Reopening of assessment is not valid if the Assessing officer was well aware of the facts. Whether assessee disclosed it or not is irrelevant.

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Reopening of assessment is not valid if the Assessing officer was well aware of the facts. Whether assessee disclosed it or not is irrelevant.

Reopening of Assessment:

The fact that the assessee did not disclose the material is not relevant if the AO was otherwise aware of it. If the AO had the information during the assessment proceeding, irrespective of the source, but chooses not to utilize it, he cannot allege that the assessee failed to disclose truly and fully all material facts & reopen the assessment (Scope of Explanation 1 to S. 147 explained)

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.3546 OF 2018
Rajbhushan Omprakash Dixit. ] … Petitioner
Versus
Deputy Commissioner of Income Tax ] Central Circle 2(
4), Mumbai. ] … Respondent
Mr. C. S. Agarwal, Senior Advocate a/w Mr. Sankalp Sharma & Mr.
Ravikumar Mall i/b Mr. Prem Jha for Petitioner.
Mr. Suresh Kumar a/w Ms. Samiksha Kanani for Respondent.
CORAM :AKIL
KURESHI &
SARANG V. KOTWAL, JJ.
DATE :05
APRIL, 2019
P. C. :1.
Heard learned Counsel for parties for final disposal of the
petition.
2. The Petitioner, an individual, has challenged a notice
dated 02/05/2017 issued by the Respondent Deputy
Commissioner
of Income Tax.

  1. Brief facts are as under :
    The Petitioner, at the relevant time, was working as an
    independent Director of one M/s. Toporder Properties Pvt. Ltd. which
    was one of the Sterling Biotech Ltd. group companies. The said group
    of entities, including the Petitioner, was subjected to search and
    seizure action under Section 132(1) of the Income Tax Act, 1961 (‘the
    Act’, for short) and survey operations under Section 133A of the Act
    on 28/06/2011. Subsequent to the search, the Assessee filed the
    return of income for the Assessment Year 20112012
    declaring total
    income of Rs.7.20 Lakhs (rounded of). The Assessing Officer
    completed the assessment under Section 153A read with 143(3) of the
    Act on 20/03/2014 accepting the Petitioner’s returned income.
    4. To reopen such assessment, he issued the impugned
    notice. In order to do so, he had recorded the following reasons :
    “Return of Income for the year under consideration was filed
    23.02.2012 declaring total income of Rs.7,20,916/.
    Subsequently, assessment u/s 153A r.w.s. 143(3) was finalized
    by the then DCIT, CC. 10, Mumbai on 20.03.2014
    determining total income of Rs.7.20,980/.
    Search & Seizure action u/s. 132(1) of the I.T. Act was
    conducted in the Sterling Group of cases on 28.06.2011 by the
    DDIT (Inv.) Unit VII (4), Mumbai. In the Search and Seizure
    action u/s. 132(1) several parties were involved at various
    places. Party No.17 conducted search at the premises of M/s.
    Sterling Biotech Ltd. at Sandesara Estate, Vadodara. During
    the course of search proceedings, the search party seized
    various documents being AnnexureA7,
    on perusal of
    AnnexureA7,
    it is observed thati.
    AnnexureA7
    consists of 152 pages.
    (A) In the page no.8 dated 10.1.2011, the following
    entry is made interalia Rs.
    20,00,000/cash
    received fro Mr. R. B. Dixit at
    Delhi, the same is given to cash S.K.G. (through Gagan
    Dhawan).
    The above entry in the seized document clearly reveals
    that the assessee had minimum cash in hand on 10.01.2011 of
    Rs.20,00,000.
    The cash possessed by the assessee is not
    forming part of assessee’s return of income for the year under
    consideration. This tantamount escapement of income within
    the meaning of Section 147 of the Income Tax Act.
    Survey u/s. 133A was conducted in the case of M/s.
    PMT Machines Ltd., 20/B, Khatau Bldg., A. D. Marg, Fort,
    Mumbai by DDIT, (Inv) UnitI,
    on 28.6.2011. The survey was
    conducted simultaneously when the Search & Seizure action
    was taken in the case of M/s. Sterling Group of cases on
    28.06.2011 by the DDIT (Inv.) Unit VII(4), Mumbai. During
    the course of survey action 133A the survey team impounded
    certain documents which includes Annexures A4
    and A5
    inter
    alia. On perusal of these Annexures it is observed that these
    impounded documents include vouchers. These vouchers show
    the payments have been made to Shri R. B. Dixit on various
    dates as detailed below :URS
    Annexure Page No. Date Amount (Rs.)
    A4
    104 11.10.2010 18,00,000
    A4
    65 8.06.2010 3,25,000
    A4
    53 27.04.2010 5,35,000
    A4
    45 15.11.2010 15,00,000
    A5
    157 27.01.2011 16,00,000
    A5
    139 8.9.2010 2,85,000
    A5
    134 17.9.2010 11,50,000
    A5
    49 12.01.2011 20,00,000
    A5
    11 19.10.2010 20,00,000
    Total 85,35,000
    The aforementioned amounts of Rs.85,35,000/received
    by Shri R. B. Dixit for the reasons specified in the
    vouchers. These amounts received by the assessee is an income
    in his hands which is not offered for tax in the return of
    income and thereby not forming part of assessment order.
    In the backdrop of above, the undersigned has reason
    to believe that the income has escaped within the meaning of
    section 147 of the I.T. Act, Accordingly notice u/s. 148 is being
    issued after obtaining necessary sanction required by
    provisions of Section 151 of the Pr. CIT, Central1,
    Mumbai.”
    5. Upon being supplied the reasons, the Assessee raised
    objections to the notice of reopening of assessment under a letter
    dated 14th July, 2017. In such objections, he had, inter alia,
    contended as under :

“The reference of the documents which is given in the reason
for reopening of the case, were already available with the
asessing officer at the time of assessment and after considering
these documents/materials assessment concluded u/s. 143(3)
w.r.t. 153A and hence it is stated that there is only difference
of opinion and change of view. In the absence of the
additional evidence other than seized material we hereby state
that provisions of reassessment under section 147/148 is not
warranted and is bad in law as it amounts to change in view.”
6. The Assessing Officer rejected such objections by an order
dated 19.09.2018. In such order, in relation to the Petitioner’s
contention of the documents relied upon in the reasons already
available with the Assessing Officer during the original assessment, he
stated as under :
“5. During the course of the assessment proceedings for the
A.Y. 21112,
the assessee was not countered by the Assessing
Officer with the entires found in Annexure A7
seized during
the search action at the premises of Sterling Biotech Ltd. at
Sandesara Estate, Vadodra. The assessee was also not
countered with the vouchers included in Annexure A4
and A5
which were impounded during the course of survey action u/s
133A on M/s. PMT Machines Limited on 28.06.2011. The
Assessing Officer failed to form an opinion on the contents of
these entries which show cash possessed by the assessee to the
tune of Rs.20,00,000/and
the content of voucher which
shows payment made to the assessee amount to Rs.85,35,000.
As the Assessing Officer did not form an opinion on this
issue, there is no question of any difference or change of
view/opinion.”

  1. The Petitioner thereafter filed this petition to challenge
    the notice of reopening of assessment. Learned Counsel for the
    Petitioner submitted that there was no failure on the part of the
    assessee to disclose truly and fully all material facts. The documents
    relied upon by the Assessing Officer in the reasons for reopening the
    assessment, were available with the Assessing Officer during the
    original scrutiny assessment.
    8. On the other hand, Mr. Suresh Kumar, learned Counsel for
    the Department, opposed the petition contending that the Assessing
    Officer has recorded proper reasons. There was lack true and full
    disclosure on the part of the Assessee, particularly in view of the
    Explanation 1 to Section 147 of the Act.
    9. Having thus heard the learned Counsel for parties, we may
    refer to the reasons recorded by the Assessing Officer. In such
    reasons, he has referred to two facts. Firstly, as per the seized
    documents (AnnexureA7)
    during the search, an amount of
    Rs.20,00,000/was
    stated to have been paid in cash by the Assessee
    to one S.K.G. According to the Assessing Officer, the Assessee had
    cash on hand of Rs.20,00,000/which
    was undisclosed. The second
    fact which the Assessing Officer relied upon was the seizure of
    vouchers during the search showing a total payment of Rs.85,35,000/to
    the Assessee. Here again, the Assessing Officer believed that the
    Assessee had thus received cash amount of Rs.85,35,000/.
    10. Undisputed fact is that all these documents were before
    the Assessing Officer when the original scrutiny under assessment
    under Section 153A read with 143(3) was made. It was in this
    background that the Assessee had, in his objections, asserted that the
    documents relied upon in the reasons were very much available with
    the Assessing Officer earlier. It was in the context of these objections
    that the Assessing Officer, while disposing of the objections, as noted
    above, had remarked that he had not formed any opinion on such
    documents in the assessment order.
    12. The stand taken by the Assessing Officer may save him
    from the allegation of change of opinion, however, in the present case
    when we are examining the validity of the notice of reopening issued
    beyond the period of four years from the end of relevant assessment
    year, the question of lack of true and full disclosure by the Assessee
    would become relevant. In this context, once the Department i.e. the
    Assessing Officer had certain information, material, or document
    before him during the assessment proceeding, irrespective of the
    source of such information, material, or document, the Assessee
    cannot be blamed for nondisclosure
    thereof.
    13. Mr. Suresh Kumar, however, sought to rely on the
    Explanation 1 to Section 147 to contend that this would be a case of
    lack of true and full disclosure on the part of the Assessee. This
    Explanation reads as under :
    “Explanation 1.Production
    before the Assessing Officer of
    account books or other evidence from which material
    evidence could with due diligence have been discovered by
    the Assessing Officer will not necessarily amount to
    disclosure within the meaning of the foregoing proviso.”
    As per this Explanation thus, 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 first proviso to Section 147. Here is not a case where the
    Assessee is seeking to rely on a disclosure which the Revenue can seek
    to bring within the fold of the said Explanation. Here is a case where
    the Department already had collected certain documents and
    materials which were before the Assessing Officer at the time of
    framing assessment. If the Assessing Officer did not, for some reason,
    advert to such material or did not utilize the same, he surely cannot
    allege that the Assessee failed to disclose truly and fully all material
    facts.
    14. In view of the above discussion, the impugned notice is set
    aside. The petition is allowed and disposed of.
    (SARANG V. KOTWAL, J.) (AKIL KURESHI, J.)

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