2024 (2) TMI 404 - HC - Income Tax

Re-opening under Section 147 - Addition made on amounts which did not form part of the reasons recorded for reopening - considering issues only spelt out in the original notice under Section 147 - assessee s case was reopened on the basis of information relating to accommodation entry received - As decided by ITAT 2023 (4) TMI 634 - ITAT DELHI no addition was made in the assessment order on this amount since the amount had already been added in the order u/s 153A - In addition was made u/s 68 of the Act in respect of the amount received from 5 persons which did not form part of the reasons recorded for reopening of the case, in these circumstances, the case laws of Jet Airways (I) Ltd. ( 2010 (4) TMI 431 - HIGH COURT OF BOMBAY are fully applicable and there is no infirmity in the well-reasoned order of ld. CIT (A). HELD THAT - While the addition of accommodation entry received need not detain us, since this amount came to be added subsequently in terms of the order made under Section 153A of the Act and is dated 30 March 2014, the ITAT has adversely commented upon the addition u/s 68 on the ground that the same did not form part of the reasons which were spelt out in the original notice under Section 147 of the Act. Matter requires consideration. We accordingly, admit the instant appeal on the following question of law A. Whether Ld. ITAT has erred on the facts and circumstances of the case in not appreciating Explanation 3 of Section 147 of the Income Tax Act, 1961 and whether the same would empower the Assessing Officer to assess or reassess income in respect of any issue which has escaped assessment notwithstanding the reasons recorded under sub-section (2) of Section 148 having not alluded to the same or formed the basis for reopening? Let the matter be called again on 27.03.2024.

Summary

Issues involved:
The judgment involves the issue of re-opening under Section 147 of the Income Tax Act, 1961 and the interpretation of Explanation 3 of Section 147.

Re-opening under Section 147:
The Income Tax Appellate Tribunal (ITAT) considered the case where the assessment was reopened based on information related to accommodation entry received from a trading company. While no addition was made on this amount as it had already been added in a previous order, an addition was made on another amount which did not form part of the reasons for reopening. The ITAT upheld the order of the Commissioner of Income Tax (Appeals) based on relevant case laws. However, the Tribunal adversely commented on the addition that was not part of the original notice under Section 147.

Interpretation of Explanation 3 of Section 147:
The Court examined Explanation 3 to Section 147, which allows the Assessing Officer to assess income in respect of any issue that has escaped assessment, even if it was not part of the original reasons recorded for reopening. Reference was made to a previous order which highlighted the importance of circumstances in determining the validity of reassessment proceedings. The Court also discussed the requirement of tangible material to support a reassessment notice, emphasizing that the framing of assessment does not automatically imply a judicial application of mind. The judgment referred to various High Court decisions and the Supreme Court's stance on the interpretation of Section 147 and its Explanation.

Separate Judgment:
The Court expressed doubts regarding the interpretation of Section 147 as per the case of Ranbaxy Laboratories Limited and decided to refer the issue to a larger Bench. The question framed for reference to the Full Bench concerned whether the restrictive interpretation of Section 147, as seen in previous cases, was appropriate in sustaining additions made in reassessment proceedings. The matter was directed to be listed before the Full Bench for further consideration.