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Income-Tax Officer Ward-1 Anand Versus Meheboobbhai Yusufbhai Vohra Prop. of M/s. M.Y. Kelawala

Validity of reopening of assessment - reasons to believe - change of opinion - possession of assets by assessee - Held that:- There is no mention of what type of information the Department had about the assessee’s shop and another shop A/c hall along with vehicles, godowns and other assets. Neither the nature/source of information nor any specific allegation is mentioned. Mere possession of assets by itself does not constitute a belief that income of the years in question had escaped assessment. .....

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issue notice u/s 148 of the Act. Supreme Court in the case of CIT vs Kelvinator of India Ltd,(2010 (1)11 - SUPREME COURT OF INDIA ) has held that the reasons must be specific, should have objective and a live connection with the escaped income and there should be a proper form of belief. - Decided in favour of assessee - ITA Nos. 2151 to 2153/Ahd/2012 - Dated:- 17-1-2017 - SHRI R.P. TOLANI, JUDICIAL MEMBER For The Revenue : Shri G.C. Daxini, Sr DR For The Assessee : None ORDER These three appea .....

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under:- On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in setting-aside the reassessment order holding the same as bad in law, without considering the Explanation 3 to Section 147 inserted by the Finance Act, 2009 w.e.f. 01.04.1989, which gives a wider scope to Section 147 of the Act. 4. Brief facts are that the assessee s assessments were reopened for the three years in question u/s 147 on the basis of following common reasons:- In this case, there is .....

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a in Banana and, on traditional lines, the business has been conducted as per past years; (ii) The assessee receives only commission for facilitating the sale of this agricultural produce between farmers and the ultimate buyers; (iii) The value of goods purchased from various farmers for his principals and value of such banana mentioned in memo prepared and given to principal is same and equal and the assessee was charging separately the amount of commission in each bill. This establishes that t .....

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The assessee cannot pledge the goods since the ownership does not vest in the hands of assessee. Thus presumption that the assessee is a pacca arhatia is not correct. Since the assessee is simply an agent with no domain over the goods, the turnover in hands of assessee is only the commission amount and not the value of goods procured for principal. The amount of commission being less than the limits of section 44AB of the Act, the assessee was never under obligation to get accounts audited. 4.2 .....

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cific instance of escapement of income; (ii) The reasons recorded and the additions made are totally different; (iii) No proper reasons were recorded to form a belief in terms of Section 147 for escapement of income by following observations:- 9. From the above it can be seen that the case of appellant for the above assessment years including the assessment year under consideration was reopened u/s 147 of the IT Act in view of the fact that there was information with the department that at Juna .....

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e addition made by the AO in such order u/s 143(3) rws 147 of the Act are different from the reasons which were recorded by him and in view of which the assessment in question was reopened by him. The AO has finally made the addition of ₹ 7,49,480/- by estimating the net profit of the appellant @ 5% on the basis that he is a Pacca arhatia and he was supposed to maintain all the books of accounts as applicable for purchase and sales of books and also he was supposed to get his books of acco .....

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High Court, Delhi High Court and MP High-Court have held that if after issuing notice u/s 148, the AO has accepted the contention of the assessee and holds that the income for which he has initially formed a reason to believe as having escaped assessment has not actually escaped assessment, then it is not open to him to independently assess some other income. As per the decision of the Hon'ble Courts if the AO wants to do so, a fresh notice u/s 148 would be necessary, the regality of which w .....

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formed, is a must. In view of the decisions of above Hon'ble courts, the present assessment order u/s 143(3) rws 147 of the IT Act for the year under consideration cannot be upheld accordingly, the additional grounds of the appellant is accepted and the above addition of ₹ 7,49,480/- is deleted 6. Aggrieved, the Revenue is now in appeal before the Tribunal. 7. The ld. DR contends that the Assessing Officer recorded the reasons on the basis of information in possession of the Departmen .....

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f 2013. The Hon ble Karnataka High Court in the case Shri N. Govindaraju (supra) has held as under:- 24. From a plain reading of section 147 of the Act it is clear that its latter part provides that 'any other income' chargeable to tax which has escaped assessment and which has come to the notice of the Assessing Officer subsequently in the course of the proceedings, can also be taxed. The said two parts of the section having been joined by the words 'and also', what we have to n .....

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ade. 25. Chapter XIV of the Act deals with the 'Procedure for Assessment'. It provides for filing of Return of Income (s.139), Self Assessment (s.140 A), Assessment (s.143), Best Judgment Assessment (s.144) and also for Income Escaping Assessment (s.147). The purpose of these provisions is to bring to tax the entire taxable income of the assessee and in doing so, where the Assessing Officer has reason to believe that some income chargeable to tax has escaped assessment, he may assess or .....

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cond part of section 147 is to be read in conjunction with the first part, and some have held that the second part is to be read independently. To clarify the same, in the year 1989, the legislature brought in suitable amendments in sections 147 and 148 of the Act, which was with the object to enhance the power of the Assessing Officer, and not to help the assessee. Explanation 3 was inserted in section 147 by Finance (No.2) Act, 2009 with effect from 1.4.1989. By the said Explanation, which is .....

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background, if we read Section 147 it would be clear that in the phrase 'and also' which joins the first and second parts of the section, 'and' is conjunctive which is to join the first part with the second part, but 'also' is for the second part and would be disjunctive. It segregates the first part from the second. Thus, when we read the full section, the phrase 'and also' cannot be said to be conjunctive. 7.1 Further reliance was placed on the judgments of Punj .....

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ith effect from 1.4.1989. 7.2 The Hon ble Karnataka High Court in the case Shri N. Govindaraju (supra) has also held as under:- In the present case, insertion of Explanation 3 to section 147 does not in any manner override the main section and has been added with no other purpose than to explain or clarify the main section so as to also bring in 'any other income' (of the second part of section 147) within the ambit of tax, which may have escaped assessment, and comes to the notice of th .....

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n of the enactment, it can be clarified by insertion of an Explanation to the said section of the Act. Same has been done in the present case. Section 147 of the Act was interpreted differently by different High Courts, i.e., whether the second part of the section was independent of the first part, or not. To clarify the same, Explanation 3 was inserted by which it has been clarified that the Assessing Officer can assess the income in respect of any issue which has escaped assessment and also &# .....

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s are given in notice under section 148), notwithstanding that the reasons for such issue ('any other income') have not been given in the reasons recorded under section 148(2) of the Act. We are thus in agreement with the view taken by the Punjab & Haryana High Court in the cases of Majinder Singh Kang and Mehak Finvest (supra). Considering the provision of section 147 as well as its Explanation 3, and also keeping in view that section 147 is for the benefit of the Revenue and not th .....

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gard to which reasons have been recorded under section 148(2) of the Act, and the phrase 'any other income' used in the second part of the section is with regard to where no reasons have been recorded before issuing notice and has come to the notice of the Assessing Officer subsequently during the course of the proceedings, which can be assessed independent of the first part, even when no addition can be made with regard to 'such income', but the notice on the basis of which proc .....

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