TMI Blog2017 (11) TMI 1475X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is without jurisdiction. Another contention was that the AO did not dispose off the objections. Without passing a separate order by considering the objections of assessee, the AO has simply mentioned in the assessment order that as per the Explanation 3 of the Provisions of the section 147 of the Act are attracted. AO continued the reassessment proceedings, without of disposing the objections raised by assessee by way of a speaking order. For the reasons stated above, both initiation of proceedings and continuation of assessment proceedings are ab initio void. Consequently, the order of AO/ CIT(A) stands set aside. Ld.CIT(A) should have examined the facts and arguments and should have followed the principles of law on the issue, as interpreted by higher judicial authorities. Appeal of assessee is treated allowed. - I.T.A. No. 962/HYD/2017 - - - Dated:- 22-11-2017 - SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri K.A. Sai Prasad, AR For The Revenue : Shri Ravi Babu, DR ORDER This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-Tirupati, dated 30-03-2017, for the AY. 2012-13. 2. The gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Computation of total income, gross receipts of ₹ 5,2,0162/- only. Thus there is difference of gross receipts of ₹ 3,30,017/- and the income @ 8% of ₹ 26,401/- . 4.1. Assessee submitted that he filed a letter before the AO on 02-05-2014, clearly mentioning that the wrong uploading of certain entries with the PAN of assessee has been rectified by the Contractee department and also enclosed the latest Form No. 26AS downloaded from the Income Tax Department website, which are tallying with the Gross Receipts disclosed in the return of income and objected for the reopening of assessment u/s. 147 of the Act, as there are no difference in Gross Receipts. 4.2. Another contention raised by Assessee was that the AO issued notice u/s. 148 of the Act on 23-12-2013 i.e., before the expiry of the time limit for the issuance of notice u/s. 143(2) of the Act. Hence the action of the AO in reopening the assessment made by issuance of notice u/s. 148 of the Act before the expiry of time limit for issuance of notice u/s. 143(2) of the Act is legally invalid. Reliance was placed in the case of M/s. Eenadu Relief Fund Vs. DDIT, ITA No.434/Hyd/2010 dt. 13th January, 2011 where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , ₹ 3,85,555/- for the acquisition of temporary huts and katcha houses situated in the said agricultural lands and also ₹ 7,45,913/- as interest as per the order of Lok Adalat. It was submitted that the compensation received on the acquisition of agricultural land along with 'Katcha house/huts thereon was a composite asset and houses as such cannot be separated from the land which is undisputedly agricultural land. The houses are appurtenant to the agricultural lands. Such houses are houses for agricultural purposes for keeping agricultural produce, residence of agricultural labour/cultivators and motor pump house. For that assessee relied on definition of agriculture in WT Act and definition of agricultural income in IT Act. 4.6. Assessee further submitted that, in the instant case, the Katcha house/huts attached to agricultural land were made with Madras Terrace Roof, Mangalore Terrace Low Roof and Bodakottam. All these Katcha huts are meant for the residence of agricultural labour/cultivators, to keep the agricultural produce and for electrical motor pump house. The lands are situated in a remote village where not even one hundred families were there and are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was the submission of Ld. Counsel that Ld.CIT(A) failed to appreciate the facts and law on the issues, including Hon'ble jurisdictional High Court judgment/ITAT orders. The legal issues raised are that AO has no reason to believe so as to issue a notice u/s. 148 of the Act after initiating proceedings u/s. 147, when the return of income filed by assessee was not scrutinized and notice u/s. 143(2) could have been issued instead of notice u/s. 148. It was further submitted that the AO having satisfied that there is no discrepancy in turnover, the basis for reopening, should have dropped the proceedings but made addition on other counts, which according to assessee are not taxable. He reiterated the detailed submissions made before the Ld.CIT(A) and placed on record the Hon'ble Jurisdictional High Court orders in the case of CIT-III Vs. Swarna Andhra IJMII Integrated Township Development Private Limited in ITTA No. 165 of 2014 dt. 12-03- 2014 supporting the legal principles. He also made submissions on merits of the additions and referred to the orders of the acquisition and submissions before the authorities. 7. Ld.DR submitted that the return of income was filed belated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessing officer in initiating the proceedings u/s 147 in similar circumstances. However, it appears that the important distinction in fact of these two cases namely time available for issue of notice u/s. 143(2) had not expired in the case of K. M.Pachiappan (311 ITR 31) has not placed before the Madras High Court. Further, the Tribunal in the case of Super Spinning Mills Ltd. Vs. Addl. CIT Tribunal Tax reported (3rd Member) (Chennai) held that: The department wants to interpret the expression 'no assessment has been made' in clause (b) of Explanation 2 to 8.147 to mean that it also includes situation where assessment u/s 143(3) is till possible but not yet made. If this interpretation is to be accepted, it will set at naught the fundamental principles underlying s.147 and which principles have been followed till date. These principles are applicable even to the extended meaning given to them term 'escaped assessment' in the amended provision. The above clause is intended to cover the following two situations (i) where a return is filed and non action is taken either u/s. 143(1) or u/s. 143(3) and the time limit for issuing notice u/s. 143(2) has expired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 of the Act never intend the AO to continue the reassessment proceedings even though the reasons based on which the notice u/s. 148 has been issued ceased to exist. 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 AO to independently assess only that income which comes to his notice subsequently in the course of the proceedings under that section as having escaped assessment. Hence, the action of the AO in continuing the reassessment proceedings, even though the reason for which the notice issued u/s. 148 of the Act ceased to exist, by citing the Explanation 3 to the provisions of section 147 of the Act is not correct. Thus the assessment made u/s. 143(3) r.w.s.147 of the Act is without jurisdiction and bad in law. The reopening of the assessment, as per the reasons recorded for that purpose, was only in relation to reconciliation of receipts as per 26AS and computation of in-come and hence following the decisions of Bombay High Court in the case of Jet Airways (Supra), the assessment made by the AO u/s. 143(3) w.r.t. 147 of the IT Act with reference to other issues alone is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning. Any new issue that has cropped up subsequently on new set of facts, the aforesaid Explanation has no application. We think that the Explanation-3 has not really diluted cardinal object of Section 147 of the Income Tax Act for reopening. The Explanation-3 has been given a retrospective effect with an idea there are so many assessment orders, which were passed earlier without deciding the issue subsisting at the time of original assessment. This Explanation has held to be reopened in those cases . Thus, on this reason the assessment completed by the AO on other issues has become bad-in-law. 8.4. As seen from the satisfaction recorded, the case was reopened by the AO on the reason that there was a difference of ₹ 3,30,017/- in the gross receipts reflected in the Form No:26AS and in the Computation of income with regard to Gross Receipts received from Commissioner, Tirupati Municipality and therefore the AO was of the opinion that there was reason to believe that income, chargeable to tax has escaped assessment. Once the difference in the gross receipts from Commissioner, Tirupati Municipality was duly reconciled by furnishing the rectified Form No.26AS downloaded f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court in GKN Drive Shifts (India) Pvt. Ltd. Vs Income Tax Office and others (2003) 259 ITR 19, the Hon'ble Gujarat High Court in the case of General Motors India (P) Ltd., Vs Dy. CIT reported at (2013) 354 ITR 244 (Guj) has held as under: We hold that it was not open to the Assessing Officer to decide the objections to notice under section 148 by a composite assessment order. The AO was required to, first decide the objections of the assessee filed under section 148 and serve a copy of the order on the assessee, and after giving some reasonable time to the assessee for challenging his order, it was open to him to pass an assessment order. This was not done by the AO, therefore, the order on the objection to the notice under section 148 and the assessment order passed under the Act deserves to be quashed . Thus the order of AO is also bad in law. 9. For the reasons stated above, both initiation of proceedings and continuation of assessment proceedings are ab initio void. Consequently, the order of AO/ CIT(A) stands set aside. Ld.CIT(A) should have examined the facts and arguments and should have followed the principles of law on the issue, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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