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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 ..... gh Court in the case of ATS Infrastructure Ltd. [ 2024 (7) TMI 1441 - DELHI HIGH COURT] are binding in nature as the AO was situated within the territorial and subjective jurisdiction of the Hon ble Delhi High Court. Thus, hold that there were no infirmities in the impugned orders and we thus, decline to interfere with. We hold that reassessment orders in these cases were bad in the eyes of the law and therefore, these are hereby quashed. Decided in favour of assessee. - Shri Satbeer Singh Godara, Judicial Member And Shri Avdhesh Kumar Mishra, Accountant Member For the Revenue : Ms. Jaya Chaudhary, CIT(DR) For the Assessee : Shri Ashwini Kumar, Adv. ORDER PER AVDHESH KUMAR MISHRA, AM Common grounds and facts arise in these above captioned appeals of the Revenue and Cross Objections (hereinafter, the C.Os. ) of the assessee; therefore, these appeals and C.Os. were heard together and are being disposed off by this common order. 2. The above captioned appeals of Assessment Years (hereinafter, the AY ) 2013-14, 2014-15 2015-16 arise against orders dated 21.12.2023 of the Commissioner of Income Tax (Appeals), NFAC, Delhi [hereinafter, the CIT(A) ]. Against these appeals of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29.05.2023 wherein additions on issues; such as bogus purchases (labour expenses) and variation in stock, stores spares, etc. However, the AO did not make any addition on the reason based on which these cases were reopened for reassessment but he made additions on other issues which were not included in the reasons recorded for reopening these cases. In appeal, the assessee succeeded in all these years. Aggrieved, the Revenue filed appeals and the assessee preferred C.Os. against all appeals. 5. Since, the C.Os. raise legal issue; therefore, the Ld. Authorized Representative (hereinafter AR ) of the assessee was heard first. It was submitted that the basic reasoning for reopening of the assessment proceedings was incorrect and flawed, since the so-called credible information was actually incredible which strikes at the root of the re-assessment proceedings. It was further contended that the AO did not confront with the alleged bogus transactions for which these cases were reopened as no incriminating evidence was ever shared with the assessee during the proceedings 148A of the Act and even during the reassessment proceedings. It was specifically admitted that no addition had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nters is with respect to a situation where, in the course of reassessment, the AO ultimately comes to the conclusion that no additions or variations were warranted in respect of the heads or items of income which had formed the basis for initiation of action under Section 148 of the Act. It is in the aforesaid backdrop that the Court in Ranbaxy Laboratories Ltd. proceeded on facts to hold that since no additions had ultimately been made in respect of items such as club fees, gifts and presents, and which constituted the basis for initiation of reassessment, it would not be open to the AO to revise or modulate findings on any other head or items that may have been dealt with in the original assessment. 25. The position in law which emerges from the aforesaid discussion is that while it is true that the AO would have to establish that reassessment is warranted on account of information in its possession which appears to indicate that income chargeable to tax had escaped assessment, once the assessment itself is reopened it would not be confined to those subjects only. This would, however, be subject only to one additional rider and that being if, in the course of reassessment, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have escaped assessment. The reassessment proceedings, thus, in the present case cannot be held to be vitiated. 27. For the sake of completeness, we may note that a Division Bench of this Court had expressed certain doubts with respect to the view taken by the Court in Ranbaxy Laboratories Ltd. This becomes evident upon a consideration of the opinion expressed by the Court in Principal Commissioner of Income Tax vs. Jakhotia Plastics Pvt. Ltd. 12 The Court in Jakhotia Plastics had expressed certain reservations with respect to what it viewed as undue importance having been placed by the Bombay High Court on the words and also in Jet Airways (I) Ltd. 28. In light of the above, the Court in Jakhotia Plastics had observed that since there was some doubt as to the accuracy of the interpretation accorded in Ranbaxy Laboratories Ltd., it would be appropriate for the matter being placed for the consideration of a larger Bench. This becomes evident from a reading of paragraphs 13, 14 and 15 of the report and which are extracted hereinbelow:- 13. This Court specifically is of the opinion that the Karnataka High Court's view in the case of N. Govindaraju (supra) is a more accurate one. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment would have to be independently evaluated and cannot be confused with the power that could ultimately be available in the hands of the AO and which could be invoked once an assessment has been validly reopened. 31. Explanation 3, or for that matter, the Explanation which presently forms part of Section 147, would come into play only once it is found that the power to reassess had been validly invoked and the formation of opinion entitled to be upheld in light of principles which are well settled. The Explanations would be applicable to issues which may come to the notice of the AO in the course of proceedings of reassessment subject to the supervening requirement of the reassessment action itself having been validly initiated. 32. Explanation 3, cannot consequently be read as enabling the AO to attempt to either deviate from the reasons originally recorded for initiating action under Section 147/148 of the Act nor can those Explanations be read as empowering the AO to improve upon, supplement or supplant the reasons which formed the bedrock for initiation of action under the aforenoted provisions. 33. The writ petitions are accordingly allowed and the impugned notices and ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1) Delhi Ors.10 and where we had an occasion to deal with a similar challenge. While ruling on these aspects, we in ATS Infrastructure Limited had observed as follows:- 6. Our Court in Commissioner of Income Tax-II Vs. Living Media India Ltd. had pertinently observed that additional reasons cannot be provided or recorded by the Assessing Officer4 subsequent to the issuance of a notice under Section 148 of the Act. We deem it apposite to quote the following passage from that decision:- 13. With regard to the additional reasons which were recorded subsequent to the issuance of notice under section 148 of the said Act, we have already observed that this could not have been done by the Assessing Officer. The validity of the proceedings initiated upon a 2024:DHC:5474-DB notice under section 148 of the said Act would have to be judged from the stand point of the reasons which existed at the point of time when the section 148 notice was issued. The additional reasons cannot be provided or recorded subsequent to the issuance of notice under section 148. It is, of course, open to the Assessing Officer, if some other information comes within his knowledge to issue another notice under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajesh Jhaveri (supra). At that stage, an established fact of the escapement of income does not have to be proved, since it is not necessary that the Assessing Officer should have finally ascertained that income has escaped assessment. The nature of the jurisdiction of the Assessing Officer which was dealt with by the judgment of the two learned judges of the Supreme Court in Rajesh Jhaveri's case was revisited in a decision of three learned judges in CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC). The Supreme Court has held that though after April 1, 1989, a wider power has been conferred upon the Assessing Officer to reopen an assessment, the power cannot be exercised on the basis of a mere change of opinion nor is it in the nature of a review. The Supreme Court has laid down the test of whether there is tangible material on the basis of which the Assessing Officer has come to the conclusion that there is an escapement of income. The Supreme Court held thus (page 564): However, one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned is on the assumption that the provisions of section 115AD would stand attracted. That is on the assumption that the assessee is an FIL Though the attention of the Assessing Officer was drawn to the fact that the assessee is not an FII and that the provisions of section 115AD would not be attracted, the Assessing Officer persisted in rejecting the objections to the reopening of the assessment. In the order disposing of the objections which were raised by the assessee, the succeeding Assessing Officer has clearly attempted to improve upon the reasons which were originally communicated to the assessee. The validity of the notice reopening the assessment under section 148 has to be determined on the basis of the reasons which are disclosed to the assessee. Those reasons constitute the foundation of the action initiated by the Assessing Officer of reopening the assessment. Those reasons cannot be supplemented or improved upon subsequently. While disposing of the objections of the assessee, the Assessing Officer has purported to state that the assessee had filed only sketchy details in its return filed in the electronic form. As we have noted earlier, the relevant provisions expressl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct income constituting remittances made to a foreign entity, it was clearly established that a return had in fact been filed and duly acknowledged. The petitioner had not made any remittances to third parties. In fact it had earned revenue from the sale of shares which were claimed exempt from taxation by virtue of Article 13(4) of the DTAA. Once the aforesaid explanation was proffered, the AO then proceeded to hold that the petitioner was not entitled to treaty benefits, a charge which was not even laid in the original SCN or which could be said to have constituted the basis for the formation of opinion that reassessment was warranted. In fact the petitioner was not even made aware of the view which the AO was inclined to take in this regard. The AO then sought to salvage the reopening by requiring the petitioner to furnish further particulars with respect to the allotment of shares in terms of the Scheme of Arrangement. Suffice it to note that the original SCN not only failed to refer to this Scheme, a reading thereof leaves us with the definite impression that the AO was perhaps not even aware of those developments. We are thus constrained to hold that the impugned action when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems). However, no mention of the same was there in the notice issued under section 148A(b) of the Act. Accordingly, the AO expanded the reasons for reopening while passing the order under section 148A(d) of the Actin respect of which the notice under section 148A(b) of the Act was never issued to the assessee. 5.5 The Ld. AR further contended that the reassessment proceedings were based on change of opinion and thus, the same was bad in the eyes of the law. The reassessment power of the AO had to re-assess the escaped income and not to review or change his opinion on a matter which had already been deliberated upon and examined, in particular, when an assessment had been completed after scrutiny of books/records and examination of books of accounts under section 143(3) of the Act. In support of the argument, the Ld. AR placed reliance on the following decisions: - (i) Kelvinator of India Ltd [(2010) 320 ITR 561 (SC)] (ii) Usha International Ltd. [(2012) 348 ITR 485 (Delhi)] (iii) Marico Ltd.[(2020) 425 ITR 177(Bom)] SLP dismissed by the Supreme Court [(2020) 117 Taxmann.com 244 (SC)] (iv) Orient News Prints Ltd. [(2017) 393 ITR 527 (Guj)]. 6. On the other hand, the Ld. Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X
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