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TMI Blog2023 (3) TMI 1149X X X X Extracts X X X X X X X X Extracts X X X X ..... Woollen Mills v. ITO (1999) ~'.36 ITI~ 34: 236 ITR 34 (SC). (ii) "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the notice under section 148 was issued on the basis of invalid reasons and quashed the assessment holding as void ab-initio despite the Assessing Officer has duly recorded the reason and only then having satisfied as to the reopening of assessment proceedings issued notice under section 148 of the Act. (iii) "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that there is no tangible material to show the nexus between the reasons recorded and belief so made by the Assessing Officer disregarding the facts that the submissions made and details provided by the assessee to the Inv. Wing as well as to the Assessing Officer which fanned the reason to believe and has deal t with subsequently, that even upto the appellate stage, there is no sufficient material available to grant any benefit of doubt to the assessee in its transactions and that in light of the material available, the only conclusion possible is the culpability of the assessee under section 68 as arrived at by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, notice u/s 148 of the Act was issued after recording reasons u/s 147 of the Income-tax Act, 1961 [the Act, for short] and after taking approval from the PCIT, Gurgaon. The reasons for initiating proceedings u/s 147 of the Act read as under: ~ Assessee has filed its income tax return for A. Y.2011-12 on 30.09.2011 vide acknowledgement No.301427331300911 declaring interest income having no business income. Later on information was received from the office e of the DDIT(Inv.) Unit-1(3} Jhandewalan Extension New Delhi through DCIT, Circle2(l) vide his office letter No.17241 dated 28.03.2018 that they have information regarding dummy companies having various bank accounts with different bank / branches. After analyzing the transfer pattern it was noticed that the accounts gets credit mainly in the form of clearing and withdrawals are mainly in the form of transfer. Further, it was very clear pattern of money being credited and debited on the same day and quantum of money is credited and debited immediately in the accounts indicating that the money is being routed from one account to another account with a purpose of creating layers. In view of above observations, it is established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available with the Assessing Officer was the letter dated 28.03.2018 of the DDIT, INV, New Delhi wherein it has been stated that the accommodation entries of Rs. 1.57 crores and Rs. 10 lakhs in the name of paper companies M/s White Lotus Securities and from Blue Spire Health Care Pvt Ltd were debited to the account No. 670320110000269 maintained with Bank of India. 10. Accommodation entry was mentioned as purchase/ investment/ advance and the assessee was described as beneficiary from the above transactions. On going through the bank statement, it is noted that the assessee has made payment of Rs. 87 lakhs and Rs. 70 lakhs through RTGS on 31.01.2010 to M/s White Lotus Securities and Rs. 10 lakhs to Blue Spire Health Care Pvt Ltd on 22.06.2010. 11. These demonstrative facts clearly show that the Assessing Officer has reopened the assessment based upon wrong facts, wrong appreciation of facts and without any application of any mind, in as much as, the assessee has not taken any credit entry but, in fact, have made debit entries and, therefore, by no stretch of imagination provisions of section 68 of the Act can be applied. 12. Even if we assume that the reopening was done to know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome "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. 6. The effect of Explanation 3 which was inserted by the Finance (No. 2) Act of 2009 is that even though the notice that has been issued under section 148 containing the reasons for reopening the assessment does not contain a reference to a particular issue with reference to which income has escaped assessment, the Assessing Officer may assess or reassess 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. The reasons for the insertion of Explanation 3 are to be found in the Memorandum explaining the provisions of Finance (No. 2)Bill of 2009. The Memorandum treats the amendment to be clarificatory and contains the following Explanation : "Some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch upon any other issue for which no reasons have been recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complied with if any other income chargeable to tax has escaped assessment, or which comes to his knowledge subsequently in the course of the proceedings. In other words, when proceedings are already on in respect of one item in respect of the income for which he had already recorded reasons is it necessary that he should record reasons for assessing or reassessing any of the items which are totally unconnected with the proceedings already initiated. Suppose under two heads income has escaped assessment and those two heads are inter-linked and connected, the proceedings initiated or notice already issued under sub-section (2) of section 148 would be sufficient if the escaped income on the second head comes to the knowledge of the officer in the course of the proceedings. But if both the items are unconnected and totally alien then the assessing authority has to follow sub-section (2)of section 148 with regard to the escaped income which comes to his knowledge during the course of the proceedings." Hence, the view of the Punjab and Haryana High Court and the Kerala High Court was that, once the Assessing Officer has reason to believe that income chargeable to tax has escaped asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of first principle, interpreting the section as it stands and on the basis of precedents on the subject. 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 148, the Assessing Officer has the power to assess or reassess the income, which he has reason to believe had escaped assessment and also any other income chargeable to tax. The words "and also" cannot be ignored. The interpretation 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer has accepted the objections of the assessee, and has not assessed or reassessed the income, which was the basis of the notice. Therefore, in light of the judgment of the Hon'ble High Court of Bombay [supra] it would not be open to the Assessing Officer to assess income under some other issue independently. 19. Similar issue had arisen before the Hon'ble Jurisdictional High Court in the case of Ranbaxy Laboratories Limited versus CIT, (2011) 336 ITR 136 (Delhi). In the said case, the Division Bench had also examined Explanation 3 to Section 147, which was inserted by Finance (No. 2) Act of 2009 with retrospective effect from 1st April, 1989. Reference was made to the decision of the Bombay High Court in CIT versus Jet Airways India Limited, (2011) 331 ITR 236 (Bom) in which it has been held as under: "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 ; (ii) upon the formation of that belief and before he proceeds to make an assessment, reassessment or rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed: "18. We are in complete agreement with the reasoning of the Division Bench of the Bombay High Court in the case of CIT v. Jet Airways (I) Limited [2011] 331 ITR 236 (Bom). We may also note that the heading of section 147 is "income escaping assessment" and that of section 148 "issue of notice where income escaped assessment". Sections 148 is supplementary and complimentary to section 147. Sub-section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute the escaped income. Section 147 mandates 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 the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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