TaxTMI 
TaxTMI 
2024 (7) TMI 402
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.....2 : That having regard to the facts and circumstances of the case, Ld. Principal CIT(Central) has erred in law and on facts assuming jurisdiction in passing the order u/s. 263, more so when the assessment order u/s. 143(3) r.w order u/s. 147 dt. 29.03.2022 was neither erroneous nor prejudicial to the interest of Revenue. Thus, order passed by Ld. Principal CIT(Central) is bad in law, erroneous and may kindly be quashed. 3. Ground 3: That on the Facts and on the circumstance of the case, Hon. Principal CIT(Central) was not justified in law in treating the Assessment Order u/s. 143(3) r.w.s 148 dated 29.03.2022 as erroneous and prejudicial to the interest of the revenue directing AO to reframe the assessment novo after verifying creditworthiness of unsecured loan of Rs. 1,88,56,508/- as well as share capital & share premium of Rs. 2,74,50,810/- and their taxability in view of the provisions of section 68 of the I.T. Act. 4. Ground 4: That on the Facts and on the circumstance of the case, Hon. Principal CIT(Central) was not justified in law and fact in passing the Order u/s 263 by rejecting the submission of the Assessee mechanically based on suspicion and presumpti....
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....i Singh (107222 shares); and (c) Smt. Rajendra Kaur (144638 shares); AND (ii) a sum of Rs. 1,88,56,508/- claimed by the assessee company to have been received as unsecured loans from three persons, viz. (a) Shri Baldev Singh : Rs. 18,30,008/-; (b) Smt. Harjeet Kaur : Rs. 1,47,26,500/-; and (c) Shri Jagjeet Singh : Rs. 23,00,000/-. 5. Accordingly, the Pr. CIT vide "Show Cause Notice" (SCN) dated 15.03.2024 called upon the assessee company to explain as to why the order passed by the A.O u/s. 147 r.w.s. 143(3) of the Act dated 29.03.2022 being erroneous and prejudicial to the interest of the revenue may not be revised by him. As the explanation filed by the assessee did not find favour with the Pr. CIT, therefore, he vide his order passed u/s. 263 of the Act dated 30.03.2024 set-aside the assessment order with a direction to the A.O to reframe the assessment after conducting proper enquiries and affording a reasonable opportunity of being heard to the assessee company. 6. The assessee company being aggrieved with the order of the Pr. CIT u/s. 263 of the Act dated 30.03.2024 has carried the matter in appeal before us. 7. We have heard the Ld. Authorized Representatives of bot....
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....on/disallowance in the hands of the assessee company. Our aforesaid view is fortified by the judgments of the Hon'ble High Court of Bombay in the case of CIT-5, Mumbai Vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom) and that of the Hon'ble High Court of Chhattisgarh in the case of ACIT vs Major Deepak Mehta (2012) 344 ITR 641 (C.G.). For the sake of clarity, the observations of the Hon'ble High Court in the case of ACIT vs Major Deepak Mehta (supra) are culled out as under: "17. We have heard learned counsel appearing for the parties, perused the pleadings and the documents appended thereto. 18. Sections 147, 148 & 152 (2) of the Act, 1961 read as under : "147. Income escaping assessment.-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 recompute the loss or the depreciation allowance or any other allowanc....
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....r depreciation allowance or any other allowance under this Act has been computed. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of Section 148." "148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or re-computation under Section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such r....
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....e income alleged to have escaped assessment had been taken into account, or the assessment or computation had been properly made: Provided that in so doing he shall not be entitled to reopen matters concluded by an order under Sections 154, 155, 260, 262 or 263." 19. Provisions of Section 147 of the Act, 1961 makes it clear that the AO may reassess any income chargeable to tax, which has escaped assessment for any assessment or there was under assessment or the claimed excessive loss, deduction, allowance or relief in the return, subject to provisions of Sections 148 to 153. The pre- condition to reopen the assessment or recomputation is that the AO should have reason to believe that no income chargeable tax has escaped assessment or under assessment or the claimed excessive loss, deduction, allowance or relief in the return. Thereafter, a notice under Section 148 shall be served on the assessee requiring him to furnish return of the income or income of any other person in respect of which he is assessable under this Act. 20. Sub-section (2) Section 148 provides that before issuing any notice under Section 148 (1), the AO shall record his reasons for doin....
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....end to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under-assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income Tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject-matter of proceedings under Section 147. An assessee cannot resist validly initiated reassessment proceedings under this section merely by showing that other income which had been assessed originally was at too high a figure except in cases under Section 152(2). The words `such income' in Section 147 clearly refer to the income which is chargeable to tax but has "escaped assessment" and the Income Tax Officers' jurisdiction under the section is confined only to such income which has escaped assessment...." 26. In S. Sundaram Pillai (supra), relied on by the learned counsel appearing for the respondent, the Supreme Court has dealt with the Explanation to a statutory provision as under : "(a) to explain ....
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.... opportunity to put forward his case under Section 152 (2) of the Act, 1961, to avail benefit of the said Section for dropping the proceedings. Thus, the Revenue cannot take advantage of the Explanation 3 to Section 147, as the same is not available in the facts of the case. 32. Explanation 3 is applicable only in the event the income was formed opinion in the notice has been found correct and the proceeding in the respect of the said income was not dropped under Section 152 (2) of the Act, 1961. 33. The Supreme Court in Sun Engineering Works (P) Ltd. (supra) held that the issue was in respect of inclusion of other incomes in addition to that item or items which have led to the issuance of notice under Section 148 and it was found that the AO was right in including other incomes. On the issue as to when the item or items which have led to the issuance of notice under Section 148 has been dropped under Section 152 (2), what would be the stand of the AO was not in issue in the said case. It was further held that the AO cannot reopen the entire assessment except the unescaped income for which the proceedings have been initiated. 34. The Supreme Court in S. S....
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....gh : Rs. 23,00,000/-. 14. Carrying our observations further, we are of the view that now when the A.O himself was divested of his jurisdiction from making any addition with respect to the aforesaid two independent/stray issues, the Pr. CIT, thus, could not have stepped in and held the re-assessment order passed by him u/s. 147 r.w.s. 143(3) dated 29.03.2022 as erroneous for the reason that he had failed to carry out verification as regards the said two issues and made additions on the said count in the hands of the assessee company, i.e. had failed to do something which he could not have lawfully done. 15. At this stage, we may herein observe that the A.O in the backdrop of the facts involved in the present case was divested of his jurisdiction to make additions on the aforesaid two issues, viz. (i) sum of Rs. 2,74,50,810/- that was received by the assessee company as share capital/premium and (ii) unsecured loans of Rs. 1,88,56,508/- received by the assessee company from three persons. Accordingly, the Pr. CIT could not have assumed jurisdiction u/s. 263 of the Act, and held the order passed by the A.O u/s. 147 r.w.s. 143(3), dated 29.03.2022 as erroneous on the ground that ....
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....** *** (b) *** *** *** (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub- section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order ....
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....) or both, the proceedings for bringing to tax an 'escaped assessment' can only commence by issuance of a notice under Section 148 of the Act within the time prescribed under the Act. Thus, under Section 147, the assessing officer has been vested with the power to "assess or reassess" the escaped income of an assessee. The use of the expression "assess or reassess such income or recompute the loss or depreciation allowance" in Section 147 after the conditions for reassessment are satisfied, is only relatable to the preceding expression in Clauses (a) and (b) viz., "escaped assessment". The term "escaped assessment" includes both "non- assessment" as well as "under assessment". Income is said to have "escaped assessment" within the meaning of this section when it has not been charged in the hands of an assessee in the relevant year of assessment. The expression "assess" refers to a situation where the assessment of the assessee for a particular year is, for the first time, made by resorting to the provisions of Section 147 because the assessment had not been made in the regular manner under the Act. The expression "reassess" refers to a situation where an assessment has alre....
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....proceedings validly initiated, the assessee can seek reopening of the whole assessment and claim credit in respect of items finally concluded in the original assessment. The assessee cannot claim re-computation of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment which has since acquired finality. Of course, in the reassessment proceedings it is open to an assessee to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but that the same had been shown under some inappropriate head in the original return, but to read the judgment in Jaganmohan Rao's case, as if laying down that reassessment wipes out the original assessment and that reassessment is not only confined to "escaped assessment" or "under assessment" but to the entire assessment for the year and starts the assessment proceeding de novo giving the right to an assessee to reagitate matters which he had lost during the original assessment proceeding, which had acquired finality, is not only erroneous but also against the phraseology of Section 147 of the Act and....
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....cannot be said to have any application whatsoever. It is not a case where the subject matter of reassessment and subject matter of assessment were the same. They were not. 13. It may be of some interest to notice that a similar contention raised at the instance of an assessee was rejected by a 3-Judge Bench of this Court in Commissioner of Income-Tax v. Shri Arbuda Mills Ltd. [231 ITR 50]. This Court took note of the amendment made in Section 263 of the Act by the Finance Act, 1989 with retrospective effect from June 1, 1988, inserting Explanation (c) to Sub-section (1) of Section 263 of the Act stating: "The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has be....
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....g not the subject of the reassessment proceedings, the period of limitation provided for under Sub-section (2) of Section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the Commissioner of Income Tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity." (emphasis supplied by us) Also, we find that the aforesaid view had been reiterated by the Hon'ble Apex Court in the case of CIT Vs. Industrial Development Bank of India Ltd. (2023) 454 ITR 811 (SC). 16. Accordingly, in the backdrop of our aforesaid observations read a/w. the aforementioned judgements of the Hon'ble Supreme Court, we are of the view that it is only in a case where the issues before the Commissioner at the time of exercising powers under Section 263 of the Act relate to the subject matter of re-assessment, the same would bring the order of reassessment within the realm of the jurisdiction of the Commissioner u/s. 263 of the Act. Also, the period of limitation for exercising jurisdiction u/s. 263 of the Act would start f....