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TMI Blog2025 (1) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the Revenue in appeal of AY 2013-14 are extracted here under: ITA No. 2731/Del/2024, AY 2013-14: "1. Ld. CIT(A) has erred in deleting the disallowance of bogus purchases of Rs. 2,33,81,685/- made by the assessee which were not substantiated by documentary proof by the assessee. 2. Ld. CIT(A) has erred in deleting the addition of Rs. 18,72,63,613/- of profit earned on suppressed sales out of variation in stock. 3. Ld. CIT(A) has erred in deleting the addition of Rs. 2,12,82,436/- out of excessive expenditure on stores and spares." 3.1 Grounds of C.0. No.70/Del/2024 read as under: 1. That the order dated 21.12.2023 passed under section 250 of the Income Tax Act, 1961 (hereinafter, the "Act") by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi is against law and facts on the file as much as he was not justified to hold that the ground challenging the initiation of proceedings u/s 148 has no merit by ignoring the fact that i. Information on the basis of which satisfaction was recorded that there is reason to believe that income amounting to Rs. 4,61.00,000/- has, allegedly, escaped assessment is factually incorrect; ii. Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated in these years. However, the additions on entirely different issues/grounds were made in instant cases. 5.1 The Ld. AR argued that the AO had to assess or reassess or recompute income on the issues which formed belief of escapement of income from assessment and only if he did so, he could travel beyond the reasoning recorded for reopening the case, otherwise not. It was argued that if the AO held that income, for which he had initially formed a reason to believe that it had escaped assessment, had, as a matter of fact, not escaped assessment, it was not open to the AO to assess some other income. To buttress the above contention, the Ld. AR placed reliance on the following decisions: - (i) Yashoda ShivappaNagangoudar [(2022) 138 taxmann.com 296 (Bombay); (ii) Jet Airways (1) Ltd [(2011) 331 ITR 236 (Bombay); (iii) Atlas Cycle Industries [(1989) 180 ITR 319 (P & H); (iv) Ranbaxy Laboratories Ltd. (2011) 336 ITR 136 (Delhi); (v) Mohmed Juned Dadani [(2014) 355 ITR 172 (Gujarat); (vi) Adhunik NiryatIspat Ltd. [(2008) 170 Taxman 470 (Delhi) (vii) Abdul Rashid Sofi (Order dated 20.09.2022 passed by the Hon'ble ITAT Amritsar in I.T.A Nos. 02 & 03/Asr/2021) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lude that no additions or modifications are warranted under those heads, it would not be entitled to make any additions in respect of other items forming part of the original return. 26. This position in law also finds resonance in the judgment of the Punjab and Haryana High Court in Majinder Singh Kang Versus Commissioner of Income-tax and Another11 and where it was observed:- "8. Learned counsel for the assessee submitted that the Assessing Officer had reopened the assessment by issuing notice under section 148 of the Act on the ground that the income from salary, perquisites and unexplained cash deposits in various accounts along with interest thereon had escaped assessment. The counsel urged that the Assessing Officer, however, while passing the reassessment order had sought to make addition of another amount without any addition having been made on the ground on the basis of which reassessment had been initiated. According to the learned counsel, no reassessment order could be passed by the Assessing Officer. Learned counsel for the assessee relied upon the following observations made by this court in CIT v. Atlas Cycle Industries [1989] 180 ITR 319 (page 322): " ...we a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this Court's view the emphasis placed in Jet Airways's case (supra) on "and also" undermines the essential Order dated 22.01.2018 in ITA 727/2017 objective of Section 147 of the Act and unduly restricts and narrows it. The circumstance clarifies existence of an additional power to bring to tax other sums. This per se would not mean that the sums or amounts sought to be brought to tax in a reassessment notice (which are ultimately not the subject of the final reassessment orders), act as a limitation. 14. Having regard to the facts, this Court is of the opinion that since there is some doubt as to the accuracy of the interpretation in the case of Ranbaxy Laboratories Limited (supra) and which was subsequently followed in the case of Monarch Educational Society (supra), the appropriate course would be to refer the issue to a larger Bench. 15. The following issue is accordingly framed for reference to the Full Bench i.e. whether the view expressed in the case of Ranbaxy Laboratories Limited (supra) [following Jet Airways's case (supra) of the Bombay High Court and followed later in Monarch Educational Society's case (supra)] with respect to the interpretation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the impugned notices and orders in each of the above-captioned writ petitions are quashed. The impugned orders under Section 148A(d) dated 31.07.2022 [W.P.(C) 3807/2023], 23.07.2022 [W.P.(C) 3804/2023], and 29.07.2022 [W.P. (C) 3808/2023], respectively as well as the notices under Section 148 dated 31.07.2022 [W.P.(C) 3807/2023], 23.07.2022 [W.P.(C) 3804/2023], and 29.07.2022 [W.P.(C) 3808/2023], respectively are hereby quashed." Banyan Real Estate Fund Mauritius [WP(C) 10485/2023] "28. Before concluding, and in our considered opinion, the impugned action is liable to be faulted since it clearly suffers from the following foundational illegality. As was rightly contended by Mr. Singh, the reasons which weigh upon an Assessing Officer proposing to reopen an assessment and form the bedrock of a notice under Section 148A(b) of the Act alone are germane for the purposes of evaluating the validity of that action. It is those set of reasons and which form the basis for the Assessing Officer forming an opinion that income liable to tax has escaped assessment alone which would merit examination and evaluation. A decision to reopen or reassess cannot be based or sought to be justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is knowledge to issue another notice under section 148 for different reasons. But that is not the case here. On the basis of the very same notice issued under section 148, the Assessing Officer has recorded additional reasons subsequent to the issuance of notice and this is impermissible in law." 7. It becomes pertinent to observe that the validity of the proceedings initiated upon a notice under Section 148 of the Act would have to be adjudged from the stand point of the reasons which formed the basis for the formation of opinion with respect to escapement of income. That opinion cannot be one of changing hues or sought to be shored upon fresh reasoning or a felt need to make further enquiries or undertake an exercise of verification. Ultimately, the Court would be primarily concerned with whether the reasons which formed the bedrock for formation of the requisite opinion are tenable and sufficient to warrant invocation of Section 148 of the Act. 8. We in this regard find the following pertinent observations which appear in a decision of the Bombay High Court in Indivest Pe. Ltd. Vs. Additional Director of Income-tax and Ors.5 "11. Reading the reasons of the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after April 1, 1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words 'reason to believe' but also inserted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm. As we have noted earlier, the relevant provisions expressly make it clear that no document or report can be filed with the return of income in the electronic form. The assessee has an opportunity to do so during the course of the assessment proceedings if a notice is issued under section 143(2). The Assessing Officer was, in our view, not entitled, when he disposed of the objections to travel beyond the ambit of the reasons which were disclosed to the assessee. For all these reasons, we are of the view that the exercise of the jurisdiction under section 147 and section 148 in the present case is without any tangible material. The notice of reopening does not meet the requirements as elucidated in the judgment of the Supreme Court in Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) For these reasons, we make the rule absolute by quashing and setting aside the notice dated March 16, 2011, and the order passed by the Assessing Officer on December 20, 2011." xxxxxxxxxxxx 11. We also find merit in the submission of Mr. Kantoor who drew our attention to the First Proviso to Section 148 which reads as under:- "148. Issue of notice where income has escaped assessment -Before maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se developments. We are thus constrained to hold that the impugned action when tested in light of the above and the legal principles which stand enunciated in respect of the authority to reassess cannot sustain. 32. We accordingly allow the writ petition and quash the impugned order under Section 148A(d) of the Act dated 27 April 2023 and impugned notice under Section 148 of the Act dated 27 April 2023. For reasons aforenoted, we also set aside the original SCN under Section 148A(b) dated 24 March 2023. We, however, accord liberty to the respondents to initiate proceedings afresh if otherwise permissible in law." 5.3 The Ld. AR argued that the AO had mechanically recorded the reason for reopening the case. It was contended that the AO had not verified the veracity of the information received from the Investigation Wing of the Income Tax Department. No independent verification/ enquiries by any degree of application of mind was conducted/carried out by the AO. The AO did not bring anything on record on the basis of which any nexus could have been established between the information received from the Investigation Wing of the Income Tax Department and the escapement of income. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C)] (iv) Orient News Prints Ltd. [(2017) 393 ITR 527 (Guj)]. 6. On the other hand, the Ld. Commissioner of Income Tax- Departmental Representative (hereinafter 'CIT-DR') drew our attention to the Explanation of Section 147 of the Act and submitted that the AO had all the powers to examine and to make any addition even other than the reasoning recorded for reopening the assessment. In this regard, the Ld. CIT-DR, placing reliance on the decisions of the Hon'ble Punjab & Haryana High Court in the cases of Mehak Finvest Pvt. Ltd., 367 ITR 769 (SLP file against this order was dismissed by the Hon'ble Supreme Court) & Majinder Singh Kang, 25 taxman.com 124 and decision in the case of N. Govind Raju 60 taxman.com 333 (Kar), requested that the impugned order deserved to be set aside with upholding of all assessment orders. 7. We have heard both the parties and have perused the material available on the record. We also perused the above referred case laws. We find force in the arguments/contentions/submissions of the Ld. AR. We are of the considered view that this case is squarely covered by the decision of the Hon'ble Delhi High Court in the case of ATS Infrastructure Ltd. (supra) whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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