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TMI Blog2025 (4) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 3,77,65,215/- in purchasing of a flat in Mumbai; but deleting the addition on account of disallowance of a deduction of Rs. 1,00,00,000/- claimed under Section 54EC of the Act. The Revenue had also preferred an appeal to the extent that the learned CIT(A) had allowed a deduction under Section 54EC of the Act. 3. The Assessee had preferred the aforementioned appeal before the learned CIT(A) for assailing the order dated 26.03.2013 [the impugned assessment order] passed under Section 147 of the Act read with Section 143 (3) of the Act. QUESTION OF LAW 4. The present appeal was admitted by an order dated 24.11.2022 for consideration of the following question of law: "A. Whether in view of the additions made on the basis of reasons recorded having been deleted in the appellant's case on merits, does the reopening of assessment under Section 148 of the Act survive?" 5. It is the Assessee's case that since none of the reasons for which the assessment for AY 2010-11 was opened were sustained; no other addition or disallowance on any other grounds, could be sustained. PREFATORY FACTS 6. The Assessee had filed his return of income for AY 2010-11 declaring an income of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Less: a) Investment in residential flat at Mumbai in Sept. 2007 out of advance rcvd 37765215 b) Investment in construction of residential unit at 19 Kautilya Marg, N.D. 17000000 c) Investment in REC Capital gain bonds on 24.2.2009 out of advance : 5000000 d) Investment in NHAI Bonds on 9.12.2009 out of advance : 5000000 e) Indexed cost of 50% of area sold as per valuation report attached 50% cost as on 1.4.81 7710000 Indexed cost 7710000x632/100 f) Indexed cost of freehold charges of Rs.2639321/- and regisration charges of Rs.211260/- in F.Y. 2006-07 = 2850581 x 632/519 3471227 116963642 25036358" THE IMPUGNED ASSESSMENT ORDER 11. The AO issued a notice dated 01.03.2012 under Section 148 of the Act seeking to reopen the assessment for AY 2010-11 and also furnished the reasons for reopening of the assessment. According to the AO, the Assessee's claim for deduction under Section 54EC of the Act was required to be confined to Rs. 50,00,000/- and the Assessee had claimed excess deduction of Rs. 50,00,000/-. Further the AO reasoned that the Assessee was entitled to claim deduction in respect of one of the properties under Section 54 of the Act but had c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO had erred in not accepting the fair market value of the asset at Rs. 77,10,000/- as claimed by the Assessee and upheld the AO's valuation of the capital asset at Rs. 7,70,160/- as on the year 1981. 17. However, the learned CIT(A) rejected the AO's reasoning that the investment made for purchasing a residential flat at Mumbai was not eligible for deduction under Section 54(1) of the Act for the reason that the investment was made prior to the sale of the subject property. The learned CIT(A) accepted that the consideration for the capital asset was received in tranches in advance and the investments had been made out of such advances. The learned CIT(A) rejected the Assessee's claim for deduction on the ground that it was not admissible in respect of two independent residential units. 18. Insofar as the Assessee's claim for deduction under Section 54EC of the Act is concerned, the learned CIT(A) deleted the said disallowance. The learned CIT(A) found that the Assessee had demonstrated that the investments in REC Capital Gains Bonds and NHAI Bonds were made from the consideration of the capital asset received by the Assessee in advance. THE IMPUGNED ORDER 19. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel appearing for the Assessee has confined the present appeal on the sole ground that the additions made were not sustainable as the additions made on the basis of the reasons recorded for reopening of the assessment had been deleted. 27. At the outset, it is relevant to refer to the reasons recorded for reopening of the assessment. The same are reproduced below: "Return declaring an income of Rs.2,91,02,041/- for A.Y. 2010-11 in this case was filed on 26.7.2010. A perusal of computation of total income annexed with a the return shows that during the year, the assessee has received an amount of Rs.14,20,00,000/- from sale of 50% share in House No.19, Kautilya Marg, New Delhi. The assessee has declared Long Term Capital Gain of Rs.2,50,36,358/-. Out of Sale Proceeds, the assessee has made the following investments:- a) Investment in REC Capital Gain bonds on 24.02.2009 out of advance rcvd: Rs.50,00,000/- a) Investment in NHAI Bonds on 9.12.2009 out of Advance Rs.50,00,000/- Section 54EC reads as under:- (1) Where the capital gains arises from the transfer of a long- term capital Asset and (2) Proviso to Sec.54EC reads as under:- [Provided that the investment m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house. The learned ITAT held that expression 'a residential house' could not be construed as a singular house. 31. It is not necessary to examine the merits of the learned ITAT's decision as the Revenue has accepted the ITAT's decision and has not filed an appeal against the impugned order. Thus, we must proceed on the basis of the AO's reasoning that the deduction under Section 54 of the Act was confined to investment made in one residential house has not been sustained. 32. Insofar as the second reason is concerned - that the deduction under Section 54EC of the Act is confined to Rs. 50,00,000/- only - the same was also not sustained by the learned ITAT. The learned ITAT had following the decision of the Madras High Court in Commissioner of Income-tax, Chennai v. C. Jaichander: (2015) 370 ITR 579 concluded that the issue whether a deduction under Section 54EC of the Act could exceed the said amount, as claimed by the Assessee, was covered in the Assessee's favour. The Revenue's appeal against the CIT(A)'s order was, accordingly dismissed. 33. In view of the above, the principal question to be addressed is whether the additions made by the AO are sustainable if the reasons for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment and which comes to his notice subsequently in the course of the proceedings under the section. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of the position that the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, 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 take into account, he would be required to issue a fresh notice under section 148." 35. In ATS Infrastructure Ltd. v. Assistant Commissioner of Income Tax, Circle 1 (1) Delhi & Ors.: Neutral Citation No. 2024:DHC:5474-DB, this court had examined catena of decisions and reiterated the view as expressed in Ranbaxy Laboratories Limited v. Commissioner of Income-tax: (2011) 336 ITR 136 (supra). The relevant extract of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his would, however, be subject only to one additional rider and that being if, in the course of reassessment, the AO ultimately comes to conclude 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 Another:2010 SCC OnLine P&H 13401 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. L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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