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TMI Blog2024 (7) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment, the same would bring the order of reassessment within the realm of the jurisdiction of the Commissioner u/s. 263 of the Act. Also, the period of limitation for exercising jurisdiction u/s. 263 of the Act would start from the date of the re-assessment order. However, if the subject matter of the re-assessment is distinct and different, as in the present case before us, then in that case the relevant date for the purpose of determination of period of limitation for exercising powers under Section 263 of the Act would be the date of the original assessment order. We, thus, are of the view that the Pr. CIT had exceeded the jurisdiction vested with him u/s. 263 of the Act with respect to the aforesaid two issues, viz. (i) sum received by the assessee company as share capital/premium AND (ii) sum received by the assessee company as unsecured loans from three persons, as the same did not form the subject matter of the reassessment order passed the A.O u/s. 147 r.w.s. 143(3). Accordingly, the revision of the order passed by the A.O u/s. 147 r.w.s. 143(3) by the Pr. CIT u/s. 263 of the Act being not as per the mandate of law cannot be sustained and is liable to be struck down. Decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 143(3). 6. Ground 6: That on the Facts and on the circumstance of the case, Hon. Principal CIT(Central) was not justified in law and fact in passing the Order u/s. 263 since issue w.r.t share capital and Share premium were not the subject matter of Reassessment proceedings u/s. 147, hence the Order passed u/s. 147 is neither prejudicial not erroneous. 7. Ground 7: That on the Facts and on the circumstance of the case, Hon. Principal CIT(Central) was not justified in law and fact in passing the Order u/s 263 when entire Books of Accounts have already been verified during the Course of Original Scrutiny Assessment/ Reassessment Proceedings. 8. Ground 8 : The assessee craves leave to add, urge, alter or withdraw any grounds before or at the time of hearing of this appeal. 2. Original assessment in the case of the assessee company was framed by the A.O vide his order passed u/s. 143(3) of the Act dated 29.08.2016, wherein its returned income was accepted as such. 3. The. A.O, thereafter, holding a bonafide belief that the cash deposits of Rs. 36,59,500/-(sic) made by the assessee company in its bank account during the subject year, as had surfaced in the course of survey/post-survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9. We find that the concluded assessment of the assessee company was reopened by the A.O u/s. 147 of the Act based on the following reasons to believe : During the post survey proceedings, the bank account of the assessee was verified and cash deposit during the year was examined. The assessee company was provided with opportunities to explain the source and further to reconcile the same with its books of accounts, however, it failed to provide justified explanation. The findings of the survey and post survey proceedings show that the assessee company has made cash deposits of Rs. 36,59,500/- during the period under consideration which are not explained and reconciled in the books of the assessee, therefore, the said amount remains unexplained in the hands of the assessee for AY 2014-15 as unaccounted income. Sd/- ANIL LAXMANRAO KHADSE CENTRAL CIRCLE 2, RAIPUR (In case the document is digitally signed please refer Digital Signature at the bottom of the page) 10. The A.O in the course of reassessment proceedings found favour with the explanation of the assessee company as regards the nature and source of cash deposits of Rs. 37,06,500/- in its bank account and vide his order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in - respect of which he is assessable under this Act during the previous year exceeded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me limit for making the assessment, reassessment or recomputation as specified in sub- section (2) of Section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of Section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of Section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub- section (2) of Section 153, every such notice referred to in this clause shall be deemed to be a valid notice. Explanation.-For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section. (2) The Assessing Officer shall, before issuing any notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave not been included in the reasons recorded under subsection (2) of Section 148. 22. From bare perusal of the entire provisions, it is clear that the AO should have reason to believe to reopen assessment under the provisions of Section 147 before making the assessment, reassessment or recomputation. 23. The assessee has a right to inform the AO that the income which has allegedly escaped assessment was shown and had been taken into account and the assessment had been properly made. In that event the AO has an obligation to drop the proceedings of the said income, under the provisions of Section 152 (2) of the Act, 1961. 24. Explanation 3 to Section 147 of the Act, 1961 provides that if the proceedings on the basis of reasons recorded under sub-section (2) Section 148 in the course of proceedings of the income reasons have been recorded under Section 148 (2), the other income may also be included, which has escaped assessment for the purpose of assessment or re-assessment under Section 147 of the Act, 1961, in the same proceeding. 25. The Supreme Court in Sun Engineering Works (P) Ltd. (supra) held as under : 41....we find that in proceedings under Section 147 of the Act, the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht the working of an Act by becoming an hindrance in the interpretation of the same. 27. The Bombay High Court in Jet Airways (supra) observed that after issuing a notice under Section 148, the income which has initially formed a reason to believe that the income has escaped assessment, but as a matter of fact has not escaped assessment. The AO cannot proceed to assess some other income independently, however, it was observed that it is open for the AO to issue a fresh notice under Section 148 and proceed thereafter. 28. The High Court of Delhi in Ranbaxy Laboratories Limited (supra), has taken the similar view. 29. In the facts of the case, the income in respect of building to the tune of Rs. 20,16,383/- (sic Rs. 21,16,383/-) formed reason to believe that the same had escaped assessment, as in the notice issued under Section 148, as aforestated, in the preceding para 8. In the course of proceeding other incomes were also found to have escaped assessment. 30. The assessee filed his reply under Section 152 (2) stating therein that the said income which had formed reasons in the notice under Section 148 had not escaped assessment, as the same was disposed of in the same assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , proceedings of the other incomes may also be examined along with the said income. 12. We are of the view that now when the A.O had not made any addition with respect to the cash deposits of Rs. 36,59,500/- (sic) made in the bank account of the assessee company during the year under consideration, i.e. the issue, based on which, its case was reopened by him u/s. 147 of the Act, and thus, was divested of his jurisdiction from making any further independent addition /disallowance, therefore, the Pr. CIT could not have held the re-assessment order so passed by him as erroneous for the reason that he had failed to carry out verification on such independent issues. 13. We, thus, based on our aforesaid observations, are of the view that now when the A.O had not made any addition with respect to the cash deposits of Rs. 36,59,500/- (sic), therefore, he as per the mandate of law was divested of his jurisdiction to make any addition with respect to the aforesaid two independent issues, viz. (i) a sum of Rs. 2,74,50,810/- claimed by the assessee company to have been received as share capital/premium from (a) Shri Jaspreet Singh Khanuja (34614 shares); (b) Shri Hari Singh (107222 shares); an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 29.08.2016 that could have been revised by the Pr. CIT u/s. 263 of the Act for setting right the failure of the A.O to carry out necessary verifications on the aforesaid issues which, thus, had rendered the said original assessment order as erroneous in so far it was prejudicial to the interest of the revenue. Our aforesaid view is supported by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Alagendran Finance Ltd., (2007) 293 ITR 1 (SC) wherein, the Hon'ble Apex Court had observed as under: 6. Before embarking upon the rival contentions of the parties raised before us, we may notice the relevant part of Section 263 of the Act which is as under: 263. Revision of orders prejudicial to revenue - (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 147, which is subject to Section 148, divides cases of income escaping assessment into two clauses i.e. viz. (a) those due to the non- submission of return of income or non-disclosure of true and full facts and (b) other instances. Explanation (1) defines as to what constitutes escape of assessment. In order to invoke jurisdiction under Section 147(a) of the Act, the ITO must have reason to believe that some income chargeable to tax of an assessee has escaped assessment by reason of the omission or failure on the part of the assessee either to make a return under Section 139 for the relevant assessment year or to disclose fully and truly material facts necessary for the assessment for that year. Both the conditions must exist before an ITO can proceed to exercise jurisdiction under Section 147(a) of the Act. Under Section 147(b) the Income-tax Officer also has the jurisdiction to initiate proceedings for reassessment where he has reason to believe, on the basis of information in his possession, that income chargeable to tax has been either under- assessed or has been assessed at too low a rate or has been made the subject of excessive relief under the Act or excessive loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside and the whole assessment proceedings start afresh. When once valid proceedings are started under section 34(1)(b), the Income-tax Officer had not only the jurisdiction, but it was his duty to levy tax on the entire income that had escaped assessment during that year. 10. There may not be any doubt or dispute that once an order of assessment is reopened, the previous underassessment will be held to be set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of reassessment is distinct and different, the entire proceeding of assessment would be deemed to have been reopened. 11. In Sun Engineering Works P. Ltd (supra) also, V. Jaganmohan Rao (supra) was noticed stating: The principle laid down by this Court in Jaganmohan Rao's case, therefore, is only to the extent that once an assessment is validly reopened by issuance of a notice under Section 22(2) of the 1922 Act (corresponding to Section 148 of the Act) the previous under assessment is set aside and the ITO has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year. The judgment in Jaganmohan Rao's c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Officer may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of notice under Section 148 and where reassessment is made under Section 147 in respect of income which has escaped tax, the Income Tax Officer's jurisdiction is confined to only such income which has escaped tax or has been under-assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under- assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The Income Tax Officer cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject-matter of proceedings under Section 147. 12. We may at this juncture also take note of the fact that even the Tribunal found that all the subsequent events were in respect of the matters other than the allowance of 'lease equalization fund'. The said finding of fact is binding on us. Doctrine of merger, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier. Cases of underassessment are also treated as instances of escaped assessment. The order of reassessment is one which deals with the assessment already made in respect of items which are not required to be reopened, as also matters which are required to be dealt with in order to bring what had escaped in the earlier order of assessment, to assessment. An assessee who has failed to file an appeal against the original order of assessment cannot utilise the reassessment proceedings as an occasion for seeking revision or review of what had been assessed earlier. He may only question the extent of the reassessment in so far as the escaped assessment is concerned. The Revenue is similarly bound. The same principle was reiterated by a Division Bench of the Calcutta High Court in Commissioner of Income-Tax v. Kanubhai Engineers (P.) Ltd. [241 ITR 665]. 15. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income Tax exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which being not the subject of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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