TaxTMI 
TaxTMI 
2019 (1) TMI 271
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....er: " (i) That the Ld Assessing Officer erred in law as well as in facts in assessing item of income which was not part of reasons to believe even when the item of income alleged to have escaped assessment was never claimed as deduction. (ii) That the Ld Assessing Officer erred in law as well as in facts in assessing the sum of Rs. 53500000/- as unexplained cash credit u/s 68 of the Income Tax Act, 1961 in view of the facts and circumstances of the case that, the amount of interest paid Rs. 1418390/- never escaped assessment which was the sole reason for the Assessing Officer to believe that income has escaped assessment and further in view of the provisions of section 147 of the Income Tax Act, 1961 the said amount of Rs. 53500000/- could not have been assessed to tax". Issue involved here in this additional ground of appeal is in case the basis on which the assessment had been reopened u/s 148 is not sustainable, can the assessment order survive. During the appellate proceedings the AR has filed a copy of the letter No.Circle-8(1),Kolkata/ 147/2016-17/923 dt.30- 09-2016 addressed to the Principal Officer, M/s Chowringhee Residency Pvt Ltd, 42B, Chowring....
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....al estate project and the cost incurred in connection to the acquisition of Land along with all the related construction/ development costs (including interest) was carried forward as Stock in trade. Therefore, it is not understood as to how reassessment proceedings can be initiated in respect of interest amount of Rs. 1418390/- and alleged to be on account of jamakharchi transactions, which was not claimed as deduction from taxable income in the relevant assessment year. Thus, it is submitted that when the said sum of Rs. 1418390/-, which was never claimed as a deduction, could never be said to have escaped assessment. Therefore the action of the Ld Assessing Officer in assessing the principal amounts of loans received being alleged unexplained cash credit is contrary to provisions of section 147 of the Income Tax Act, 1961". The AO in the assessment -order has given his findings as under: "In the case of cash credit entry, it is necessary for the assessee to prove not only identity of the creditors but also to prove the capacity of the creditors to advance the money and the genuineness of the transactions. Therefore, the submission of the assessee is no....
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.... .this case the Hon'ble Bombay High Court has decided the ratio on the subject as under: "Reassessment-Scope of power of Assessing Officer-Law applicable-Effect of amendment of section 147 w.e.f 1-4-1989-Assessing Officer can also assess other incomes not referred to in notice of reassessment-power to assess such other income only if income referred to in notice of reassessment has been assessed. Explanation 3 to section 147 of the Income Tax Act, 1961, was inserted by the Finance (No.2) Act of 2009, with effect from April 1, 1989. The effect of the Explanation is that even though the notice that has been issued under section 148 containing the reasons for reopening the assessment does not contain a reference to a particular issue with reference to which income has escaped assessment, the Assessing Officer may assess or reassess the income in respect of any issue which has escaped assessment, when such issue comes to his notice subsequently in the course of the proceedings. Parliament having used the words "assess or reassess such income and also any other income chargeable to tax which has escaped assessment", the words "and also" cannot be read as being in t....
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.... DCIT (2017) 55 ITR (Trib) 242 (Pune) , has held that reassessment-scope of provisions-Assessing Officer making no addition on issue on which assessment reopened-Assessing Officer cannot make other additions-Income Tax Act, 1961, s.147. I have considered findings of the AO in the assessment order and AO's reasons to believe to reopen the assessment in his notice u/s 148(2). I have also considered written submission filed by the AR and different case laws brought on record on this issue during the appellate proceedings. I think. the ratio decided by the Hon'ble Bombay High Court in Jet Airways case (supra), by the Hon'ble Delhi High Court in the case of Ranbaxy Laboratories (supra) and by the Hon'ble Chhattisgargh High Court in the case of major Deepak Mehta (supra), are very appropriate and relevant in this case. In fact, the factual position in this case is squarely covered by the ratio decided in cases referred above. Accordingly, assessee's appeal on the additional ground is allowed on technical basis. 5. Since I have already allowed assessee's appeal on technical grounds, therefore I am not inclined to decide / adjudicate this case on merit....
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.... decisions (supra) that if a re-opening is done for "x" reason, then it deserves to be quashed in case no addition is made for the said reason. Mr. Majumdar's case is that the Assessing Officer had made the twin addition(s) including one forming the subject-matter of re-opening. He fails to dispute the clinching fact that assessee had no where claimed the impugned expenditure in its books for the impugned assessment year which gave rise escapement of taxable income from being assessed. The CIT(A) has rightly observed therefore that the above re-opening reason itself had been assumed on an incorrect factual position. That being the case, we find merit in the CIT(A)'s above extracted detailed reasoning that the impugned re-opening would not sustain the test of legality. Coupled with this, this tribunal's coordinate bench's decision in Sanju KJalan vs. ITO ITA No.634/Kol/2017 decided on 10.01.2018 has quashed validity of re-opening in case the above based on sole reason wherein stand deleted in appeal proceedings as follows:- "2. The Assessee is an individual. His source of income is income under the head salaries, other sources and capital gains. For A.Y.2012-13 the assessee....
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....me to the extent of Rs. 14,55,472/- has escaped assessment within the meaning of section 147 of the I.T.Act,1961. 3. The assessee objected to the validity of initiation of re-assessment proceedings but the same was rejected by the revenue authorities. 4. It can be seen from the reasons recorded by the AO for initiating proceedings for reassessment that the AO wanted to examine the genuineness of purchase of Diamonds by the assessee during the previous year of the value of Rs. 4,55,472/- from M/s. Nice Diamonds, Mumbai. As far as the question whether purchase of diamond was bogus the assessee had submitted before the AO that the purchases were genuine and furnished documentary evidence like invoice dated 17.03.2012 issued by Nice Diamonds, bank statement maintained with Union Bank of India evidencing payment to Nice Diamonds through cheques dated 27.03.2012 for Rs. 10,02,472/- and cheque dated 3 ITA No.634/Kol/2017 Sanju Jalan A.Yr.2012-13 3 28.03.2012 for Rs. 4,53,000/-. As per the invoice diamonds were sold at Surat. The AO insisted on proof of delivery of diamonds at Surat. The assessee also wanted right of cross examination of Shri Bhawarlal Jain who the revenu....
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....urchase therefore is a doubtful document, when viewed in the surrounding circumstances of the case. f. No diamonds were found during the search and seizure operations carried out in the premises of the Bhanwarlal Jain Group, who were alleged to be accommodation entry givers. g. There is no merit in the contention of the assessee that she ought to be provided an opportunity for cross-examination, as the Seller has already denied the transaction. h. Therefore, once the information had been provided by the Ld AO to the assessee, the onus was cast on the assessee to controvert the information, and this has clearly not been done." 9. The other additions of bogus long term capital gain was also confirmed by the CIT(A). Aggrieved by the order of CIT(A), the assessee has preferred the present appeal before the tribunal raising the following grounds of appeal : "1.For that the order 01 the Ld. CIT (A) is arbitrary, illegal and bad in law. 2. For that the Ld. C.I.T (A) erred in confirming the initiation of proceedings u/s. 147 by the AO who merely relied on the information from DGIT(Inv), Mumbai without applying h 5 ITA No.634/Kol/2017 Sa....
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....13 6 10. For that the assessee craves leave to add, alter or amend any ground before or at the time of hearing. 10. First we will take up for consideration ground no.5 with regard to the addition on account of bogus purchases of diamonds. On the above issue the ld. Counsel for the assessee reiterated the submissions as were made before the revenue authorities. The ld DR relied on the order of the revenue authorities. 11. The undisputed facts of the case are that the assessee purchased jewellery worth Rs. 14,55,472/- from Nice Diamonds, Mumbai on 17.3.2012. The Assessee paid Nice Diamonds the purchase value of the jewellery by two cheques for Rs. 10,02,472 and Rs. 4,53,000 respectively dated 27.3.2012 and 28.3.2012 respectively. In the Balance Sheet as on 31.3.2013 the Assessee has shown the value of the jewellery as addition to his capital. The documentary evidence like bills, invoices, bank statements etc., were furnished by the Assessee and there is no dispute on this aspect. 12. The return of income filed by the Assessee for AY 2012-13 was accepted and an intimation was issued u/s.143(1) of the Act. 13. It appears that there was infor....
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....uted position that addition in case of the assesse has been made u/s 69 of the Act. Section 69 of the Act reads as follows :- Unexplained investments "69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the 8 ITA No.634/Kol/2017 Sanju Jalan A.Yr.2012-13 8 value of the investments may be deemed to be the income of the assessee of such financial year." 17. In the present case investments of jewellery is duly reflected in the books of accounts of the assesses. Therefore there is no scope of applying the provision of section 69 of the Act. Apart from the above source of funds is evidenced by the payments from disclosed bank accounts. Therefore the source of investments is also properly and satisfactorily explained by the assesses. In the circumstances, We are of the view that the additions made by the AO and confirmed by CIT(A) cannot ....
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.... he would cease to have jurisdiction to proceed with the reassessment; (iv) Explanation 3 lifts the embargo inserted by judicial interpretation on the making of as 147 assessment in respect of items not referred to in the recorded reasons. However, it does not and cannot override the substantive part of s. 147 that the income for which the notice was issued must be assessable. The learned DR relied on the order of the CIT(A). 19. We have considered the submission of the learned counsel for the Assessee in the light of the judgment of the Hon'ble Bombay in the case of Jet Airways (I) Ltd. (Supra). We are of the view that on the facts and in the circumstances of the present case the ratio laid down by the Hon'ble Bombay High Court in the case of Jet Airways India Ltd. (supra)is squarely applicable. As we have already seen that the assessment was reopened for the reason that the jewellery purchased by the Assessee was from undisclosed sources and the purchases were bogus. That addition has not been sustained now. The Assessing Officer however, proceeded to make an addition on account of Long Term Capital Gain (LTCG) on sale of shares. This was clearly beyond 10 ITA N....