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TMI Blog2024 (11) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of purchase of shares of FDPL; it would follow that the PCIT could not fault the AO for not making any such addition. Clearly, once the AO accepted the assessee s explanation regarding the investment made in the shares of FDPL and the amount borrowed from APPL for funding the said purchase, the AO could not proceed to make any addition on any other ground in the reassessment proceedings. Thus, non-addition of any income on account of alleged income from interest commensurate with the TDS deposited by Valtika Limited, or making further enquiries would not confer the learned PCIT with the jurisdiction to pass an order under Section 263 of the Act. Decided in favour of assessee. - HON'BLE MR. JUSTICE VIBHU BAKHRU AND HON'BLE MS. JUSTICE TARA VITASTA GANJU For the Appellant Through: Mr C S Aggarwal, Sr Advocate with Mr Ravi Pratap Mall, Mr Pushpa Sharma and Mr Uma Shankar, Advocates. For the Respondent Through: Mr Sunil Aggarwal, SSC, Mr Shivansh B Panday, Mr Viplav Acharya, JSCs and Mr Utkarsh Tiwari, Advocate. VIBHU BAKHRU, J. (ORAL) 1. The appellant (hereafter the assessee) has filed the present appeal under Section 260A of the Income Tax Act, 1961 (hereafter the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee company maintained in Axis Rank, there was huge credit during the FY 2015-16 of Rs. 95,44,00,462/-. It was further observed that within one month of inception of account, assessee received 4,00,99,000 shares of Feldon Developers Pvt Ltd from third party 2,00,00,000/- shares from Information TV Private Limited, 2,00,99,000 shares from INX News Private Limited. High Value transaction with the above pattern gives prima facie belief of tax evasion in form purchase of shares. 1. Details of analysis of information received and material collected The above information has been carefully examined and the same has also been verified from the IT'R filed by the Assessee. As reported to the bank, assessee was engaged into activity of real estate developer, and such a huge share transaction is not commensurate with the income profile of the assessee. Accordingly, it is prima facie apparent that amount of Rs. 95,44,00,462/- has escaped assessment. 1. Income Chargeable to tax escaping assessment In this case, not more than four years have elapsed from the end of the assessment year under consideration and there had not been scrutiny assessment completed for the year under conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the investment made by the assessee in acquiring 4,00,99,000 (four crores and ninety-nine thousand) number of shares of FDPL from two entities (2,00,00,000 shares from Information TV Private Limited and 2,00,99,000 shares from INX News Private Limited). And, passed an order dated 30.03.2022 accepting the income as returned by the assessee. 12. The relevant extract of the assessment order dated 30.03.2022 which clearly indicates that the AO was satisfied with the assessee s explanation to the proposed addition under Section 68 of the Act, is set out below:- 3. Subsequently, in order to verify genuineness of transaction this unit has issued notice u/s 133 (6) to the above parties for cross checking. However, no details/information received from the above three parties. Therefore, this office has issued notice u/s 142 (1) of IT Act on 14/03/2022 requesting assessee to collect information as called vide notice U/s 133 (6) from the above parties and upload the same immediately. Being aggrieved by the settlement of objection raised, the assessee company filed submission for the disposal of objection raised against the proceeding u/s 147 of the IT Act. This office vide letter dated 17/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer did not raise any query related to this issue during the course of proceedings nor has the assessee given any justification for claim of TDS without declaring the corresponding interest income from securities. 4. In light of the above facts, it appears to me that the assessment order passed by Assessing Officer is erroneous and is prejudicial to the interest of revenue. 15. The assessee responded to the said notice and explained that it had invested a sum of Rs. 1,045.00 Crores in non-convertible debentures of Vatika Limited issued for Rs. 1,000.00 Crores (issue value). The said non-convertible debentures were redeemed by Vatika Limited on 31.03.2016 at a value of Rs. 1,045.50 Crores. The assessee claimed that it had earned an income from capital gain of Rs. 50,00,000/- which was duly disclosed in its returns. However, Vatika Limited had deducted TDS at the rate of 10% on the difference between the issue value and the value at with the said debentures were redeemed being Rs. 45.50 Crores (Rs. 1,045.50 Crores less Rs. 1,000.00 Crores). 16. The learned PCIT also issued the notice dated 18.03.2024 alleging that the assessee had received a sum of Rs. 140,95,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o being substituted with effect from 01.04.2021 by virtue of the Finance Act, 2021. The main provision of Section 147 of the Act, as applicable at the material time, is set out below: 147. Income escaping assessment. 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 Section 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 notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): [Emphasis added] 24. It is apparent from the plain language of Section 147 of the Act, as applicable at the material time, that subject to the Assessing Officer having reasons to believe that the assessee s income had escaped assessment, he could assess or reassess such income and also any other income chargeable to tax, which has escaped assessment. Once the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147. 26. The Bombay High Court in Commissioner of Income Tax v. Jet Airways (I) Limited: (2011) 331 ITR 236 (Bom) had examined the import of Explanation 3 that was introduced to Section 147 of the Act. The said explanation clarified that the power of the AO was not confined to assessing or reassessing such income for which he had reasons to believe had escaped assessment but also to other income which, during the course of the proceedings, were found to be chargeable to tax. However, the Bombay High Court had held that introduction of Explanation 3 by virtue of Finance (No. 2) Act of 2009 with retrospective effect from 1989 did not override or negate the condition as contained in the substantive provision of Section 147 of the Act. Thus, the income, other than the income which the AO had reasons to believe had escaped assessment, could be assessed only if the income which the AO had reasons to believe had escaped assessment was found to have escaped assessment. The relevant extract of the Bombay High Court s decision is reproduced below: 22. Explanation 3 li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of the escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the assessee by the decision of this court in Ranbaxy Laboratories Ltd. v. CIT (2011) 336 ITR 136 (Delhi) which has been followed in CIT v. Software Consultants (2012) 341 ITR 240 (Delhi). In sum, if no addition is made on the basis of the reasons to believe recorded by the Assessing Officer for reopening the assessment under section 148 of the Act, resort cannot be had to Explanation 3 to section 147 of the Act to make an addition on any other issue not included in the reasons to believe for reopening the assessment. No substantial question of law arises. The appeal is dismissed. 29. The issue involved in the present case is similar to the one involved in Commissioner of Income Tax v. Software Consultants (supra). In the said case, the assessee had not filed its return of income for the AY 1993-94. During the assessment proceedings relating to a subsequent assessment year (AY 1997-98), the AO noted that the Central Bureau of Investigation (CBI) had conducted a search in the premises of the assessee and had found Fixed Deposit Receipts (FDRs) of a value of Rs. 20,00,000/- in the possession of a Director of the assessee company. The said Director claimed that although th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any addition for the reasons recorded at the time of issue of notice under section 148 of the Act. This position is not disputed and disturbed by the Commissioner of Income-tax in his order under section 263 of the Act. Sequitur is that the Assessing Officer could not have made an addition on account of share application money in the assessment proceedings under section 147/148. Accordingly, the assessment order is not erroneous. Thus, the Commissioner of Income-tax could not have exercised jurisdiction under section 263 of the Act. 34. In a recent decision in ATS Infrastructure Limited v. Assistant Commissioner of Income Tax: Neutral Citation: 2024:DHC:5474-DB, this Court took note of a number of decisions including in Ranbaxy Laboratories Ltd. v. Commissioner of Income Tax (supra) and reiterated the proposition that in the event no addition is made in respect of income which the AO had reason to believe had escaped assessment, no other income would be taxed as having escaped the assessment. 35. Clearly, if the AO could not have made an addition in the taxable income of the assessee for the relevant assessment year, on account of investment made in FDPL shares which was the AO s r ..... 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