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TMI Blog2012 (12) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... h he assumed jurisdiction. Therefore, jurisdiction acquired by the A.O. u/s 147 is not in accordance with law. Therefore, the order of the A.O. is liable to be quashed - Decided in favor of assessee. - ITA No.286/Agr/2011 C.O. No.22/Agr/2012 - - - Dated:- 20-7-2012 - SHRI BHAVNESH SAINI, AND SHRI A.L. GEHLOT, JJ. Revenue by : Shri A.K. Sharma, Jr. D.R. Assessee by : Shri Rajendra Sharma, Advocate ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: The appeal by the Revenue and the Cross Objection by the assessee have been filed against the order dated 02.05.2011 passed by the Ld. CIT(A)-II, Agra for the Assessment Year 2003-04. 2. The grounds raised by the Revenue in this appeal is in respect of deletion of addition of ₹ 10,29,566/- under section 68 of the Income Tax Act, 1961 ( the Act hereinafter) on account of unexplained income shown as sale consideration of shares. 3. The grounds raised in the Cross Objection by the assessee read as under :- 1. That the notice issued u/s 147 of Income Tax Act for re-opening of the closed assessment is illegal, resultant to assessment completed u/s 148/143 is liable to be annulled being in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic, reliable, relevant and directly related to the assessee, for the particular assessment year and also of the particular transaction, was available with the A.O. for recording of the reasons, required for reopening of the completed assessment under section 147 of the Act. It was submitted before the CIT(A) that on the basis of which the A.O. reopened the assessment but later on the A.O. did not make any addition while completing the reassessment. In the reasons recorded, the A.O. has mentioned that the information has been received to the A.O. in respect of amount of ₹ 70,000/- in books of account of the assessee which was received from Ayushi Stock Broker (P) Ltd., Sanjay Place, Agra while completing reassessment the A.O. made addition of ₹ 10,29,566/- in respect of sale proceed of shares received through Deepak Securities, New Delhi. There was difference in material on the basis of which the reasons were recorded and later on the income alleged to be treated in respect of income escaped assessment. Thus, the reasons recorded were not the same or related to the income which the A.O. has assessed in the reassessment completed under consideration. Apart from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 70,000/- has escaped assessment and liable to be taxed in F.Y. 2002-2003 relevant to A.Y. 2003-04. 7. On perusal of records, we find the admitted facts that the case of the assessee was re-opened on the ground that the assessee has obtained accommodation entries and received amount of ₹ 70,000/- on 23.08.2002 through unreliable documents in the form of share application money/capital gains/gifts etc. during the F.Y. 2002-03 from Ayushi Stock Brokers Pvt. Ltd. and the same was deposited in State Bank of India, Seo Ka Bazaar, Agra. The A.O. has reason to believe that the income earned is unexplained and entry for ₹ 70,000/- has escaped assessment and liable to be taxed for A.Y. 2003-04. The A.O. made addition of ₹ 10,29,566/- on the ground that the assessee purchased 9000 shares for ₹ 90,000/- of M/s. G.L. Commercial Limited and same was sold to M/s. Deepak Security, Ansari Road, Daryaganj, Delhi for ₹ 10,29,566/-. Thus, it is clear that the addition made by the A.O. was different than reasons recorded under section 148 of the Act. To examine this issue, we would like to discuss some judicial pronouncements which are as under :- 7.1 Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for taking a cheque for that amount. The information did not indicate the source of the capital gains which in this case were shares. There was no information which shares had been transferred and with whom the transaction had taken place. The Assessing Officer did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice under section 148. What had been recorded by the Assessing Officer as his reasons to believe was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The Assessing Officer had clearly substituted form for substance and therefore the action of the Assessing Officer was not sustainable. 7.3 Hon ble Punjab Haryana High Court in the case of CIT vs. Smt. Paramjit Kaur, 311 ITR 38 held The assessee filed her original return declaring nil income. The Assessing Officer initiated reassessment proceedings on the basis of informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 148 is mandatory and prerequisite to the assumption of Jurisdiction by the officer for initiating proceedings for assessing or reassessing income which has escaped assessment; (2) the reasons are of particular significance when action is taken under section 147(a) because they indicate the reasons which the Officer had in mind for believing that income had escaped assessment by reason of one or other default of the assessee specified therein; (3) in order to Justify action under section 147(a), it is not open to the officer to refer to reasons other than those recorded by him pursuant to section 148(2); (4) in the instant case there is nothing in the reasons so recorded by the officer attracting the terms in which section 147(a) is set out so far as the petitioner is concerned ; and (5) hence, the notice under section 148 and the proceedings taken pursuant thereto have to be quashed . 7.5 Hon ble High Court of Delhi in the case of Ranbaxy Laboratories Limited vs. CIT, 336 ITR 136 (Delhi) held The assessee-company was engaged in the business of manufacture and trading of pharmaceuticals products. The Assessing Officer accepted the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of club fees, gifts and presents and provision for leave encashment, but during the assessment proceedings, he found the deduction under sections 80HH and 80-1 as claimed by the assessee to be not admissible. He consequently proceeded to make deductions under sections 80HH and 80-1 and accordingly reduced the claim on these accounts. The very basis of initiation of proceedings for which reasons to believe were recorded was income escaping assessment in respect of items of club fees, gifts and presents, etc., but while these items were not disturbed, the Assessing Officer proceeded to reduce the claim of deduction under sections BOHR and 80-1 which was not permissible. The Tribunal was right in holding that the Assessing Officer had the jurisdiction to reassess issues other than the issues in respect of which proceedings were initiated but he was not justified when the reasons for the initiation of those proceedings ceased to survive. 7.6 Hon ble High Court of Bombay in the case of CIT vs. Jet Airways (I) Ltd, 331 ITR 236 (Bom) held (Head note) Explanation 3 to section 147 of the Income Tax Act, 1961, was inserted by the Finance (No.2) Act of 2009, with effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o so, a notice under section 148 would be necessary in the event of challenge by the assessee. The effect of section 147 as it now stands after the amendment of 2009 can therefore, be summarized as follows : (i) the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year ; (ii) upon the formation of that belief and before he proceeds to make an assessment, reassessment or recomputation, the Assessing Officer has to serve on the assessee a notice under sub-section (1) of section 148 (iii) the Assessing Officer may assess or reassess such income, which he has reason to believe, has escaped assessment and also any other income, chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section; and (iv) though the notice under section 148(2) does not include a particular issue with respect to which income has escaped assessment, he may none the less, assess or reassess the income in respect of any issue which has escaped assessment and which comes to his notice subsequently in the course of the proceedings un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn for the assessment year 1970- 71 and while examining the same and scrutinizing the accounts of the assessee, the Income Tax Officer found that the assessee had made purchases and made payments in cash for such purchases exceeding ₹ 2,500. The Income Tax Officer also found that there were discrepancies in the dates of payments and receipts between the purchaser and the seller. The Income Tax Officer came to the conclusion that there were infringements of the provisions of section 40A(3) of the Income Tax Act, 1961, and thus a total amount of ₹ 16,250/- was disallowed and added back to the total income. The Income Tax Officer also made on addition of ₹ 5,092 to the total income of the assessee by estimating the income by sale by rejection of the account books and entries in the account books of the assessee. While passing the assessment order, the Income Tax Officer also initiated penalty proceedings under section 271(1)(c) and referred the matter to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner held that the assessee was not guilty of committing gross or willful neglect, so as to attract the trading addition of Rs,5,092. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has obtained accommodation entries received for ₹ 70,000/- on account of shares from Ayushi Stock Brokers Pvt. Ltd. but while making addition the A.O. made addition of ₹ 10,29,566/- on different transaction that the assessee purchased 9000 shares of G.L. Commercial Limited and were sold through broker Deepak Securities. The assessee has declared short term capital gain in respect of transaction pertaining to ₹ 70,000/- for which the A.O. recorded reasons for reopening. The A.O. did not record reason for reopening of assessment in respect of 9000 shares for which addition was made. The ld. Authorised Representative demonstrated this fact by referring page nos.4 to 8 of assessee s Paper Book where copy of account of assessee in books of account of M/s. Ayushi Stock Brokers (P) Ltd. (page no.4 of Paper Book) and in the books of account of Deepak Securities (page no.8 of PB). Page no.2 of Paper Book where a copy of computation of total income for A.Y. 2003-04 has been placed. Thus, admittedly the reasons recorded and additions made are different transactions. It is also admitted fact that the A.O. did not make any addition in respect of transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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