TaxTMI 
TaxTMI 
2026 (9) TMI 1787
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.... The case of the assessee was reopened u/s 147 of the Act and accordingly, the assessment was framed u/s 147 /143(3) of the Act vide order dated 12.07.2023, determining the total income at Rs.21,17,360/-. The Ld. PCIT upon perusal of the assessment record noted that the Ld. AO has not examined the issue of transportation charges. The PCIT noted that the assessee incurred total expenditure of Rs.2,43,46,239/-, out of which Rs.2,08,63,787/- was claimed towards transportation charges. The Ld. PCIT noted that the assessee was engaged in the business of transportation services, however no related assets were shown in the balance sheet meaning there by that the transportation services were out sourced and the payments were made exceeding the mandatory limit of 30,000 per contract/ payment of Rs.1.00 lacs in aggregate during the year as prescribed u/s 194C of the Act and liable for deduction of tax at source at the rate of 2% which the assessee has failed to deduct. Accordingly, the 30% of the transportation charges should have been disallowed which worked out to Rs.62,59,136/-, which were not disallowed and added to the income. Accordingly, the order passed by the Ld. AO is erroneous and....
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....Finance Act, 2021. The Ld. AR submitted that Proviso to Section 148 of the Act provides for exception where provisions of Section 148A are not applicable. The Ld. AR dealt upon the said explanation in detail and submitted that the Provisions of Section 148A of the Act are not applicable in case of information under Explanation 2 clause (i) (iii) and (iv) of the Act. The Ld. AR therefore submitted that it is evident that assessments in search case and non-search case have been taken up differently in spite of fact that assessment is made u/s 148 of the Act. In other words, the assessments u/s 153A / 153C of the Act in such cases have been included in the provisions of section 147 to 151 of the Act vide explanation 2 of the Act. The ld. AR has submitted that therefore, assessment in non-search cases and search cases are under same sections 147 - 151 of the Act but cannot be treated at par. The Ld. AR submitted that in terms of first proviso to section 148 of the Act, the Ld. AO cannot issue notice u/s 148 of the Act until and unless he has information which suggests that income of the assessee has escaped assessment. The Ld. AR submitted that the proviso applies in the case of both i....
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....ssment on the returned income only. Therefore issuance of notice u/s 148 of the Act as per explanation 2 of the Act is bad in law since no incriminating material was found during the course of search. The third submission made by the counsel of the assessee is that the ld. PCIT had invoked jurisdiction u/s 263 of the Act on the ground that TDS was not deducted on the transportation charges amounting to Rs.2,08,63,787/- and therefore, expenses to the tune of Rs.30% were not allowable in terms of section 40(a)(ia) of the Act to the tune of Rs.62,59,136/-. The ld. PCIT accordingly held the order of the assessment to be erroneous and prejudicial to the interest of the Revenue. The ld. AR submitted that the ld. AO passed the order u/s 147 of the Act on 09.06.2023, which was held to be erroneous by the ld. Pr. Commissioner of Income Tax. The ld. AR submitted that assessee filed the return of income on 29.09.2017 and the time to issue notice u/s 143(2) of the Act expired on 31.12.2018. The search was initiated on 24.02.2022. The ld. AR therefore submitted that at the time of search the assessment year 2017-18 was not pending and has attained finality. In other words, the assessment was un....
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....assessment independently. Therefore, the ld. PCIT has exceeded his jurisdiction by passing the order u/s 263 of the Act. The ld. AR finally prayed that the order passed by the ld. PCIT is invalid and may kindly be quashed. 5. The ld. DR on the other hand relied on the order of the ld. PCIT heavily. 6. After hearing the rival contentions and perusing the materials available on record, we find that a search u/s 132 of the Act was conducted on Naxal Group on 24.02.2022 and in pursuance to search action, a notice u/s 148 of the Act was issued on 17.02.2023, after obtaining the approval from the competent authority. The assessee complied with the notice by fling the return of income on 14.03.2023, declaring total income of Rs.21,17,360/-. Subsequently, notice u/s 143(2) and 142(1) of the Act were issued along with questionnaire. The query raised with respect to suppression of sales and source of advance payment to the suppliers. The assessee complied with the said questionaries and the ld. AO framed the assessment u/s 147 of the Act vide order dated 12.07.2023 accepting the returned income. We note that post amendment by Finance Act, 2021, the scheme of assessment has changed from....
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....ooks of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee. the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee [where] the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person". 6.1. It is apparent from the above that explanation 1 is applicable in non-search cases whereas search cases were covered under explanation 2. We also note that a new section u/s 148A of the Act have been inserted by Finance Act, 2021 and the Proviso to Section 148A of the Act provides that explanation where provisions of Section 148A of the Act are not applicable. For the sake of ready reference the same are extracted below:- "Provided that the provisions of this section sha....
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.... dealing with issue of the incriminating material found during the course of search held that no addition can be made by the ld. AO in absence of any incriminating material found during the course of search u/s 132 of the Act or requisition u/s 132A of the Act. The Hon'ble Apex Court further ruled that the assessment can be re-opened by the ld. AO in exercise of power of Section 147/ 148 of the Act subject to the fulfillment of the conditions as mentioned under the relevant section and those powers of the AO are saved. Therefore, in the search assessment u/s 147 of the Act, explanation 2 of Section 148 read with first proviso to Section 148 of the Act, the information shall be in the form of incriminating material found during the course of search in absence of which any other information shall constitute the information under explanation 1 of section 148 of the Act. Therefore, search assessment u/s 147 of the Act cannot be framed in absence of incriminating material found during the course of search. 6.4. We note that during the course of search, certain materials were found relating suppression of sales and source of advance payments to suppliers and accordingly the ld. AO....
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....s 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 (1) limited 331 ITR 236 (Bom), wherein it was held as follows ............................... We note that in the assessee's case under consideration, the assessment for AY 2009-10 was completed us. 143(3)/11 of the Act on 01/03/2011. A notice under section 148 of the Act was issued on 22.03.2016 to reopen the assessment w/s. 147 of the Act. The only reason for issuing the said 148 notice as per Reasons Recorded dated 17.08.2016 was that income of Rs. 59,42,709-hus escaped assessment for having deposited money with the specified person Ms. Nissan Developers &Propert....