TMI Blog2005 (9) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer raised several queries, which are related to huge deposits in the accounts of the assessee in the financial year relevant to assessment year under consideration. In this regard reference may be made to the notices issued by the Assessing Officer under sections 142(1) and 143(2) of Income-tax Act and detailed replies of the assessee for explaining these deposits. These letters of the assessee are available in Paper Book at Page. Thus, the notice issued by the Assessing Officer is found to be fully valid. Issue No. 1 is, therefore, decided in affirmative and accordingly. According to the Hon'ble Court in the case of Damodar H. Shah v. Asstt. CIT [ 2000 (6) TMI 27 - GUJARAT HIGH COURT] , distinction between u/s 143(1)(a) and 143(3) is well brought out by the statutory provisions as stood at different points. The Hon'ble Court has also considered the effect of change brought by the amendment with effect from1st April 1979in the scope of u/s 147. Thus, it is clear that reassessment proceeding can be initiated after intimation u/s 143(1)(a) is issued and such proceedings will not be barred merely because, notice u/s 143(2) of Income-tax Act was not issued a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is under assessed. (8) The Assessing Officer can exercise power u/s 147 in relation to other items of income which were not the basis for formation of belief or reasons to believe for issuing notice u/s 148 but for assessing such income he should indicate that any material or information has come to his notice during reassessment proceedings through external or internal source but he cannot reassess any item of income only after gathering general information or on conducting general probe from the assessee during the course of reassessment proceedings. Thus, it is clear that the term 'any income' has been used intentionally in this provision and it cannot be taken into 'entire income' or total income. The word 'such income' also qualifies 'any income'. Similar interpretation can be made of the various clauses of Explanation 2 to section 147. The deemed escaped assessment can be inferred where income chargeable to tax has been under assessed. In view of the above observations, Issue No. 3 is decided accordingly. In the result, the appeal stands allowed. - HON'BLE P.N. PARASHAR, JUDICIAL MEMBER AND N.S. SAINI, ACCOUNTANT MEMBER For the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee filed the return on 30-3-1996 declaring total income of Rs. 41,200 for the assessment year 1994-95. This return was processed under section 143(1)(a) on 28th June 1996. (ii) The Enforcement Directorate wrote a letter dated 9-10-1998 to the Joint Secretary, Foreign Tax Division, C.B.D.T., which is as under: Ref. No. T-3/84-D/97 Date 9-10-1998 To The Joint Secretary, Foreign Tax Division, C.B.D.T., Department of Revenue, North Block. New Delhi. Sir, Sub.: Enquiries regarding fixed deposits in the name of Shri Awaninder Singh, Passport No. L-524965 and Smt. Poonam Rani Singh Passport No. R-769566 resident of A-2/177, Safdarjung Enclave, New Delhi-110029 with Wells Fargo Bank, 1705, North First Street, San Jose, CA 95112, USA. We are conducting certain enquiries against the subject parties under the provisions of Foreign Exchange Regulation Act, 1973. We are in the possession of two certificates of Deposits of US $1,00,000 each issued by Wells Fargo Bank, 1705, North First Street, San Jose, CA 95112, USA in the name of captioned parties. These deposits appear to have been made in June, 1996 which coincide with the dates during which Shri Awaninder Singh and his wife Smt. Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addition on account of low withdrawals 1,12,000/- (As discussed above in para 6) Gross Total Income 1,68,65,457 /- Less: Deduction U/s 8OL 12,000/- Total Income 1,68,53,457 /- Or 1,68,53,460 /- (v) It is clear from the above details that no addition has been made in the Assessment Order on the basis of any foreign account deposits. 6. In the setting of above factual background, we proceed to adjudicate the additional ground. The Learned Counsel for the assessee Shri Salil Aggarwal while challenging the validity of notice issued under section 148, made following submissions: (i) That as observed by the Assessing Officer in the reasons to be recorded, the reopening was made on the basis information provided by the Enforcement Directorate which was in relation to deposits by the assessee in various foreign accounts and as no addition has been made on account of any deposit in the foreign account in the reassessment order, the notice of reopening on that basis itself is illegal. (ii) That the additions have been made on the items, which are not mentioned in the reasons recorded for issuing notice under section 148 and thus there is no nexus between the reasons recorded for reopening th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer was fully authorized to examine the same after reopening the assessment. It was further submitted by him that the assessment can be reopened on any ground it the Assessing Officer has belief or has reasons to believe that income of the assessee has escaped assessment. According to him the Assessing Officer, while making assessment is not to confine to reasons recorded alone and can make additions on other items of income even it reopening has been made on different items. 8. In rejoinder, the learned counsel for the assessee submitted that before issuing notice under section 148, the Assessing Officer should satisfy that particular income of the assessee has escaped assessment and in the reassessment order additions can be made only regarding such 'escaped income' and not on totally different aspects or items of income. 9. We have carefully considered the entire relevant material on record and revival submissions. The following facts are found to be undisputed: (1) The information of the Enforcement Directorate as conveyed through letter dated 9-10-1998, reproduced above, was that there were certain certificates of deposits in foreign bank accounts in the names of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): x x x Explanation 1.- Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.- For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) Where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) Where an assessment has been made, but- (i) income c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Woollen Mills Ltd. v. ITO [1999] 236 ITR 34, has considered the scope of section 147 of Income-tax Act and has observed as under: In determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the Department could reopen the ease. The sufficiency or correctness of the material is not a thing to be considered at this stage. In view of the ratio of this decision, the notice issued by the Assessing Officer is found to be fully valid. Issue No. 1 is, therefore, decided in affirmative and accordingly. ISSUE NO. 2 14. Coming to the second issue, the provisions of section 147 provide, in unequivocal terms that after having reasons to believe that any income chargeable to tax has escaped assessment, the Assessing Officer can assessed or reassess, such income and also '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'. In view of terminology used in section 147, therefore, it is open to the Assessing Officer to consider any other income or any other item of income which comes to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to believe that the income chargeable to tax has escaped assessment, the requisite jurisdictional fact for the issuance of notice under section 148 did exist and even though the same turned out to be wrong during the reassessment proceedings, there is no valid reason to thwart the proceedings under section 147 at the threshold. 18. So far as the arguments of Learned Counsel for the assessee that after processing return under section 143(1)(a) on the basis of the same information, the reassessment cannot be made, is concerned, in the case of Mahanagar Telephone Nigam Ltd. the Hon'ble Delhi High Court has observed that the intimation under section 143(1)(a) cannot be treated to be an order of assessment. According to the Hon'ble Court, distinction between under section 143(1)(a) and 143(3) is well brought out by the statutory provisions as stood at different points. The Hon'ble Court has also considered the effect of change brought by the amendment with effect from1st April 1979in the scope of under section 147. The observations of the Hon'ble High Court are as under: The intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems were made. The content ion of the assessee in that case was that since no addition was made in reassessment order with respect to CPRA, the grounds for reopening of the assessment did not survive and the Assessing Officer has no jurisdiction to continue with the proceedings. On this basis, it was contended that the entire proceedings were without having valid jurisdiction. The contention of the learned DR on the other hand was that once the case reopened in section 147 of the Income-tax Act, the full assessment was above to the Assessing Officer. The bench after considering the various authorities has ordered. Thus, the issue stands covered by the decision of Hon'ble High Court referred to above and the decision in the case of South Eastern Coalfields Ltd. The bench considered the decisions of Hon'ble Court relating to the pre-amendment provision of section 147 and amended provision of the same and concluded as under: A resume of all the case laws discussed above relating to the pre-amended provisions of section 147 goes to show that the information was the basis for forming belief about the escapement of income as per the pre-amended provisions and the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax @50 per cent in the Statement of Accounts filed with the return. The return was filed on 31-5-1994 and was processed under section 143(1)(a) for the assessment year 1992-93 on the same date. The depreciation was admissible to the assessee only @40 per cent. After noticing this mistake, the Assessing Officer, with a view to rectify the mistake, issued notice under section 154/155 of the Act on 1st May, 1995 requiring the assessee to file the objections, if any, to the proposed notification. The reply of the assessee was that no rectification was called for. In support of this reply a chart was filed on the basis of which it was explained that if the depreciation @40 per cent is to be calculated then also no rectification will be needed because on one truck no depreciation was claimed in the return and if the same is added then the depreciation claimed will be fully justified. 22. During the pendency of proceedings under section 154/155 the assessee filed return of income for assessment year 1993-94 on March 31, 1995. From the statement of accounts attached with the return it was found that the assessee again claimed depreciation @50 per cent. The Income-tax Officer while process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was necessary that an assessment order either under sub-section (1) or under sub-section (3) of section 143 of the Act had to be passed. However, after the amendment made with effect from April 1, 1989, the position has materially changed. Now, the Assessing Officer initially processes the return under section 143(1)(a) of the Act and determines the amount payable or refundable on that basis. It is not necessary for him to frame an assessment in each and every case. However, in case he chooses to verify the return and frame an assessment, he has to issue a notice under sub-section (2) of section 143 and require the assessee to produce his books of account and other materials in support of the return. Thereafter he can make an assessment under sub-section (3) of section 143 of the Act. Another important change incorporated in sub-section (2) of section 143 of the Act is that the notice under this sub-section cannot be served on an assessee after the expiry of 12 months from the end of the month in which the return is furnished. Therefore, in a case where a return is filed and is processed under section 143(1)(a) of the Act and no notice under sub-section (2) of section 143 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of escaped income only, if he has not taken recourse to the process under section 143(2) within the time prescribed for that purpose. Thus, after the expiry of period prescribed for notice under section 143(2) the scope of inquiry will be limited and shall not be the same as is available in the case of original assessment under section 143(3) of the Income-tax Act. This issue is, therefore, decided accordingly. 32. On the basis of our discussion and findings recorded while adjudicating various issues formulated in this matter, the following preposition may be culled out: (1) The proceedings under section 148/147 can be initiated if the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment. The only requirement is that at the stage of initiation of such proceedings there must exist some grounds or material for formation of the belief and there should be nexus between such grounds and reason to form belief that any income has escaped the assessment. (2) The reopening cannot be held to be invalid merely because in the ultimate analysis no escapement of income is found in relation to any ground on the basis of which proceedings for reopeni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of reassessment proceedings it comes to his notice through information form ADI that the assessee has made huge deposits in his bank account, which were not disclosed in the return. The Assessing Officer after making inquiry can definitely make addition in respect of such income, which escaped assessment. Similarly, if from Sales Tax Department he gets information that the assessee has suppressed sales then after making inquiry on this issue, he can make addition accordingly. Thus, any item of escaped income, which comes to his notice during reassessment proceedings, can be included in the reassessment proceedings. It is not open to him to make the entire assessment de novo or afresh. He has to confine only to particular items, which escaped assessment or in relation to which there was under assessment or excessive relief were allowed. Such items have to be identified and specified before making the reassessment in relation thereto. 34. The above conclusion is fully fortified from various authorities referred to above. The language and terminology used in section 147 also makes it clear that it is particular income, which in the opinion of the Assessing Officer has escaped ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken during the year with confirmed copy of account of lenders alongwith documentary evidence regarding identity and creditworthiness of the lenders. 4. Exact particulars of immovable properties owned giving addresses, location, date of acquisition and source of Investment in acquisition of such properties. Investment made in immovable properties during the financial year 1993-94 and source of such investment. 5. Details of Investment made in movable assets during the financial year 1993-94. 6. Details of Bank accounts/Bank deposits giving account number, name and address of the bank and nature of account along with a copy each of the bank statement/pass book of such bank account/bank deposits for the financial year 1993-94. 7. Details of Bank account/Bank deposits with any foreign bank giving account number, name and address of the bank and nature of account, along with a copy each of the bank statement/pass book of such bank accounts/bank deposits for the financial year 1993-94. 8. Details of Investment with companies/concerns as on 31-3-1994. 9. Details of vehicles owned during the financial year 1993-1994 with Source of Investment in acquisition of such vehicles. 10. Details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) within the period prescribed for that purpose. In view of the decision in the case of Vipin Khanna the assessment proceedings stood terminated after the expiry of the period prescribed for issuance of notice under section 143(2) of Income-tax Act in this case. Hence, the Assessing Officer could have considered only those specific and particular items which escaped assessment and which were under assessed. He could not undertake the same general inquiry under section 147 of Income-tax Act in this case which he could have undertaken while making regular assessment. 39. In view of the above, the additions made by the Assessing Officer in consequence of such general inquiry or robbing and fishing inquiry cannot be sustained and have to be deleted. We, therefore, delete various additions challenged in this appeal as having been made on the basis of such fishing and robbing inquiry which course was not legally justifiable. We may clarify here that the assumption of jurisdiction by the Assessing Officer in issuing the notice under section 148 and in proceeding under section 147, was fully justified and, therefore, the assessment order cannot be quashed. To this extent, therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d retired from service in 1977. He also expired in 1999. Thus, as the creditor had expired, no more details about the source of the source could be given by the assessee. In our opinion, therefore, the assessee discharged the burden which lay upon her. In view of above, the learned CIT(A) was not justified in sustaining the addition of Rs. 4,67,600 and the same is deleted. 44. Ground No. 3: Addition of Rs. 50,000 has been made on account of low withdrawal. The Assessing Officer has drawn inference that the assessee must be maintaining farmhouse E-18, Bijwasan, New Delhi. This farm house was purchased by her husband Mr. Awanindra Singh in September, 1994. The assessee was not living in this farmhouse but was staying at A-2/177. The Assessing Officer was, therefore, not justified to include the expenditure allegedly incurred by the assessee on the employees for maintaining the farm house. 45. The Allahabad Bench of the ITAT in the case of Rajkumar Jain 50 ITD 1 (Third Member) has held that the additions made on estimate basis and on assumptions and presumptions cannot be sustained. In this case the husband of the assessee was also making withdrawals for household expenditure. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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