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TMI Blog2024 (5) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... come which he has reason to believe had escaped assessment and which formed the basis of a notice u/s 148, it is not open to AO to assess or reassess independently any other income which does not form the subject-matter of the notice. As far as 3rd Proviso to section 147 is concerned, in our considered interpretation, it does not give any authority to AO to assessee independent incomes, rather it places one more restriction upon AO that under the provisions of section 147, he can only assessee or reassess those matters which are not subject-matters of any appeal, reference or revision. The AO s understanding that it gives authority to him to assess only independent or newer items, even if the original items forming part of reasons do not survive, is not correct. Therefore, respectfully following the decision of Jet Airways which is very much applicable to the facts of present case, we are inclined to quash the order of re-assessment passed by AO. The assessee succeeds in this appeal. - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER For the Appellant : Shri Harsh Vijaywargiya, CA For the Respondent : Ms. Simran Bhullar, CIT DR ORDER Per B.M. Biyani, A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexplained income of assessee u/s 68 and that too by recording incorrect facts and findings and in violation of principles of natural justice and without appreciating/considering the submissions of the assessee company. (vi) That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of ld. AO in making aggregate addition of Rs. 4,57,21,842/- on account of sundry creditors by treating it as alleged unexplained income of assessee u/s 68, is beyond jurisdiction, bad in law, illegal, unjustified, against the principles of natural justice, void ab initio and barred by limitation also. (vii) That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of ld. AO in making aggregate disallowance of Rs. 4,33,05,189/- on account of various expenses claimed by the assessee company u/s 37 of the Act and that too by recording incorrect facts and findings and in violation of principles of natural justice and without appreciating/considering the submissions of the assessee company. (viii) That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of ld. AO in m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion No. ITA/964/Kol/2019 and the issue involved therein the addition of Rs. 116,49,75,000/- made by AO on account of bogus share capital/share premium. Re-opened assessment Present appeal before us: 5. Subsequently, the Dy. CIT, Central-II, Bhopal [ AO ] re-opened assessment through notice dated 28.03.2019 u/s 148 after recording reasons. The said reasons were supplied by AO to assessee against which the assessee filed objection. The AO, however, rejected assessee s objection and continued proceedings. Ultimately, the AO completed re-assessment u/s 147 read with section 144, vide order dated 26.12.2019, assessing total income at Rs. 133,30,03,030/- as under: Income shown in return filed u/s 148 Nil Add: Addition on account of bogus share capital, share premium 124,39,76,000/- Add: Addition on account of sundry creditors 4,57,21,842/- Add: Addition on account of disallowance of expenses 4,33,05,189/- Total income assessed as per 144 133,30,03,031/- Total income assessed as per 144 (rounded off) 133,30,03,030/- Aggrieved by order of re-assessment, the assessee went in appeal to Ld. CIT(A) but did not get any relief. Now, the assessee has come in next appeal before us. Submission by p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges of assessment-order and demonstrated that the AO has ultimately made three types of additions while framing assessment. The first addition of Rs. 124,39,76,000/- on account of bogus share capital/share premium has been made on the basis of statement of Shri Sharad Darak (who was also a director of assessee-company) recorded during a search conduced upon one Asnani Group on 16.05.2018 and corroborating the same with the statement of another person named Shri Krishan Kumar recorded u/s 131 and the observations made from survey-action in the cases of certain companies alleged to have been controlled by Shri Sharad Darak. The AO noted that Shri Sharad Darak was involved in providing/arranging accommodation entries by way of share capital or loans. Therefore, the share capital/share premium of Rs. 124,39,76,000/- shown in assessee s books was also bogus. Other two additions, namely (i) the addition of Rs. 4,57,21,842/- on account of sundry creditors, and (ii) the disallowance of expenses of Rs. 4,33,05,189/- have been made on the premise that the assessee was not having any business activity. Ld. AR submitted that in the reasons recorded, the AO alleged that the assessee had entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso find that it is a consistent submission of assessee right from beginning that it has not entered into any transaction with M/s Bhagya. The revenue is also not able to show any such transaction having been entered by assessee with M/s Bhagya. Therefore, we safely presume that the assessee has in fact not entered into any transaction with M/s Bhagya as alleged in the reasons. That means, the re-assessment proceeding has been done on the basis of an invalid reason. Once it is so, the entire proceeding becomes invalid on this very premise itself. But we would also like to deal the contention being taken by revenue/AO that it has authority to make newer additions even if they did not form part of original reasons and such authority comes from 3rd Proviso to section 147. Therefore, at first, we re-produce section 147 alongwith the said 3rd proviso, which reads as under: 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer 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 a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. 17. We have approached the issue of interpretation that has arisen for decision in these appeals, both as a.matter of first principle, based on the language used in section 147(1) and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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