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TMI Blog2020 (12) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... reopening or during the reassessment proceedings. With regard to the issue whether any addition made by the AO is legally valid in the absence of a valid addition made based on the reasons recorded is examined in the context of the judgment of the Hon ble Jurisdictional High Court in the case of Ranbaxy Laboratories ltd. Vs CIT [ 2011 (6) TMI 4 - DELHI HIGH COURT] - We hold that the other addition made by the AO depends upon the view to be taken by the AO in respect of the addition of 5,00,000 /- as mentioned in the reasons. To sum up, we hereby hold that, a. The addition of 5,00,000/- as mentioned in the reasons recorded is being sent for verification owing to absence of proof of deposit in the assessee s bank account. b. The issue of the addition of 2.20 cr. made by the AO for which reasons have not been recorded since linked to the point (a.) above will have a contemporaneous effect on the outcome of the verification by the revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... se view. 7. That under the facts and circumstances, the Ld. A. O. erred in law and on merits in making the addition u/s. 68 for ₹ 2,20,00,000 /- (₹ 17,60,000 /- share capital + ₹ 2,02,40,000 /- share premium) received during the year from 05 companies. 7.1 That in the absence of providing cross examination of relevant persons and also in the absence of confronting with all alleged adverse material, no cognize thereof can be taken for taking an adverse view. 7.2 That without prejudice, issue of ₹ 2,20,00,000/- since not a part of reasons and further no such material found during examination to justify the addition for the same, therefore this issue is outside the scope of these proceedings, therefore the A. O. exceeded his jurisdiction in examining and in making addition of ₹ 2,20,00,000/-. 7.3 That without prejudice, in case the addition of ₹ 5,00,000 /- for which the proceedings have been initiated, stands deleted, no other issue including of ₹ 2,20,00,000/- can be examined and adjudicated in impugned proceedings u/s. 147 / 148. 7.4 That Ld. CIT( A) committed grave error of law and facts in confirming the addition of ₹ 2,20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was incorporated on 13.03.2006. The assessee company in F.Y. 2009-10 relatable to A.Y. 2010-11 has received ₹ 1, 96,36,000 /- as share capital and ₹ 7,77,40,000/- as securities premium. The financial figures of the company are tabulated below: S. No. Particulars A. Y. 2009 - 10 A. Y. 2010 - 11 1. Authorized Share Capital ₹ 2,00,00,000 ₹ 3,00,00,000 2. Issued, Subscribed and Paid up Capital ₹ 1,78,76,000 ₹ 1,96,36,000 3. Securities premium Account/ Share Application Money ₹ 5,75,00,000 ₹ 7,77,40,000 4. Share application Money Rs. NIL Rs. NIL 5. I have carefully perused and analyzed the facts of the case as detailed above and the following facts emerge from the same:- (i) Particulars of all investing companies are found recorded in the diary maintained in the regulate course, at the premises under control of Sh. S. K Jam. (ii) The pass books/cheque books of all the investing companies who have made investments in the assessee company have been found at the premises 0j Jain arid Sh. Virender Jain when these persons are not directors/shareholders of these companies. (iii) Perusal of various seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from M/ s Asheesh Capital Services Pvt. Ltd. obtained through Sh. G. L. Gupta as per reasons recorded in the form of accommodation entry and the same is fully corroborated with cheque No. and bank details, the same is also added u/ s 68 of the I. T. Act." 10. During the arguments, the assessee has submitted the following certificates: i. Certificate dated - 04.09.2019 from Kotak Mahindra Bank ii. Certificate dated - 05.09.2019 from Axis Bank iii. Certificate dated - 03.09.2019 from CITI Bank iv. Certificate dated - 03.08.2019 from Bank of India 11. All the banks have categorically certified that the PO No./Cheque No. 030971 dated 30.11.2019 of ₹ 5,00,000 /- has not been cleared/deposited/collected by their banks. 12. The assessment order has also not mentioned anywhere as to, in which bank account of the assessee, the alleged cheque has been deposited. The ld. CIT (A) has also not given any finding as to where or in which bank account, the said amount of ₹ 5,00,000 /- has been deposited. 13. The ld. AR fierily and vehemently submitted before the Court and made a categorical statement that the assessee has not received and deposited any such cheque no. 030971 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 147 though the reasons for such issue were not included in the reasons recorded in the notice under section 148 (2 ) on the basis of which he had initiated proceedings under section 147. Similar question came for consideration before the Division Bench of Bombay High Court in CIT v. Jet Airways ( I) Ltd. [ 2011 ] 331 ITR 236 /[2010 ] 195 Taxman 117. The Court held as under :- " 9. The effect of section 147 as it now stands after the amendment of 2009 can, therefore, be summarised as follows: ( i) The Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year; ( i i) 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 ) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of proceedings under section 147, the Assessing Officer 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 Assessing Officer 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 Assessing Officer may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147." 14. The Bombay High Court also discussed the cases of V. Jaganmohan Rao (supra) and Sun Engg. Works (P.) Ltd. ( supra) of the Apex Court. In the case of Sun Engg. Works ( P.) Ltd. (supra) the issue before the Supreme Court was whether in the course of reassessment on an escaped item of income could an assessee seek a review in respect of an item which stood concluded in the original order of assessment. The Supreme Court dealt with the provisions of section 147, as they stood prior to the amendment on 1 -4 - 1989. In this context, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r income" coming to the notice of the Assessing Officer, during the course of the proceedings, can be roped in. 16. In the case of C. J. International Hotels Ltd. (supra) before the Tribunal, the facts were almost similar as in the present case. The Tribunal relied upon the case of Shri Ram Singh (supra) while holding that the Assessing Officer was justified in initiating the proceedings under section 147 /148, but then, once he came to the conclusion, that the income, with respect to which he had entertained, his jurisdiction came to a stop at that, and did not continue to possess jurisdiction, to put to tax, any other income which subsequently came to his notice, in the course of the proceedings, which were found by him, to have escaped assessment. 17. Now, coming back to the interpretation which was given by the Bombay High Court to sections 147 and 148 in view of the precedent on the subject. The Court held as under:- " 11.... Interpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under section 147 and following the issuance of a notice under section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. If upon the issuance of a notice under section 148(2 ), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of section 147 with effect from 1 - 4 - 1989 clearly stipulated that the Assessing Officer has to assess or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceedings. In the absence of the assessment or reassessment the former, he cannot independently assess the latter." Section 147 has this effect that the Assessing Officer 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 section 148, he accepted the contention of the assessee and holds that the income which he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t held that the object of section 147 enures to the benefit of the revenue and it is not open to the assessee to convert the reassessment proceedings as an appeal or revision and thereby seek relief in respect of items which were rejected earlier or in respect of items not claimed during the course of the original assessment proceedings. The judgment in V. Jaganmohan Rao' s case ( supra) dealt with the language of sections 22 (2 ) and 34 of the Act of 1922 while the judgment in Sun Engg. Works (P.) Ltd.' s case (supra) interprets the provisions of section 147 as they stood prior to the amendment on 1 - 4 - 1989. 13. The effect of the amended provisions came to be considered in two distinct l ines of precedent on the subject. The first l ine of authority, to which a reference has already been made earlier, adopted the principle that where the Assessing Officer has formed a reason to believe that income has escaped assessment and has issued a notice under section 148 on certain specific issues, it was not open to him during the course of the proceedings for assessment or reassessment to assess or reassess any other income, which may have escaped assessment but which did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her income, chargeable to tax, which the Assessing Officer 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 Explanation (3 ) to section 147 by the Finance (No. 2 ) Act, 2009 clearly had before it both the l ines of precedent on the subject. The precedent dealt with two separate questions. When it effected the amendment by bringing in Explanation 3 to section 147, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain courts that the Assessing Officer has to restrict the assessment or reassessment proceedings only to the issues in respect of which reasons were recorded for reopening the assessment. The corrective exercise embarked upon by " Parliament in the form of Explanation 3 consequently provides that the Assessing Officer may assess 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 under section 148 (2 ). The decisions of the Kerala High Court in Travan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under section 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 section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. 17. We have approached the issue of interpretation that has arisen for decision in these appeals, both as a matter of first principle, based on the language used in section 147 (1 ) and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147 ( 1 ) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently durin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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