TMI Blog2020 (12) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue whether any addition made by the AO is legally valid in the absence of a valid addition made based on the reasons recorded is examined in the context of the judgment of the Hon ble Jurisdictional High Court in the case of Ranbaxy Laboratories ltd. Vs CIT [ 2011 (6) TMI 4 - DELHI HIGH COURT] - We hold that the other addition made by the AO depends upon the view to be taken by the AO in respect of the addition of ₹ 5,00,000 /- as mentioned in the reasons. To sum up, we hereby hold that, a. The addition of ₹ 5,00,000/- as mentioned in the reasons recorded is being sent for verification owing to absence of proof of deposit in the assessee s bank account. b. The issue of the addition of ₹ 2.20 cr. made by the AO for which reasons have not been recorded since linked to the point (a.) above will have a contemporaneous effect on the outcome of the verification by the revenue. - ITA No. 8199/Del/2019 - - - Dated:- 21-10-2020 - Sh. K. N. Chary, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. Raj Kumar, CA For the Revenue : Sh. Jagdish Singh, Sr. DR ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adverse material, no cognize thereof can be taken for taking an adverse view. 7. That under the facts and circumstances, the Ld. A. O. erred in law and on merits in making the addition u/s. 68 for ₹ 2,20,00,000 /- (₹ 17,60,000 /- share capital + ₹ 2,02,40,000 /- share premium) received during the year from 05 companies. 7.1 That in the absence of providing cross examination of relevant persons and also in the absence of confronting with all alleged adverse material, no cognize thereof can be taken for taking an adverse view. 7.2 That without prejudice, issue of ₹ 2,20,00,000/- since not a part of reasons and further no such material found during examination to justify the addition for the same, therefore this issue is outside the scope of these proceedings, therefore the A. O. exceeded his jurisdiction in examining and in making addition of ₹ 2,20,00,000/-. 7.3 That without prejudice, in case the addition of ₹ 5,00,000 /- for which the proceedings have been initiated, stands deleted, no other issue including of ₹ 2,20,00,000/- can be examined and adjudicated in impugned proceedings u/s. 147 / 148. 7.4 That Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 3,00,00,000 ₹ 1,00,00,000 (+) 2. Issued, Subscribed and Paid up Capital ₹ 1,78,76,000 ₹ 1,96,36,000 ₹ 17,60,000 (+) 3. Securities premium Account ₹ 5,75,00,000 ₹ 7,77,40,000 ₹ 2,02,40,000 (+) 4.2 From the above it is evident that the assessee company has increased its share capital/share premium by total amount of ₹ 2,02,40,000/-. Thus the information received from the investigation wing is corroborated by the particulars shown by the assessee company in its return of income. 4.3 The company was incorporated on 13.03.2006. The assessee company in F.Y. 2009-10 relatable to A.Y. 2010-11 has received ₹ 1, 96,36,000 /- as share capital and ₹ 7,77,40,000/- as securities premium. The financial figures of the company are tabulated below: S. No. Particulars A. Y. 2009 - 10 A. Y. 2010 - 11 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , assessee company as the fact that the Share Capital and Share Premium is being introduced through these dummy companies is nowhere disclosed by the assessee company. In view of explanation 2 to clause b of proviso of section 147 of the Income Tax Act, 1961, where a return of income has been furnished by the assessee but no assessment has been made and it is noticed that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, deemed, to be cases where income chargeable to tax has escaped, assessment. Keeping in view all the above, I have reason to believe that an amount at least of ₹ 5,00,000/- has escaped assessment in case of M/s Designarch Infrastructure Put. Ltd. for the A.Y. 2010-11 within the meaning of Section 147/148 of Income Tax Act/1961. 9. Having recorded the reasons the Assessing Officer went ahead and brought an amount of ₹ 5,00,000/- to tax. The entire part of the assessment order relevant to this issue is reproduced as under: 7. Besides as per information furnished by the Investigation Wing of the department on the basis of amount of ₹ 5, 00, 000 /- received from M/ s Asheesh C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f reopening or during the reassessment proceedings. 16. Explanation-3 to Section 147 reads as under: Section 147 .. [Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub- section (2 ) of section 148.] 17. With regard to the issue whether any addition made by the AO is legally valid in the absence of a valid addition made based on the reasons recorded is examined in the context of the judgment of the Hon ble Jurisdictional High Court in the case of Ranbaxy Laboratories ltd. Vs CIT 336 ITR 136. The Hon ble High Court held as under: 11. Now, after the insertion of Explanation 3, as noted above, the position is that the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under section 147 though the reasons for such issue were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Learned counsel relied upon the case of Jet Airways ( I) Ltd. ( supra) and also CIT v. Shri Ram Singh[ 2008 ] 306 ITR 343 (Raj.) and CIT v. Dr. Devender Gupta [2008 ] 174 Taxman 438 (Raj.). Reliance was also placed in the case of C. J. International Hotels Ltd. v. ITO being IT Appeal No. 2736 / Del./ 2006 dated 24 - 10 -2008. 13. Similar contention was raised before the Division Bench of Bombay High Court in the case of Jet Airways ( I) Ltd. ( supra). The Court referred to the interpretation by Rajasthan High Court in Shri Ram Singh' s case (supra) wherein it was observed as under :- .... 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 other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under section 147. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to tax has escaped assessment, for any assessment year, and it was found, that the section puts no bar on the powers of the Assessing Officer, to put to tax, any other income, chargeable to tax, which has escaped assessment, and which subsequently comes to his notice, in the course of the proceedings, but then, the prefixing words and also , which succeeded any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income . This expression was found to be making clear, that existence of the income, for which the Assessing Officer formed belief, to have escaped assessment, is a precondition, for including any other income chargeable to tax, escaping assessment, and coming to the notice of the Assessing Officer subsequently, in the course of the proceedings. Thus, unless and until such income, as giving rise to form belief, for escaping assessment, continues to exist, and constitutes a subject- matter of assessment, under section 147 no other income coming to the notice of the Assessing Officer, during the course of the proceedings, can be roped in. 16. In the case of C. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative 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 proceedings 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have escaped assessment within the meaning of the section when it has not been charged in the hands of an assessee during the relevant assessment year. The expression assess refers to a situation where the assessment of the assessee for a particular year is, for the first time, made by resorting to the provisions of section 147. The expression reassess refers to a situation where an assessment has already been made but the Assessing Officer has reason to believe that there is under assessment on account of the existence of any of the grounds contemplated by Explanation 1 to section 147. The Supreme Court adverted to the Judgment in V. Jaganmohan Rao v. CIT [ 1970 ] 75 ITR 373, which held that once an assessment is validly reopened, the previous under assessment is set aside and the Income- tax Officer has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year. The Court held that the object of section 147 enures to the benefit of the revenue and it is not open to the assessee to convert the reassessment proceedings as an appeal or revision and thereby seek relief in respect of items which were rejected earlier o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under section 147. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the Assessing Officer were to come to the conclusion, that any income chargeable to tax, which, according to his reason to believe , had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the Assessing Officer entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the Assessing Officer may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147. 15. Parliament, when it enacted the Explanation (3 ) to secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 Act (No. 2 ) of 2009. However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. 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 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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