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TMI Blog2022 (9) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... r the jurisdiction to adopt proceedings u/s 147 of the Act and if the notice is illegal, the reassessment proceedings are invalid. We should bear in mind the decision in the case of GKN Driveshafts (India) Limited [ 2002 (11) TMI 7 - SUPREME COURT] wherein it was held that the assessing officer is bound to furnish reasons within a reasonable time and the noticee is entitled to file their objection to such notice and the assessing officer is bound to dispose of the same by passing a speaking order. Though the Explanation 3 inserted by the amendment empowers the assessing officer to assess the income in respect of any issue which has escaped assessment when such issue comes to his notice subsequently in the course of the proceedings under Section 147 notwithstanding that the reasons for such issue have not been included in the reasons recorded under Sub-Section 2 of Section 148, the prerequisite is there should be a valid notice. Admittedly, in the case on hand, the notice was held to be not sustainable. If that be so, AO cannot be stated to be empowered to make a roving enquiry into other issues which according to him came to his notice during the reassessment proceedings. The found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopers and Properties Pvt. Ltd. to the tune of Rs/ 59,42,709/-. It was further seen that the said company is a specified person of the assessee. According to the Assessing Officer, the assessee is hit by Section 13(1)(c)(ii) and Section 13(1)(d) of the Act., for such reason the assessment was reopened under Section 147 of the Act by issuance of notice under Section 148 dated 13.03.2016. Subsequently, notices under Section 143(2) and Section 142(1) were issued. Pursuant to such notices the assessee through their authorized representative appeared before the Assessing Officer and produced details and documents and made their submissions. The Assessing Officer observed that from the impugned documents it was seen that the assessee had deposited Rs. 59,42,709/- and Rs. 3,65,97,000/- with M/s. Nissan Developers and Properties Pvt. Ltd. and Poddar Projects Ltd. respectively and both these companies are specified persons of the assessee. Therefore, the Assessing Officer held that these amounts are to be taxed separately at Maximum Marginal Rate in terms of the proviso to Section 164(2) of the Act. Further, the Assessing Officer pointed out that two of the trustees are also directors of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the decision of the Hon'ble Supreme Court in CIT Versus Kelvinator India Ltd. (2010) 320 ITR 561 (SC) to support the contention that the reassessment proceeding was a case of change of opinion. Several other grounds were raised touching upon the merits of the matter. 4. The CIT(A) by order dated 30th July, 2019 substantially affirmed the view taken by the Assessing Officer except for granting partial relief such as with regard to the claim for carry forward of the depreciation etc. Aggrieved by such order the assessee preferred an appeal before the leaned Tribunal. It was contended before the Tribunal that the CIT(A) failed to take note of the material irregularity committed by the Assessing Officer while initiating proceedings under Section 148 of the Act for reopening assessment under Section 147 without noting the vital fact that the basis of issuing notice under Section 148 was on a wrong assumption of fact that the assessee had invested money with its specified persons. Further, it was contended that the solitary reason recorded by the Assessing Officer for reopening of the assessment was deleted by the CIT(A) and in such circumstances, the assessment under the other hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Versus Jet Airways (I) Limited (2011) 331 ITR 236 (Bom), Ranbaxy Laboratories Ltd. Versus CIT (2011) 336 ITR 136, Principal Commissioner of Income Tax Versus Lark Chemicals (P) Limited (2018) 99 taxmann.com 312 (SC), Yashoda Shivappa Nagangoudar Versus Income Tax Officer (2022) 138 taxmann.com 296 (Bombay), CIT Versus Mohmed Juned Dadani (2013) 355 ITR 172 (Guj.), Asstt. CIT Versus Major Deepak Mehta (2012) 344 ITR 641 (Chattisgarh), Commissioner of Income Tax Versus Shri Ram Singh (2008) 306 ITR 343 (Raj), M/s. Tractors and Farm Equipment Limited Versus The Assistant Commissioner of Income Tax T.C. (A) No. 1548 of 2008, Martech Peripherals P. Ltd. Versus Deputy Commissioner of Income Tax & Anr. (2017) 394 ITR 733 (Mad), Commissioner of Income-Tax (Exemption) Versus Monarch Educational Society (2016) 387 ITR 416 (Del), GKN Driveshafts (India) Ltd. Versus Income-Tax Officer and Ors. (2003) 259 ITR 19 (SC), Principal Commissioner of Income Tax Versus Anil Nagpal (2017) 291 CTR 272 (P&H). 7. It is submitted that the decision in Jet Airways have been consistently followed by the various High Courts and the decision in Majinder Singh Kang referred by the revenue was taken note of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eve that any income chargeable to tax has escaped assessment for any assessment year; upon the formation of that belief and before he proceeds to make an assessment, reassessment or re-computation, the Assessing Officer has to serve on the assessee a notice under Sub-Section (1) of Section 148; 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 Section 147 and though the notice under Section 148 (2) does not include a particular issue with respect to which income has escaped assessment, he may nonetheless assess or reassess the income in respect of any issue which has escaped assessment which has come to his notice subsequently, in the course of the proceedings under the Section. The Hon'ble Division Bench held that even after the Amendment, the Parliament has not taken away the basis of the decision in CIT Versus Shri Ram Singh (2008) 306 ITR 343 (Raj). Following paragraphs of the judgment would be of great relevance: Parliament, when, it enacted Explanation 3 to Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance (No. 2) Act of 209. However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of Section 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. 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 has initially formed a reason to believe had escaped assessment, has as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to taken into accounts, he would be required to issue a fresh notice under Section 148. 12. The decision in Jet Airways was followed in Lark Chemicals (P) Limited, which decision was affirmed by the Hon'ble Supreme Court as SLP stood dismissed, reported in (2018) 99 Taxman.com 312 (SC). Yet again, the decision in Jet Airways was followed in Yashoda Shivappa Nagangoudar. In Mohmed Juned Dadani, the Hon'ble Division Bench had taken note of the decision in Majinder Singh Kang, referred to the decision of the Hon'ble Supreme Court in S. Sundaram Pillai Versus V.R. Pattabiraman AIR 1985 SC 582 to explain the object of an explanation to a statutory provision, the Court also took note of the decision in Jet Airways, Atlas Cycles Industries and Travancore Cements Limited and held that if the assessing officer were to drop the ground on which the reassessment proceedings was initiated cannot be permitted to chase other grounds not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormly taken a view that Explanation 3 to Section 147 of the Act does not change the situation in so far as the present controversy is concerned. The leading decision of the Bombay High Court in the case of CIT Versus Jet Airways (I) Ltd. Has been followed by different High Courts. In the case of CIT Versus Jet Airways (I) Ltd., the High Court, in its elaborate decision considering the statutory provisions, different judicial pronouncements and the explanatory memorandum for introduction of Explanation 3 to Section 147 of the Act, rules in favour of the assessee. * The Punjab and Haryana High Court in the case of Majinder Singh Kang Versus CIT [2012] 344 ITR 358 (P & H) of course has sounded a different note. We may, however, notice that the explanatory memorandum to Explanation 3 to Section 147 of the Act was not brought to the notice of the High Court in the said decision. The High Court gave considerable importance on such Explanation 3 to section 147 of the Act and the language used therein. 13. The decisions in Jet Airways and Ranbaxy Laboratories were also followed and the appeal in favour of the assessee was allowed in the case of M/s. Tractors and Farm Equipment Limited. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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