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2016 (4) TMI 531 - ITAT AGRA

2016 (4) TMI 531 - ITAT AGRA - TMI - Validity of reopening of assessment - Held that:- The Hon’ble Bombay High Court in the case of Jet Airways(I)Ltd. (2010 (4) TMI 431 - HIGH COURT OF BOMBAY) had interpreted the provision of Section 147 on first principle and held that as per section 147, upon formulation of a reason to believe u/s 147, and following the issuance of a notice u/s 148, the AO has the power to assess or reassess the income which he has reason to believe has escaped assessment and .....

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e and that the AO had exceeded his jurisdiction in passing the impugned order u/s 147. The same is liable to be quashed. - Decided in favour of assessee. - ITA No.134/Ag/2014 - Dated:- 5-4-2016 - SHRI BHAVNESH SAINI , JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER Appellant By : Sh. Dipendra Mohan Ms. Prathna Jalan Respondent By : Sh. Waseem Arshad ORDER PER ANNAPURNA MEHROTRA A.M. This appeal has been filed by the assessee against the order of Ld. CIT(A) Muzaffar Nagar dt. 20/01/ .....

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. That the re-assessment order passed u/s 148 of the I.T. Act, 1961 is void-abinitio. 4. That the Hon ble C.I.T (Appeals) has erred in law and on facts in sustaining the addition u/s 68 on account of gift received amounting to ₹ 5,00,000/- even when the identity, creditworthiness and genuineness of the transaction was proved by the appellant. 5. That the Hon ble C.I. T (Appeals) has erred in law and on facts in sustaining the addition u/s 68 amounting to ₹ 15,47,000/- on account of u .....

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n the assessee making addition of ₹ 5.00 Lacs on account of gift received by treating the same as not genuine and ₹ 15,47,000/- on account of unexplained cash credits. 3. The assessee filed an appeal before the Ld. CIT(A) who dismissed the appeal of the assessee vide his order dt. 20/01/2014. 4. Aggrieved by the same the assessee filed the present appeal before us. 5. Ground No. 1 raised by the assessee is against the validity of the assessment order passed under section 147. The ple .....

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assessee had wrongly claimed indexation on sale of UTIMEP-92. Ld. AR drew our attention to the order sheet entries of the case and more specifically to the order sheet entry dt. 30/05/2005 which recorded the reason for the reopening of the case. The same is reproduced here under : The assessee has shown income from LIC Commission and income from other sources viz interest income, dividend income. As against such income of ₹ 1,24,678/-, the assessee has claimed deduction of interest paid on .....

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. No indexation is allowable u/s 45(6) on sale of such asset. With the above facts, I have reason to believe that income of the assessee chargeable to tax has escaped assessment. Such income shall be assessed under section 147. With these reasons, notice u/s 148 is being hereby issued. Ld. AR thereafter drew our attention to the assessment order passed under section 147 and stated that the addition made was on account of unexplained gift amounting to ₹ 5,00,000/- and unexplained cash credi .....

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n of the same is that it is only if addition on account of income which has been found to have escaped assessment as per the reasons recorded is made that addition on account of any other income can be made. Ld. AR drew our attention to the judgment of the Hon ble Bombay High Court in the case of Jet Airways India vs CIT 331 ITR 236, the Hon ble Delhi High Court decision in case of Ranbaxy Laboratories Ltd. Vs. CIT 336 ITR 136 and to the decision of the Agra Bench of the Tribunal in the case of .....

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could not be challenged or held to be bad in law. Ld. DR stated that the reason recorded need not be conclusive on the issue of escapement of income and may result in addition not being ultimately made but the same does not render the reason invalid and hence the proceeding under section 147 also. 8. We have heard the rival submissions carefully and perused the material placed on record before us. 9. At the outset it may be stated that this ground was not raised before the Ld. CIT(A) and is for .....

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recorded and reproduced above, for disallowance of interest expenses claimed against LIC Commission and income from other sources. Further the claim of indexation on sale of UTI Mutual Fund was also not allowable as per the reasons recorded. The assessment we find, has been framed making addition on account of unexplained cash credit and unexplained gifts and no addition on account of the income which were found to have escaped assessment as per the reasons recorded, has been made. We hold that .....

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nt and any other income chargeable to tax. The word and used in the section is important and results in an interpretation that it is only along with income which the AO has formed reason to believe has escaped assessments that any other income can be brought to tax. Independently any other income cannot be assessed to tax. It is only when in proceedings u/s 147, the AO, assesses or reassesses any income chargeable to tax which has escaped assessment for any assessment year, with respect to which .....

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rpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under section 147 and following the issuance of a notice under section 148, the Assessing Officer has power to assess or reassess the income which he has reason to believe had escaped assessment, and also any other income chargeable to tax. The words and also cannot be ignored. The interpretation which the court places on the provision .....

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or . The Legislature did not rest content by merely using the word and . The words and as well as also have been used together and in conjunction. 15. The Shorter Oxford Dictionary defines the expression also to mean further, in addition besides, too. The word has been treated as being relative and conjunctive. Evidently therefore, what Parliament intends by use of the words and also is that the Assessing officer, upon the formation of a reason to believe under section 147 and the issuance of a .....

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ndicative 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 proceeding 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 .....

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from April 1, 1989 clearly stipulated that the Assessing Officer has to assess to reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceeding. In the absence of the assessment or reassessment of the former, he cannot independently assess the latter. The Hon ble High Court further held that Explanation 3 to section 147 only lifts the embargo placed by judicial decisions on the making of an as .....

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. 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 2009. However, Explanation 3 does not and cannot override the necessity of fulfilling the condi .....

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h comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of .....

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have approached the issue of interpretation that has arisen for decision in these appeals, both as a matter for 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 r .....

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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 1, 1989, continue to hold the field. The Hon ble Delhi High Court following the above decision of the Bombay High Court has also upheld this view in Ranbaxy Laboratories L .....

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