TaxTMI 
TaxTMI 
2015 (6) TMI 1217
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....her there is any cross appeal against the impugned order passed by the CIT(A). We are informed that no cross appeal is filed against this order. Learned Departmental Representative did not object to our reframing the ground of appeal but submitted, by way of a written note dated 5th June 2014, that "the learned CITA) could not do so in view of the judgment of Hon'ble Punjab & Haryana High Court in the case of Manjinder Singh Kang Vs CIT reported at 344 ITR 358". It is in this backdrop that we proceed to dispose of this appeal on the above ground of appeal. 4. To adjudicate on the above ground of appeal, only a few material facts need to be taken note of. This is a case of reopened assessment. As for the reasons for which the assessment was reopened is evident from the following observations at pages 1-2 of the assessment order: "An information was gathered by the Department that the assessee alongwih Sh. Narinder Singh, Mrs. Aspinder Kaur, Sh. Jaswinder Singh, Smt. Nirmal Kaur, Sm. Mohinder Kaur, Sh. Surinder Mohan Singh and Sh. Jiwan Singh were running a firm under the name and style of M/s. City Plaza, Jalandhar wherein they were dealing in real estate business. Vide dissoluti....
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....as the written submissions of the assessee on the issue under reference. I have also considered the other material brought on record in the case of the partnership firm M/s. City Plaza, Rainik Bazar, Jalandhar. On the perusal of material brought on record it has been noticed that the Assessing Officer was having plenty of reasons to issue notice u/s. 148 of the Act. During the course of investigations by the ADIT(Inv.), the assessee has not disclosed the facts which are now being disclosed at the time of appellate proceedings. Moreover, proof of payment made by the buyer has not been filed. The cheques issued by Shri Surinder Mohan Singh to the outgoing partners were found to be drawn on an account which was not in his name or in the name of partnership firm. In these facts and circumstances of the case, I am of the opinion that he Assessing Officer is fully justified in assuming jurisdiction in this case u/s. 147/148 of the Act and making assessment in this case. In the result, the ground of appeal No. 1 taken by the assessee is, therefore, dismissed." 6. Quite interestingly, even as the CIT(A) upheld the reassessment proceedings the very additions made on the basis of the r....
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....hether there is any contradiction in the action of the CIT(A) in upholding the reassessment proceedings and quashing the additions made on the basis of the reasons recorded for reopening the assessment. This question assumes significance in the light of the fact that while these additions stand deleted, some other additions, made during the course of reopened assessment, continue to survive. 8. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 9. We have noted that the assessment was reopened on the ground that the partnership firm Citi Plaza, in which the assessee had 25% share, had issued three post dated cheques of Rs. 23,57,000 each and made bank payments of Rs. 40,90,630 towards principal and Rs. 40,92,568 towards interest, whereas the above "payments were much more than the income declared by the assessee". Learned CIT(A) himself holds, in paragraph 6.4 extracted above, that the post dated cheques issued by the partnership firm were not encashed and that the bank payments were not made by the partnership firm but by the buyers of the property sold by the partnership firm. ....
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....ase (i.e. any income chargeable to tax has escaped assessment for a particular year) before he proceeds to issue notice under s. 147" and that "the reasons which are recorded by the AO are the only reasons which can be considered when formation of belief is impugned". In view of these discussions, and the correctness of the reasons recorded for reopening the assessment having been decided against this assessee, the CIT(A) ought also have held that the very reassessment proceedings are legally unsustainable on the facts of this case. There is an inherent contradiction in the approach of the CIT(A). 12. Learned Departmental Representative's defence for the stand of the CIT(A)'s order is reliance on Hon'ble jurisdictional High Court's judgment in the case of Majinder Singh Kang (supra). That was a case in which Their Lordships have held that even when the Assessing Officer does not make any addition in respect of the reasons for which reassessment proceedings are initiated, the reassessment proceedings can still be valid nevertheless. To quote the observations made by Their Lordships, "A plain reading of Explanation 3 to Section 147 clearly depicts that the assessing officer has....
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....ther than the reasons recorded for reopening the reassessment. Hon'be High Court's judgment in the case of Majinder Singh Kang's case (supra) has not been shown to have altered, even sub silientio, the well settled legal position that the validity of reassessment proceedings is a sine qua non for any additions being made to the income of the assessee, during the course of the reassessment proceedingswhether in respect of the reasons recorded for reopening the assessment or in respect of the reasons other than the reasons recorded for reopening the assessment. 15. Moreover, particularly in the light of the scheme of law as visualized by Hon'ble Supreme Court's decision in the case of GKN Driveshafts Vs ITO [(2003) 259 ITR 101 (SC)], such a situation would be rather rare . 16. The reason is this. The reasons for reopening the assessment, as is the scheme of law visualized and set out by Hon'ble Supreme Court in the GKN Driveshaft's case (supra), are to be confronted to the assessee and the assessee has an opportunity to rebut these reasons. This is a stage prior to the Assessing Officer proceeding with the reassessment proceedings and after he has issued notice for reopening t....
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....herein, the reassessment was quashed on the ground that the Assessing Officer "could not make additions in respect of the income which had not escaped assessment for which no notice had been given to the assessee under Section 148 read with Section 147 of the Act". Their Lordships appreciated that to that extent the legal proposition was incorrect in the light of insertion of Explanation 3 to Section 147, and the earlier judicial precedents, which were relied upon by the assessee, did not hold good law, as Their Lordships made clear in no uncertain words. The correctness of the reasons of reopening was not an issue before Their Lordships. The correctness of the reasons for reopening was not, directly or indirectly, in challenge. 19. As is evident from the discussions earlier in this order, here is a case in which the very reasons on account of which the CIT(A) has deleted the quantum additions were also good enough to hold that the initiation of reassessment proceedings is bad in law and yet the CIT(A) was fighting shy of the logical conclusions thereto and natural corollaries to these findings. It is also important to bear in mind the fact that the relief so granted by the CIT(A)....