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TMI Blog2019 (1) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... . That being the case, we find merit in the CIT(A)’s above extracted detailed reasoning that the impugned re-opening would not sustain the test of legality. - Decided in favour of assessee. - ITA No.1800/Kol/2017 And C.O. No.112/Kol/2018 - - - Dated:- 31-12-2018 - Shri S.S.Godara, Judicial Member And Shri, M. Balaganesh, Accountant Member For The Assessee : Shri S.S. Gupta, FCA For The Revenue : Shri Pradip Majumdar, Addl. CIT-Sr-DR ORDER PER S.S.Godara, Judicial Member:- This Revenue s appeal and assessee s cross-objection arise from Commissioner of Income Tax (Appeals)-21,Kolkata s order dated 26.05.2017 passed in case No.10745/CC-3(2)/CIT(A)-21/KOL/16-17 involving proceedings u/s 147 r.w.s.143(3) of the Income Tax Act, 1961; in short the Act . Heard both the parties. Case file perused. 2. We come to Revenue s appeal ITA No.1800/Kol/2017 first seeking to reverse CIT(A) s findings quashing re-opening / re-assessment in issue vide following detailed discussion:- 4. The AR has filed an additional ground of appeal on 19-04-20 17 in which assessment order passed u/s 147/143(3) has been challenged. This additional ground of appeal is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess of setting up a real estate project and the cost incurred in connection to the acquisition of Land along with all the related construction/ development costs (including interest) was carried forward as stock in trade. The interest amount of ₹ 1418390/- alleged to be on account of jamakharchi transactions was not claimed as deduction in the relevant assessment year. Therefore, the contention that income has escaped assessment, is erroneous and misplaced . During the assessment proceedings the AR has also produced/filed a copy of audited balance sheet as on 31-03-2009. In schedule VII under the head details of inventories (work-in-progress ₹ 1418390/-) has been shown. Accordingly, this amount has not been claimed by the assessee as any deduction/ expenditure during the relevant assessment year. I have also considered the written submission filed by the AR on this issue which is as under: Regarding addition made on account of alleged disallowance of interest of ₹ 1418390/-, it was also submitted before the Ld Assessing Officer vide our letter dt.28-11-2016 as follows: It was also submitted that the assessee company was in the process of sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then in that situation where is the question of making disallowance of this amount of ₹ 1418390/- as wrong expenditure claimed. Accordingly, AO's action of making disallowance for alleged expenditure as interest payment in AY 2009-10 of ₹ 1418390/- cannot be sustained. Once it is clear that the assessee has not claimed the amount of ₹ 1418390/- as expenditure (on account of interest payment) during the AY 2009-10. In that situation the AO's reason to believe that an amount of ₹ 1418390/- has escaped assessment (on account of payment of interest to jamakharchi companies) is not based on factual position of this case. Accordingly, the very basis on which notice u/s 148(2) has been issued cannot be justified and sustained. In this situation wherein the very basis of the ' reasons to believe' of the AO for reopening of the assessment does not stand and addition made on that basis is not sustained then, can other additions made in the assessment order passed u/s 147/143(3) be sustained. The AR has brought on record different case laws on this issue which may be discussed as under. In the case law of CIT vs Jet Airways (I) Ltd (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 the notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepts 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. Similarly, the Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd vs CIT (2011) 336 ITR 136 (Del) held that Reassessment items of income said to have escaped assessment on which reassessment proposed not added but other deductions reduced not permissible . Again, the Chhattisgarh High Court in the case of ACIT vs Major Deepak Mehta (2012) 344 ITR 641 (Chhattisgarh) held (Reassessment-validity-effect of Explanation 3 to section 147 and section 152(2)- finding that income mentioned in notice had not escaped assessment-reassessment not valid. Further the Pune Bench of ITAT in the case of Maharashtra Academy of Engineering and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.143(1) of the Act. This followed the regular assessment dated 27.12.2011 completed in assessee s case making various disallowance(s) / addition(s) resulting in an enhancement of above declared income to ₹43,43,533/-. 4. Case file indicated that the Assessing Officer thereafter framed reasons to believe that assessee s taxable income liable to be assessed had escaped assessment in view of sole reason that its interest payment of ₹14,18,390/- had been paid to jamakharchi company(ies). We make it clear that there is no dispute that the Assessing Officer having re-opened the above regular assessment in view of the said sole reason. This followed the impugned reassessment framed on 29.03.2016 both disallowing the above interest payment as well as adding unsecured loans of ₹5,35,00,000/- availed from 13 entities. 5. The assessee preferred a appeal against the above two addition(s). The CIT(A) observes that the assessee had successfully demonstrated during the course of lower appellate proceedings that it had never claimed the impugned interest expenditure in its books. He thereafter holds that the Assessing Officer s sole reason of re-opening no more survives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted on 03.10.2013. As a result of the said search and follow - up investigation, it came to the light that Bhawarlal Jain Group is a leading entry provider of Mumbai. The group provides accommodation entries of bogus purchases through various benami concern operated and managed by Bhanwarlal Jain and his son. The search revealed various incriminating documentary evidences indicating the same. Statements of various persons (who assists Bhanwarlal Jain in providing bogus purchases through benami concern to the beneficiaries) were recorded. It is further mentioned in the said report that the entire bogus nature of the transactions has also been admitted by Bhawarlal Jain in his statement recorded u/s. 132(4) of the I.T.Act,1961. On the basis of detailed report, it is summarized that the group indulged in providing bogus purchase bills and returning the amount in cash after deducting commission and this modus operandi was also followed in the assessee's case. Based on the above information, I have the reason to believe that the assessee entered into bogus purchases through accommodation entries without actual delivery of goods and payments as detailed above being the modu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed] 14,55,472 Add: Unexplained cash credit [as discussed] 41,38,799 Total Income 59,49,783 7. It may be seen from the above additions made by the AO that the long term capital gain which was treated as bogus viz. ₹ 41,38,799/- was not the reason for which the assessment proceedings were initiated by the AO u/s 147 of the Act as recorded in the reasons for initiating reassessment proceedings which we have extracted in paragraph 2 of this order. 8. On appeal by the assessee the CIT(A) confirmed the order of the AO. The conclusion of the CIT(A) on the issue of bogus purchase of diamonds were as follows: a. The assessee has been unable to prove the actual transport and receipt of the diamond in her hands, despite being repeatedly asked in the matter by the Ld. AO. b. The two cheques were paid by the assessee after a hiatus of 10 days to the alleged supplier, quite an impossibility in the jewellery trade, more so in the diamond trade. c. It is quite impossible for any jeweller not to demand and accept money on handing over the diam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque for which bank statement was produced, there was no evidence of any other payment and no deduction was claimed as the source of the purchase was duly proved and there was no evidence that he assessee earlier purchased the diamonds by paying cash money. 6. For that the Ld. C.I.T(A) erred in confirming the addition of ₹ 41,17,365/- as unexplained cash credit U/s. 68 when there is nothin8 on record to treat the said sum as concealed income which had come to his notice 01 the AO in the course of assessment proceedings, 7. For that the Ld. C.I.T(A) erred in addin8 back ₹ 41,17,365/- as unexplained cash credit when all the evidences with regard to the earning of the said capital aain were filed and the Ld. AO failed to bring on record any evidence to prove the contrary except relying of the here say communication forwarded by the DGIT(Inv). 8. For that the Ld. C.I.T(A) erred in confirming the estimate and making addition of ₹ 21,434/- as payment made for arranging the capital gain when there was no such payment nor any evidence was brought on record to prove the same. 9. For that the reopening of the assessment for the reasons recorded was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne. Ultimately the AO made an addition in the case of the Assessee by observing that since the assessee in the balance sheet has shown increase in jewelry there is no evidence on record to doubt that he didn't make any purchase in the FY-2011-12 but the purchases were made by the Assessee from some other party in earlier year but the assessee has not furnished the details of the same. Accordingly, expenditure incurred towards purchase of diamonds shown as jewelery in the Balance Sheet is considered as unexplained investment u/s 69 of the Act and deemed to be the income of the assessee for the financial year 2009-10. On appeal by the assessee the CIT(A) confirmed the orders of the AO. 15. We have heard the submissions of the ld. Counsel for the assessee and the ld. DR. The ld. Counsel for the assessee pointed out that the jewellery in question has been purchased by the assessee which was confirmed by Nice Diamonds and the payment has been made by cheques. More important it was pointed out that the investments has been shown in the books of accounts and the source had been duly explained as from the disclosed bank accounts of the assessee. It was submitted that in the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... geable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section . Explanation 3 to s. 147 inserted by F (No. 2) Act, 2009 w.r.e.f 1.4.1989 provides that the AO may assess or reassess the income in respect of any issue notwithstanding the reasons for such issue have not been included in the reasons recorded ITA No.634/Kol/2017 Sanju Jalan A.Yr.2012-13 9 ( ii) The words and also indicate that reassessment must be with respect to the income for which the AO has formed an opinion and also in respect of any other income which comes to his notice subsequently. However, if the AO accepts the objection of the assessee and does not assess the income which was the basis of the notice, it is not open to him to assessee income under some other issue independently; ( iii) Explanation 3 to s. 147 was inserted to supersede the judgments in Vipin Khanna 255 ITR 220 (P H) Travancore Cements 305 ITR 170 (Ker) where it was held that the AO could not assess income in respect of issues unconnected with the issue for which the notice was issued. However, Explanation 3 does not affect the judgments in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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