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TMI Blog2025 (1) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... out in the course of assessment that the said loan amount had come only from one of them, namely, Bay Inland Finance Pvt. Ltd. This being the case, AO s reopening reasons, even if held as carrying valid approval (which is not so in the instant case), hardly satisfies the clinching test of being based on the tangible material and therefore, not sustainable in law going by Indo Arab Air Services [ 2015 (10) TMI 2383 - DELHI HIGH COURT ] We further quote Hindustan Liver Ltd. Vs. R.B. Wadkar [ 2004 (2) TMI 41 - BOMBAY HIGH COURT ] that there is no scope of any addition/deletion or substitution in the AO s reopening reasons and validity thereof has to be decided as they were recorded at the first instance. We accordingly accept the assessee s legal arguments challenging the validity of the impugned reopening and reject the Revenue s stand supporting the same in very terms. Decided in favour of assessee. - Shri Satbeer Singh Godara, Judicial Member And Shri M. Balaganesh, Accountant Member For the Assessee : Sh. S.K. Tusiyan, Adv., Sh. Lakshya Budhiraja, CA, Ms. Bhoomija Verma, Adv. For the Department : Ms. Baljeet Kaur, CIT(DR) ORDER PER SATBEER SINGH GODARA, JM This assessee s appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December, 2016, inter alia, adding an amount of Rs. 40,05,00,000/- as unexplained cash credits and unexplained investment under section 69 amounting to Rs. 80.10 lakhs respectively which stood upheld in the lower appellate proceedings. 6. We now advert to the first and foremost legal issue herein challenging the validity of the reopening (supra). Learned counsel invites the bench s attention to the assessee s paper-book at pages 15 to 18 wherein the Assessing Officer recorded his reasons to believe that the assessee had in fact introduced its undisclosed money through accommodation entries amounting to Rs. 90 lakhs through five entities, namely, Gromore Fund Management Company, Stocknet International Ltd., Artillence Bio-Innovation Ltd., Bay Inland Finance Pvt. Ltd. and Bhaskar Fund Management Ltd. 7. Learned Departmental Representative could further not dispute the facts emerging from the case records that the prescribed authority i.e. the learned Addl. CIT had dealt with the Assessing Officer s foregoing reason on 31st March, 2016 that once the assessment period is happened to be beyond four years counted from the date of notice, it was the PCIT concerned who was vested with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for Education (2022) 448 ITR 695 (Cal.)(HC), which decided in assessee s favour as under: 2. We have heard Mr. Vipul Kundalia, learned Senior Standing Counsel assisted by Mr. Anurag Roy, learned Advocate for the appellants and Mr. Sourabh Bagaria assisted by Mr. Saumya Kegriwal and Mr. G.S. Gupta, learned Advocates for the respondents. 3. The respondent assessee filed the return of income for the assessment year under consideration, AY 2009-10, declaring a total income of Rs. NIL. The return was processed under Section 143 (1) of the Act. A survey under Section 133A of the Act was conducted from which it was found that the assessee has deposited money with M/s. Nissan Developers and Properties Pvt. Ltd. to the tune of Rs/ 59,42,709/-. It was further seen that the said company is a specified person of the assessee. According to the Assessing Officer, the assessee is hit by Section 13(1)(c)(ii) and Section 13(1)(d) of the Act., for such reason the assessment was reopened under Section 147 of the Act by issuance of notice under Section 148 dated 13.03.2016. Subsequently, notices under Section 143(2) and Section 142(1) were issued. Pursuant to such notices the assessee through thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO and Ors.1 was violated. Further, it was contended that in the assessment order the Assessing Officer has raised several other issues which were not forming part of the reasons for reopening as was communicated to the assessee. Further, it was submitted that in the original assessment under Section 143(3) which was completed on 01.03.2011, the Assessing Officer issued notice to the assessee called for document and details which were furnished and the Assessing Officer has recorded his satisfaction in the assessment order dated 01.03.2011. Therefore, it was contended that on the very same facts, reopening could not have been done. (2003) 259 ITR 19 (SC).The assessee placed reliance on the decision of the Hon'ble Supreme Court in CIT Versus Kelvinator India Ltd.2 to support the contention that the reassessment proceeding was a case of change of opinion. Several other grounds were raised touching upon the merits of the matter. 4. The CIT(A) by order dated 30th July, 2019 substantially affirmed the view taken by the Assessing Officer except for granting partial relief such as with regard to the claim for carry forward of the depreciation etc. Aggrieved by such order the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer in the course of the proceedings, can also be taxed and that there are two parts to the Section and they which had been joined by the words and also , cannot be treated as conjunctive but has to be disjunctive. It is submitted that the judgment in the case of Majinder Singh Kang Versus CIT and Ors.6, CIT Versus Atlas Cycle Industries 7 and (2011) 331 ITR 236 (Bom) (2011) 336 ITR 136 2015 SCC Online Kar 7386 (2012) 344 ITR 358 (P H) (1989) 180 ITR 319 (P H), CIT Versus Shri Ram Singh 8 were taken note of and the said decision clearly applies to the facts of the case on hand. 6. Mr. Bagaria placed reliance on the decisions in Commissioner of Income Tax Versus Jet Airways (I) Limited 9, Ranbaxy Laboratories Ltd. Versus CIT 10, Principal Commissioner of Income Tax Versus Lark Chemicals (P) Limited 11, Yashoda Shivappa Nagangoudar Versus Income Tax Officer 12, CIT Versus Mohmed Juned Dadani 13, Asstt. CIT Versus Major Deepak Mehta 14, Commissioner of Income Tax Versus Shri Ram Singh 15, M/s. Tractors and Farm Equipment Limited Versus The Assistant Commissioner of Income Tax 16, Martech Peripherals P. Ltd. Versus Deputy Commissioner of Income Tax Anr.17, Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which reason had been given in the notice for reopening assessment, the second part cannot be invoked, but if it is not to be read in conjunction, the second part can be (2014) 367 ITR 769 (P H) invoked independently even without the reason for the first part to survive. The Court held that the two parts of the Section which had been joined with the words and also , cannot be read as conjunctive but has to be read as disjunctive. 10. The earliest of the decisions on the point is in the case of Jet Airways. The Hon'ble Division Bench took note of the decision in Shri Ram Singh, Altas Cycle Industries held that after the Amendment of 2009, the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year; upon the formation of that belief and before he proceeds to make an assessment, reassessment or re-computation, the Assessing Officer has to serve on the assessee a notice under Sub- Section (1) of Section 148; 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 assessment and which comes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two grounds mentioned in the notice under Section 148 were incorrect or nonexistent. The decisions of the Punjab and Haryana High Court in Atlas Cycle Industries [1989] 180 ITR 319 and of the Rajasthan High Court in Shri Ram Singh [2008] 306 ITR 343 would not be affected by the amendment brought in by the insertion of Explanation 3 to Section 147. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment of reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons, for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance (No. 2) Act of 209. However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of Section 147. An E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oratories wherein it was held as follows: 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 the basis of which he assumed jurisdiction. For every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to taken into accounts, he would be required to issue a fresh notice under Section 148. 12. The decision in Jet Airways was followed in Lark Chemicals (P) Limited, which decision was affirmed by the Hon'ble Supreme Court as SLP stood dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued but to chase some other grounds not so mentioned for issuance of the notice. In such a situation, even if a case where notice for reopening has been issued beyond a period of four years, the assessment would continue even though on all the grounds on which the additions are being made, there was no failure on the part of the assessee to disclose true and full material facts. In such a situation an important requirement of failure on the part of the assessee to disclose truly and fully all material facts would be totally circumvented. As already noted, except for the Punjab and Haryana High Court in the case of Majinder Singh Kang Versus CIT [2012] 344 ITR 358 (P H) all courts have uniformly taken a view that Explanation 3 to Section 147 of the Act does not change the situation in so far as the present controversy is concerned. The leading decision of the Bombay High Court in the case of CIT Versus Jet Airways (I) Ltd. Has been followed by different High Courts. In the case of CIT Versus Jet Airways (I) Ltd., the High Court, in its elaborate decision considering the statutory provisions, different judicial pronouncements and the explanatory memorandum for introduction of Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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