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TMI Blog2019 (3) TMI 2079X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial year would reckon from the original assessment order passed u/s 143(3) on 15th Dec, 2010 and not from the subsequent reassessment order. Accordingly, the impugned order is invalid being without jurisdiction as the time-limit for passing the order was already expired. Hence the same is quashed being invalid. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... . Director of IT, Mumbai, regarding share application money received from 6(six) parties amounting to Rs. 2.25 crores as bogus. The AO passed the reassessment order under s. 143(3) r/w. s. 147 on 26th Dec, 2011, thereby the total income of the assessee was assessed at Rs. 1,36,41,140. The matter did not rests there and the AO once again reopened the assessment by issuing a notice under s. 148 on 15th Oct., 2014 based on the information received from Dy. Director of FT, Mumbai, regarding 6 (six) more share applicants to be treated as bogus application money total amounting to Rs. 1.17 crores. Consequently, the AO passed the second reassessment order on 30th March, 2016 whereby the total income of the assessee was assessed at Rs. 2,54,87,390. The learned Authorized Representative has pointed out that the matter arising from the original assessment order under s. 143(3) was carried to this Tribunal and this Tribunal has deleted this addition/disallowances made by the AO. The appeal against the first reassessment order passed by the AO on 26th Dec, 2011 is still pending before the learned CIT(A). The appeal against the second reassessment order dt. 30th March, 2016 was also filed befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act cannot be exercised on the issues which were not subject-matter of consideration while passing the order of reassessment under s. 143(3) r/w. s. 147 of the Act but a part of an assessment done earlier under the Act. The learned Authorized Representative has pointed out that in the case of assessee, there was a scrutiny assessment under s. 143(3) on 15th Dec., 2010 and, therefore, the jurisdiction under s. 263 can be exercised by the learned Principal CIT on the ground of lack of enquiry only against the original assessment passed under s. 143(3) and not against the reassessment. He has then relied upon the order of Hon'ble Allahabad High Court in case of LG Electronics India (P) Ltd. vs. Principal CIT (2016) 143 DTR (All) 105 : (2016) 290 CTR (All) 283 : (2016) 388 ITR 135 (All) and submitted that the Hon'ble High Court has held that the limitation under s. 263(2) of the Act was to be reckoned with reference to the original assessment order and not with respect to the reassessment order when the issue on which the jurisdiction under s. 263 was invoked was not a subject-matter of assessment. The learned Authorized Representative then relied upon the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have considered the rival submissions as well as the relevant material on record. The background history of the case of the assessee has been recorded by the learned Principal CIT in the impugned order in paras 1 to 3 as under: "1. In this case, the assessee had filed return of income on 30th Sept., 2008 declaring total income at Rs. Nil. The AO had passed assessment order under s. 143(3) on 15th Dec, 2010 and made addition of Rs. 15,21,860 on account of property rent, unexplained cash credit and disallowance of legal & professional; office, consultancy, garden development expenses. 2. The AO had initiated reassessment proceedings under s. 147 due to the reason that from the information available, it was noticed that the assessee had obtained entries in the form of share application money which found to be bogus, and passed assessment order under s. 148/143(3) on 26th Dec, 2011 assessing the total income at Rs. 1,36,41,140. 3. Reassessment proceedings was further initiated in this case due to the reason that the assessee had obtained bogus share application money through accommodation entries, and the AO had passed assessment order under s. 143(3) r/w. s. 147 on 30th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The one of the beneficiaries in the said list in the financial year 2007-08 (relevant to asst. yr. 2008-09) is M/s. Chhabra Syncotex Ltd., Chhabra Mansion, Pur Road, Bhilwara, is noticed of Mahasagar Group pertaining to Rajasthan. Since the said assessee had entered into transaction of bogus purchase and sales of shares/securities as beneficiary from Mukesh Choksi's Group of companies [(Talent Infoway Ltd., Mansagar Securities, Mihir Agencies (P) Ltd., Alpha Chemic Trade Agencies (P) Ltd., Buniyad Chemicals (P) Ltd.)] for total amount of Rs. 225 lacs in the asst. yr. 2008-09, therefore, re-assessment proceedings under s. 147/148 of IT Act, 1961, are initiated in this case of assessee-company as per the letter of Dy. Director of IT (Inv.)-II/Udr/2010-11/735, dt. 21st March, 2011 addressed to this office in the said matter of share scam. 4. Accordingly, in the case of said assessee income to the extent of Rs. 2,25,00,000 has escaped assessment within the meaning of s. 147 r/w. s. 148 of IT Act, 1961, and therefore, it is fit case where notice under s. 148 can be issued. Further, I have reason to believe that short-term/long-term capital gain declared on sales of shares and se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -09, therefore, issue notice under s. 148 of the IT Act, 1961." Therefore, in the second reopening of the assessment, the AO again proposed to make the addition in respect of the accommodation entries received on account of share capital and share premium from six companies total amounting to Rs. 1.17 crore. The AO then passed the second reassessment order on 30th March, 2016 whereby an addition of Rs. 1.17 crore was made. It is clear from the second reassessment order dt. 30th March, 2016 that the decision of the AO is based on the information received from Dy. Director of IT, Mumbai, and the statement of one Shri Pravin Kumar Jain recorded by the Dy. Director of IT, Mumbai, was relied upon by the AO for making the addition in respect of the share capital and premium received from six companies as given in the reasons recorded reproduced supra. Hence, it is clear that the AO has also completed three rounds of assessment/reassessments and in the second reassessment the subject-matter of reopening was the share capital and share premium received from six companies stated in the reasons recorded. The jurisdiction of the AO in the reopening assessment proceedings under s. 147 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. On perusal of assessment record, it is revealed that you have received Rs. 4.92 crores from 22 companies tabulated as under, on account of share capital and share premium during the year under consideration. S. No. Alleged subscriber of share capital/ share premium Amount (Rs.) Share capital/share premium (Bonus) Share capital/Share premium Total 1. Amuk Tieup (P) Ltd. - 21.00,000 21,00,000 2. Dharavi Management Service (P) Ltd. - 9,00,000 9,00,000 3. Karan Vyapaar (P) Ltd. - 6,00,000 6,00,000 4. Mukund Merchandise (P) Ltd. - 6.00.000 6.00.000 5. Dreiser Traders (P) Ltd. - 9,00,000 9,00,000 6. Sangeeta Synthetics (P) Ltd. - 9,00,000 9,00,000 7. Cosmat Vinimay (P) Ltd. - 18,00,000 18,00,000 8. Feeder Tieup (P) Ltd - 6.00.000 6.00.000 9. Radha Chemical (P) Ltd. - 6,00,000 6,00,000 10. Garden Mercantiles & Holdings (P) Ltd. - 18.00.000 18,00,000 11. KEscope India (P) Ltd. - 48,00,000 48,00,000 12 Bhanu Finvest Ltd. - 6,00,000 6.00.000 13. Melco Sales (P) Ltd. - 6,00,000 6.00.000 14. Neelkanth Goods (P) Ltd. - 12,00,000 12.00.000 15. Rextile Traders (P) Ltd. - 9,00,000 9,00,000 16. Goldstar Advertisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial in the possession of the AO to arrive at the opinion or conclusion that certain income assessable to tax has escaped assessment. The issue of share capital and premium stood finalized at the time of original assessment order dt. 15th Dec, 2010 except those taken up on the reassessment under s. 147 of the Act. Hence, we find that if there was any lack of enquiry on the part of the AO, it was only at the time of passing the scrutiny assessment order under s. 143(3) on 15th Dec, 2010. Thereafter, the AO has completed two rounds of reassessments but on specific issue. Therefore, in the absence of any new material or information came to the knowledge of the AO or after completion of the reassessment to the knowledge of the learned Principal CIT to show that the remaining 22 share applicants also belonged or controlled by the alleged entry operator Shri Pravin Kumar Jain as alleged by the AO while completing the reassessment order dt. 30th March, 2016, the so-called lack of enquiry cannot be imputed to the second reassessment order. Even otherwise, the learned Principal CIT has also not referred any such information or material in the impugned revision order which could lead to a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "12. We have considered the rival submissions. It is not disputed that save and except the issue of non-genuine purchases all other issues dealt with by the CIT in the order dt. 30th March, 2009, were not a subject-matter of the assessment order passed on 28th June, 2006, under s. 143(3)/147 of the Act. All the other issues on which the CIT is seeking to exercise the jurisdiction under s. 263 of the Act were concluded by virtue of an intimation under s. 143(1) of the Act which admittedly was done beyond a period of two years prior to the notice dt. 17th March, 2009, issued under s. 263 of the Act. Sec. 263(2) of the Act provides that no order would be made in exercise of the jurisdiction under s. 263(1) of the Act after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. It is an admitted position that the CIT has not exercised the revisional jurisdiction in respect of the order/intimation passed s. 143(1) of the Act within two years of it being passed. Therefore, exercise of jurisdiction on those issues under s. 263 of the Act is time-barred as held by this Court in CIT vs. Anderson Marine & Sons (P) Ltd. (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of the financial year in which the intimation under s. 143(1) was issued was barred by limitation. Similarly, in case of Ashoka Buildcon Ltd. vs. Asstt. CIT (supra), the Hon'ble High Court has again considered this issue in paras 7 to 12 as under: "7. Sec. 263 empowers the CIT to call for and examine the record of any proceedings under the Act and to pass such orders as the circumstances of the case justify, including an order enhancing, modifying or cancelling the assessment and directing a fresh assessment, if he considers that any order passed by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue. Sub-s. (2) of s. 263 stipulates that no order shall be made under sub-s. (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. That period of two years from the end of the financial year in which the original order of assessment dt. 27th Dec, 2006 was passed, has expired on 31st March, 2009. Hence, the exercise of the revisional jurisdiction in respect of the original order of reassessment is barred by limitation. This is sought to be obviated by the CIT by seeking to revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rests of the Revenue. But, the proceedings for reassessment had nothing to do with the said head of income. The Supreme Court clearly held that the doctrine of merger was not attracted to a case of that nature. The Supreme Court followed its earlier judgment in CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) and held that the Tribunal had found that all the subsequent events were in respect of matters other than the lease equalisation fund. In other words, this was not a case where the subject-matter of the assessment and the reassessment was the same. The Supreme Court then held as follows: We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the CIT exercising his revisional jurisdiction reopened the order of assessment only in relation to lease equalisation fund which being not the subject of reassessment proceedings, the period of limitation provided for under sub-s. (2) of s. 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been dealt with in the order of reassessment. Hence, it has been urged that the omission of the AO, while making an order of reassessment to deal with those issues under s. 143(3) r/w. s. 147 constitutes an error which can be revised in exercise of the jurisdiction under s. 263. The submission cannot be accepted either as a matter of first principle, based on a plain reading of the provisions of ss. 147 and 263, nor is it sustainable in view of the law laid down by the Supreme Court. The Supreme Court has now clearly held in the decision in Alagendran Finance that the doctrine of merger does not apply where the subject-matter of reassessment and of the original order of assessment is not one and the same. In other words, where the assessment is sought to be reopened only one or more specific grounds and the reassessment is confined to one or more of those grounds, the original order of assessment would continue to hold the field, save and except for those grounds on which a reassessment has been made under s. 143(3) r/w. s. 147. Consequently, an appeal by the assessee on those grounds on which the original order of assessment was passed and which do not form the subject of reasse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opened, the commencement of limitation would be with reference to the order of reassessment. The present case does not fall in that category. 11. Counsel appearing on behalf of the Revenue relied upon the judgment of the Supreme Court in ITO & Anr. vs. K.L. Srihari (HUF) & Ors. (2002) 176 CTR (SC) 99 : (2001) 118 Taxman 890 (SC). That was a case where an assessment was reopened under s. 147. The Supreme Court, after considering the original order of assessment dt. 19th March, 1983 and the order of reassessment dt. 16th July, 1987 passed under s. 147 held that the subsequent order made afresh assessment of the entire income of the assessee. Once, in the exercise of the power under s. 147, the AO had reassessed the entire income of the assessee, the Supreme Court held that the original order would stand effaced by the subsequent order. Srihari was, therefore, a case where the subject-matter of the original order of assessment as well as of the order of reassessment was the same. This is distinct from the situation in the subsequent judgment of Alagendran Finance Ltd.'s case (supra) where the Supreme Court noted that the subject-matter of the original assessment and the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious assessment will be held to be set aside and the whole proceeding would start afresh but that would not mean that even when the subject-matter of reassessment is distinct and different, the entire proceeding of assessment would be deemed to have been reopened. Since the CIT in exercise of his revisional jurisdiction reopened the order of assessment in relation to the lease equalisation fund which was not the subject-matter of the reassessment proceedings, the period of limitation provided under sub-s. (2) of s. 263 would, it was held, begin to run from the date of the order of assessment and not from the order of reassessment. 6. But, the submission which has been urged by the counsel for the Revenue is that the decision of the Supreme Court in Alagendran Finance (supra) was rendered on 27th July, 2007 which was prior to the amendment of s. 147 by the insertion of Expln. 3. The counsel submits that as a result of the insertion of Expln. 3, once an assessment is reopened, the AO is entitled to assess or reassess the income in respect of any issue which has escaped assessment though the reasons in respect of such issue have not been included in the reasons recorded under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case arises because the revisional jurisdiction under s. 263 is sought to be exercised in respect of issues which did not form the subject-matter of the reassessment proceedings under s. 143(3) r/w. 147. In respect of those issues, limitation would commence with reference to the original order of assessment. If the exercise of the revisional jurisdiction under s. 263 was to be in respect of issues which formed the subject-matter of the reassessment, after the original assessment was reopened, the commencement of limitation would be with reference to the order of reassessment. The present case does not fall in that category.' Sub-s. (2) of s. 263 stipulates a period of limitation of two years within which an order under sub-s. (1) has to be passed. Under sub-s. (2) no order under s. 263(1) can be made after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. The order of assessment under s. 143(3) in the present case allowed the deduction which was claimed under s. 36(1)(vii), s. 36(1)(viia) and in respect of foreign exchange rate difference. Neither in the first order of reassessment dt. 22nd Feb., 2000 nor in the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Jaganmohan Rao's case (supra) was noticed stating: 'The principle laid down by this Court in Jaganmohan Rao's case, therefore, is only to the extent that once an assessment is validly reopened by issuance of a notice under s. 22(2) of the 1922 Act (corresponding to s. 148 of the Act), the previous under-assessment is set aside and the ITO has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year......The judgment in V. Jaganmohan Rao's case, therefore, cannot be read to imply as laying down that in the reassessment proceedings validly initiated, the assessee can seek reopening of the whole assessment and claim credit in respect of items finally concluded in the original assessment. The assessee cannot claim re-computation of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment which has since acquired finality. Of course, in the reassessment proceedings, it is open to an assessee to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings are initiated. The ITO cannot make an order of reassessment inconsistent With the original order of assessment in respect of matters which are not the subject-matter of proceedings under s. 14...." 12. We may at this juncture also take note of the fact that even the Tribunal found that all the subsequent events were in respect of the matters other than the allowance of lease equalization fund'. The said finding of fact is binding on us. Doctrine of merger, therefore, in the fact situation obtaining herein cannot be said to have any application whatsoever. It is not a case where the subject-matter of reassessment and subject-matter of assessment were the same. They were not. 13. It may be of some interest to notice that a similar contention raised at the instance of an assessee was rejected by a 3-Judge Bench of this Court in CIT vs. Shri Arbuda Mills Ltd. (1998) 147 CTR (SC) 474 : (1998) 231 ITR 50 (SC). This Court took note of the amendment made in s. 263 of the Act by the Finance Act, 1389 with retrospective effect from 1st June, 1988, inserting Expln. (c) to sub-s. (1) of s. 263 of the Act stating: The consequence of the said amendment made wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quot; The same principle was reiterated by a Division Bench of the Calcutta High Court in CIT vs. Kanubhai Engineers (P) Ltd. (2000) 158 CTR (Cal) 219 : (2000) 241 ITR 665 (Cal). 15. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the CIT exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-s. (2) of s. 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the CIT beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity." Therefore, even if an order of assessment is reopened, the whole proceedings would start afresh but it would not disturb the issues which were not subject-matter of reopening of the assessment and even not falling under the purview of Expln. 3 to s. 147 of the Act. Therefore, for the purpose of limitation under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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