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TMI Blog2024 (11) TMI 1384X X X X Extracts X X X X X X X X Extracts X X X X ..... 007-08, passed under Section 147 of the Act. 2. The assessment of the income chargeable to tax in the previous year relevant to AY 2007-08 was sought to be reopened by issuance of notice under Section 148 of the Act. The Assessing Officer (AO) found that there were reasons to believe that the income of the Assessee for the relevant year had escaped assessment. The relevant extracts of the reasons recorded by the AO for reopening the assessment are set out below. "Reasons for issue of notice u/s 148 of the I.T.Act, 1961 in the case of M/s Sunlight Tour & Travels Pvt. Ltd. for the A.Y. 2007-08-reg. Information about entry operators and their beneficiaries of Delhi has been received from the office of the DGIT (Inv.) 3rd Floor, Scindia House, Ballard Estates, Mumbai vide letter F.No. DGIT(Inv.)/Information/PJ/2013-14/ dated 07.03.2014 and F.No. Addl. DIT(Inv.)/U-IV/u/s 148/2013-14/335 dated 10.03.2014 along with detailed report giving working of entry operators with a list of beneficiaries. After making inquiries the Addl. Directors Income Tax, Unit-VI of Investigation in their report has established large amount of tax evasion in the transactions between entry operators and the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,03,09,361/- which comprised of the income of Rs. 2,09,361/- as originally assessed and Rs. 6,01,00,000/- which was added under Section 68 of the Act. 6. The Assessee appealed the said decision before the learned CIT(A) on the ground that the AO had no jurisdiction to make any addition after finding that no addition could be made on account of the reasons, which had prompted the AO to reopen the assessment under Section 147 of the Act. The Assessee also challenged the addition made on merits. 7. The Assessee challenged the assessment order dated 26.03.2015 on the ground that the AO did not have the jurisdiction to proceed with the reassessment, and that the AO had not applied its mind to the material on record, which had no live nexus with the reason to believe that the Assessee's income had escaped assessment. As noted above, it was the Assessee's case that the alleged transactions on the basis of which notice under Section 148 of the Act was issued, were non-existent. The Assessee also challenged the merits of the addition and contested the AO's decision to make an addition of Rs. 6,01,00,000/- under Section 68 of the Act. 8. Whilst, the learned CIT(A) rejected the Assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Plastics Pvt. Ltd.: Order dated 22.01.2018 in ITA 727/2017, this court had doubted the correctness of the decision in the case of Commissioner of Income Tax v. Jet Airways (I) Ltd. (supra) and the decision of this court in Ranbaxy Laboratories Limited v. CIT (supra). He submitted that the court had observed that the narrow interpretation of Section 147 of the Act would undermine its essential object. However, the said appeal was disposed of on account of low tax effect. 13. In ATS Infrastructure Ltd. v. Assistant Commissioner of Income Tax, Circle 1 (1) Delhi & Ors.: Neutral Citation No. 2024:DHC:5474-DB, a coordinate bench of this court had noted the decision in the case of Principal Commissioner of Income Tax vs. Jakhotia Plastics Pvt. Ltd. (supra), and had concurred with the decision in Ranbaxy Laboratories Limited v. CIT (supra), which is binding. 14. It is relevant to refer to the main provision of Section 147 of the Act as applicable at the material time. The same 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148(2) must assess or reassess : (i). 'such income' ; and also (ii) 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. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of the position that the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under section 147." To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the Assessing 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." 14. The Bombay High Court also discussed the case of V. Jaganmohan Rao (1970) 75 ITR 373 (SC) and Sun Engineering (1992) 198 ITR 297 (SC) of the apex court. In the case of Sun Engineering (1992) 198 ITR 297 (SC), the issue before the Supreme Court was w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of the proceedings. Thus, unless and until such income, as giving rise to form belief, for escaping assessment, continues to exist, and constitutes a subject-matter of assessment, under section 147 "no other income" coming to the notice of the Assessing Officer, during the course of the proceedings, can be roped in. 16. In the case of C. J. International Hotels Ltd. (supra) before the Tribunal, the facts were almost similar as in the present case. The Tribunal relied upon the case of CIT v. Shri Ram Singh (2008) 306 ITR 343 (Raj) while holding that the Assessing Officer was justified in initiating the proceedings under section 147/148, but then, once he came to the conclusion that the income with respect to which he had entertained, his jurisdiction came to a stop at that, and did not continue to possess jurisdiction to put to tax any other income which subsequently came to his notice in the course of the proceedings, which were found by him, to have escaped assessment. *** *** *** "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 (1) Limited (2011) 331 ITR 236 (Bom). We may also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stained, there would be little rationale for expanding the reassessment proceedings. In our view, it would not be apposite to accept an expansive interpretation to the provision of Section 147 of the Act. Given that the nature of the proceedings is to unsettle concluded assessment, a strict interpretation of the plain language of Section 147 of the Act, is warranted. We respectfully concur the view of this court as articulated in Ranbaxy Laboratories Limited v. CIT; ATS Infrastructure Ltd. v. ACIT; and PCIT v. Jaguar Buildcon Pvt. Limited (supra). 18. It is also relevant to note that various courts had taken a view that the reassessment proceedings were confined under Section 147 of the Act only to the issues (reasons to believe) on the basis of which the assessments were reopened. Thus, there was no scope for making any addition other than those which were circumscribed by the reasons to believe as recorded by the AO prior to the issuing a notice under Section 148 of the Act. However, this controversy was set at rest by introduction of Explanation 3 by virtue of the Finance Act, 2009 with retrospective effect from 01.04.1989. Explanation 3 to Section 147 as applicable at the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer 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."
[Emphasis added]
21. In view of the above, no substantial question of law arises in the present appeal. Therefore, the same is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X
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