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TMI Blog2023 (6) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... d mechanical opinion of higher authorities. 3. Because the Ld. CIT (Appeal) has erred in law and on facts in confirming ex - parte assessment Oder u/s 144 of the Act without service of proper notice u/s 142(1 )/144 of the Act and any show cause notice. 4. Because the Ld. CIT (A) has erred in law and on facts in confirming an addition of Rs. 1,7500,000/- even though no addition has been made in respect of alleged transaction with M/s While Collar Management Pvt. Ltd. which was the subject matter of initiation of reassessment proceedings. 5. Because the ld. CIT (A) has erred in law and on facts in making an addition of Rs. 1,75,00,000/- without appreciation of the evidences produced on record and non- admission of evidences without proper opportunity to the assessee company. 6. Such other relief as may crave in during the appellate proceedings." 3. Representatives of both the sides were heard at length. Case records carefully perused and relevant documentary evidences duly considered in light of Rule 18(6) of the ITAT Rules. 4. Reasons recorded for reopening the assessment read as under: "Reasons recorded in the case of M/S UJJWAL MICROFINANCE PVT. LTD.A.Y. 2011-12 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 of the Paper Book wherein the assessee had very specifically mentioned as under: "(a) Your good self without verifying the fact whether the assessee has actually taken any accommodation entries amounting to Rs. 2.65 crores from White Collar Management Ltd., has, merely on suspicion, reopen the assessment proceedings. Whereas the facts remain that the assessee has not entered into any transaction of whatsoever nature with White Collar Management Ltd. during the year under consideration. (b) We state that the report of the investigation wing is based on the wrong fact and confirm that we have not entered into any transaction with White Collar Management Ltd. during the year under consideration and the transaction of receipts of money aggregating to Rs. 2.65 crores from the above mentioned party as alleged by you is wrong as no such money was received by us from the party during the year under consideration." 6. These specific objections being part of the objections raised by the assessee against the said notice u/s 148 of the Act were disposed of by the order exhibited at pages 29 to 33 of the Paper Book. But, surprisingly, the Assessing Officer has not touched upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 148." 12. 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 Vs. Jet Airways [I] Ltd 331 ITR 236. The relevant part of the judgment is extracted as under: "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 reason to believe that income chargeable to tax has escaped assessment, the Assessing Officer is empowered to assess or reassess such income "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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect 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: "....The Assessing Officer gets jurisdiction under section 148 to assess or reassess the income which has escaped assessment only after sub-section (2) of section 148 is complied with. The question is whether sub-section (2) of section 148 has to be 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 recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or recomputation, the Assessing Officer has to serve on the assessee a notice undersub- 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 nonetheless, 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. 10. XXX 11. 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 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 of the former, he cannot independently assess the latter." 13. 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 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing 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." 12. The Division Bench in Ranbaxy Laboratories Limited (supra)considered the judgment of the Supreme Court in the case of V. Jagmohan Rao versus CIT and EPT, (1970) 75 ITR 373(SC) and CIT versus Sun Engineering Works Private Limited, (1992) 198 ITR 297 (SC) and has then elucidated: "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 esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer proceeded to reduce the claim of deduction under sections 80HH and 80- I which as per our discussion was not permissible. Had the Assessing Officer proceeded to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-I as well." 16. Considering the facts of the case in totality, in light of the judgment of the Hon'ble Jurisdictional High Court and Hon'ble High Court of Bombay [supra], we do not find any merit in the re assessment proceedings initiated by the Assessing Officer on wrong facts and therefore, the said assessment order deserves to be quashed. We accordingly, quash the assessment order and since the assessment has been quashed, we do not find it necessary to dwell into the merits of the case. 17. Before parting, we would be failing in our duties if we do not bring to the notice the attitude of the Departmental Representative. The authorized representative for the assessee Dr. Rakesh Gupta concluded his arguments and then the ld. DR stated that he wants to look into the Investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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