TaxTMI 
TaxTMI 
2019 (3) TMI 2079
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....s. 263 of the Act by wrongly and incorrectly holding that the subjected reassessment order passed under s. 143(3)/147, dt. 30th March, 2016, was without making proper enquiries w.r.t. the share capital of Rs. 82 lakhs and share premium of Rs. 4.10 crores (totalling to Rs. 4.92 crores) and the assumption of jurisdiction, both are contrary to the provisions of law and facts on record. Hence, the proceedings initiated under s. 263 of the Act and the impugned order dt. 30th March, 2016 deserve to be quashed. 4. The learned Principal CIT, Ajmer, erred in law as well as on the facts of the case in wrongly setting aside the assessment order dt. 30th March, 2016 despite there being specific findings given by the AO after full application of mind on the issues before him and this was nothing but a case of change of opinion, based on which, assumption of jurisdiction under s. 263 is not permissible. The impugned order dt. 5th March, 2018 therefore, lacks valid jurisdiction under s. 263 of the Act and hence, the same kindly be quashed. 5. The appellant prays Your Honour's indulgence to add, amend or alter all or any of the grounds of the appeal on or before the date of h....
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....y the learned Principal CIT, the learned CIT(A) has passed a summary order dt. 25th Jan., 2019 treating the appeal filed by the assessee as infructuous. Thus, the learned Authorized Representative has submitted that the AO has already completed three rounds of assessment and reassessments and after the second reassessment order passed on 30th March, 2016, the learned Principal CIT has invoked the provisions of s. 263 of the Act on the ground that the AO has not carried out proper enquiry in respect of the share capital and share premium received by the assessee from the remaining 22 shareholders. He has referred to the provisions of s. 263 and submitted that the limitation for invoking the provisions of s. 263 has been provided in sub-s. (2) whereas the learned Principal CIT has passed the impugned order under s. 263 after the expiry of about 7 years from the end of the financial year in which the original assessment order under s. 143(3) was passed. The learned counsel has submitted that the AO has reopened the assessment by recording the reasons whereby AO proposed to make the addition in respect of 6 share applicants and, therefore, the issue of genuineness and creditworthiness ....
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....13) 218 Taxman 112 (Del)(Mag) and submitted that a similar view has been taken by the Hon'ble Delhi High Court on the point of limitation provided under s. 263(2) of the IT Act. He has also referred to the decision of Hon'ble Bombay High Court in case of Ashoka Buildcon Ltd. vs. Asstt. CIT & Anr. (2010) 39 DTR (Bom) 113 : (2011) 239 CTR (Bom) 318 : (2010) 325 ITR 574 (Bom) as well as the decision in case of CIT vs. ICICI Bank Ltd. (2012) 252 CTR (Bom) 85 : (2012) 70 DTR (Bom) 419 : (2012) 343 ITR 74 (Bom) and submitted that the Hon'ble High Court has taken a consistent view that where the jurisdiction under s. 263 is sought to be exercised with reference to an issue which is covered by the original assessment order under s. 143(3) and which does not form subject-matter of reassessment, the period of limitation provided under s. 263(2) must begin to run from the order passed under s. 143(3). The learned Authorized Representative has pointed out that all these decisions have been rendered by following the decision of Hon'ble Supreme Court in case of CIT vs. Alagendran Finance Ltd. (2007) 211 CTR (SC) 69 : (2007) 293 ITR 1 (SC). Hence, the learned Authorized Representa....
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....87,390." Thus, it is manifest from the record that the original assessment was passed under s. 143(3) on 15th Dec, 2010 wherein the AO has examined some of the parties while making the addition under s. 68 of the Act on account of unexplained cash credit. Subsequently, the AO reopened the assessment by issuing a notice under s. 148 on 24th March, 2011 by recording the reasons as under: "1. The assessee company has filed his return of income on 30th Sept., 2008 declaring income/loss of Rs. 1,32,66,597 which was processed under s. 143(1) of IT Act, 1961. In this case scrutiny assessment under s. 143(3) of IT Act, 1961 was completed at total income NIL income on 15th Dec, 2010 by the Dy. CIT, Circle, Bhilwara. In the said assessment order tax under s. 115JB (MAT) was charged at Rs. 14,63,738 on declared book profit of Rs. 1,29,19,131. 2. From the information available in this office, it is observed that the assessee has obtained entries in the form of share application money amounting to Rs. 2,25,00,000 from the following parties/companies during financial year 2007-08: M/s Talent Infoway Ltd. Rs. 42,00,000 M/s Mahasagar Securities Rs. 27,00,000 M/s....
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....d securities in the computation of total income filed in the return of income had to be examined and verified in this assessment year." The AO initiated the reassessment proceedings based on the information received from the Dy. Director of IT (Investigation Wing) Mumbai, in respect of a search and seizure action undertaken in case of Mahasagar Securities Ltd. belonging to Mr. Mukesh Choksi and Mr. Jayesh K. Sampat. Therefore, the AO proposed to make the addition in respect of the share capital and share premium received from six parties belonging to the group concerns of Shri Mukesh Choksi and Shri Jayesh K. Sampat. The reassessment under s. 143(3) r/w. s. 147 was completed on 26th Dec, 2011 whereby the AO made an addition of Rs. 2.25 crores as undisclosed investment. Thereafter, the AO again proposed to reopen the assessment by issuing notice under s. 148 on 15th Oct., 2014 by recording the reasons as under: "In this case, the assessee filed its return of income electronically for the year under consideration on 30th Sept., 2008 declaring total taxable income of Rs. Nil which was assessed under s. 143(1) at income of Rs. Nil. Order under s. 143(3) passed on 15th Dec, ....
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....tion of the AO in the reopening assessment proceedings under s. 147 is primarily limited to the issue which is taken up in the reasons recorded and it may be expanded to reassess the income as per Expln. 3 to s. 147 which reads as under: "Explanation-3 -- For the purpose of assessment or reassessment under this section, the AO 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-s. (2) of s. 148." Therefore, the subject-matter of reassessment and jurisdiction of the AO is only limited to the extent of issue on which the assessment was reopened as recorded in the reasons for reopening and it may be extended if during the reassessment proceedings the AO come to know that some other income has escaped assessment not part of the issue in the reasons recorded by the AO. Therefore, if during the reassessment proceedings such issue come to the notice of the AO that an income other than the income specified in the reasons recorded has escap....
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.... 6,00,000 6.00.000 13. Melco Sales (P) Ltd. - 6,00,000 6.00.000 14. Neelkanth Goods (P) Ltd. - 12,00,000 12.00.000 15. Rextile Traders (P) Ltd. - 9,00,000 9,00,000 16. Goldstar Advertising (P) Ltd. - 57,00,000 57,00,000 17. Mask Finest (P) Ltd. - 45,00,000 45.00.000 18. Bhavesh Metal (P) Ltd. - 42,00,000 42.00.000 19. Sun blink Trading & Investment (P) Ltd. - 48.00.000 48.00.000 20. Miller Chemical (P) Ltd. - 48,00,000 48.00.000 21. Garrson Pharma Ltd. - 48,00,000 48,00,000 22. Mahachand Jain - 15.00.000 15.00.000 Grand Total 4.92.00.000 4.92,00,000 3. It has further been noticed from the records that the assessment order has been passed by the AO without making inquiries or verification which should have been made as to the source of credit of share capital & share premium of Rs. 4.92 crores. Therefore, the source, identity & creditworthiness of the investors and genuineness of transactions in respect of share capital and share premium of Rs. 4.92 crores have not been proved. Thus, th....
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....try operator Shri Pravin Kumar Jain as alleged by the AO while completing the reassessment order dt. 30th March, 2016, the so-called lack of enquiry cannot be imputed to the second reassessment order. Even otherwise, the learned Principal CIT has also not referred any such information or material in the impugned revision order which could lead to a prima facie conclusion that the transactions of share capital and premium received from these 22 parties are bogus transactions. The concluding part of the impugned order of learned Principal CIT in para 7.2 and para 8 are as under: "7.2 The case law relied upon by the assessee in support of its contention are not similar to the facts of the instant case. In these cases, proceedings under s. 263 were initiated on that issues which were not adjudicated upon in the assessment orders which were held to be erroneous insofar as prejudicial to the interest of the Revenue whereas in the instant case, issue for initiating the proceedings under s. 263 is similar i.e., bogus share money, which was subject-matter of adjudication by the AO in the impugned order dt. 30th March, 2016. 8. In view of the above facts and circumstances o....
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....ed was passed. It is an admitted position that the CIT has not exercised the revisional jurisdiction in respect of the order/intimation passed s. 143(1) of the Act within two years of it being passed. Therefore, exercise of jurisdiction on those issues under s. 263 of the Act is time-barred as held by this Court in CIT vs. Anderson Marine & Sons (P) Ltd. (2004) 189 CTR (Bom) 118 : (2004) 266 ITR (Bom) 694. Moreover, in view of the decision of the apex Court in the matter of Alagendran Finance Ltd.'s case (supra) as well as our Court in the matter of Ashoka Buildcon Ltd.'s case (supra) the jurisdiction under s. 263 of the Act cannot be exercised on issues which were not subject-matter of consideration while passing the order of reassessment under s. 143(3)/147 of the Act but apart of an assessment done earlier under the Act. 13. In the above view, we find no fault with the order of the Tribunal in allowing the respondent's appeal. The submission of Mr. Chandrapal, learned counsel for the Revenue, is that in the case of bogus bills and non-genuine purchases, i.e., where the State is being defrauded the limitation as provided under s. 263 of the Act be ignored can....
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....sed was passed. That period of two years from the end of the financial year in which the original order of assessment dt. 27th Dec, 2006 was passed, has expired on 31st March, 2009. Hence, the exercise of the revisional jurisdiction in respect of the original order of reassessment is barred by limitation. This is sought to be obviated by the CIT by seeking to revise, under s. 263, the order dt. 27th Dec, 2007. The order dt. 27th Dec, 2007 was passed after the assessment was reopened on the ground of an escapement of income under s. 147 and an order of reassessment was passed by which the claim under s. 72A came to be disallowed. The submission that has been urged on behalf of the assessee is that, since the assessment was opened and an order of reassessment was passed only one issue, namely, the claim under s. 72A, when the CIT as a Revisional Authority under s. 263 seeks to exercise his jurisdiction on matters which did not form the subject of the order of reassessment, the period of limitation would begin to run from the original order of assessment. This submission which has been urged on behalf of the assessee would have to be accepted in view of the judgment of the Supreme Cou....
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....pened the order of assessment only in relation to lease equalisation fund which being not the subject of reassessment proceedings, the period of limitation provided for under sub-s. (2) of s. 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 CIT beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity.' 8. Where an assessment has been reopened under s. 147 in relation to a particular ground or in relation to certain specified grounds and, subsequent to the passing of the order of reassessment, the jurisdiction under s. 263 is sought to be exercised with reference to issues which do not form the subject of the reopening of the assessment or the order of reassessment, the period of limitation provided for in sub-s. (2) of s. 263 would commence from the date of the order of assessment and not from the date on which the order reopening the reassessment has been passed. 9. Sec. 147 empowers the AO, if he has reason to believe that any income chargeable to tax has escaped assessment for any....
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....essment is confined to one or more of those grounds, the original order of assessment would continue to hold the field, save and except for those grounds on which a reassessment has been made under s. 143(3) r/w. s. 147. Consequently, an appeal by the assessee on those grounds on which the original order of assessment was passed and which do not form the subject of reassessment would continue to subsist and would not abate. The order of assessment cannot be regarded as being subsumed within the order of reassessment in respect of those items which do not form part of the order of reassessment. Where a reassessment has been made pursuant to a notice under s. 148, the order of reassessment prevails in respect of those items which form part of reassessment. On items which do not form part of the reassessment, the original assessment continues to hold the field. When the AO reopens an assessment on a particular issue, it is open to him to make a reassessment on that issue as well as in respect of other issues which subsequently comes to his notice during the course of the proceedings under s. 147. The submission of the Revenue is that by not passing an order of reassessment in respect ....
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....ced by the subsequent order. Srihari was, therefore, a case where the subject-matter of the original order of assessment as well as of the order of reassessment was the same. This is distinct from the situation in the subsequent judgment of Alagendran Finance Ltd.'s case (supra) where the Supreme Court noted that the subject-matter of the original assessment and the order of reassessment was not the same. The facts of the present case are similar to those in Alagendran Finance Ltd.'s case (supra) which must, therefore, apply. 12. For these reasons, we are of the view that the exercise of the revisional jurisdiction under s. 263 is barred by limitation. We clarify that this would not preclude the Revenue from taking recourse to any other remedy that may be available in law." Therefore, if the exercise of revision jurisdiction under s. 263 in respect of issues which formed subject-matter of reassessment after the original assessment was reopened, the commencement of the limitation would be with reference to the order of reassessment, but if the CIT has exercised the jurisdiction under s. 263 on an issue which was not subject-matter of reassessment, then the limita....
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.... 27th July, 2007 which was prior to the amendment of s. 147 by the insertion of Expln. 3. The counsel submits that as a result of the insertion of Expln. 3, once an assessment is reopened, the AO is entitled to assess or reassess the income in respect of any issue which has escaped assessment though the reasons in respect of such issue have not been included in the reasons recorded under s. 148(2). On this basis it is urged that when the AO reopened the assessment on 26th March, 2002 the entire assessment was at large and hence he ought to have applied the amended provisions of s. 36(1)(vii), particularly the Explanation thereto. 7. This aspect of the matter has been considered in a judgment of a Division Bench of this Court in Ashoka Buildcon Ltd. vs. Asstt. CIT & Anr. (2010) 39 DTR (Bom) 113 : (2011) 239 CTR (Bom) 318 : (2010) 325 ITR 574 (Bom). The Division Bench considered a similar submission based on Expln. 3 which was inserted in s. 147 by the Finance Act of 2009 with retrospective effect from 1st April, 1989. Negativing the submission, the Division Bench held as follows: '..........Where a reassessment has been made pursuant to a notice under s. 148, t....
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....order under s. 263(1) can be made after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. The order of assessment under s. 143(3) in the present case allowed the deduction which was claimed under s. 36(1)(vii), s. 36(1)(viia) and in respect of foreign exchange rate difference. Neither in the first order of reassessment dt. 22nd Feb., 2000 nor in the second order of reassessment dt. 26th March, 2002 were these aspects determined. In other words, on the aforesaid three issues, the original order of assessment dt. 10th March, 1999 passed under s. 143(3) continued to hold the field. Once that is the position, then clearly the doctrine of merger would not apply. The order under s. 143(3) passed on 10th March, 1999 cannot stand merged with the orders of reassessment in respect of those issues which did not form the subject-matter of the reassessment. Consequently, Expln. 3 to s. 147 will not alter that position. Expln. 3 only enables the AO, once an assessment is reopened, to assess or reassess the income in respect of any issue, even an issue in respect of which no reasons were indicated in the notice under s. 148(2). This, ho....
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..... 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 re-agitate matters which he had lost during the original assessment proceeding, which had acquired finality, is not only erroneous but also against the phraseology of s. 147 of the Act and the object of reassessment proceedings. Such an interpretation would be reading that judgment totally out of context in which the questions arose for deci....
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....ce that a similar contention raised at the instance of an assessee was rejected by a 3-Judge Bench of this Court in CIT vs. Shri Arbuda Mills Ltd. (1998) 147 CTR (SC) 474 : (1998) 231 ITR 50 (SC). This Court took note of the amendment made in s. 263 of the Act by the Finance Act, 1389 with retrospective effect from 1st June, 1988, inserting Expln. (c) to sub-s. (1) of s. 263 of the Act stating: The consequence of the said amendment made with retrospective effect is that the powers under s. 263 of the CIT 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 CIT under s. 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 been referred." We, therefore, are clearly of the opinion that in a case of this nature, the doctrine of merger will have no application. 14. The Madras High Court in A.K. Thanga Pillai's case (supra), in our opinion, has rightly co....