9911796707
TMI Blog2024 (11) TMI 1416X X X X Extracts X X X X X X X X Extracts X X X X ..... any valid formation of belief by the AO that income of the assessee had indeed escaped assessment for the assessment year 2012-13. Difference in issue mentioned in the reasons recorded and final re-assessment order framed by AO - AO had formed a belief that the assessee was in receipt of Rs 5 lakhs as accommodation entry which was sought to be treated as undisclosed income of the assessee together with related commission expenditure there on. This was the primary reason for formation of belief to reopen the assessment, but in the final reassessment order u/s 147 no addition has been made by AO on this account. Instead, an addition on account of estimated gross profit was made by the AO finally in the reassessment proceedings. As relying on Ranbaxy Laboratories Limited [ 2011 (6) TMI 4 - DELHI HIGH COURT] no hesitation in quashing the re-assessment proceedings of AO for the assessment year 2012-13. Accordingly, we hold that the assumption of jurisdiction u/s 147 is hereby declared invalid and void abinition - Decided in favour of assessee. - SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI SUDHIR KUMAR, JUDICIAL MEMBER For the Assessee : Shri Kanchun Kaushal, Adv., Ms. Shruti Khimta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two factors, the Learned AO concluded that a sum of Rs. 5,02,500/- represent undisclosed income of the assessee and accordingly he formed a belief that he has reason to believe that income of the assessee had escaped assessment for assessment year 2012-13. Accordingly, notice under section 148 of the Act stood issued to the assessee. 4. The Learned AR before us submitted that the reasons recorded by the Learned AO for forming a belief that income of the assessee has escaped assessment are illegal, baseless and contrary to the facts available on record. This fact is evident from Para 2 of the reasons recorded wherein it has been mentioned that the undersigned is in possession of information in the case of the assessee, forwarded by Assistant Director of Income Tax (Investigation), Unit 4(1), New Delhi, vide communication dated 25-03- 2017 . In this regard, the Learned AR drew our attention to the letter dated 27-12-2018 issued by the Learned AO to Assistant Director of Income Tax (Investigation), New Delhi to provide copy of Suspicious Transaction Report (STR) and statement of Shri Vijay Goel recorded on 28-02-2013. Hence at the time of recording the reasons, the Learned AO did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 147 that the words 'has reason to believe' and sub-section (2) of section 148 came to be inserted by way of amendments in the Act with effect from 1- 4-1989. Explanation 3 to section 147 was also inserted by the Finance Act, 2009 with effect from 1-4-1989. It is seen that conditions precedent for exercise of jurisdiction under section 147 is formation of a reason to believe by the Assessing Officer that income chargeable to tax has escaped assessment. 8. The crux of section 147 of the Act is the escapement of income which may be assessed or reassessed as well as any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section. Explanation 3 makes it clear that the Assessing Officer may assess or reassess the income in respect of issue which has escaped assessment, if such issue comes to his notice in the course of proceedings under this section even though said issue did not find mention in the reasons recorded and the notice issued under section 148. Since there was confusion prevailing with regard to the powers of the Assessing Officer to assess or reassess on the issues for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, the position is that the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under section 147 though the reasons for such issue were not included in the reasons recorded in the notice under section 148(2) on the basis of which he had initiated proceedings under section 147. Similar question came for consideration before the Division Bench of Bombay High Court in CIT v. Jet Airways (I) Ltd. [2011] 331 ITR 236/[2010] 195 Taxman 117. The Court held as under : 9. The effect of section 147 as it now stands after the amendment of 2009 can, therefore, be summarised as follows: (i) The Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year; (ii) Upon the formation of that belief and before he proceeds to make an assessment, reassessment or recomputation, the Assessing Officer has to serve on the assessee a notice under sub-section (1) of section 148, (iii) The Assessing Officer may assess or reassess such income, which he has reason to believe, has escaped assessment and also any other income chargeable to tax which has escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings 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 cases of V. Jaganmohan Rao (supra) and Sun Engg. Works (P.) Ltd. (supra) of the Apex Court. In the case of Sun Engg. Works (P.) Ltd. (supra) the issue before the Supreme Court was whether in the course of reassessment on an escaped item of income could an assessee seek a review in respect of an item which stood concluded in the original order of assessment. The Supreme Court dealt with the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 Shri Ram Singh (supra) 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. 17. Now, coming back to the interpretation which was given by the Bombay High Court to sections 147 and 148 in view of the precedent on the subject. The Court held as under : 11. ... Interpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under section 147 and following the issuance of a notice under section 148, the Assessing Officer has the power to asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of section 147 with effect from 1-4-1989 clearly stipulated that the Assessing Officer has to assess or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceedings. In the absence of the assessment or reassessment the former, he cannot independently assess the latter. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king additions on those items of club fees, gifts and presents, etc., proceeded to make deductions under sections 80HH and 80-I and accordingly reduced the claim on these accounts. 20. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under sections 80HH and 80-I which as per our discussion was not permissible. Had the Assessing Officer proceeded not to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-I as well. 21. In view of our above discussions, the Tribunal was right in holding that the Assessing Officer had the jurisdiction to reassess issues other than the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive. Consequently, we answer the first part of question in affirm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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