TaxTMI 
TaxTMI 
2005 (9) TMI 244
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....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 have supported their arguments by making reference to various authorities. 5.....
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....ount has been transferred or who withdrawn the money. 5.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. Special Director (iii) On the basis of the ....
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....s 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 proceedings. (v) That so far as additions on account of unexplained loans, unexplained gifts and unexplained investment in immovable properties are concerned, the assessee had already submitted details in the Balance Sheet and on the basis of same information, the Assessing Officer was not competent to reopen the assessment and to make additions in the assessment order passed under section 143/147. In suppor....
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....' 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 alleged deposits referred to which has been made in the reasons recorded for reopening the assessment. (3) The additions have been made on other items some of which are reflected in the Balance Sheet filed along with the return of income, which was processed under section 143(1)(a). 10. In view of the above factual background, we proceed to adjudicate upon the additional ground raised before us. For an analytical examination of the matter and for due appreciation of the arg....
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....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 relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. ISSUE NO. 1 12. As per the above provisions, the Assessing Officer should have reasons to believe that any income chargeable to tax has escaped assessment. In the instant case, the letter of Enforcement Directorate, which was received by the Assessing Officer, contained the specific details relating to the deposit allegedly made by the assessee and her husband The details, which include even the address, passport number and bank account number as a....
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.... 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 making additions for which the reopening was initiated and not other items, is not sustainable and appears to be fallacious. 15. The issue has been considered and decided by various Courts. The Hon'ble Gujarat High Court in the case of CIT v. Ahmedabad Mfg. & Calico Printing Co. Ltd. [1977] 106 ITR 159 observed as under: "Where reassessment proceedings had been validly initiated, but the grounds on which they were initiated were subsequently found to be non-existent on the position of law as subsequently expounded and hence that particular point regarding which the notice of reassessment was issued ....
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....ment. 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 stood at different points of time. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery of the amount indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceedings under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessm....
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....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 have such information in his possession to enable him to validly acquire the jurisdiction under section 147 and in the absence of the very existence of such information, the various judicial authorities proceeded to conclude that the Assessing Officer did not have jurisdiction to assess or reassess the income of the assessee under section 147. However, where the factum of having such information was found to be in existence at the time of reopening the assessment but in the ultimate analysis the Assessing Officer did not find any escapement, the reopening was considered valid by the judicial forum giving jurisdiction to the Assessing Officer to proceed under sectio....
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....nt 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 processing the return under section 143(1)(a) restricted the claim of depreciation to 40 per cent and made adjustment accordingly. The assessee challenged the adjustment made by the Income-tax Officer before the Commissioner of Income-tax (Appeals) who deleted the addition made by making adjustment under section 143(1)(a). 23. In this background the Income-tax Officer initiated proceedings under section 147 of the Income-tax Act for assessing the income, which had escaped assessment due to excessive claim of depreciation by issuance notice under section 145 for both the assessment years 1992-93 and 1993-94. 24. Following reasons were recorded in issuing notice under section 148:-....
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....count 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) of the Act and no notice under sub-section (2) of section 143 of the Act thereafter is served on the assessee within the stipulated period of 12 months, the assessment proceedings under section 143 come to an end and the matter becomes final. Thus, although technically no assessment is framed in such a case, yet the proceedings for assessment stand terminated." 29. On going through the order of the learned High Court it is clear that issuance of notice under section 148 was found to be justified. It was also held that in view of the amendment made under section 147 of the Income-tax Act w.e.f. 1-4-1989, the Assessing Officer could not only assess or reassess the escaped income in respect of which proceedings under sect....
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....ng 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 no escapement of income is found in relation to any ground on the basis of which proceedings for reopening were initiated. In other words if there was requisite material for assumption of jurisdiction at that stage but the same could not substantiated during reassessment proceedings, then proceedings under section 147 cannot be held to be invalid. (3) The reassessment proceedings may be initiated on one ground but the reassessment may be done on any other ground, if such ground comes to the notice of Assessing Officer during the course of assessment proceedings. It is, therefore, open to the Assessing Officer to consider other items even though they were not included under section 148. (4) The intimation under section 143(1)(a) cannot be trea....
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....pen 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 above. The language and terminology used in section 147 also makes it clear that it is particular income, which in the opinion of the Assessing Officer has escaped assessment and for which reassessment is to be made. For the sake of clarity, at the cost of repetition we are reproducing the provisions of section 147 again which are as under: "147. If the [Assessing] officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess 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 the proceedings under this section', or recomputed the loss or the depreciation allowance ....
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.... 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/bank deposits for the financial year 1993-94. 8. Details of Investment with companies/concerns as on 31-3-1994. 9. Details of vehicles owned during the financial year 1993-1994 with Source of Investment in acquisition of such vehicles. 10. Details of gifts received/given from to any person(s) during the financial year 1993-94 along with documentary evidence. 11. Details of foreign visits made during the financial year 1993-94. Expenditure made in such foreign travelling and source of such expenditure. 12. Details of family members, their activities and withdrawals made for household expenses during the financial year 1993-94. You are also requested to produce your books of account, bank statements/bank pass books for the financial year 1993-94. The date and time fixed for compliance is11-10-1999at10.30 A.M. Notices under sections 143(2) a....
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....ent. 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, therefore, delete various additions challenged in this appeal as having been made on the basis of such fishing and robbing inquiry which course was not legally justifiable. We may clarify here that the assumption of jurisdiction by the Assessing Officer in issuing the notice under section 148 and in proceeding under section 147, was fully justified and, therefore, the assessment order cannot be quashed. To this extent, therefore, the challenge in the additional ground is not acceptable. In view of our findings, recorded on various issues formulated by us, the additional ground is disposed of accordingly. 40. While deciding the additional ground, we have observed that various additions made in consequence of general and roving enquiry conducted by the Assessing Officer, which course has not been approved by us, cannot be sustained. However, we consider it proper to decide the additions challenged in various grounds in this appeal on merit also. 41. Ground No. 1: The Assessing Officer had ma....