TaxTMI 
TaxTMI 
2025 (4) TMI 1847
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....ncome Tax (Appeals) is erroneous on facts of the case and In law. 2. The Ld CIT(A) erred in holding the re-opening u/s 147 of the Act as Invalid by relying on case laws prior to the amendments made in the Act by Finance Act 2016 in respect of section 147 of the Act w.e.f. 01/06/2016 wherein under Explanation 3 It is mentioned that - "For the purposes 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" for allowing the appeal of the assessee.' 3. The Ld. CIT(A) erred In not appreciating that the assessee failed to discharge his duty of full disclosure of consolidated Profit & Loss account of three businesses as Explanation 1 to section 147 of the Act reads clearly (as introduced by Finance Act 2016 w.e.f. 01/06/2016)," Production before the Assessing Officer of account books or other evidence from which material evi....
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....n of jurisdictional High Court in the case of Martech Phephericals supra as that amendment was already there on the statute when this decision was rendered. 6. Notwithstanding the above, the Ld. CIT(A) has rightly observed that reopening is bad in law without any fresh material suggesting escapement of income when the appellant had made full disclosures during earlier scrutiny proceedings and for that reason also, reopening is held as bad in law. The appellant submitted an the financial statements before the AO during the course of assessment proceedings u/s.143(3) wherein the investment in Showri Palem land was already shown. 5. Brief facts of the case are as under: 5.1. The assessee is an individual carried out Real estate business under the name K.V. Jayaraman Real estate. He conducted hotel business in the name of "Hotel Cheran'. He also carried out agricultural activities under the name 'Palani Farm', The assessee had filed return of income originally for A.Y 2017-18 declaring a loss of Rs.4,48,718/-. The case of the assessee was re-opened for scrutiny u/s 147 to verify the source of the immovable property purchased by him to the tune of Rs.39,42,000....
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....unting to Rs.2,93,50,000/- under the name of Palani Farm' on the various dates, establishing that the Credit entries were introduced in AY 2017-18. Therefore, the sum of Rs. 2,93,50,000/- was added as unexplained credits u/s 68 as the sum was credited in the books of accounts in AY 2017-18 and was used for Cash deposits in the Bank accounts, for which the assessee had failed to satisfactorily offer an explanation for the source. The assessment was completed by the AO u/s 143(3) r.w.s 147 as under:- Income returned u/s 148 (-) 4,48,718/- Add: Disallowance of other expenses and development charges u/s 37(1) Rs. 49,40,946/- Unexplained cash credits u/s 68 Rs. 2,93,50,000/- Total income Rs. 3,38,42,228/- 6. Aggrieved, assessee challenged the order of assessment u/s 143(3)/147 dated 30.03.2022 before the ld. CIT(A). 7. The ld. CIT(A) in its order from paras 7-7.8 has reproduced the reasons for reopening, relevant portion of Profit and Loss account, the ledger relating to Sowripalayam land purchase, relevant portions of the case law citations relied and held as under: "7.8 Thus, the case laws clearly imply that the additions made by AO on ....
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....essment order passed u/s.143(3) r.w.s. 147 of the Act on the following grounds:- The assessee's case for AY 2017-18 was re-opened and a notice u/s 148 was issued on 31.03.2021. In response, the assessee filed return on 13.12.2021 showing the same income as declared in the original return u/s 139(1). The re-opening notice was issued apparently to verify the source of investment in an immovable property purchased by the assessee during the relevant year for a consideration of Rs.39,00,000/- as admitted by the AO in the first para of the assessment order itself For issuing notice u/s 148, the mandatory condition is that there should be some information based on which the AO should form a belief that income has escaped assessment. In the assessee's case, the AO has no information whatsoever in his possession which can remotely give rise to a belief that income has escaped assessment for AY 2017-18. The AO has not shown any basis for forming a belief that investment made in the immovable property was out of undisclosed source of income. The AO himself admits that the re-opening was made for the purpose of verifying the source of investment on this property to the tune of Rs.39,42,000....
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....ssessee, however, challenges this action of the respondents/Revenue, on the ground that it was not permissible for the respondents/Revenue to tax the forfeited share application money, by taking recourse to provisions of Section 147 read with Section 148 of the Act, unless it assesses to tax that income with reference to which the Assessing Officer had formed reason to believe (within the meaning of Section 147), that it had escaped assessment. 21. To my mind, a careful reading of Section 147 of the Act would show that it empowers an Assessing Officer to reopen the assessment, if, he has reason to believe, that any income chargeable to tax has escaped assessment for the relevant year, ''and also bring to tax", any other income, which may attract assessment, though, it is brought to his notice, subsequently, albeit, in the course of the reassessment proceedings. 21.1 To put it plainly, the purported income discovered subsequently during the course of reassessment proceedings, can be brought to tax, only, if the escaped income, which caused, in the first instance, the issuance of notice under Section 148 of the Act, is assessed to tax. 22. Explanati....
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....de it or render the substance and 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, 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. . . . . " (Emphasis is mine) 12. In the case of Anand Cine Services (P.) Ltd. v. Assistant Commissioner of Income-tax [2024] 169 taxmann.com 236 (Madras) the jurisdictional High Court held as under: 8. The next question to be examined is whether the impugned notice and proceedings consequent thereto are liable....
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.... though the reasons for such issue were not included in the notice under section 148(2). The decisions of the Kerala High Court in Travancore Cements Ltd., [2009] 179 Taxman 117/305 ITR 170 (Kerala) and of the Punjab and Haryana High Court in Vipan Khanna, [2002] 122 Taxman 1/255 ITR 220 (Punjab & Haryana) would, therefore, no longer hold the field. However, in so far as the second line of authority is concerned, which is reflected in the judgment of the Rajasthan High Court in Shri Ram Singh, [2008] 306 ITR 343 (Rajasthan), Explanation 3 as inserted by Parliament would not take away the basis of that decision. The view which was taken by the Rajasthan High Court was also taken in another judgment of the Punjab and Haryana High Court in CIT v. Atlas Cycle Industries, [1989] 46 Taxman 315/180 ITR 319 (Punjab & Haryana). The decision in Atlas Cycle Industries, [1989] 46 Taxman 315/180 ITR 319 (Punjab & Haryana) held that the Assessing Officer did not have jurisdiction to proceed with the reassessment, once he found that the two grounds mentioned in the notice under section 148 were incorrect or nonexistent. The decisions of the Punjab and Haryana High Court in Atlas Cycle Industries,....
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....7 as it stands postulates that assessment for any assessment year, the Assessing Officer may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being 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 (Rajasthan). 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." 10. When the same issue came up for consideration before the Division Bench of this Court in TAFE (supra), the Division Bench of this Court cited Jet Airways with approval and followed the ratio laid d....