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TMI Blog2020 (6) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... hare application money of Rs. 10,00,000 received by the appellant from VPC Financial Services Pvt. Ltd., company belonging to search party, i.e., Sh. S.K. Jain Group as an accommodation entry, without any independent verification / satisfaction of the assessing officer, constituted valid "reason to believe" to assume jurisdiction under section 147 of the Act. 1.2 That the CIT(A) erred on facts and in law in holding that the assessing officer applied independent mind on the investigation report before forming 'reason to believe' and issuing notice under section 148 of the Act. 1.3 That the C1T(A) erred on facts and in law in not adjudicating and not quashing the impugned reassessment order passed under section 147 on the ground of being barred by limitation, having been initiated after the expiry of four years from the end of the relevant assessment year in terms of first proviso to section 147 in the absence of any failure on the part of the appellant to disclose fully and truly all material facts in relation to the receipt of share application money from VPC during original assessment. 1.4 That the CIT(A) erred on facts and in law in not adjudicating and not quashing the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of facts and the same be admitted for adjudication. 5. Briefly in the facts and circumstances of the case the assessment has been initiated u/s 147 of the Act by recording reasons for re-opening the assessment on the basis of certain information received consequent to search and seizure operations carried out at the residential and business premises of Sh.Surendra Kumar Jain and Sh. Virendra Jain on 14.09.2010. The Assessing Officer recorded the reasons for re-opening the assessment and thereafter, issued notice u/s 148 of the Act. Though, several additions have been made in the hands of the assessee, which stand confirmed by the order of CIT(A; but the preliminary issue which need to be adjudicated first is against the reopening of the assessment u/s 147/148 of the Act. 6. The Ld.AR referred to the reasons recorded for re-opening the assessment u/s 147 of the Act, which are placed at pages 188 & 189 of the Paper Book and pointed out that the reasons are only in respect of the accommodation entry received of Rs. 10 Lakhs only. He then referred to the letter dated 16.11.2012 wherein the Assessing Officer talks of notice issued u/s 142(1) of the Act; but do not talk of any notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2011] 336 ITR 136 (Del.) and Hon'ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. [2010] 331 ITR 236 (Bom.). The third issue raised by the Ld.AR was that re-opening of assessment was after a period of 4 years and there was no failure on the part of the assessee. Our attention was drawn to the original proceedings u/s 143(3) of the Act and the queries raised. He also stressed that there was no independent application of mind by the Assessing Officer on the information received and on this ground also the reassessment proceedings cannot survive. 9. The Ld.DR for the Revenue pointed out that the information was with Assessing Officer and after applying his mind, other contentions were raised and the additions were made. He fairly pointed out that the issue be decided accordingly. 10. We have heard the rival contentions and perused the record. Various issues have been raised by the assessee with regard to re-opening of assessment u/s 147/148 of the Act. The preliminary issue raised is whether the aforesaid re-opening of the assessment is validly initiated or not? Without going into the aspect of issue of notice u/s 143(2) of the Act, we proceed to address the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any other source be upheld in the hands of the assessee in assessment completed u/s 147 r.w.s. 143(3) of the Act. The Income tax Act very clearly provides that in case the re-assessment proceedings has been initiated on one account then any other addition can be in the hands of the assessee; but in case no addition has been made on account of the reasons recorded for re-opening the assessment then whether the other additions made in the hands of the assessee can survive or not is the question before us. 13. The Hon'ble Bombay High Court in CIT vs Jet Airways (I) Ltd. (supra) had considered the amendment u/s 147 of the Act by Finance (No.2) Bill of 2009 and held as under:- 9. "The effect of s. 147 as it now stands after the amendment of 2009 can, therefore, be summarised as follows : (i) The AO 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 AO has to serve on the assessee a notice under sub-s. (1) of s. 148; (iii) The AO may assess or reassess such income, which he has reason to believe, has esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. Parliament having used the words "assess or reassess such income and also any other income chargeable to tax which has escaped assessment", the words "and also" cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word "or". The legislature did not rest content by merely using the word "and". The words "and", as well as "also" have been used together and in conjunction. The Shorter Oxford Dictionary defines the expression "also" to mean 'further, in addition, besides, too'. The word has been treated as being relative and conjunctive. Evidently, therefore, what Parliament intends by use of the words "and also" is that the AO, upon the formation of a reason to believe under s. 147 and the issuance of a notice under s. 148(2) must assess or reassess : (i) 'such income'; and also (ii) any other income chargeable to tax which has escaped assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealt with the provisions of s. 147, as they stood prior to the amendment on 1st April, 1989. The Supreme Court held that the expression "escaped assessment" includes both "non-assessment" as well as "underassessment". Income is said to have escaped assessment within the meaning of the section when it has not been charged in the hands of an assessee during the relevant assessment year. The expression "assess" refers to a situation where the assessment of the assessee for a particular year is, for the first time, made by resorting to the provisions of s. 147. The expression "reassess" refers to a situation where an assessment has already been made but the AO has reason to believe that there is underassessment on account of the existence of any of the grounds contemplated by Expln. 1 to s. 147. The Supreme Court adverted to the judgment in V. Jaganmohan Rao vs. CIT (1970) 75 ITR 373 (SC), which held that once an assessment is validly reopened, the previous underassessment is set aside and the ITO has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year. The Court held that the object of s. 147 enures to the benefit of the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : ". . . if is only when, in proceedings under s. 147 the AO, assesses or reassesses any income chargeable to tax, which has escaped assessment for any assessment year, with respect to which he had 'reason to believe' to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under s. 147. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under s. 147, the AO were to come to the conclusion, that any income chargeable to tax, which, according to his 'reason to believe', had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147." 15. Parliament, when it enacted the Expln. (3) to s. 147 by the Finance (No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Expln. 3 by the Finance Act (No. 2) of 2009. However, Expln. 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of s. 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Sec. 147 has this effect that the AO has to assess or reassess the income ("such income") which 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 his notice during the course of the proceedings. However, if after issuing a notice under s. 148, he 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. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es so, he can also assess or re-assess any other income which has escaped assessment and which comes to his notice during the course of proceedings. However, if after issuing notice u/s 148 of the Act, the Assessing Officer accepts the contention of the assessee and holds that the income which he initially formed reason of believe of escapement of income, as a matter of fact not escaped assessment, then it was not open to him to independently assess the other income. Incase if he intended to do so, fresh notice u/s 148 of the Act would be necessary in the accordance with law. 15. The Hon'ble Delhi High Court in Ranbaxy Laboratories Ltd. vs CIT (supra) relying on the ratio laid down by the Hon'ble Rajasthan High Court in the case of CIT vs Shri Ram Singh [2008] 306 ITR 346 (Raj.) and also referring to the decision of Hon'ble Bombay High Court in CIT vs Jet Airways (I) Ltd. (supra) and various other case laws finally referred to the conclusion of Hon'ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. (supra) and held as under:- 18. "We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of Jaganmohan Rao (supra). We may ..... X X X X Extracts X X X X X X X X Extracts X X X X
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