was discrepancies in the declared

income of the assessee. The assessee was in the full control

of the premises and managing the entire business himself

for the family. The factual finding recorded in the impugned

order was not controverted by the assessee with the help of

40 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

any positive material. The finding contained in para-5, 5.1

and 5.2 of the impugned order was not controverted by the

assessee. In para 5.1, it was observed that in order to

avoid the payment of maximum tax rate of 30%, the

assessee preferred to offer the said unaccounted income in

the hands of other family members, without their

knowledge/consent, thus, in that situation, the Ld.

Commissioner of Income Tax (Appeal) came to a particular

conclusion, consequently, the stand of the Ld.

Commissioner of Income Tax (Appeal) is affirmed.

Finally, the appeal of the assessee is partly allowed.

This order was pronounced in the open court on

18/09/2018.

Sd/- Sd/- (Rajesh Kumar) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य /JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 18/09/2018 f{x~{tÜ? P.S //.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai.

41 ITA No.3336/Mum/2017 Mohd. Hasan Abdul Gafoor Momin

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai