TaxTMI 
TaxTMI 
2025 (6) TMI 461
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....143(3) of the Act was passed on 29-12-2011 assessing the total income at Rs. 22,55,48,604/-. Thereafter, a notice u/s. 148 was issued on 09-03-2015 for the reasons [a] disallowance u/s. 14A r.w.r. 8D was wrongly worked out at Rs. 1,13,521/- instead of Rs. 2,18,174/- and [b] the amount received from National Stock Exchange Ltd [NSEL] amounting to Rs. 244.98 crores is in the nature of income brought in the account of debtors in the guise of so-called paper trade and which needs to be taxed in the hands of the assessee company. 2.1. In response, the assessee requested to treat the original return in response to the notice issued u/s. 148 of the Act and asked for the reasons recorded for reopening of assessment. But the Ld AO completed the reassessment by making disallowance u/s. 43(5) r.w.s. 73 and sec.40A(2)(b) of Rs. 13,89,08,810/- and excess disallowance u/s. 14A of Rs. 1,04,652/- and demanded tax thereon. 3. Aggrieved against the re-assessment order, the assessee filed appeal before ld. CIT(A) and raised additional ground on reopening of assessment as follows:- * The Appellant submits that the reasons recorded by AO contain main allegation regardin....
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....reasons recorded, reassessment order deserves to be quashed." 3.1. The Ld. CIT(A) considered this additional grounds first as it goes to the root of the jurisdictional issue thereby decided the issue in favour of the assessee and held the re-assessment proceedings is bad in law by observing as follows:- "4.8 So far as merits of additional claim are concerned, it is observed that AO had issued reassessment notice on two grounds. The main ground for reassessment notice was with reference to transactions with NSEL for Rs. 244.98 crores. The Appellant has claimed that no transaction with NSEL was carried out in current year, which is also accepted by the Special Auditor in his report under Section 142A of the Act. The figure of Rs. 244.98 crores was nothing but addition made in Appellant's own case for A.Y.2011-12 in Assessment Order passed on 21/11/2014. This contention of Appellant was accepted by AO while passing the Assessment Order and no addition was made. So far as second issue being disallowance under Section 14A for Rs. 2,18,174/- is concerned, it is observed that addition under Section 14A for Rs. 1,13,521/- was also made in original Assessment Order dated 29/....
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....In view of above discussions and factual matrix of the case and respectfully following the decisions of Hon'ble Jurisdictional High Court of Gujarat in the case of CIT vs. Mohmed Junded Dadani [2013] 30 taxmann.com 1(Gujarat)/ [2013] 214 taxman 38 (Gujarat)/355 ITR 172 (Guj), Hon'ble Jurisdictional Tribunal in Appellant's own case and other decisions as mentioned above and also as relied upon by the Appellant on similar issue to the Appellant's case, I find that claim of Appellant is correct. 4.10. In addition to above and on perusal of reasons recorded by AO which is reproduced herein above, it is apparent that major issue for alleged escapement of income relates to payment from NSEL for Rs. 244.98 crores. In the present year the Appellant has not carried out any transactions with NSEL and even figure of alleged escapement of income pertains to addition made by AO for AY 2011-12. This issue is elaborately discussed in preceding paras which makes it clear that reasons recorded by AO are based upon factually incorrect details or same are non-existing. Reliance is placed on following decisions wherein jurisdictional High Court as well as Tribunal have consist....
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....on 143(2) of the Act was issued and thereafter, notice under Section 142(1) of the Act along with questionnaire was served and pursuant to these notices, the assessee had furnished required details along with copy of return, audited accounts, balance sheet, profit and loss account etc. The issue of disallowance was considered by the respondent authority at length and disallowance of interest was restricted upto Rs. 34,06,859/-. The observations with regard to disallowance made in the original assessment order reads thus ............ 11. We have perused the reasons for reopening, wherein, the Assessing Officer observed that, during the course of original assessment, disallowance was made only Rs. 34,06,859/ restricting to the extent of exempted income, as a result, income of Rs. 4,78,99,237/ has escaped assessment on the ground that there was an omission on the part of the assessee to disclose fully and truly all the material facts. It was further observed by the Assessing Officer that........ 12. A bare perusal of the reasons and original the assessment order made under Section 143(3) of the Act, the facts emerge that, the respondent authority had determined the i....
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....ng that the reasons recorded by the AO are based upon factually incorrect details or same are non-existing, without considering the discrepancies pointed out in the report u/s 142(2A) submitted by the Special Auditor. 2. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in deleting the disallowance of Rs. 13,89,08,810/- made u/s 43(5) read with section 73 and 40A(2)(b) of the Act. 3. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in quashing the assessment order holding that reassessment notice relating to alleged escapement of income relating to disallowance u/s. 14A is mere change of opinion on part of the subsequent Assessing Officer, without considering the difference in computing the disallowance u/s 14A r.w.r 8D. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent." 4.1. The Grounds of Cross Objection filed by the assessee are as under:- "1. In law and on the f....
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.... and the Revenue appeal is liable to be dismissed and the Cross Objection filed by the assessee is to be allowed. 7. We have heard rival submissions at length and also considered the materials placed on record. It is undisputed fact that the assessee filed its Original Return of Income which was taken for scrutiny assessment and regular assessment order u/s. 143(3) of the Act was passed on 29-12-2011 assessing the total income at Rs. 22,55,48,604/-. It is four years thereafter but within six years reopened the assessment by issuing a notice u/s. 148 on 09-03- 2015 recording two reasons namely [a] disallowance u/s. 14A r.w.r. 8D was wrongly worked out at Rs. 1,13,521 instead of Rs. 2,18,174 and [b] the amount received from NSEL amounting to Rs. 244.98 crores is in the nature of income brought in the account of debtors in the guise of so called paper trade and which needs to be taxed in the hands of the assessee company. 7.1. On first reason for reopening being disallowance u/s. 14A for Rs. 2,18,174/- is concerned, it is observed that addition u/s. 14A for Rs. 1,13,521/- was made in original Assessment Order dated 29- 12-2011. On appeal before this Tribunal vide Appellate Order....
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....he additions are being made, there was no failure on the part of the assessee to disclose true and full material facts. In such a situation an important requirement of failure on part of the assessee to disclose truly and fully all material facts would be totally circumvented. 31. As already noted, except for the Punjab and Haryana High Court in case of Majinder Singh Kang (supra) all courts have uniformly taken a view that Explanation 3 to Section 147 of the Act does not change the situation insofar as the present controversy is concerned. Leading decision of Bombay High Court in case of Jet Airways (I) Ltd. (supra) has been followed by different High Courts. In case of Jet Airways (I) Ltd. (supra) the High Court, in its elaborate decision considering the statutory provisions, different judicial pronouncements and the explanatory memorandum for introduction of Explanation 3 to Section 147 of the Act ruled in favour of the assessee." 8. On second reason for reopening the assessment, the assessee claimed that it had no transaction carried out with NSEL in the present asst year, which is also accepted by the Special Auditor in his report u/s. 142A of the Act. Whereas the ....
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....d the purpose for which the same was introduced. Let us have a closer look to such Explanation which provides that for the purpose of assessment or reassessment under the said section, the Assessing Officer may assess or reassess the income in respect of any issue which escaped assessment and which comes to his notice subsequently in the course of reassessment proceedings. The explanation further provides that this would be so notwithstanding that the reasons for such issue have not been included in the reasons recorded under Section 148(2). 26. If the contention of the assessee that even after introduction of Explanation 3 to Section 147 of the Act, the situation has not undergone any material change is accepted, the question that immediately would come to one's mind is, what then was the purpose of introducing such an explanation. An argument may arise that if before and after introduction of Explanation 3, the nature of jurisdiction exercised by the Assessing Officer was not to undergo any change, would Explanation 3 not be rendered redundant. Would such a situation not run counter to a well known legal principle that the Legislature cannot be seen to have enacted a....
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....planation was introduced in the statute. Thus, the explanation was meant to be merely clarificatory in nature and was introduced with the purpose of putting at rest the legal controversy regarding the true interpretation of Section 147 of the Act which had arisen on account of certain judicial pronouncements. We have noticed that prior to enactment of Explanation 3 to Section 147, Punjab and Haryana High Court in case of Commissioner of Income Tax v. Atlas Cycle Industries reported in 180 ITR 319 (supra) had taken a restricted view of the power of the Assessing Officer to make any addition on the grounds not mentioned in the reasons recorded for reopening the assessment. We may also notice that Kerela High Court in case of Travencore Cements Ltd. v. Asstt. CIT [2008] 305 ITR 170/[2009] 179 Taxman 117 had taken somewhat similar stand. 28. Explanation 3 to Section 147 of the Act thus does not in any manner, even purport to expand the powers of the Assessing Officer under Section 147 of the Act. In any case, an explanation cannot expand the scope and sweep of the main body of the statutory provision. In case of S.Sundaram Pillai v. V.R. Pattabiraman AIR 1985 (SC) 582 the Supr....