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2017 (4) TMI 727

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....r. Second, that the impugned order proceeded to tax sums received in the form of share application amount, which was transferred to "forfeiture of share account", under the head income from "profits and gains of business/profession", whereas, notice under Section 148 of the Act was issued on a different ground, which, ultimately, did not form part of the impugned order. 3. It may be pertinent to note that notice under Section 148 of the Act was issued to the petitioner on the ground that there was an escapement of income, for the reason that the petitioner/assessee had failed to offer to tax under the head "capital gains" - the reduction in the investments made in mutual funds for the previous year, 2007-08. In other words, what was alleged against the petitioner/assessee was that, the investments made in mutual funds, as obtaining on 31.03.2007, stood reduced at the end of the year, i.e., 31.03.2008, and that, such reduction should have been offered to tax under the head capital gains. Prefatory facts: 4. In order to adjudicate upon the instant Writ Petition, the following brief facts are required to be noticed: 4.1. The petitioner, in the usual course, had filed its return of....

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....of the above, you are hereby required to furnish the details of investments in mutual funds as on 1.4.2007, purchases made during the year off loaded or sold during the year and held as on 31.3.2008, dividends therefrom, income therefrom and income on sale of these investments and as to how the gain or loss on account of sale of these investments in mutual fund has been reflected in your P&L Account vis a vis income computed under IT Act. 3. Please produce the Books of account and copies of Bank Statement. 4. Produce copies of account statements of Mutual Funds." 4.5. It appears that thereafter, vide communication dated 14.08.2012, respondent No.2 informed the petitioner/assessee, that a hearing in the matter was fixed on 23.08.2012. 5. The record shows that vide communication dated 30.08.2012, the petitioner/assessee lodged its objections to the reopening of assessment. 5.1. Briefly, the petitioner submitted that respondent No.2 could reopen the assessment, only if, there was tangible material available, on the basis of which, he could have reason to believe that income chargeable to tax had escaped assessment. Furthermore, the petitioner/assessee submitted in the very sam....

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....mpugned order, as indicated above, the petitioner/assessee has filed the instant Writ Petition. Submissions : 9. In the background of the aforesaid facts, submissions were advanced by Mr.Suhrith Parthasarathy on behalf of the petitioner/assessee, while the respondents/Revenue were represented by Mr.T.Pramod Kumar Chopda. 10. Counsel for the petitioner/assessee, as indicated above, submitted that the impugned order was without jurisdiction, in as much as, it was passed without dealing with the objections filed qua the notice issued under Section 148 of the Act. 10.1. Learned counsel further submitted that the impugned order was also bad in law, since, the ground, on which, notice was initially issued for reopening of the assessment under Section 148 of the Act was not carried through and, thus, did not form part of the impugned order and, instead, respondent No.1 brought to tax, a receipt, which did not form part of the notice issued under Section 148 of the Act, for reopening the assessment. 10.2. It was the submission of the learned counsel for the petitioner/assessee that this was contrary to the judgments of various High Courts, which included, the Bombay High Court, the Gu....

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....his aspect will have to be examined in the context of the other submission raised on behalf of the petitioner/assessee, which has been noticed hereinabove by me. Reasons: 14. Having heard the learned counsel for the parties and perused the records, according to me, in so far as the first submission of the petitioner is concerned, it has been conceded by the counsel for the respondents/Revenue that objections filed by the petitioner/assessee to the notice issued by respondent No.2, for reopening of the assessment, have not been disposed of. 14.1. The mandate of law requiring the Revenue to dispose of the objections is clearly set out in the Supreme Court's judgment rendered in : GKN Drive Shafts (India) Limited V. ITO - 259 ITR 19 (SC). 14.2. For the sake of convenience, the relevant extract is set out hereinafter: " We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under s. 148 of the IT Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the no....

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....essment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject-matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1. ....... Explanation 2. ....... Explanation 3. For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respec....

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....icer, which is not contemplated under the Act. 18.4. To be noted, the power vested in the Assessing Officer under Section 147 read with Section 148 of the Act is a power of reassesment and not a power of review. 18.5. It is for this reason, that an amendment was made via the Amending Act of 1989, whereby, the expression "has reason to believe", was reintroduced in Section 147 of the Act, after it had been substituted by the expression "for reasons to be recorded by him in writing, is of the opinion ....". This amendment was brought about, as, according to the Revenue, it wanted to allay the apprehensions of the assessees that reopening of assessment could be made on a mere change of opinion. (See: Commissioner of Income-Tax V. Kelvinator of India Ltd. - 99(2002) DLT 221) 18.6. Thus, in other words, reassessment can only take place, if there is tangible material available in the hands of the Assessing Officer in the form of information, which was not available to him at an earlier point in time. 19. In the instant case, the reasons supplied by respondent No.2 vide communication dated 25.07.2012 showed that the notice under Section 148 of the Act to reopen the assessment was issu....

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....the right of the Revenue to assess taxable income discovered during reassessment proceedings. In my view, Explanation 3, clearly, expounds that the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment and such other issue, that comes to his notice subsequently, albeit, in the course of proceedings held under Section 147 of the Act. In other words, if, notice for reopening of the assessment was issued on one aspect, and in the course of reassessment proceedings another aspect was discovered, the reassessment order would be valid, only if, the aspect, which led to the reopening of assessment, continues to form part of the reassessed income. 23. This view, as has been correctly submitted by the learned counsel for the petitioner/assessee, has found resonance with at least three (3) High Courts, i.e., the Bombay High Court, the Gujarat High Court and the Delhi High Court in the following cases: i) CIT V. Jet Airways, [2011] 331 ITR 236 (Bom) ii) CIT V. Mohmed Juned Dadani, Manu/GJ/0061/2013 iii) Oriental Bank of Commerce V. Additional Commissioner of Income Tax, Manu/DE/1935/2014. 23.1. The only High Court, which has taken a ....