TaxTMI 
TaxTMI 
2005 (9) TMI 244
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....s: "That the initiation of proceedings under section 147 of the Income-tax Act was wholly without justification, as there was no material for the reason to believe that the income of the assessee had escaped assessment." 3. After hearing the parties, the bench admitted this ground vide order dated 24-5-2005. 4. The arguments of the parties were heard on the additional grounds and also on the original grounds on 24th May 2005. At the time of hearing, the bench directed the Learned DR to file a copy of order of the Income-tax Officer regarding reasons recorded for the opening of the assessment and for issuing notice under section 148 of Income-tax Act. The Learned Sr. DR. vide application dated 1-7-2005, filed letter of Enforcement Directorate dated 9-10-1998 along with a copy of order dated 31-3-1999 recording reasons for issuing notice under section 148 of Income-tax Act. In view of these, subsequent developments and for providing opportunities to the assessee for rebutting these documents, the matter was again heard on 15th July, 2005. The learned representatives of both the parties have submitted arguments in relation to the additional ground reproduced above and h....
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.... were by cheque, the who issued the cheques and from which Account and name of the bank. 3. Present status of the said deposits. 4. If the deposits have been withdrawn, were the amount has been transferred or who withdrawn the money. 5. The names, passport Nos. and addresses of the persons who are authorized to operate the account. 6. Details of any other deposits or Account if any, of the subject party with the said bank. You are also requested to collect any other information in respect of the said deposits, which may be relevant for investigation under Foreign Exchange Regulation Act. The copies of the said two deposits certificates are also enclosed herewith. Yours faithfully, Sd/- (M.C. Joshi) End.:-As above. ....
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....d. The Learned Counsel for the assessee Shri Salil Aggarwal while challenging the validity of notice issued under section 148, made following submissions: (i) That as observed by the Assessing Officer in the reasons to be recorded, the reopening was made on the basis information provided by the Enforcement Directorate which was in relation to deposits by the assessee in various foreign accounts and as no addition has been made on account of any deposit in the foreign account in the reassessment order, the notice of reopening on that basis itself is illegal. (ii) That the additions have been made on the items, which are not mentioned in the reasons recorded for issuing notice under section 148 and thus there is no nexus between the reasons recorded for reopening the assessment and the reassessment made. (iii) That the Assessing Officer cannot be allowed to travel beyond the reasons recorded for making the reassessment and he can make additions only in relation to the ground having nexus with the reasons recorded and not on totally different grounds. (iv) That the Assessing Officer cannot make fishing and roving enquiry during the reassessment p....
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....g assessment is not to confine to reasons recorded alone and can make additions on other items of income even it reopening has been made on different items. 8. In rejoinder, the learned counsel for the assessee submitted that before issuing notice under section 148, the Assessing Officer should satisfy that particular income of the assessee has escaped assessment and in the reassessment order additions can be made only regarding such 'escaped income' and not on totally different aspects or items of income. 9. We have carefully considered the entire relevant material on record and revival submissions. The following facts are found to be undisputed: (1) The information of the Enforcement Directorate as conveyed through letter dated 9-10-1998, reproduced above, was that there were certain certificates of deposits in foreign bank accounts in the names of the assessee and her husband and enquiries were initiated in relation to the certificates, which were in the possession of the Enforcement Directorate. The reasons recorded in the reopening are based on this information alone. (2) In the Assessment Order no addition has been made with regard to the alleg....
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....cer 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; (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 ....
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....In determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the Department could reopen the ease. The sufficiency or correctness of the material is not a thing to be considered at this stage." In view of the ratio of this decision, the notice issued by the Assessing Officer is found to be fully valid. Issue No. 1 is, therefore, decided in affirmative and accordingly. ISSUE NO. 2 14. Coming to the second issue, the provisions of section 147 provide, in unequivocal terms that after having reasons to believe that any income chargeable to tax has escaped assessment, the Assessing Officer can assessed 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 proceedings under this section'. In view of terminology used in section 147, therefore, it is open to the Assessing Officer to consider any other income or any other item of income which comes to his notice during the course of the reassessment proceedings The arguments that only those items can be considered for ma....
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....te jurisdictional fact for the issuance of notice under section 148 did exist and even though the same turned out to be wrong during the reassessment proceedings, there is no valid reason to thwart the proceedings under section 147 at the threshold. 18. So far as the arguments of Learned Counsel for the assessee that after processing return under section 143(1)(a) on the basis of the same information, the reassessment cannot be made, is concerned, in the case of Mahanagar Telephone Nigam Ltd. the Hon'ble Delhi High Court has observed that the intimation under section 143(1)(a) cannot be treated to be an order of assessment. According to the Hon'ble Court, distinction between under section 143(1)(a) and 143(3) is well brought out by the statutory provisions as stood at different points. The Hon'ble Court has also considered the effect of change brought by the amendment with effect from1st April 1979in the scope of under section 147. The observations of the Hon'ble High Court are as under: "The intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stoo....
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....the assessee in that case was that since no addition was made in reassessment order with respect to CPRA, the grounds for reopening of the assessment did not survive and the Assessing Officer has no jurisdiction to continue with the proceedings. On this basis, it was contended that the entire proceedings were without having valid jurisdiction. The contention of the learned DR on the other hand was that once the case reopened in section 147 of the Income-tax Act, the full assessment was above to the Assessing Officer. The bench after considering the various authorities has ordered. Thus, the issue stands covered by the decision of Hon'ble High Court referred to above and the decision in the case of South Eastern Coalfields Ltd. The bench considered the decisions of Hon'ble Court relating to the pre-amendment provision of section 147 and amended provision of the same and concluded as under: "A resume of all the case laws discussed above relating to the pre-amended provisions of section 147 goes to show that the information was the basis for forming belief about the escapement of income as per the pre-amended provisions and the Assessing Officer was required to hav....
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....tax @50 per cent in the Statement of Accounts filed with the return. The return was filed on 31-5-1994 and was processed under section 143(1)(a) for the assessment year 1992-93 on the same date. The depreciation was admissible to the assessee only @40 per cent. After noticing this mistake, the Assessing Officer, with a view to rectify the mistake, issued notice under section 154/155 of the Act on 1st May, 1995 requiring the assessee to file the objections, if any, to the proposed notification. The reply of the assessee was that no rectification was called for. In support of this reply a chart was filed on the basis of which it was explained that if the depreciation @40 per cent is to be calculated then also no rectification will be needed because on one truck no depreciation was claimed in the return and if the same is added then the depreciation claimed will be fully justified. 22. During the pendency of proceedings under section 154/155 the assessee filed return of income for assessment year 1993-94 on March 31, 1995. From the statement of accounts attached with the return it was found that the assessee again claimed depreciation @50 per cent. The Income-tax Officer while proc....
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....ssessment under sub-section (3) of section 143 of the Act. Therefore, it was necessary that an assessment order either under sub-section (1) or under sub-section (3) of section 143 of the Act had to be passed. However, after the amendment made with effect from April 1, 1989, the position has materially changed. Now, the Assessing Officer initially processes the return under section 143(1)(a) of the Act and determines the amount payable or refundable on that basis. It is not necessary for him to frame an assessment in each and every case. However, in case he chooses to verify the return and frame an assessment, he has to issue a notice under sub-section (2) of section 143 and require the assessee to produce his books of account and other materials in support of the return. Thereafter he can make an assessment under sub-section (3) of section 143 of the Act. Another important change incorporated in sub-section (2) of section 143 of the Act is that the notice under this sub-section cannot be served on an assessee after the expiry of 12 months from the end of the month in which the return is furnished. Therefore, in a case where a return is filed and is processed under section 143(1)(a....
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....fishing inquiry during reassessment proceedings and has to confine to specific items of escaped income only, if he has not taken recourse to the process under section 143(2) within the time prescribed for that purpose. Thus, after the expiry of period prescribed for notice under section 143(2) the scope of inquiry will be limited and shall not be the same as is available in the case of original assessment under section 143(3) of the Income-tax Act. This issue is, therefore, decided accordingly. 32. On the basis of our discussion and findings recorded while adjudicating various issues formulated in this matter, the following preposition may be culled out: (1) The proceedings under section 148/147 can be initiated if the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment. The only requirement is that at the stage of initiation of such proceedings there must exist some grounds or material for formation of the belief and there should be nexus between such grounds and reason to form belief that any income has escaped the assessment. (2) The reopening cannot be held to be invalid merely because in the ultimate analysis n....
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....y be illustrated in the following manner. The Assessing Officer reopens assessment on the ground that the assessee claimed excessive depreciation. During the course of reassessment proceedings it comes to his notice through information form ADI that the assessee has made huge deposits in his bank account, which were not disclosed in the return. The Assessing Officer after making inquiry can definitely make addition in respect of such income, which escaped assessment. Similarly, if from Sales Tax Department he gets information that the assessee has suppressed sales then after making inquiry on this issue, he can make addition accordingly. Thus, any item of escaped income, which comes to his notice during reassessment proceedings, can be included in the reassessment proceedings. It is not open to him to make the entire assessment de novo or afresh. He has to confine only to particular items, which escaped assessment or in relation to which there was under assessment or excessive relief were allowed. Such items have to be identified and specified before making the reassessment in relation thereto. 34. The above conclusion is fully fortified from various authorities referred to abov....
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....ous items which are as under: 1. A brief note on the income earning activities during the financial year 1993-94. 2. Capital account for the year ending on 31-3-1994. 3. Details of loans taken during the year with confirmed copy of account of lenders alongwith documentary evidence regarding identity and creditworthiness of the lenders. 4. Exact particulars of immovable properties owned giving addresses, location, date of acquisition and source of Investment in acquisition of such properties. Investment made in immovable properties during the financial year 1993-94 and source of such investment. 5. Details of Investment made in movable assets during the financial year 1993-94. 6. Details of Bank accounts/Bank deposits giving account number, name and address of the bank and nature of account along with a copy each of the bank statement/pass book of such bank account/bank deposits for the financial year 1993-94. 7. Details of Bank account/Bank deposits with any foreign bank giving account number, name and address of the bank and nature of account, along with a copy each of the bank statement/pass book of such bank accounts....
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....nors. He also estimated the household expenses and made additions on all these items without pointing out in the assessment order or elsewhere that such escaped items of income came to his notice during reassessment proceedings. It is found that in the balance sheet filed with the return that assessee had disclosed all the credits etc. and no recourse was taken by the Assessing Officer to the process under section 143(2) and 143(3) within the period prescribed for that purpose. In view of the decision in the case of Vipin Khanna the assessment proceedings stood terminated after the expiry of the period prescribed for issuance of notice under section 143(2) of Income-tax Act in this case. Hence, the Assessing Officer could have considered only those specific and particular items which escaped assessment and which were under assessed. He could not undertake the same general inquiry under section 147 of Income-tax Act in this case which he could have undertaken while making regular assessment. 39. In view of the above, the additions made by the Assessing Officer in consequence of such general inquiry or robbing and fishing inquiry cannot be sustained and have to be deleted. We, the....