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TMI Blog2022 (3) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... e case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that the assessee has established the identity of the shareholders disregarding the fact that no such companies were found at the addresses given and the premises too did not belong to the companies. Inspector's report also proves it. 3. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that the assessee had established the creditworthiness of the shareholders. 4. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that the assessee had established genuineness of the transaction even when no shareholder's director responded to the notice issued under section 133(6) and the assessee also could not produce any of the shareholder companies directors. 5. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in placing reliance on the decision of the hon'ble apex court in the case of CIT v. Lovely Exports (P.) Ltd. [2009] 319 ITR (St.) 5 (SC) ; [2008] 216 CTR 195 (SC) disr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel, we have considered the relevant documentary evidence/judicial decisions relied upon. 7. Briefly stated, the facts of the case are that the return of income for the year under consideration was filed on October 31, 2007 declaring an income of Rs. 2,09,361. Assessment was completed under section 143(3) of the Act vide order dated May 29, 2009 wherein the returned income was accepted. Notice under section 148 read with section 147 was issued on March 27, 2014 and the assessee, in response to which, stated that the return filed originally may be treated as return of income filed in response to notice under section 148 of the Act. Reasons recorded by the Assessing Officer for issuing of notice under section 148 of the Act read as under : Reasons for issue of notice under section 148 of the Income-tax Act, 1961 in the case of Sunlight Tour and Travels Pvt. Ltd. for the assessment year 2007-08-Regarding. Information about entry operators and their beneficiaries of Delhi has been received from the office of the DGIT (Inv) 3rd Fioor, Scindia House, Ballard Estates, Mumbai vide letter F No. DGIT (Inv)/Information/Pj/2013-14/dated March 7, 2014 and F. No. Addl-DIT (Inv.)/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed above, income has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. In view of the above I have reason to believe that income of Rs. 88,00,000 escaped assessment within the meaning of the provisions of section 147 of the Income-tax Act, 1961, therefore, a notice under section 148 of the Income-tax Act, 1961 is requested to be issued to the assessee-company to assess the income escaped as stated here in above. In view of the above I have reason to believe that income of Rs. 88,00,000 escaped assessment within the meanings of the provisions of section 147 of the Income-tax Act, 1961, therefore, a notice under section 148 of the Income-tax Act, 1961 is requested to be issued to the assessee-company to assess the income escaped as stated here in above. 8. The assessee raised strong objections against the issuance of notice under section 148 of the Act. In its objections, the assessee strongly agitated that it had not received any of the impugned amount during the year under consideration from the persons alleged by the Assessing Officer in the reasons recorded for reopening the assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pvt. Ltd. as per details mentioned above Rs. 88,00,000. This accommodation entry taken by M/s. Sunlight Tour and Travels (P.) Ltd. is earlier identified and examined by the Investigation Wing to establish that all these entry providing entities were tools in Praveen Kumar Jain business of providing accommodation entries in lieu of cash/cheques though which he had drawn a long trail of bank transaction to impart a colour of genuineness of these transactions . . .' In view of the facts stated above reasons were duly recorded and after taking necessary approval from the competent authorities a notice under section 148 was issued to reassess the income of the assessee in accordance with the provisions laid down under section 147 of the Income-tax Act. As regard to the contention made vide letter dated May 29, 2014 by the assessee that it had not received any of impugned amount during the year under consideration from the parties stated in the reasons so recorded, the same is being duly considered but not found acceptable as this is the matter of investigation that whether the assessee has given/taken any accommodation entry from the parties so alleged. Therefore the objection/c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148." 16. This insertion of Explanation 3 to section 147 of the Act has been examined and interpreted by the hon'ble High Court of Bombay in the case of CIT v. Jet Airways (I.) Ltd. [2011] 331 ITR 236 (Bom). The relevant part of the judgment is extracted as under (page 240) : "5. The condition precedent to the exercise of the jurisdiction under section 147 is the formation of a reason to believe by the Assessing Officer that any income chargeable to tax has 'escaped assessment'. Upon the formation or a reason to believe, the Assessing Officer, before making the assessment, reassessment or recomputation under section 147 has to serve on the assessee a notice requiring him to furnish a return of his income. Upon the formation of the rea son to believe that income chargeable to tax has escaped assessment, the Assessing Officer is empowered to assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A Division Bench of the Kerala High Court held in Travancore Cements Ltd. v. Asst. CIT [2008] 305 ITR 170 (Ker), that upon the issuance of a notice under section 148(2), when proceedings were initiated by the Assessing Officer on issues in respect of which he had formed a reason to believe that income had escaped assessment, it was not open to the Assessing Officer to carry out an assessment, or reassessment in respect of other issues which were totally unconnected with the proceedings that were already initiated and which came to his knowledge during the course of the proceedings. The Division Bench held that in respect of an issue which is totally unconnected to the basis on which the Assessing Officer formed a reason to believe that income escaped assessment and issued a notice under section 148, it was open to him to issue a fresh notice by following sub-section (2) of section 148 with regard to the escaped income which came to his knowledge during the course of the proceedings. The Kerala High Court held as follows (page 178) : 'The Assessing Officer gets jurisdiction under section 148 to assess or reassess the income which has escaped assessment only after sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under the section. . . . 14. The rival submissions which have been urged on behalf of the revenue and the assessee can be dealt with, both as a matter of first principle, interpreting the section as it stands and on the basis of precedents on the subject. Interpreting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. 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 April 1, 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 of the former, he cannot independently assess the latter." 17. If the above judgment is applied on the facts of the case in hand, we find that the Assessing Officer has accepted the objections of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recomputed escaped income. Section 147 man dates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess he escaped income chargeable to tax. As per Explanation 3 if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the Legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby would include different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Tribunal was justified in quashing the reassessment and the consequential additions made therein holding that the passing of order under section 143(3) read with section 147 assessing the other income based on the assessees alleged statement before the Deputy Director of Income-tax because it did not form part of reasons recorded under section 148 ?" 21. The findings given by the hon'ble Rajasthan High Court in the case of Dr. Devendra Gupta (supra) read as under (page 60) : "2. Though two separate questions have been framed, but in sub stance they comprehend the common question. The precise controversy is, that reasons were recorded for assuming certain income to have escaped assessment, however during reassessment proceedings, that income was not found to have escaped assessment, but then on the basis of certain other material, certain other incomes were found to have escaped from assessment to tax, and therefore, reassessment had been made. As such, the question precisely is, as to whether in case where despite existence of material on record, to arrive at a conclusion about escapement of certain income from assessment, in the reassessment proceedings where such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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