ASSISTANT COMMISSIONER OF INCOME TAX (CENTRAL), BILASPUR vs. M/S JAGANNATHDAS HARICHANDMAL JEWELLERS PVT. LTD, RAIGARH

O R D E R

Per Arun Khodpia, AM :

2. Whether on the fact and in the circumstances of the case in law, the Ld.CIT(A) erred in ignoring that confirmation of concealment of income/disclosure made in statement recorded during Survey u/s 133A of Act is an information, though not conclusive, which may be used in regular assessment or reassessment proceedings.

3. Whether on the fact and in the circumstances of the case in law, the Ld.CIT(A) has over relied upon the outcomes of original assessment and completely ignored the fact that assessee had not disclosed fully and truly all the necessary facts during scrutiny assessment. This becomes evident from the detailed findings of assessment order dated 30.12.2018 u/s 143(3) r.w.s. 147 of act which makes it amply clear that the lender companies are merely paper companies which lacks' commercial/financial substance and also appear in the SEBI's list of shell companies.

4. Whether on the fact an in the circumstances of the case and in law, The Ld. CIT(A) erred incompletely ignoring the decision of Hon'ble SC in the case of Bannalal Jat Construction (P) Ltd vs DCIT[2009] 106 Taxmann.com 128(SC) wherein Hon'ble Supreme Court has held that retraction should be supported by strong evidence stating that the earlier statement was recorded under duress and coercion, and this has to have certain definite evidence to come to the conclusion that indicating that there was an element of compulsion for assessee to make such statement. Whereas in the present case, the assessee failed to provide a reasoned explanation for retracting from the statement recorded during survey. 5. Whether on the fact and in the circumstances of the case and in law, while holding assessment passed u/s 147 r.w.s. 143(3) of act as invalid and void-ab-initio, the ld. CIT(A) has failed to allude to relevant facts brought on record by AO, misread the evidences and its probative value which itself gives rise to question of law in view of ratio of decision in the case of Sudarshan Silk and Sarees 300 ITR 205 (SC). 6. The order of the Ld CIT(A) is erroneous both in law and on facts. 7. Any other ground that may be adduced at the time of hearing of appeal.”

he admitted of being involved in bringing unaccounted money in books of accounts in the form of share application money in the year under consideration. Therefore, notice under section 148 of the Act dated 27/3/2018 was issued after approval from competent authority. The assessee in reply file return of income on 12/11/2018 declaring total income of Rs. 10,13,920/-. The Ld AO during reassessment proceedings found that the appellant had received share application money of Rs. 1,87,50,000/- from 19 different Kolkata based companies in the year under consideration. The AO after intensive inquiries pertaining to funds received in the garb of share capital and by taking reference of the statements of Sri Shyam Sundar Agrawal held that the appellant failed to explain identity and credit worthiness of the investors as well as genuineness of the transaction. Therefore, the Ld AO after considering entire facts made addition in the hands of appellant on account of unexplained share application money under section 68 of the Act. Being aggrieved with the assessment order, the assessee preferred an appeal before Ld CIT(A), wherein the assessee succeeded to have its ground of appeal allowed, raised pertaining to legality of assessment passed u/s 147 r.w.s. 143(3) of the Act. Now the department is in appeal before us against the order of Ld CIT(A).

19 Kolkata based companies, which are being identified as the paper / jamakhrchee companies with no creditworthiness of their own. During the reassessment proceedings the Ld AO had issued notices u/s 1336) to all the 19 companies from whom the assessee company had received the share application money. In response to the notice u/s 133(6), in most of cases the letter of notice were returned back with the remarks “Left”, “not known”, “no such company found in the given address”, in some cases neither the letter was received back nor desired information was received, only in 3 cases the information sought u/s 133(6) was received. Under such circumstances the Ld AO observed that the identity of the companies was not proved. Ld CITDR further submitted that Ld AO had done further research and investigation pertaining to all the 19 companies and have framed an exhaustive order with respect to credit worthiness of the lenders and genuineness of the transactions. Ld AO finally concluded that the intent of the assessee and the process it has chosen to introduce its own unaccounted money in the form of share application money against which the shares were issued in the same year. The assessee has miserably failed to explain the credits appearing in its books as genuine and hence action u/s 68 is called for. Ld AO further reproduced the statement of Shri Shyam Sunder Agarwal, director of the company recorded u/s 131 of the Act, having no satisfactory explanation justifying the transactions of the assessee company with the 19 share applicants. With such submissions Ld CITDR argued that the assessee company was unable to discharge its onus cast under section 68 of the Act

Identity, substantiate creditworthiness of investors and to prove the geniuses of the transaction, it was thus prayed to sustain the addition made by Ld AO by setting aside the order of Ld CIT(A) wherein the issues on merits were not dealt with by the Ld CIT(A).

(A) Reopening of an assessment is not permissible in law on the basis of survey statement recorded on oath u/s133A which has been retracted later on; whatever statement recorded u/s133A on oath is not having any evidentiary value; since it is not permissible to take sworn statements in action u/s133A and any statement obtained in the course of such survey does not have any evidentiary value and as such, the entire basis of reopening of the assessments vitiated and as such, all these impugned assessments are ab-initio-void; the substratum to give a reason to believe that income chargeable to tax has escaped assessment, is vitiated in this case; the impugned reassessment is not sustainable in law; once the statements said to have been recorded u/s132(4)/133A were withdrawn then there existed no material on record to warrant reopening of the case against the assessee u/s 148; if the very basis on which reopening was ordered did not exist, there was no que for reopening of the case; this material aspect of the matter has not been considered by the AO, who proceeded to direct reopening of the case, without there being any legally admissible evidence available on record; thus, the very issuance of notice u/s148 is found to be illegal and absolutely without jurisdiction; (B) no additions could be made on the basis of those retracted statements, when the ld AO himself has accepted the retraction as such and not made addition in AY 18-19 (i.e., the survey year) as per the survey statement; Dr J Mohan (2012) (Chen-Trib) dt.23-4-1221 taxmann.com 477 Dr N Thippa Setty (2010) (Kar HC) dt.9-4-08 322 ITR 525 Mono Orion Food India PL (2019) (Kol-Trib) dt.4-12-19 2001/Kol/2018

2.1. It is submitted that Dr J Mohan (2012) 21 taxmann.com 477 (Chen-Trib) dt.23-4-12, held as under: "8. Ld counsel appearing for the assessees contended that the grounds for reopening the concluded assessments were made out by the AO on the basis of sworn statements furnished by the assessees in the course of survey made u/s133A. Ld counsel explained that it is not permissible to take sworn statements in action u/s133A and any statement obtained- in the course of such survey does not have any evidentiary value and as such, the entire basis of reopening of the assessments vitiated and as such, all these impugned assessments are ab initio void in law. In support of his contentions, Id counsel has relied on Paul Mathews and Sons (2003) (Ker); S Khader Khan Son (2008) (Mad); and Ashok Manilal Thakkar (2005) (Ahd-Trib).

9. Shri Yogesh Kamat, the ld Jt.CIT appearing for the Revenue defended the income escaping assessment orders. He explained that the survey conducted by the Deptt has brought out materials towards certain items of income escaped in the hands of the assessees. Even if, the reasons relied on by the AO to reopen the assessments were later found to be unsustainable, still, the reopening of the assessments as such, does not have become vitiated. As far as these cases are concerned, the AO has proceeded strictly in accordance with law and, therefore, the legal objection raised by the assessees is not sustainable in law.

12. S Khader Khan Son (2008) (Mad) had considered the very same issue. The hon'ble HC has laid down the principles relating to sec133A as follows: "(i) An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts; (ii) in contradistinction to the power u/s133A, sec132(4) enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Act. On the other hand, whatever statement is recorded u/s133A is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone as evidentiary value as contemplated under law… (iii) the material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment; (iv) the materials collected during the course of survey u/s133A shall not have any evidentiary value."

Even if reassessments are held to be valid, still no additions could be made on the basis of those statements. In such circumstances, it is obvious that the reassessments would only be an empty formality. A provision of a statute is not contemplated for performing an empty formality. Therefore, by all means, it is necessary to hold that reopening of an assessment is not permissible in law on the basis of a statement obtained in the course of survey action u/s133A, which has been later on retracted. Ashok Manilal Thakkar (2005) (Ahd-Trib) is squarely on this point. In that case, a statement was obtained in the course of survey and thereafter that was retracted and on that basis the Tribunal held that no addition can be made in the hands of the assessee.

3.1.2 I have considered the factual matrix of the case, plea raised by the appellant and findings of the AO. This is a matter of fact that this case of the appellant was scrutinized earlier u/s 143(3) of the Act, wherein the appellant has furnished all the desired documents by the AO and the same were taken into consideration by the then AO. It has been found that assessment order u/s 143(3) of the Act was passed on 23.03.2015 by making adhoc disallowance of Rs. 1,00,000/- out of various expenses claimed by the appellant. Certified copies of note sheet relating to original assessment proceedings have been furnished by the appellant. It reveals that the then AO had investigated the issue of share application money amounting to Rs. 1,87,50,000/-. During the assessment proceedings the appellant has discharged its onus u/s 68 of the Act by filing various documents in relation to investor companies such as copy of ITR, audit report, bank statement, copy of application for shares and disclosure regarding source of investment, their addresses etc. Further, the then AO also confronted a report dated 05.03.2015 of ITO (Inv) Unit-3, Kolkata, wherein, it had been mentioned that the companies who had invested in share application money in the appellant company are non-existent. The appellant filed its reply on the report of the ITO (Inv) Unit-3, Kolkata vide letter dated 10.03.2015 which is reproduced hereunder:- This is with reference to your notice reference no.ITO- 1/RGH/SCTY/2014-15 dt.5-3-15 in the course of assessment proceeding in the case of our aforesaid client. Your honor had referred to report of ITO (Inv.) Unit-3 Kolkata whereby the ld AO had reported that those companies which have made investment in our company in the FY2011-12 are non-existent in the address furnished by us. In this regard, I hereby humbly want to submit that all the investor companies, a list of which has been furnished by us to you are all existing and active companies. The address furnished to you was as per our records however the registered office address of some of the companies has changed over the period of time and the further the name of one those companies has also changed from "Rosemount Vanijya Pvt Ltd " to "Brightsun Equity Finvest Pvt Ltd." (name change certificate enclosed), which we also came to know when we enquired into the matter after we received your current notice. We are enclosing herewith a fresh list with current address of all the companies. We are also furnishing herewith a printout of master data from the website of ministry of company affairs and also a copy of the Income Tax Return of all the companies for A Y 2012-13. The documents as above sufficiently explain the identity of these companies and also prove beyond doubt that they are existent and functioning too. Hence, the amount of share capital subscribed by the company shall not be added to company. This view has been taken in a number of case by various courts including CG High Court in the case of Vankateshwar Ispat Ltd 319 ITR page 393 and Supreme Court in case of Lovely Exports (P) Ltd (2008) 216 CTR 195. Hence, in view of the above we hereby request you to please take a judicious view in the matter.

It has been found that during original assessment proceedings the then AO vide order sheet entry dated 31.10.2014 after perusal of books of account of the appellant furnished by ld AR of the appellant require the appellant to furnish complete details of share application money received and also to prove identity and creditworthiness of the investors along with genuineness of the transaction. In compliance on 07.11.2014, ld AR of the appellant and filed the desired details. The then ld AO for further verification issued notice u/s 133(6) to all share holding companies on 16.02.2015 and incompliance, as transpired from note sheet entry, all the investor companies compiled with the notice issued u/s 133(6) on 12.03.2015/ 13.03.2015/ 16.03.2015/ 17.03.2015/ 18.03.2015/ 19.03.2015/ 20.03.2015/ 23.03.2015. The ld AO further cross verified the transaction related to share application money being recorded in books of appellant with reply received from investor companies and found the same genuine and passed order u/s 143(3) on 23.03.2015. Thus, it is evident that during the original assessment proceedings the then AO investigated the issue under consideration in depth and found the share application money as genuine and therefore, did not make any addition u/s 68 of the Act on this account.

3.1.3 Thereafter, after a gap of three years, survey proceedings u/s 133A of the Act were carried out in the case of appellant on 29.01.2018. During the Shri Shyam Sunder Agrawal was recorded on oath wherein, he in order to buy mental peace admitted unaccounted income in the form of share application money in AY 2011- 12 & 2012-13.

Thereafter, this case was re-opened, on the basis of statement of Shri Shyam Sunder Agrawal, after lapse of 4 years and hence case is covered under first proviso to section 147 of the Act which mandates that if the case was scrutinized u/s 143(3)/147 of the Act then the same can be re-opened u/s 147 of the Act with the pre-condition when there was a failure on the part of the assessee in furnishing full and true material facts necessary for the assessment for that assessment year. The appellant has vehemently contended that during original assessment proceedings specific queries were made with regard to share capital and premium received during the year under consideration from the appellant as well as from the investor companies. In compliance, the appellant as well as all the investor companies made necessary compliances before the AO from time to time. The sole reason for re-opening case of the appellant is statement of Shri Shyam Sunder Agrawal which has already been retracted during assessment proceedings vide letter dated 31.10.2018 and affidavit dated 14.06.2018. During assessment proceedings statement of Shri Shyam Sunder Agrawal was again recorded on oath wherein he has admitted that the statement given during survey proceedings was under coercion and pressure. Thus, reassessment proceedings has been initiated merely on the basis of statement of Shri Shyam Sunder Agrawal and the documents relating to subject issue were already available on the record of the AO and no new tangible material has been brought on record by the AO. Statements of Shri Shyam sunder Agrawal, Director in the appellant company were recorded during the survey proceedings by issuing summons u/s.131 of the Act which he at later stage retracted by filing an affidavit dated 14.06.2018 and letter dated 31.10.2018. On perusal of statements recorded / reasons recorded / assessment order, it has been found that the statements of Shri Shyam Sunder Agrawal were not based upon any evidence showing, the share capital received from 19 Kolkata based companies, bogus, recovered during the survey proceedings. The only basis of proceedings u/s.147 of the Act was the statement of Shri Shyam Sunder Agrawal which was retracted later on. Any statement can be retracted if it is not backed by credible evidence. Statement recorded u/s.131 of the Act though binds the assessee, can not be independently used for making addition unless corroborated by evidences. As per section 31 of Indian Evidence Act, 1878, admissions are not conclusively proved as against admitted proof. In absence of rebuttable conclusion, admission bind the maker when these are not rebuttable or retracted. If the assessee contends that in making the admission, he had proceeded on a mistaken understanding or on misconception of facts or untrue facts or it was given under pressure, such admission cannot be relied upon without considering the aforesaid contention. Thus, the burden to prove 'admission' as incorrect in on the maker and in case of failure of the maker to prove that the earlier stated facts were wrong, these earlier statements are suffice to conclude the matter. If retraction is proved sufficiently, the earlier stated facts lose their effect and relevance as a binding evidence and the authorities cannot conclude the matter on the basis of the earlier statement alone. If the assessee proves that the statement recorded u/s.131 was not voluntary and it was made under coercion, it has no legal validity. In the instant case, there was no corroborative evidence brought in by the Ld. AO in support of statement recorded u/s.131 which proves that the statement recorded was not voluntary. The appellant has successfully able to prove that the issue involved was examined deeply during the original assessment proceedings and no adverse inference was drawn by the then AO. Further, no fresh material against the appellant was brought in by the Ld. AO against the contentions of the appellant. Hence, retraction from the earlier statement is found duly supported by relevant facts brought in by the appellant. Thus, the statement recorded u/s.131 during the course of survey looses its legal validity as credible evidence. Accordingly, such statement cannot be made basis of reopening of the assessment. Admission of undisclosed income should be based upon credible material found in the course of search / survey. CBDT has issued instruction in this regard vide F. No. 286/2/2003-IT (Inv) dated letter 10.03.2003 on "Confession of additional income during the course of search &seizure and survey operation" which says that: "Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search &seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments " CBDT has again reiterated the same vide letter F.No. 286/98/2013-IT (Invil) 18.12.2014. It is evident from the record that in the case of the appellant, the statements taken on oath u/s.131 of the Act were not based upon any evidence or fresh material found in the course of survey proceedings which ultimately, therefore, led to retraction. Statement taken even u/s.132(4) of the Act cannot be used as a conclusive evidence if it is not backed by credible evidences. Hon'ble Apex Court in the case of Pullangode Rubber Produce Co Ltd Vs.

State of Kerala 91 ITR 18 (SC) has held that "an admission is an extremely important piece of evidence, but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect." Further in the case of Awad Kishore Dass AIR 1979 SC 861 has held that "it is true that the evidentiary admissions are not conclusive proof of the facts admitted and may be explained or shown to be wrong." Hon'ble Madras High Court in the case of CIT Vs. Smt. Jaya Lakshmi Ammal reported in (2017) 390 ITR 189 (Mad), has held that "we are of the considered view that, for deciding any issue, against the assessee, the authorities under the IT Act, 1961 have to consider, as to whether there is any corroborative material vidence. If there is no corroborating documentary evidence, then statement recorded under s. 132(4) of the IT Act, 1961, alone should not be the basis, for arriving at any adverse decision against the assessee. If the authorities under the IT Act, 1961, have to be conferred with the power, to be exercised, solely on the basis of a statement, then it may lead to an arbitrary exercise of such power. An order of assessment entails civil consequences. Therefore, under Judicial review, courts have to exercise due care and caution that no man is condemned, due to erroneous or arbitrary exercise of authority conferred." The Hon'ble court further held that "if the assessee makes a statement under s. 132(4) of the Act, and if there are any incriminating documents found in his possession, then the case is different. On the contra, if mere statement made under s. 132(4) of the Act, without any corroborative material, has to be given credence, than it would lead to disastrous results. Considering the nature of the order of assessment, in the instant case characterised as undisclosed and on the facts and circumstances of the case, we are of the view that mere statement without there being any corroborative evidence, should not be treated as conclusive evidence against the maker of the statement." Hon'ble ITAT, Indore in the case of ACIT Vs. Shri Yogesh Kumar Hotwani reported in 30 ITJ 353/380 (Ind-Trib) has also held that no addition can be made merely based on statement u/s.132(4) without linking to the seized books of accounts, other documents, money, bullion, jewellery or other valuable articles or things.

In view of the above discussion, the statement of Shri Shyam Sunder Agrawal cannot be treated as conclusive evidence which could be termed as fresh material on the record for the purposes of recoding reasons for reopening of assessment of the appellant under the provisions of section 147 of the Act.

3.1.4 The said transaction is fully recorded in audited books of account of the appellant and appellant has discharged its onus of proving identity & creditworthiness of the investors and genuineness of the transaction. Thus, as per appellant, there was no failure on the part of the assessee to disclose full and true material facts necessary for the assessment before the AO. As far as the observations of the AO are concerned, it has been observed by the AO that the all the investor companies are paper/shell companies and are involved in providing bogus accommodation entries by way of bogus share application money. the appellant has brought back its own unaccounted money in the form of share application money. Having arrived to this conclusion, AO formed his belief that the income to the tune of Rs.1,87,50,000/- has escaped the assessment and case was re-opened u/s 147 of the Act by issuing notice u/s 148 of the Act. 3.1.5 As evident from above discussion that the case of the appellant has been reopened on the basis of copy of statement of Shri Shyam Sunder Agrawal recorded during survey proceedings. As discussed above, Shri Shyam Sunder Agrawal admitted unaccounted income in the form of share application money. As a matter of fact, the issue in hand i. e. share application money received from Kolkata based companies was thoroughly examined and verified by the AO during original assessment proceedings by issuing notices u/s 133(6) of the Act to the investor companies and by requiring appellant to furnish documents to explain identity & creditworthiness of the investors and genuineness of the transaction. Compliances were made by both the parties and the then AO after detailed enquiry found share application money as genuine and no adverse inference had been drawn during the original assessment proceedings on the issue of share application money. Apart from the above, no new material or evidence was available with the AO to form reason to believe as per the provisions of section 147 of the Act. The facts as discussed above reveals that the reopening of the case has been done on the basis of mere change of opinion. No assessment can be reopened on the basis of change of opinion. I rely upon the decision of Hon'ble Apex court in the case of in the case of ACIT vs Marico Limited (SPL (civil) diary No 7367/2020, order dated 01.06.2020) wherein SLP filed against the order of Hon'ble Bombay High Court by revenue was dismissed. The relevant para, which is from the order of Hon'ble Bombay High Court is reproduced hereunder:-

12. Thus we find that the reasons in support of the impugned notice is the very issue in respect of which the Assessing Officer has raised the query dated 25 September 2017 during the assessment proceedings and the Petitioner had responded to the same by its letters dated 10 December 2017 and 21 December 2017 justifying its stand. The non-rejection of the explanation in the Assessment Order would amount to the Assessing Officer accepting the view of the assessee, thus taking a view/forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts. Accordingly, the impugned notice dated 27 March 2019 is quashed and set aside. In the circumstances, we see no reason to interfere in the matter. This Special Leave petition is, accordingly, dismissed Thus, the view taken by Hon'ble Bombay High Court was affirmed. The operative portion of the decision of Hon'ble Bombay High Court is reproduced as under:-

Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief" In the present facts, we note that the Assessing Officer during the course of regular assessment proceedings leading to the assessment order dated 30 January 2018, on basis of the profits and loss account and balance sheet and the practice for the earlier years i.e. Assessment Year 2013-14 had issued notice on 25 September 2017 to the Petitioner to show cause why the amount of Rs.47.04 crones being claimed as book depreciation on intangibles should not be disallowed to determine book profits under Section 115JB of the Act. The above query of the Assessing Officer was responded to by the Petitioner in great detail by its letters dated 10 October 2017 and 21 December 2017. It justified its claim for deductions by placing reliance upon the decisions of the Courts. In support of its contention that they are entitled to deduction of the current years depreciation from the net profit to arrive at the book profits under Section 115JB of the Act. It was also explained that under subsection 6 of Section 211 of the Companies Act, reference to a balance sheet or profit and loss account would also include any notes thereto or documents annexed thereto. Thus the notes to the account should be taken into account to determine the net profits for working out the book profits in terms of Section 115JB of the Act. The Assessing Officer thereafter proceeded to pass an assessment order dated 30 January 2018 under Section 143(3) of the Act and did not make the proposed disallowance.

10. It is undisputed position before us, that query was raised on the very issue of reopening during regular Assessment proceedings. The parties have responded to it and the Assessment Order dated 30 January 2018 makes no reference to the above issue at all. However, once a query has been raised by the Assessing Officer during the assessment proceedings and the assessee has responded to that query, it would necessarily follow, as held by our Court that the Assessing Officer has accepted the Petitioner 's/Assessee 's submissions, so as to not deal with that issue in the assessment order. In fact, our Court in GKN Sinter Metals Ltd. V/s. Ms. Ramapriya Raghavan, Assistant Commissioner of Income Tax, Circle 2(1) (371) ITR 225 had occasion to dealt with the similar/identical submissions on behalf of the Revenue viz. that an assessment order passed under Section 143(3) of the Act does not reflect any consideration of the issue, it must follow that no opinion was formed by the Assessing Officer in the regular assessment proceedings. This submission was negatived by this Court by observing as follows :- 14. According to the Revenue, it could only be when the assessment order contains discussion with regard to particular claim can it be said that the Assessing Officer had formed an opinion with regard to the claim made by the assessee. This Court in Idea Cellular Ltd. v/s. Deputy Commissioner of Income Tax 301 ITR 407 has expressly negatived on identical contention on behalf of the Revenue. The Court held that once all the material was placed before the Assessing Officer and he chose not to refer to the deduction/ claim which was being allowed in the assessment order, it could not be contended that the Assessing Officer had not applied his mind while passing the assessment order. Moreover in this case, it is evident from the letter dated 6th August, 2007 addressed by the Assessing Officer to the Petitioner containing the reasons recorded for issuing the impugned notice also record the fact that during the regular assessment proceedings, the Petitioner has been asked to furnish details in support of the claim for exemption under Section 80IA/IB of the Act. The letter further records that the details sought for were furnished and it is now observed that there has been a disproportionate dWribution of expenses between various units belonging to the Petitioner for claiming deduction under Section 801A/IB of the Act. This is a further indication of the fact that the Assessing Officer had during the regular assessment proceedings for Assessment Year 200203 sought information in respect of the allocation of expenses and the explanation offered by the Petitioner was found to be satisfactory. This is evident from query dated 27th December, 2004 and the Petitioner's response to the same on 25 th January, 2005 explaining the manner of distribution of common expenses for delaying the process of claiming deduction under Section 80IA/IB of the Act. All this would indicate that Assessing Officer had formed an opinion while passing the order dated 9 th March, 2005. This Court in Aroni Commercials Ltd. v/s. Assistant Commissioner of Income Tax 367 ITR 405 had occasion to consider somewhat similar submission made by the Revenue and negatived the same by holding that when a query has been raised with regard to a particular issue during the regular assessment proceedings, it must follow that the Assessing Officer had applied his mind and taken a view in the matter as is reflected in the Assessment Order. Besides, the manner in which an Assessing Officer would draft/frame his order is not within the control of an assessee. Moreover, if every contention raised by the assessee which even if accepted is to be reflected in the assessment order, then as observed by the Gujarat High Court in CIT v/s. Nirma Chemicals Ltd. 305 ITR 607, the order would result into an epic tome. Besides, it would be impossible for the Assessing Officer to complete all the assessments which have to under gone scrutiny at its hand. In the above view, it is clear that once a query has been raised during the assessment proceedings and the Petitioner has responded to the query to the satisfaction of the Assessing Officer as is evident from the fact that the Assessment Order dated 9th March, 2005 accepts the Petitioner's claim for deduction under Section 80IA/IB of the Act. It must follow that there is due application of mind by the Assessing Officer to the issue raised. The above observations apply on all fours to this Petition, so far as the Revenue's submission of no change of opinion is concerned.

11. The further submission of Mr. Waive that in the absence of the Assessing Officer adjudicating upon the issue it cannot be said that the Assessing Officer had formed an opinion during the regular assessment proceedings leading to the order dated 30 January 2018. An adjudication would only be on such issue where the assessee 's submissions are not acceptable to the Revenue, then the occasion to decide a list would arise i.e. adjudication. However, where the Revenue accepts the view propounded by the assessee in response to the Revenue's query, the Assessing Officer has certainly to form an opinion whether or not the stand taken by the assessee is acceptable. Therefore, it must follow that where queries have been raised during the assessment proceedings and the assessee has responded to the same, then the non-discussion of the same or non- rejection of the response of the assessee, would necessarily mean that the Assessing Officer has formed an opinion accepting the view of the Assessee. Thus an opinion is formed during the regular Assessment proceedings, bars the Assessing Officer to reopen the same only on account of a different view.

3.1.6 In the instant case, the impunged issue on which reassessment proceedings were initiated were already examined in depth by the AO during original assessment proceedings. The AO was satisfied on this issue during the original assessment proceedings and therefore, no adverse view had been taken. In such a scenario, ld. AO not having any fresh information/material in his possession which could be formed his belief about escapement of income. In view of the above judgment of Hon'ble Supreme Court and many other judicial pronouncements, it is well settled position that mere fresh application of mind to the same set of facts does not confer jurisdiction on the AO to assume jurisdiction u/s 147 of the Act and to issue notice u/s 148 of the Act. This amounts to change of opinion on the basis of which any assessment cannot be reopened. In the light of these discussions the assessment framed u/s 143(3) r.w.s 147 of the Act is not sustainable in the eyes of law.

3.1.7 Another moot question which arises here is the applicability of first proviso to section 147 of the Act. As per the first proviso to section 147 of the Act, where an assessment under sub section (3) of section 143 or section 147 of the Act has been made for the relevant assessment year, no action shall be taken under section 147 of the Act 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 of the Act or in response to a notice issued under sub-section (1) of section 142 of the Act or section 148 of the Act or to disclose fully and truly all material facts necessary for the reassessment, for that assessment year. Section 149 of the Act deals with time limit for notice under section 148 of the Act. As per clause (a) of sub-section (1), no notice under section 148 of the Act shall be issued for the relevant assessment year, if four years have elapsed from the end of the relevant assessment year unless the case falls under clause (b). Clause (b) says that no notice shall be issued if four years have elapsed but not more than six years have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.

Insofar the present case is concerned, the assessment year is 2012-13. The assessment year ends on 31.03.2013. In this case impugned notice under section 148 of the Act was issued on 27.03.2018. Therefore, it is a case of re-opening of assessment under section 149 (1) (b) of the Act after expiry of four years but before expiry of six years. In such a case, the first condition for invoking section 147 of the Act is that the ld AO must have reason to believe that income chargeable to tax has escaped assessment for the relevant assessment year. The second condition is that the AO must arrive at the satisfaction that income chargeable to tax has escaped assessment for the said assessment year by reason of the failure on the part of the assessee to make a 139 of the Act or to respond to a notice under section 142(1) of the Act or section 148 of the Act or due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. The two key and crucial expressions appearing in section 147 of the Act are "reason to believe" and "failure to disclose fully and truly all material facts necessary for assessment". These two expressions were examined and interpreted in great detail by Hon'ble Supreme Court in ITO vs. Lakhmani Mewal Das, 103 ITR 437 (SC). Hon'ble Court in the said judgment has considered validity of notice u/s 148 of the Act in respect of an assessment beyond the period of four years but within a period of eight years (now six years) from the end of the relevant year, which is also a fact of the instant case. Hon'ble Court observed that in such a case, where notice was issued beyond four years but within period of eight years (now six years), two conditions would have to be satisfied by the AO before acquires jurisdiction to issue notice u/s 148 of the Act. These two conditions are conditions are (i) He must have reason to believe that income chargeable to tax has escaped assessment; and (ii) He must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to make a return under section 139 for the assessment year under consideration or to disclose fully and truly all material facts necessary for his assessment for that year.

Both the requisite conditions must co-exit in order to confer jurisdiction by the AO. Hon'ble Court observed that duty is also cast upon the assessee to make a true and full disclosure of the primary facts at the time of the original assessment. Production of books of accounts before the AO or other evidence from which material evidence with due diligence could have been discovered by the AO will not necessarily amount to disclosure contemplated by law but the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once, the assessee has discharged its onus of furnishing true and primary facts, it is for the AO to draw the correct inference from the primary facts.

Furthermore, the grounds or reasons which led to formation of the belief that income chargeable to tax has escaped assessment must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. The reasons for formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the AO and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts.

3.1.8 In the instant case, the impunged issue on the basis of which reassessment proceedings were initiated was already examined and verified by the AO during original assessment proceedings. For that reason, so, no adverse inference was drawn by the AO on the subject issue during original assessment proceedings. Thus, there is no failure on the part of the assessee to make full and true disclosure of material fact necessary for the original assessment. However, the Id AO has assumed jurisdiction, on the basis of statement of Shri Shyam Sunder Agrawal which has been retracted in later period of time stating the same to be given under coercion and pressure. Admittedly, survey proceedings are related to the affair of the year in which surveys are carried out unless and until any material relating to past year gets unearthed during the proceedings, which is completely missing in the instant case. The entire re-assessment proceedings revolves around statement of Shri Shyam Sunder Agrawal and without having any positive evidence on record. No other/fresh material/evidence has been mentioned in the reasons recorded which conclusively suggest such claim of the assessee was bogus and hence, there was income escaped from assessment. As discussed earlier the statement of Shri Shyam Sunder Agrawal is not a fresh material unearth in the source of survey proceedings. Thus, the AO had no material to reason to believe that there was income escaped from the assessment. Hon'ble Bombay High Court in the case of Hindustan Liver Limited 268 ITR 332 has held as under:

The reason recorded for issuing notice provide the link between conclusion and evidence. The reason recoded must be based on evidence. The Assessing Officer in the event of challenge to the reason, must be able to justify the same based on material available on record. He must disclosed in the reason a to which fact or material not disclosed by the assessee fully and truly was necessary for assessment of that year, so as to establish the vital link between the reasons and evidence.

Therefore, reasons recorded for reopening of completed assessment lead to the fact that the impugned assessment has been reopened for the purposes of making roving and fishing enquiry which is not permissible as per the provisions of section 147 of the Act. This view is also supported by various judicial pronouncements. In the case of Madhya Pradesh Industries Limited 57 ITR 637 (SC), Hon'ble Apex Court has held that fishing or roving enquiry with a hope that it might lined the AO somewhere assessment, is not permissible us 147 of the Act. In the instant case, in the reasons recorded, the AO has not referred any material which has come on the record subsequently, and has not mentioned as to which material fact were not disclosed by the assessee. Further, identity & creditworthiness of the investors and genuineness of the transaction has already been explained by the appellant during assessment proceedings with supportive documentary evidences. Thus, there was no new material before the AO for making belief u/s 147 of the Act and thus, the assessment was reopened for nothing but to make roving and fishing enquiries for making addition of Rs. 1,87,50,000/-. This is not permissible u/s 147 of the Act and as per the judicial pronouncements mentioned above. In the facts and in the circumstances, the AO has failed to explain how the appellant has not disclosed the true and primary facts during original assessment proceedings even when the subject issue on the basis of which reassessment proceeding were initiated was fully verified and examined by the AO during original assessment proceeding. Thus, there exists a serious lacuna in the findings of the AO. In such a scenario, Id. AO not having any fresh information/material in his possession, merely on retracted statement formed his belief about escapement of income which is not sustainable in law. Thus, assumption of jurisdiction by Id. AO for roving and fishing enquiries is not sustainable as per the provisions of section 147 of the Act.

3.1.7 In view of the above discussion, the AO was not justified in making addition of change of opinion. Therefore, appeal on these grounds is allowed.

6. The Ld AR of the assessee further submitted that since the assessment was reopened entirely on the basis of statement of Shri Shyam Sunder Agrawal, director of the assessee company during the survey u/s 133A conducted on 29.01.2018, which were later retracted on 14.06.2018 during the assessment proceedings in progress u/s 147 r.w.s. 143(3) of the IT Act. The basis for reopening of assessment is vitiated since the statement recorded on oath u/s 132(4)/133A were withdrawn then there was no material on record exists to form the basis for initiating the reopening proceedings. It was further submitted by the Ld AR that as the reopening proceedings were initiated assessment beyond the period of four years but within a period of eight years (now six years) from the end of the relevant year but no fresh material have Ld AO with which it can be established that the Ld AO (i) have reason to believe that income chargeable to tax has escaped assessment; and, (ii) have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to make a return under section 139 for the assessment year under consideration or to disclose fully and truly all material facts necessary for his assessment for that year. On the contrary assessee had proved by showing order sheet entries and other supporting documents before the Ld CIT(A) that all the required documents pertaining to the transaction of Share Capital in question were duly submitted, explained and were accepted by the then Ld AO in the original assessment u/s 143(3) dated 23.03.2015 wherein no addition on this account was made by the Ld AO. With such submissions, it was the contention of Ld AR that the reopening of assessment u/s 147 was bad in law and Ld CIT(A) had rightly quash the assessment u/s 147 r.w.s. 143(3).

7. We have considered the rival contentions, perused the material on record and judicial pronouncements relied upon by the parties. De-facto, the assessee company was undergone with the regular scrutiny assessment u/s 143(3) for the relevant assessment year, the issue raised in the present appeal regarding bogus share capital was also show caused in the original assessment proceedings. Identity, Creditworthiness of the share applicants and Genuineness of the Ld AO, notice U/s 133(6) were also issued to the parties concerned, response to 133(6) were received from all 19 applicants and finally on being satisfied with the response and explanations of the assessee, Ld AO chooses not to make any addition on this count, order u/s 143(3) was passed on 23.03.2015. Subsequently, a survey was conducted on 29.01.2018 on the premises of the assessee, statement on oath were recoded u/s 133A of Shri Shyam Sunder Agrawal, director of the assessee company on 30.01.2018, which were retracted later on 14.06.2018. Meanwhile, reasons for escapement of income were recorded on 05.02.2018 and notice issued u/s 148 on 27.03.2018 i. e. beyond four years from end of the relevant assessment year. In the reasons to believe recorded by the Ld AO dated 05.02.2018, Ld AO recoded the satisfaction in terms of 1st proviso to section 147 of the Act that income chargeable to tax has escaped assessment for the assessment year 2012-13 by the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. On perusal of the order of Ld CIT(A), it is clearly transpired that the issue pertaining to receipt of share capital by the assessee company in the relevant assessment year was exhaustively dealt with by the Ld AO in original assessment proceedings u/s 143(3) and all the facts were explained and disclosed by the assessee, therefore, the allegation of the department that the assessee failed to discharge its burden in establishing the identity, creditworthiness and genuineness of transaction u/s 68 of the Act and Ld CIT(A) erred in ignoring that reassessment proceedings are based on fresh facts/ information rather that change of opinion cannot be subscribed to. The contention of the department that statement recorded during the survey u/s 133A of Act is an information, though not conclusive, which may be used in regular assessment or reassessment proceedings is worth consideration and in compliance of 1st Proviso to section 147 that the assessee was failed to disclose fully and truly all material facts necessary for assessment, however reopening entirely based on statement which were later retracted of the key person of the assessee company without any supporting evidences to dislodge the contentions of assessee under the retraction on statements during the survey operations. Under such circumstances the finding of the Ld CIT(A) supported with judicial pronouncements supra and Relevant circulars of CBDT 286/2/2003-IT (inv) dated 10.03.2003 regarding confession of the assessee during search and seizure and survey operations, if not based on credible evidence are later retracted do not serve any purpose. Another CBDT circular 286/98/2013-IT (Inv.11) 18.12.2014 was also relied upon by Ld CIT(A) and observed that It is evident from the record that in the case of the appellant, the statements taken on oath u/s.131 of the Act were not based upon any evidence or fresh material found in the course of survey proceedings which ultimately, therefore, led to retraction. Statement taken even u/s.132(4) of the Act cannot be used as conclusive evidence if it is not backed by credible evidences. Ld CIT(A) further followed the ratio of law laid by the binding judgment by Hon’ble Apex court in the case of Pullangode Rubber Produce Co Ltd Vs. State of Kerala 91 ITR 18 (SC) has held that "an admission is an extremely important piece of evidence, but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect." Further in the case of Awad Kishore Dass AIR 1979 SC 861 has held that "it is true that the evidentiary admissions are not conclusive proof of the facts admitted and may be explained or shown to be wrong.". It was therefore held that the statement recorded u/s 132(4)/133A cannot be termed as fresh material on record for the purpose of recording of reasons for reopening of assessment. We do not agree with the application of these cases in the present case where the reasons recorded were before the date of retraction by the assessee. Thus, according to the ratio of law in the cases relied upon till the retraction is offered by the assessee the statement of the key person should be considered as a fresh material.

Duty of the assessee is to fully and truly disclose all primary facts necessary for the purpose of assessment – it is not part of his duty to point out what legal inference should be drawn from the facts disclosed – where on consideration of material on record, one view is conclusively taken by the AO, it would not be open to reopen the assessment based on the very same material with a view to take another view

10. Under such scenario, we are of the considered opinion that the AO has failed to explain how the appellant has not discharged the onus cast upon it u/s 68 of Act, while the primary information was already made available by the assessee, no new fact could be brought on the record by the department, the basis for reopening i.e. statement of the assessee was available only till the assessee had retracted from the same. Departments plea, relying upon the judgment in the case of Bannalal Jat Constructions (P) Ltd Vs DCIT (2009) 106 Taxmann.com 128 (SC) that retraction of the assessee should be supported by strong evidence that the earlier statement was under duress and coercion cannot be accepted, when the department is obligated to CBDT 286/2/2003-IT (inv) dated 10.03.2003 regarding confession of the assessee during search and seizure and survey operations, if not based on credible evidence are later retracted do not serve any purpose. Another CBDT circular 286/98/2013-IT (Inv.11) 18.12.2014 states that Statement taken even u/s.132(4) of the Act cannot be used as conclusive evidence if it is not backed by credible evidence. Since department was not able to dislodge the retracted statement of assessee with the support of any fresh evidence or material, the addition made was bad in law. It is also the fact emanated from the order of Ld CIT(A) that the assessee had disclosed the true and primary facts during original assessment proceedings even when the subject issue on the basis of which reassessment proceeding were initiated was fully verified and examined by the AO during original assessment proceeding. Thus, there exists a serious lacuna in the findings of the AO. In such a scenario, Id. AO not having any fresh information/material in his possession, merely on retracted statement formed his belief about escapement of income which is not sustainable in law. With such observation, after a thoughtful consideration of all the material aspect of the case, in absence of any cogent evidence, addition made on the basis of statement of the assessee which have been retracted later, the additions made by the Ld AO do not hold good in the eyes of law. We therefore direct to vacate the addition made for Rs. 1,87,50,000/- in terms of our observations herein above.

Order pronounced in the court on 22 /09/2023.