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2015 (6) TMI 417 - ITAT KOLKATA

2015 (6) TMI 417 - ITAT KOLKATA - TMI - Reopening of assessment - non inclusion of sales consideration - Held that:- The assessee has not included the sale consideration of ₹ 26,84,940/- to one Shri Manish Jhunjhunwala vide agreement dated 02.06.2006, is never the subject matter of addition by the AO and once this is not the subject matter of addition, the reassessment proceedings initiated by issuing of notice u/s. 148 of the Act cannot survive because the very base for issuance of notice .....

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of assessee. - ITA No. 74/Kol/2012, CO No. 142/Kol/2012 - Dated:- 20-5-2015 - P K Bansal, AM And Mahavir Singh, JM,JJ. For the Appellant : Shri Sanjay, Addl. CIT, Sr. DR For the Respondent : Shri S M Surana, Adv. ORDER Per Shri Mahavir Singh, JM. This appeal by revenue and Cross Objection by assessee are arising out of order of CIT(A)-XII, Kolkata in Appeal No. 264/XII/12(3)/10-11 dated 31.10.2011. Assessment was framed by ITO, Ward-12(3), Kolkata u/s. 143(3)/147 of the Income-tax Act, 1961 (he .....

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before the CIT(A) and CIT(A) adjudicated the issue against assessee. The facts relating to this issue is already available in the orders of the lower authorities and no new facts need to be investigated/considered. According to Ld. Counsel, assessee is entitled to raise this issue under rule 27 of the Appellate Tribunal Rules, 1963 (hereinafter referred to as the Rules ). He referred to relevant Rule 27, which reads as under: "27. The respondent, though he may not have appealed, may support .....

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d adjudicate the same. The assessee has raised following ground in its application under Rule 27 : "That on the facts and under the circumstances and in law proceedings u/s. 147 of the I. T. Act, 1961 initiated by notice u/s. 148 dt. 23.09.09 are bad and assessment made in consequence thereof is liable to be held as a nullity, ab-initio void and/or otherwise and be cancelled." 4. Briefly stated facts are that the assessee is a private limited company engaged in the business of property .....

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f the Act are enclosed. The typed copy of the reasons recorded is at page 44 of assessee s paper book and the reasons recorded on 23.09.2009 read as under: "23.09.2009 In this case an information received from the A.O. Ward-1(1)/Kol on 17.09.2009 that the assessee Co. had sold a flat at Rajwadi on 2nd June, 2006 for a consideration of ₹ 26,84,940/- to one Sri Manish Jhunjhunwala vide an agreement dt. 02.06.2006, residing at 19, Dover Place, Kolkata-700 019. Since from the details file .....

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of income. Ld. Counsel for the assessee stated, first of all, that the reasons recorded by the AO for issuance of notice u/s. 148 of the Act has no live nexus with the income escaped assessment. For this, he stated that no addition qua the income escaped assessment as reasons recorded for issuance of notice u/s. 147 read with section 148 of the Act has been included in the assessed income while completing assessment u/s. 147 read with section 143(3) of the Act. On query from the Bench, Ld. Sr. D .....

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;Whether it is open for the AO to assessee or reassess independently any other income which does not form subject matter of reassessment notice u/s. 147 read with section 148 of the Act, wherein the AO does not assess or reassess the income, which he has reasons to believe had escaped assessment, which formed the basis of notice u/s. 148 of the Act." 5. In the light of the above question and facts and circumstances of the case, we find that this issue now stands covered by the decision of H .....

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lso" is that the Assessing Officer, upon the formation of a reason to believe under section 147 and the issuance of a notice under section 148(2) must assess or reassess: (i) such income; and also (ii) any other income chargeable to tax which has escaped 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 Asse .....

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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 the basis of the notice, it would not .....

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he Hon ble High Court adjudicated the issue as under: "Parliament, when, it enacted Explanation 3 to section 147 by the Finance (No. 2) Act, 2009 clearly had before it both the lines of precedent on the subject. The precedent dealt with two separate questions. When it effected the amendment by bringing in Explanation 3 to section 147, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain courts that the Assessing Officer has to .....

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sions of the Kerala High Court in Travancore Cements Ltd. [2008) 305 ITR 170 and of the Punjab and Haryana High Court in Vipan Khanna [2002] 255 ITR 220 would, therefore, no longer hold the field. However, in so far as the second line of authority is concerned, which is reflected in the judgment of the Rajasthan High Court in Shri Ram Singh [2008) 306 ITR 343, Explanation 3 as inserted by Parliament would not take away the basis of that decision. The view which was taken by the Rajasthan High Co .....

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ajasthan 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 ass .....

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. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. 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 .....

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oached the issue of interpretation that has arisen for decision in these appeals, both as a matter of first principle, based on the language used in section 147 and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147 as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess su .....

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retation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh [2008] 306 ITR 343. Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147 as they stood after the amendment of April I, 1989, continue to hold the field. In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the .....

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income chargeable to tax, which has escaped assessment and which comes to his notice subsequently during the assessment proceedings u/s. 147 of the Act. The Hon ble Rajasthan High Court held as follows: "It is only when, in proceedings under section 147 the Assessing Officer, assesses or reassesses any income chargeable to tax, which has escaped assessment for any assessment year, with respect to which he had reason to believe to be so, then only, in addition, he can also put to tax, the o .....

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