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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 ..... the reasons for reopening, assessment has been concluded by making addition on account of increase in share capital being share capital issued by the company to Shri Gautam Goyal, Shri Gaurav Goyal and Saraswati Properties, Goyal Investment and Shudd Edible Products Ltd. Individuals are directors of the assessee company and corporate investors are part of the group. Since the additions have been made other than the reasons recorded for reopening assessment, in our considered view, the Assessing Officer has drawn support from Explanation 3 to section 147 of the Act which was inserted by the Finance [No. 2] Act, 2009 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 JET AIRWAYS (I) LTD. [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY] it would not be open to the Assessing Officer to assess income under some other issue independently. No merit in the re assessment proceedings initiated by AO on wrong facts and therefore, the said assessment order deserves to be quashed. Decided in favour of assessee. - ITA No. 3877/DEL/2019 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector of Income Tax (In v.), Unit - 6(3), New Delhi vide letter F.No. ADIT(lnv.)/Unit6(3)/2017-18/293 dated 18-09-2017 regarding the beneficiaries of the accommodation entries provided by the Mr. Himanshu Verma group of entities. The name of the assessee company, M/S Ujjwal Microfinance Pvt. Ltd., appears at S.No. 505 of the list of beneficiaries : Sl No Name of the beneficiary/ entity PAN Amount Name of Himanshu Verma Group\ Company F.Y 505 Ujjwal Microfinance Pvt Ltd AAACM2200K 2,65,00,000 White Collat management Pvt Ltd 2010-11 Search and seizure operations had been conducted on the Mr. Himanshu Verma group of entities on 29-03-2012. It was gathered from the investigations that Mr. Himanshu Verma was engaged in the activities of providing accommodation entries to beneficiaries in lieu of commission. This done through an elaborate web of numerous corporate and non corporate paper entities whose directors / partners / proprietors were the employees or close associates o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at pages 29 to 33 of the Paper Book. But, surprisingly, the Assessing Officer has not touched upon the specific objections that no such transactions were done by the assessee with the said White Collar Management Ltd. 7. The same was reiterated before the ld. CIT(A) and even the ld. CIT(A), in his wisdom, chose not to comment on such specific objections and evidences. 8. This demonstrative fact shows that the Assessing Officer has reopened the assessment based upon wrong facts, wrong appreciation of facts and without any application of mind, in as much as, the assessee has not taken any credit entry from White Collar Management Ltd. However, we find that the Assessing Officer has gone one step further and has made addition of Rs. 1.75 crores being the increase in share capital from Rs. 25 lakhs to Rs. 2 crores, which has nothing to do with the reopening of the assessment, which means that on the one hand the Assessing Officer has reopened the assessment on wrong facts and on the other hand, the Assessing Officer has completed assessment on totally irrelevant facts which were never confronted to the assessee. 9. A perusal of the reasons recorded, extracted hereinabove, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. The above interpretation is contrary to the legislative intent. With a view to further clarifying the legislative intent, it is proposed to insert an Explanation in section147 to provide that the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready 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 assessment and proceeds to issue a notice under section 148, it is not open to him to assess or, as the case may be, reassess the income under an independent or unconnected issue, which was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting 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 words and , as well as also have been used together and in conjunction. The Shorter Oxford Dictionary defines the expression also to mean 'further, in addition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight 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. 14. 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 recomputation, the Assessing Officer has to serve on the assessee a notice under subsection (1) of section 148 ; (iii) the Assessing Officer may assess or reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 be competent to make assessment of those items. However, the Legislature could not be presumed to have intended to give blanket powers to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Investigation Wing s report which is the reason for reopening the assessment. 18. The Bench pointed out that he should have taken this stand at the beginning of the hearing and not after the conclusion of the arguments of the ld. counsel for the assessee Dr Rakesh Gupta. The ld. DR accused the Bench of denying the right of hearing. We fail to understand as to how the ld. DR can make such an accusation, when what he is asking for has nothing to do with the facts of the case in hand. 19. The ld. DR went on to say that he received the file only on Friday and since he is on rotational duty, he did not have time to go through the records. Such pathetic state of the representation from the department s side is condemned and, whosoever is in charge should take notice of such attitude of the ld. Departmental Representatives before the Highest Fact Finding Forum. 20. In the result, the appeal of the assessee in ITA No. 3877/DEL/2019 is allowed. The order is pronounced in the open court on 09.06.2023. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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