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Facts
The Revenue challenged the CIT(A)'s order which partly allowed the assessee's appeal against an assessment order. The original assessment order was passed after regular scrutiny under Section 143(3) and accepted the assessee's claim for foreign exchange loss. Subsequently, reassessment proceedings under Section 147 were initiated after 4 years based on a revenue audit objection.
Held
The CIT(A) quashed the reassessment proceedings, holding that they were initiated due to a change of opinion without any fresh tangible material and that the assessee had made full and true disclosure of primary facts. The Tribunal concurred with the CIT(A), finding that the reassessment was based on re-appraisal of existing records and not on new material, and thus violated the proviso to Section 147 as it was initiated after more than 4 years from the relevant assessment year.
Key Issues
Whether the reassessment proceedings initiated after 4 years were valid, or if they were based on a change of opinion without tangible new material, and if the assessee made a full and true disclosure of primary facts.
Sections Cited
Section 147, Section 144B, Section 143(3), Section 37(1), Section 43(5), Section 73(1), Section 148, Section 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, E BENCH, MUMBAI
(Assessment Year: 2014-15) 456 (SC) was misplaced. We further note that it is admitted position that Assessment Order under Section 143(3) of Act was passed on 23/12/2016 after regular scrutiny assessment wherein queries relating to Foreign Exchange Loss/(Gains) were raised by the Assessing Officer. The contention of the Revenue is that no specific queries relating to the nature of loss being capital and/or speculative in nature were raised by the Assessing Officer and that the Assessee had also not placed on record any material from which the nature of loss could be determined. On the other hand that Assessee contended that all primary facts were disclosed by the Assessee and there was no default on the part of the Assessee in making full and true disclosure. Since regular scrutiny assessment had been framed on the Assessee under Section 143(3) of the Act, it was contended by the Assessee that as per the First Proviso to Section 147 of the Act, reassessment proceedings could have been initiated after the expiry of 4 years from the end of the relevant assessment year, only in case of default by the Assessee in making full & true disclosure.
We note that the CIT(A) has, while accepting the contention of the 26. Assessee and quashing the assessment order, placed reliance on the judgment of the Hon’ble Supreme Court in the case of New Delhi Television Limited Vs. ACIT : 116 taxmann.com 151 (SC) wherein the Hon’ble Supreme Court has, analyzing the meaning of expression ‘full & true disclosure’, held as under: ―Question No.2 24. Coming to the second question as to whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts. The case of the assessee is that it had disclosed all facts which were required to be disclosed.
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(Assessment Year: 2014-15) 32. A number of decisions have been cited as to what is meant by true and full disclosure. It is not necessary to multiply decisions, as law in this regard has been succinctly laid down by a Constitution Bench of this Court in Calcutta Discount Co. Ltd. v. ITO AIR 1961 SC 372, wherein it was held as follows:— '(8)...The words used are "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year". It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise — the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. (9) There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income- tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example — "I have produced the account books and (Assessment Year: 2014-15) the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account-books and the documents." His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, will amount to "omission to disclose fully and truly all material facts necessary for his assessment." Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, gives a quietus to all such contentions; and the position remains that so far as primary facts are concerned, it is the assessee's duty to disclose all of them — including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed. (10) Does the duty however extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else — far less the assessee — to tell the assessing authority what inferences — whether of facts or law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences — whether of facts or law — he would draw from the primary facts. (11) If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could (Assessment Year: 2014-15) anassessee be charged with failure to communicate an inference, which he might or might not have drawn?' A careful analysis of this judgment indicates that the Constitution Bench held that it is the duty of the assessee to disclose full and truly all material facts which it termed as primary facts. Nondisclosure of other facts which may be termed as secondary facts is not necessary. In light of the above law, we shall deal with the facts of the present case.
In our view the assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. We are of the view that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case. In the present case the assessing officer on the basis of the facts disclosed to him did not doubt the genuiness of the transaction set up by the assessee. This the assessing officer could have done even at that stage on the basis of the facts which he already knew. The other facts relied upon by the revenue are the proceedings before the DRP and facts subsequent to the assessment order, and we have already dealt with the same while deciding Issue No.1. However, that cannot lead to the conclusion that there is non-disclosure of true and material facts by the assessee.‖ (Emphasis Supplied) The Hon’ble Supreme Court has, in the above judgment, held that 27. the duty of the Assessee was limited to disclosure of primary facts and did not extend to communication/disclosure the inference drawn or to be drawn from the same.
In paragraph 7 to 15 above, we have already noted various 28. disclosures made by the Assessee in the financial statements, and during the regular scrutiny assessment proceedings while responding to the queries raised by the Assessing Officer. During the regular scrutiny assessment proceedings, the Assessing Officer had,
(Assessment Year: 2014-15) vide notice, dated 14/07/2016 and 18/11/2016, called upon the Assessee to provide complete details/supporting evidences in respect of: i) Large expenses claimed in Profit & Loss Account vide Point No. 12 (iii) of notice under Section 142(1) dated 14/07/2016 and ii) Break up of foreign currency transaction, accounting treatment of forex gain/loss, effect of notional gain/loss and working for capital expenditure and revenue expenditure vide Point No. 11 of notice under Section 142(1) dated 18/11/2016 In response to the above notice(s), the Assessee, vide letters dated 29. 17/08/2016 and 21/12/2016 provided the details of ‘Net Gain/(Loss) of Foreign Currency Transaction and Translation’ and details of currency swap contract (Trade Confirmation) vide Point No. 3 of letter dated 21/12/2016.
Thus, from abovesaid it is clear that the Assessee had placed on 30. record financial statements showing that the Assessee had debited to the Profit & Loss Account for the previous year relevant to the Assessment Year 2014-15 ‘Net Loss/(Gain) on account of Foreign Currency Transaction & Translation’ of INR 604.35 Crore which included aggregate realized/unrealized foreign exchange loss of INR 602,95,70,778/- pertaining to CCS. During the regular scrutiny assessment proceedings, the Assessee had also filed details of the mark to market losses booked in respect of CCS, both, settled and outstanding, till the end of the relevant previous year. Further, the Assessee had also placed on record one of the CCS – Deal
(Assessment Year: 2014-15) Confirmation, dated 11/07/2013, issued by IndusInd Bank Ltd. giving the applicable terms and conditions. On consideration of material placed before us as part of paper-book containing documents filed during the course of regular scrutiny assessment proceedings, we are of the considered view that there was no failure on the part of the Assessee to make full and true disclosure of the primary facts. Relying upon the judgment of Hon’ble Supreme Court in the case of New Delhi Television Limited Vs. ACIT: 116 taxmann.com 151 (SC), the CIT(A) had concluded that the Assessee, having disclosed truly and fully the primary facts, was not under obligation to communicate to the Assessing Officer the possible inferences which could have been drawn from the primary facts disclosed. We concur with the aforesaid view taken by the CIT(A). Further, in our view Explanation 1 to Section 147 of the Act could be not attracted in the facts and circumstances of the case as the primary facts were apparent from the details and documents submitted by the Assessee.
We also note that the CIT(A) had noted that specific queries were 31. raised by the Assessing Officer in relation to Foreign Exchange Loss/(Gain) in response to which the Assessee had provided relevant financial statements, documents, details and submissions. The CIT(A) had further noted that in the reasons recorded the Assessing Officer had drawn inference that income has escaped assessment on the basis of facts already on record and not on the basis of any new material which came in the possession of the Assessing Officer subsequent to the conclusion of the assessment proceedings. The CIT(A) had concluded that reassessment proceedings were initiated on re-appraisal and re-examination of the assessment records without bringing any tangible material to show that income has (Assessment Year: 2014-15) escaped assessment on account of failure on the part of the Assessee to furnish true and full facts. We do not find any infirmity with the aforesaid conclusion drawn by the CIT(A). In our view, on the basis of the primary facts disclosed by the Assessee, the Assessing Officer drew inference in favour of the Assessee and accepted Assessee’s claim for deduction for ‘Net Loss/(Gain) on account of Foreign Currency Transaction & Translation’ of INR 604.35 Crores’. Subsequently, reassessment proceedings were initiated on account of change of opinion formed on re-appraisal of the facts already on record and examined during the regular assessment proceedings which was contrary to the judgment of Hon’ble Supreme Court in the case of CIT Vs. Kelvinator India Ltd.: [2010] 320 ITR 561 (SC). Be that as it may, we have already concluded that there was no failure on the part of the Assessee to disclose the primary facts and therefore, in view of the provisions contained in First Proviso to Section 147 of the Act re-assessment proceedings could not have been initiated in the case of the Assessee after the expiry of 4 years for the end of relevant assessment years.
Accordingly, we concur with the view taken by the CIT(A) and hold 32. that the CIT(A) was correct in quashing the Assessment Order, dated 29/03/2022, passed under Section 147 read with Section 144B of the Act of the Act. Hence, Ground No. 1 to 4 raised by the Revenue are dismissed.
Ground No. 5 to 8 As regards, Ground No. 5 to 8 raised by the Revenue dealing with 33. the merits are concerned, the same have been rendered academic in view of the fact we have sustained the order of CIT(A) quashing the (Assessment Year: 2014-15) Assessment Order dated 29/03/2022, passed under Section 147 read with Section 144B of the Act. Accordingly, without any adjudication upon the merits, Ground No. 5 to 8 to raised by the Revenue are dismissed as being infructuous.
In result, the present appeal preferred by the Revenue is dismissed. 34.
Order pronounced on 05.01.2024.