TaxTMI 
TaxTMI 
2026 (8) TMI 1044
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....he reasons recorded by him, when no addition is made by him on the issues which are included the reasons recorded? (b) Whether in the facts and circumstances of the case and in law, the learned ITAT has erred in holding that the Explanation 3 to Section 147 which has been inserted by Finance (No. 2) Act, 2009 retrospectively with effect from 01.04.1989 i.e. "For the purpose 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" cannot expand the scope and sweep of the main body of Statutory provision? (c) Whether in the facts and circumstances of the case and in law, the learned ITAT has erred in upholding the decision of the CIT(A) in deleting the disallowance of Rs. 13,89,08,810/ made u/s. 43(5) r.w.s 73 and 40A(2)(b) of the Income tax Act, 1961? 3. Brief facts of the case are that the assessee-company is engaged in manufactu....
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....ded for present case, AO was of the view that net average asset needs to be taken. It is pertinent to note that entire issue of disallowance under Section 14A as was raised in original Assessment Order was deleted by Hon'ble Ahmedabad ITAT in Appellate Order dated 27/07/2016. The relevant operative part of the said decision is reproduced hereunder.- "29. We have heard the rival contentions and perused the material on record. Assessee is aggrieved with the disallowance u/s 14A of the Act of Rs. 1,13,521/-confirmed by Id. CIT(A). We further observe that Id. AR specifically mentioned that there is no exempt income earned by the assessee during the year. We also observe that in the judgment of Hon. Jurisdictional High Court in the case of CIT vs. Cortech Energy P. Ltd. (supra) has confirmed the order of the Tribunal deleting disallowance u/s 14A of the Act as the assessee has not claimed any exempt income. Similar is the situation in the case of assessee and we respectfully following the judgment of Hon. Jurisdictional High Court are of the view that no disallowance is called for u/s 14A as assessee has not claimed any exempt income in the year under appeal. We hold that Id. C....
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....rted in 18 taxmann.com 353; 4. Sunbarg Tradelink (p.) Ltd vs. Income Tax Officer reported in [2016] 74 taxmann.com 16; 5. Ambience Business Services Pvt. Ltd vs. DCIT in Writ Petition NO. 2608 of 2019 dated 28.11.2019; 6. Shamshad Khan vs. Assistant Commissioner of Income Tax dated 11.04.2017 82 taxmann.com 35; 7. M/s. Gujarat Eco Textile Park Ltd vs. ACIT in SCA No. 4017 of 2016 dated 05.07.2016; 8. Mitul Gems vs. ACIT reported in [2015] 62 taxmann.com 66 (Guj.); 9. Oriental Insurance Co. vs. CIT reported in [2015] 63 taxmann.com 171 [Delhi]; 10. Asharam Ashram vs Income Tax Officer (Exemption) Ward No.1 in SCA No. 4774 of 2016 dated 20.07.2016. Considering the above decisions, the reassessment notice on the ground of alleged escapement of income for the transactions made with NSEL was held to be not justified by CIT(Appeals). 3.7 With regard to the second issue of alleged escapement relating to computation of disallowance under Section 14A of the Act is concerned, the CIT (Appeals) held as under: "4.11 So far as second issue of alleged escapement relating to computation of disallowance under Section 14A....
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....wance under Section 14A is mere change of opinion on part of the subsequent Assessing Officer and reassessment notice issued by AO is nothing but an invalid notice. Therefore, CIT(Appeals) allowed additional ground of appeal filed by Appellant and quashed reassessment order. 3.9 Being aggrieved by the order of the CIT (Appeals), the Revenue preferred an appeal before the Tribunal, and the assessee preferred cross-objections challenging the directions of the Assessing Officer to conduct a special audit under Section 142(2A) of the Act, as well as on merits. 3.10 The Tribunal, after considering the submissions made by both sides as well as the order passed by the CIT (Appeals), dismissed the appeal of the Revenue, upholding the order passed by the CIT (Appeals) quashing the reassessment order being without jurisdiction. Consequently, the addition made under Section 43(5) read with Sections 73 and 40A(2)(b) of the Act of Rs. 13,89,08,810/- was also quashed and set aside. As a consequence, the cross-objections filed by the assessee supporting the order of the CIT (Appeals) were allowed. 4. Learned Senior Standing Counsel Mr. Varun Patel submitted that the Tribunal has committe....
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....reported in [2024] 168 taxmann.com 543 (Delhi); 5. Yashoda Shivappa Naganhoudar vs. Income Tax Officer reported in [2022] 138 taxmann.com 296 (Bombay); 6. Principal Commissioenr of Income Tax vs. Lark Chemicals (P.) Ltd reported in [2018] 99 taxmann.com 312; 7. Principal Commissioner of Income Tax (Centra)-3, New Delhi vs. Jakhotia Plastics (P.) Ltd reported in [2018] 94 taxamann.com 89 (Delhi); 8. Jakhotia Plastics (P.) Ltd vs. Principal Commissioner of Income Tax reported in [2018] 94 taxmann.com 96 (SC). 6. Having heard the learned Advocates for the parties and on perusal of the reasons recorded, and on perusal of the assessment order passed under Section 147 read with Section 143(3) of the Act, it emerges that no addition is made by the Assessing Officer for the reasons recorded for reopening of the assessment and therefore, there was no failure on the part of the assessee for true and full disclosure of the income which can be said to have escaped the assessment. 7. The regular assessment order under Section 143(3) of the Act was passed on 29.12.2011, assessing the total income at Rs. 22,55,48,602/-. Thereafter, the reassessment notice....
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....ituation would come about if ultimately the Assessing Officer were to drop the ground on which notice for reopening had been issued but to chase some other grounds not so mentioned for issuance of the notice. In such a situation, even if a case where notice for reopening has been issued beyond a period of four years, the assessment would continue even though on all the grounds on which the 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 ju....
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....der Section 147 of the Act, to assess or reassess such income for which he had recorded his reasons to believe had escaped assessment and also any other income which escaped assessment which came to his notice subsequently in the course of the assessment proceedings. 24. Sans explanation (3), Section 147 of the Act, however, by no stretch of imagination, can be construed as to provide that if the reason on which the assessment is reopened fails, the Assessing Officer still can proceed to assess some other income which according to him had escaped assessment and which came to his light during the course of the assessment. For assuming jurisdiction to frame an assessment under Section 147 of the Act what is essential is a valid reopening of a previously closed assessment. If the very foundation of the reopening is knocked out, any further proceeding in respect to such assessment naturally would not survive. 25. A question may therefore, arise whether introduction of Explanation (3) would change this position and for that purpose we need to ascertain what is true purport of Explanation 3 and the purpose for which the same was introduced. Let us have a closer look to ....
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....n is contrary to the legislative intent. With a view to further clarifying the legislative intent, it is proposed to insert an Explanation in section 147 to provide that the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reason for such issue has not been included in the reasons recorded under sub-section (2) of section 148. This amendment will take effect retrospectively from 1st April, 1989 and will, accordingly, apply in relation to assessment year 1989-1990 and subsequent years." 27. From the above, it can be seen that the explanation was meant to be clarificatory in nature and to put the issue beyond any legal controversy. When the Legislature found that in face of the provisions contained in Section 147 of the Act post 01.04.1989 some of the courts had taken a view that the Assessing Officer is restricted to the reassessment proceedings only on issues in respect of which the reasons were recorded for reopening the assessment, such explanation was introduced in the statute. Thus, the explanation was meant to be mer....