TaxTMI 
TaxTMI 
2022 (10) TMI 1300
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....d. CIT(A) erred in confirming addition of Rs.15,00,000/- under section 68. 4. Assessee craves leave to reserve right to add to, alter or amend any of the aforesaid grounds of appeal at or before the time of hearing and to produce such further evidence, documents and papers in support of claim." 2. Briefly stated facts necessary for adjudication of the issues at hand are: assessee company filed its return of income for A.Y. 2010-11, the year under consideration declaring total income at Rs. 34,54,910/-. Subsequently, the assessment was reopened under section 147 of the Income Tax Act, 1961 (for short 'the Act') after getting approval of Pr. Commissioner of Income Tax. Thereafter, on the basis of "reasons recorded" notice was issued under section 148 of the Act. From the information received from DDIT(Inv.) the Assessing Officer (AO) noticed that high value transactions by the assessee for A.Y. 2010-11 were found in the bank account of M/s. Govind Sharda & Co. and M/s. Durga Prasad & Co. (proprietor Mr. Sachin S. Gaikwad). From the bank detail it was also noticed by the AO that during 01.04.2009 to 31.03.2010 the payment credit of Rs. 15,00,000/- was made by asses....
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....n 147/148 of the Act are merely on the basis of information received without applying his mind on vague and ambiguous reasons are not permissible; that since income element in this case is missing reopening under section 148 of the Act is not sustainable. 6. However, on the other hand, the Ld. D.R. for the Revenue in order to repel the argument addressed by the Ld. A.R. for the assessee, contended that the reopening in this case has been validly initiated which is based upon the audit report of the assessee. 7. At the very outset, the Ld. A.R. for the assessee contended that reopening in this case by the AO is not legally sustainable as addition has been made on the basis of some other grounds not mentioned in the reasons recorded. So first of all legal issue as to the validity of reopening is required to be decided. 8. Before proceeding further it is necessary to extract the reasons recorded by the AO to initiate the reopening proceedings under section 147 of the Act, which are as under: 9. Bare perusal of the reasons recorded for initiating the reopening by the AO goes to prove that the same are very vague and ambiguous reasons, not sufficient to reopen the assessment....
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....prietor of M/s. Govind Sharda & Co. The assessee has also not been given any opportunity by the AO to cross examine M/s. Govind Sharda & Co. on the basis of whose statement information was forwarded by DCIT. 14. Hon'ble Bombay High Court in case of CIT vs. Jet Airways (I) Ltd. (supra) decided the identical issue that "when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the AO could not make an assessment or reassessment on other issue which comes to his notice during the proceedings, by returning following findings: "The Explanation 3 to section 147 lifts the embargo 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 section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpret....
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....[Para 17] The question of law would, accordingly, stand answered against the revenue and in favour of the assessee. The appeal was, accordingly, to be dismissed. [Para 18]" 15. Identical issue has also been decided by the Hon'ble Gujarat High Court in case of CIT vs. Mohmed Juned Dadani (supra) wherein substantial question of law was framed as under: "Whether the Income Tax Appellate Tribunal was right in law in coming to the conclusion that when on the ground on which the reopening of assessment is based, no additions are made by the Assessing Officer in the order of assessment, he cannot make additions on some other grounds which did not form part of the reasons recorded by him." 16. Hon'ble Gujarat High Court decided the substantial question of law in favour of the assessee by returning following findings: "29. Above decision has been referred to and relied upon in several subsequent decisions. Above proposition being well settled, it is not necessary to refer to all such decisions. 30. We may also approach the question from a slightly different angle. It is not in dispute that once an assessment is reopened by a valid exercise o....
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....ns, different judicial pronouncements and the explanatory memorandum for introduction of Explanation 3 to Section 147 of the Act ruled in favour of the assessee. 32. Punjab and Haryana High Court in case of Majinder Singh Kang (supra) ofcourse 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. 33. In the result, we answer the question in the affirmative i.e. in favour of the assessee and against the revenue. All tax appeals are dismissed." 17. Similarly, Hon'ble Delhi High Court in case of Sh. Anugrah Varshney vs. ITO in ITA No.134/Ag/2014 order dated 05.04.2016 also decided the identical issue by interpreting explanation 3 to section 147 of the Act wherein the Ld. D.R. has tried to distinguish the fact of Jet Airways (I) Ltd. (supra) on the ground that at that point of time explanation 3 to section 147 of the Act was not in statute. However, the Hon'ble Delhi High Court by following the....
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....ed. We quash accordingly." 18. Apart from this the AO was not sure enough as to whether he has reason to believe if the high value transaction by the assessee in the bank account of M/s. Govind Sharda & Co., has escaped assessment (which itself is a vague proposition) or he is reopening the assessment on the basis of alleged payment credit of Rs.15,00,000/- by the assessee to M/s. Durga Prasad & Co., which fact he has completely ignored while framing the assessment. 19. In view of what has been discussed above, we are of the considered view that when the AO has reopened the assessment on the basis of vague and ambiguous reasons and during the assessment proceedings has dropped the core issue as to making the payment credit of Rs. 15,00,000/- by the assessee to M/s. Durga Prasad & Co. alleged to have escaped assessment, the very initiation of the reopening is not sustainable in the eyes of law in view of the law laid down by Hon'ble Bombay High Court in case of Jet Airways (I) Ltd. (supra), Hon'ble Delhi High Court in case of Sh. Anugrah Varshney (supra) and Hon'ble Gujarat High Court in case of Mohmed Juned Dadani (supra). Since very initiation of reopening under ....