INCOME TAX ACT, 1961

Section 147, Proviso Article 226

Reassessment - Full and true disclosure - Validity of notice under section 148 - Reason to believe where there was tangible material

For the assessment year under consideration, as the Petitioner (EDPL) was the only surviving entity, it alone filed return of income declaring loss. The return of income was selected for scrutiny and after making certain disallowances, the total income was assessed and assessment order, dated 19-3-2015 was passed under section 143(3) at positive income. Subsequently, revenue issued the impugned Notice, dated 31-3-2019 under section 148 along with a copy of the reasons recorded, proposing to reassess the income of the Petitioner. Along with the notice issued under section 148, the respondent also furnished copy of the recorded reasons. Along with the notice issued under section 148, the respondent also furnished copy of the recorded reasons which disclose that an information had been received from DIT (Intell. & Cr. Inv.), New Delhi on 30-3-2015 regarding funds received by the assessee from a foreign entity. The DIT (Intell. & Cr. Inv.), New Delhi had carried out the investigation and detailed inquiry regarding the funds received by the Experion Group Company in India from it's parent company which did not have sufficient funds of its own to make such investments. Since the then AO was not aware of the fact that the investments into the assessee companies had been made from an entity which does not have funds of its own to invest such huge amounts, and that the investing entity had only been used as a conduit to route funds through complex transactions the income had escaped assessment due to the failure of the assessee to disclose fully and truly all the material facts necessary for its assessment. Held: The tangible material in the present case was information received by the assessing officer from DIT (Intell. & Cr. Inv.). Since the investment was claimed to have been made in the share capital of the assessee company, it was for the assessee to establish that it was a genuine investment, since the facts were exclusively within the assessee's knowledge. It is trite law that for cases relating to inter alia, share application money, three vital aspects have to be considered by the AO, namely (i) the identity of the investors; (ii) the credit worthiness of the investors; and (iii) the genuineness of the transaction. There was fresh tangible material in the hands of the AO with respect to the dubious nature of the source of investments made into the assessee company, which fact had not been fully and truly disclosed at the time of the assessment. Mere disclosure of the identity of the investor could not translate into a satisfaction with regard to creditworthiness of the investor. The genuineness of this transaction as also the creditworthiness of the investor were doubtful in the present case and, therefore, mere mention of the said transaction does not amount to 'ful' and 'true' disclosure. Necessary sanction for issuance of notice under section 148, as required under section 151 had also been obtained. The issuance of notice under section 148 was therefore, justified as there was reason to believe that there was escapement of income of assessee.

Relied:United Electrical Co. Pvt. Ltd. (2002) 258 ITR 317 (Del) : 2002 TaxPub(DT) 1670 (Del-HC), Pr. CIT (Central-I v. NRA Iron & Steel (P) Ltd. (2019) 103 Taxmann.com 48 (SC), Vedanta Ltd. v. Asstt. CIT W.P. (C) 13036/2019, decieed on 20-12-2019 : 2020 TaxPub(DT) 307 (Del-HC), RDS Project Ltd. W.P.(C) 11274/2019 decided on 23-10-2019, Asstt. CIT v. Rajesh Jhaveri Stock Broker Pvt. Ltd. (2008) 14 SCC 208 : 2007 TaxPub(DT) 1257 (SC), Sri Krishna Pvt. Ltd. v. ITO (1996) 221 ITR 538 (SC) : 1996 TaxPub(DT) 1220 (SC), G.S. Engineering & Construction Corporation v. Dy. Director of IT (International Taxation), Circle-1(2) (2013) 38 Taxmann.com 29 (Del) : 2013 TaxPub(DT) 2521 (Del-HC)], Kale Khan Mohammad Harif v. CIT (1963) 50 ITR 1 (SC) : 1963 TaxPub(DT) 420 (SC), Roshan Di Hatti v. CIT, (1977) 107 ITR 938 (SC) : 1977 TaxPub(DT) 0842 (SC), Shankar Ghosh v. ITO (1985) 23 TTJ 20 (Cal-Trib) : 1985 TaxPub(DT) 1012 (Cal-Trib), NTPC Ltd. v. Dy. CIT (2013) 29 Taxmann.com 421 (Del) : 2013 TaxPub(DT) 562 (Del-HC), Honda Siel Power Products Ltd. v. Dy. CIT (2012) 340 ITR 53 (Del : 2011 TaxPub(DT) 904 (Del-HC), Rose Serviced Apartments (P.) Ltd. v. Dy. CIT (2011) 9 Taxmann.com 199 (Del) : 2011 TaxPub(DT) 1753 (Del-HC), Phool Chand Bajrang Lal v. ITO (1993) 203 ITR 456 (SC) : 1993 TaxPub(DT) 1453 (SC), CIT-8 (Erstwhile CIT-III) v. Soyuz Industrial Resources Ltd. (2015) 58 Taxmann.com 336 (Del) : 2015 TaxPub(DT) 1995 (Del-HC), Prem Chand Shaw (Jaiswal) v. Asstt. CIT, Circle-38, Kolkata (2016) 67 Taxmann.com 339 (Cal-HC) : 2016 TaxPub(DT) 1688 (Cal-HC) and Virbhadra Singh v. Dy. CIT, Circle Shimla (2017) 88 Taxmann.com 888 (HL-HC) : 2017 TaxPub(DT) 170 (HP-HC).

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