TaxTMI 
TaxTMI 
2025 (8) TMI 689
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.... in law. 3. For this, the assessee drew our attention to Ground no. 3 which reads as under:- 3. "That the reassessment order passed u/s 147 of the Act is further not tenable under the law because the additions made on the basis of reasons recorded for reopening were deleted by Ld. CIT(A) and thus, no additions on the basis of reasons recorded for reopening survives in case of assessee." 4. The Ld. Counsel for the assessee being aggrieved from the additions made by the Assessing Officer (hereinafter referred to as 'AO') and confirmed by the Ld. CIT(A) raising various grounds forming part of the appeal. He stated that the legal issue raised by the assessee as regards to re-opening of assessment and assumption of jurisdiction u/s 147 of the Act by the AO which is purely legal issue but could not be incorporated with the original grounds of appeal agitated and as such the same now is being taken as additional ground. He also stated that being purely of legal in nature and no new facts are required to be investigated in the present appeal and keeping in view the decision of the Hon'ble Supreme Court in the case of NTPC vs CIT 229 ITR 383 (SC), the ground need to be admitt....
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..... 47,77,755/- 9. The Ld.Counsel for the assessee stated that apart from the reasons recorded for making addition of LTCG of Rs. 9.60 lakhs, the AO made addition of Rs. 15.48 lakhs being cash and cheques deposited in assessee's bank account u/s 68 of the Act as well as addition of Rs. 20,62,375/- being amount invested in purchase of property u/s 68 of the Act. The Ld.Counsel for the assessee, thereafter, took us through the order of Ld.CIT(A) and stated that the Ld.CIT(A) has deleted the addition made by the AO on account of bogus share transactions claimed as LTCG by observing as under:- VI. BOGUS SHARE TRANSACTIONS a. "The shares were never purchased in the year 2009-10 or any earlier year as claimed. The contract notes furnished are fabricated and bogus. The shares are received in the demat account of the beneficiary by way of off market transfer from conduit accounts. In the conduit account, shares were received from another conduit account by way of off market transaction. In this second or end conduit account, these shares were received by way of purchase through current stock market transaction. This clearly establishes that the shares were actually acqui....
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.... from salary, perquisites and unexplained cash deposits in various accounts along with interest thereon had escaped assessment. The counsel urged that the Assessing Officer, however, while passing the reassessment order had sought to make addition of another amount without any addition having been made on the ground on the basis of which reassessment had been initiated. According to the learned counsel, no reassessment order could be passed by the Assessing Officer. Learned counsel for the assessee relied upon the following observations made by this court in CIT v. Atlas Cycle Industries [1989] 180 ITR 319 (page 322): " ...we are of the view that the Tribunal was right in cancelling the reassessment as both the grounds on which reassessment notice was issued were not found to exist, and the moment such is the position, the Income-tax Officer does not get the jurisdiction to make a reassessment." 9. Support was also drawn from the decision of the Rajasthan High Court in CIT v. Shri Ram Singh (2008) 306 ITR 343 (Raj) wherein judgment of this court in Atlas Cycle Industries' case (1989) 180 ITR 319 (P&H) was followed." .......................................
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....ers), act as a limitation. 14. Having regard to the facts, this Court is of the opinion that since there is some doubt as to the accuracy of the interpretation in the case of Ranbaxy Laboratories Limited (supra) and which was subsequently followed in the case of Monarch Educational Society (supra), the appropriate course would be to refer the issue to a larger Bench. 15. The following issue is accordingly framed for reference to the Full Bench i.e. whether the view expressed in the case of Ranbaxy Laboratories Limited (supra) [following Jet Airways's case (supra) of the Bombay High Court and followed later in Monarch Educational Society's case (supra)] with respect to the interpretation of Section 147 read with Explanation (3) of the Act, is restrictive, so as to sustain only additions made in the course of reassessment proceedings subject to the additions of amounts adverted to in the reassessment notice in the "reasons to believe" under Sections 147/148 of the Act and notice pursuant thereof?" However, the aforesaid reference ultimately came to be closed on 07 February 2020 on account of low tax effect. 29. In our considered opinion, an....
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..../2023], and 29.07.2022 [W.P.(C) 3808/2023], respectively are hereby quashed." 11. Even Hon'ble High Court of Calcutta in the case of CIT(Exemption) v B. P. Poddar Foundation For Education [2023] 148 taxmann.com 125 (Calcutta) exactly on similar facts where addition was deleted by Ld.CIT(A) on the reasons recorded and other additions were sustained, the Hon'ble High Court has quashed the assessment by observing in para 13 & 14 as under:- 13. "The decisions in Jet Airways (I) Ltd. (supra) and Ranbaxy Laboratories Ltd. (supra) were also followed and the appeal in favour of the assessee was allowed in the case of Tractors & Farm Equipment Ltd. (supra) The decision in N. Govindaraju (supra) was considered in Anil Nagpal (supra) and it was held that if the notice issued under section 148 is invalid the assessing officer cannot reopen the assessment. Further it was held that even if the reasons recorded do not refer to a particular issue, the assessing officer would be entitled to assess the income or reassess the computation of income with regard thereto, if the same comes to his notice during the course of the proceedings for reassessment, however this can be done provided t....
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.... does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance or core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, afresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee." 13. In view of the above proposition of law and ratio laid by Hon'ble Delhi High Court in the case of....
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....O further noted that on examination of the return of income filed by the assessee, it was found that the assessee had not shown the amount of LTCG of Rs. 9,60,000/- at all and thus the AO concluded that the assessee had concealed the particulars of his income. Accordingly, the AO held that the same being found undisclosed/unexplained and therefore he issued a notice u/s 148 of the Act dated 28.03.2019 after obtaining prior approval of the competent authority. The assessment order in this case was passed on 25.11.2019. 3. During the assessment proceedings, the AO issued a show cause notice dated 20.11.2019 to the assessee asking him to show cause why the LTCG should not be treated as not genuine and why it should not be treated as undisclosed and unexplained income of the assessee. The AO noted that no compliance was made by the assessee and after discussing the facts of the case and certain case laws he added the sum of Rs. 9,60,000/- u/s 68 of the Act. 3.1. The AO noted that further detailed analysis of evidences available on record i.e. bank statements and statement of affairs filed by the assessee revealed that the assessee had deposited cash amounting to Rs. 1,48,000/- an....
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....the Ld. CIT(A). The Ld. CIT(A) unit-3, Coimbatore, deleted the addition made by the AO under section 68 of the Act in respect of LTCG claimed exempt by the assessee which as discussed earlier was the basis of reopening of the assessment in this case. The relevant finding of the Ld. CIT(A) are reproduced once again for ready reference:- "a. The shares were never purchased in the year 2009-10 or any earlier year as claimed. The contract notes furnished are fabricated and bogus. The shares are received in the demat account of the beneficiary by way of off market transfer from conduit accounts. In the conduit account, shares were received from another conduit account by way of off market transaction. In this second or end conduit account, these shares were received by way of purchase through current stock market transaction. This clearly establishes that the shares were actually acquired immediately (very few days) before the day as it has been shown to be credited in the demat account of beneficiary and not long back (years) earlier as claimed by the subject. Unaccounted money, in cash, was utilized for these arranged purchase of shares from market. These shares were transfer....
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.... 148 of the Act dated 22.03.2016 for AY 2009- 10 was that income amounting to Rs. 59,42,709/- had escaped assessment on the ground that the assessee had deposited money with M/s Nissan Developers and Properties Ltd. which was a specified person of the assessee and was hit by both the sections 13(1)(c)(ii) and 13(1)(d) of the Act. The same was added by the AO in the assessment order dated 28.12.2016 u/s 1417 r.w.s. 143(3) of the Act. 3.5. On appeal by the assessee, the ld. CIT(A) deleted the addition of Rs. 59,42,709/-. However, the Ld. CIT(A) had confirmed the following additions made by AO, which were not part of the reasons recorded by the Assessing Officer. (i) An amount of Rs. 3,64,97,000/- invested with Poddar Projects Ltd. (ii) Fee amounting to Rs. 37,50,000/- received from students in cash. (iii) Corpus Fund Rs. 9,95,000/- (iv) Development Fund Rs. 1,07,74,500/- 3.6. In the cited case, the Co-ordinate Bench of Kolkata Tribunal, vide its order dated 13.11.2019 in ITA No.1863/Kol/2019 for AY 2009-10had quashed the reassessment proceedings on the ground that since the addition of Rs. 59,42,709/-, which was the basis for reopening of the....
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....t view of the matter, the other additions made in the said reassessment order which were not part of the reasons recorded for reopening the assessment are not sustainable in the eyes of law even after insertion of Explanation 3 to section 147 of the Act by Finance Act, 2009. We note that AO may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice; however, if after issuing a notice under section 148 of the Act, the AO accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income, for that we rely on the judgment of Hon`ble Bombay High Court in the case of Jet Airways (I) limited 331 ITR 236 (Bom), wherein it was held as follows: "21. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under s. 148 s....
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....has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Expln. 3 if during the course of these proceedings the AO comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the AO that on assuming jurisdiction under s. 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before AO during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under s. 148." 3.8. The discussion about the order of the Hon'ble Calcutta High Court confirming the relief granted to the assessee by the Tribun....
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....h formed the basis of a notice under section 148, is it open to the Assessing Officer to assess or reassess independently any other income, which does not form the subject matter of the notice." 3.11. On perusal of the above substantial question of law, it emerges that the AO had not made addition on the issue in this case on which the assessment was reopened and had made additions of other issues not mentioned in the reasons recorded. This is further evident from the findings of the order of the Hon'ble Bombay High Court in para no.21 and 22 in this case and therefore the facts of the said case are distinguishable in the case of the present assessee in as much as in the case of the present assessee the AO had disallowed the claim of the assessee of LTCG of Rs. 9,60,000/- being claimed as exempt u/s 10(38) of the Act on the basis of which the assessment was reopened and was added u/s 68 of the Act. The relevant extract of the decision of the Hon'ble Bombay High Court in para no.21 and 22 are reproduced as under:- "21. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment of reassessment on grounds other than those....
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....ad these words as being in in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion to Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh, (2008] 306 ITR 343. Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147 as they stood after the amendment of April 1, 1989, continue to hold the field. 22. In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall accordingly stand answered against the Revenue and in favourof the assessee. The appeal is accordingly dismissed. There shall be no order as to costs." (emphasis supplied by me) 4. On perusal of the facts in the case of the present assessee and the facts and the decision in the case of ATS Infrastructure Ltd. vs ACIT(supra) and CIT vs Jet Airways (I) Lt....
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....that upon the formation of a reason to believe under Section 147 and following the issuance of a notice under Section 148, the Assessing Officer has the power to assess or reassess the income which he has reason to believe had escaped assessment and also any other income chargeable to tax. The words "and also" cannot be ignored. The interpretation which the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. 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 the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word "or". The Legislature did not rest content by merely using the word "and". The words "and" as well as "also" have been used together and in conjunction." ... Evidently, therefore, what Parliament intends by use of the words "and also" is that the Assessing Officer, upon the formation of a reason t....
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....e which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under Section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. 18. We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of Jaganmohan Rao (supra). We may also note that the heading of Section 147 is "income escaping assessment" and that of Section 148 "issue of notice where income escaped assessment". Sections 148 is supplementary and complimentary to Section 147. Sub-section (2) of Section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargea....
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....an the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive. Consequently, we answer the first part of question in affirmative in favour of Revenue and the second part of the question against the Revenue." (emphasis supplied by me) 4.1. As discussed above, in the case of the present assessee the AO disallowed the claim of the assessee of LTCG of Rs. 9,60,000/- claimed as exempt u/s 10(38) of the Act on the basis of which the assessment was reopened and was added u/s 68 of the Act and had also made other additions u/s 68 of the Act in respect of unexplained money and cheque deposit amounting to Rs. 15,48,000/-and u/s 69 of the Act in respect of unexplained purchase of property amounting to Rs. 20,62,375/-. Therefore, relying upon the decision of the Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs CIT(supra), it is held that the AO was justified in making additions in respect of the other items being unexplained which he came across during the reassessment proceedings and for this no separate notice u/s 148 of the Act was required to reassess the said othe....
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....d by the Revenue before the Hon'ble High Court was as under:- (i) Whether on the facts and circumstances as well as in law the Income Tax Appellate Tribunal was correct in law in holding that the other additions made in the order under Section 147/ 143(3) of the Income Tax act, 1961, which were not part of the reasons recorded for reopening the assessment were not sustainable in the eyes of law even after insertion of Explanation 3 to Section 147 of the Act by Finance Act, 2009 when addition was made by the Assessing Officer on the ground of reopening? (ii) Whether on the facts and circumstances of the case the Learned Income Tax Appellate Tribunal correctly interpret the decision reported in the case of Jet Airways (1) Limited reported 331 ITR 236 (Bom) and Ranbaxy Laboratories Ltd. reported in 336 ITR 136 (Del) on facts in the instant case? 5.1. As discussed earlier in para no.3.6 of this order, the Kolkata Tribunal had granted relief to the assessee by quashing the reassessment proceedings u/s 147/148 of the Act on the ground that the issue on which reopening was done was deleted by the ld. CIT(A) and the AO had not issued separate notices u/s 148 of the Act....
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.... been held to be illegal. 5.4. On perusal of this order, it is seen that the Hon'ble High Court decided the appeal in favour of the assessee on the ground that there was no valid notice u/s 148 of the Act in this case. This is evident from the observation of the Hon'ble Court in para no.13 and 14 of its order. The para no.13 and 14 of the said order are reproduced as under:- "13. The decisions in Jet Airways and Ranbaxy Laboratories were also followed and the appeal in favour of the assessee was allowed in the case of M/s. Tractors and Farm Equipment Limited. The decision in N.Govindaraju was considered in Anil Nagpal and it was held that if the notice issued under Section 148 is invalid the assessing officer cannot reopen the assessment. Further it was held that even if the reasons recorded do not refer to a particular issue, the assessing officer would be entitled to assess the income or reassess the computation of income with regard thereto, if the same comes to his notice during the course of the proceedings for reassessment, however this can be done provided there is a valid notice under Section 148 that the assessing officer the jurisdiction to adopt proceedings u....
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....lanatory memorandum for introduction of Explanation 3 to Section 147 of the Act, rules in favour of the assessee. The Punjab and Haryana High Court in the case of Majinder Singh Kang Versus CIT [2012] 344 ITR 358 (P & H) of course has sounded a different note. We may, however, notice that the explanatory memorandum to Explanation 3 to Section 147 of the Act was not brought to the notice of the High Court in the said decision. The High Court gave considerable importance on such Explanation 3 to section 147 of the Act and the language used therein. xxxxxxxxx 15. Thus, for all the above reasons, we are of the considered view that the Tribunal was right in granting relief to the assessee." (Emphasis supplied by me) 5.6. From the above discussion, it is seen that the Hon'ble Calcutta High Court in allowing relief to the assessee relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. (supra). However, the facts in the present case are distinguishable from the case of CIT vs Jet Airways (I) Limited, where the AO had not made addition on the issue on which the assessment was reopened whereas in the present case the AO had....
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....ent was made was deleted in appeal, then the AO could not make addition in respect of other issues which came to his notice during the reassessment proceedings, unless the AO has issued a separate notice u/s 148 of the Act to assess each of the said new issue coming to the notice of the AO during the reassessment proceedings is not acceptable because no such proposition was laid down in the decisions of Hon'ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd.(supra) and of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs CIT (supra). 5.9. In the decisions of Hon'ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd.(supra) and of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs CIT (supra), it was the AO who had accepted the explanation of the assessee and did not make the addition on the issue on which the assessment was reopened and it was not a case in which the Ld. CIT(A) had deleted the addition on the issue which was the basis of reopening the assessment. Therefore, in the said decisions of Hon'ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd.(supra) and of Hon'ble Delhi High Court in the case of ....
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....erence of opinion between two learned Members of the Division Bench. By an order dated 14.02.2025, the following question has been formulated for being decided by the Third Member : "Whether, in the given facts and circumstances of the case, the reopening under Section 147 read with Section 148 of the Act is valid or not where the Assessing Officer made addition independently of other income which does not form the subject matter of reopening and where addition made by the Assessing Officer on the basis of reasons recorded for reopening were deleted by the CIT(A) and no addition of that income on the basis of reasons recorded survives which has reason to believe had escaped assessment and which formed the basis of reopening." 2. The brief facts are that the assessee was an employee with the Municipal Corporation of Delhi and, inter alia, had salary income. The assessee filed his Return of Income (RoI) for assessment year 2012-13 on 18.06.2012 declaring an income of Rs. 2,07,380/-, which was processed under Section 143(1) of the Act. There was no regular assessment under Section 143(3) of the Act made in this case. It appears that the assessment was reopened by the Asses....
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....ng reliance on the decision of Bombay High Court in CIT vs Jet Airways (I) Ltd., 331 ITR 236 (Bom) and jurisdictional Delhi High Court decision in ATS Infrastructure Ltd. vs ACIT, 473 ITR 595 (Delhi) has found that once the addition made on account of original reasons recorded (in this case, the addition on account of alleged bogus LTCG is deleted, the other two additions, which were not part of original reasons recorded, cannot be sustained. The learned Accountant Member, by his dissenting order, has found that the decision in Jet Airways (I) Ltd. (supra) and ATS Infrastructure Ltd. (supra) are distinguishable on facts and cannot be called into aid to delete the balance additions. 6. It is submitted by the learned counsel for assessee that once the addition made by the Assessing Officer relying on the reasons recorded is deleted, no other addition can be sustained as held by the Bombay High Court in Jet Airways (I) Ltd. (supra) and Delhi High Court in ATS Infrastructure Ltd. (supra) and Ranbaxy Laboratories Ltd. vs CIT, 336 ITR 136 (Delhi). It is submitted that the Kolkata Bench of the Tribunal has also taken a similar view in B.P. Poddar Foundation for Education vs ACIT (ITA N....
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.... the learned CIT(A) has sustained the other two additions. The question is whether the reassessment can be sustained in such circumstances. 10. I have carefully gone through the differing orders passed by the learned Members of the Bench. While the learned Judicial Member has placed reliance on the decision, viz. ATS Infrastructure Ltd. (supra), B.P. Poddar Foundation for Education (supra) and Jet Airways (I) Ltd. (supra), the learned Accountant Member has found that the decisions in the case of ATS Infrastructure Ltd. (supra) and Jet Airways (I) Ltd. (supra) are distinguishable on the ground that in those cases the Assessing Officer himself had not made any addition on the basis of the reasons recorded for reopening. In other words, the learned Accountant Member has made a distinction between the cases where the Assessing Officer did not make any addition on the basis of original reasons recorded, but made certain other additions and a case where the Assessing Officer indeed makes addition on the basis of original reasons recorded alongwith other additions and the addition made on the basis of the original reasons recorded is deleted by the learned CIT(A). I am of the considere....
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....ata Bench involves identical facts. Incidentally, the decision in the said case has been confirmed by the Calcutta High Court. This aspect has been considered by the learned Accountant Member in para 5 onwards of his order. Before the Calcutta High Court, the Revenue had raised the following substantial question of law :- (i) Whether on the facts and circumstances as well as in law the Income-tax Appellate Tribunal was correct in law in holding that the other additions made in the order under section 147/143(3) of the Income-tax act, 1961, which were not part of the reasons recorded for reopening the assessment were not sustainable in the eyes of law even after insertion of Explanation 3 to section 147 of the Act by Finance Act, 2009 when addition was made by the Assessing Officer on the ground of reopening? (ii) Whether on the facts and circumstances of the case the Learned Income-tax Appellate Tribunal correctly interpret the decision reported in the case of Jet Airways (I) Limited reported 331 ITR 236 (Bom) and Ranbaxy Laboratories Ltd. reported in 336 ITR 136 (Del) on facts in the instant case?" 15. The Calcutta High Court, inter alia, relying upon the deci....
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....f learned CIT(A) while deleting the addition in respect to bogus LTCG. The learned Accountant Member found that the findings are "a little abrupt". Although the reasons given by the learned CIT(A) could have been more specific and clear, the said aspect cannot be gone into for the reason that ultimately the learned CIT(A) has partly allowed the appeal and deleted the addition and that order has not been challenged by the Revenue and has thus attained finality. 18. In the result, Ground no. 3 as raised by the assessee deserves to be allowed and the impugned addition cannot be sustained. The question as referred to is answered accordingly, holding that the reopening u/s 147 r.w.s 148 of the Act, in this case, is not valid. The appeal, therefore, deserves to be allowed as proposed by the learned Vice President (Judicial Member). PER MAHAVIR SINGH, VP : This appeal was fixed for giving effect to the order of the Ld. Third Member in which the Ld. Third Member concurred with the view of Ld. Vice President (Judicial Member) with regard to the following question framed :- "Whether, in the given facts and circumstances of the case, the reopening under Section 147 read with....