TMI Blog2021 (2) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute. - Decided in favour of assessee. - ITA No. 398/JP/2018 - - - Dated:- 2-2-2021 - SHRI SANDEEP GOSAIN, JM And SHRI VIKRAM SINGH YADAV, AM Assessee by : Sh. Vedant Agarwal (Adv.) Revenue by : Smt. Runi Pal (JCIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Ajmer dated 22.01.2018 wherein the assessee has raised the following grounds of appeal: 1. On the facts circumstances of the case and in law also Ld. CIT(A) grossly erred in not accepting the additional evidences filed before him under rule 46A of the Income Tax Act, 1962. 2(i) On the facts circumstances of the case and in law also ld. Lower authorities grossly erred in initiating reassessment proceedings u/s 147 of the Act. (ii) On the facts circumstances of the case and in law also Ld. AO grossly erred in initiating reassessment proceedings on borrowed satisfaction only. 3. On the facts circumstances of the case in law also Ld Lower authorities grossly erred in making and confirming a huge addition of ₹ 45,33,000/- under section 68 of the Income Tax Act 1961 by adding advances received by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 Kamal Kishore 5,50,000/- 10 PG Network Market Pvt. Ltd. 50,00,000/- 4. It was submitted that the assessee had also received a gift of ₹ 5,51,000 from her father in law and another gift of ₹ 2,51,000 from her father. That the said agricultural land could not be sold to nine farmers as they could not pay the remaining amount. The assessee used these advances and gifts to make the payment for the land purchased. That all of the aforementioned persons from whom the aforementioned advances were received submitted affidavits and confirmations. The Ld. AO even issued summons and recorded statements u/s 131 of the Income Tax Act. For the company i.e. PG Network Market Pvt. Ltd., the Ld. AO sought necessary confirmation and documents through Section 133(6) of the Income Tax Act. That all the persons accepted and confirmed that they have given the money to the assessee in their statements. Therefore, there is no doubt with respect to their identity and the genuineness of the transaction. As far as PG Network Market Pvt. Ltd is concerned, the Ld. AO was satisfied afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acity to advance money and the law nowhere states that the same has to be proven by furnishing of bank account statements and PAN. If a person does have a PAN and Bank Account, it does not automatically mean, he is creditworthy to advance money. It was submitted that the Ld. AO as well as the Ld. CIT(A) both failed to rely on the facts revolving around these nine farmers from whom the advances have been received and who had appeared before the AO and their statements were recorded during the course of reassessment proceedings and beyond ensuring their personal appearance before the AO, it was not possible for the assessee to prove their creditworthiness with any further evidence as most of these people were farmers not having PAN as well as bank accounts. That the Ld. AO as well as the Ld. CIT(A) should have considered that every person has given a statement with regards to their yearly earnings and as to why they wanted to purchase the said land. That the Ld. AO as well as the Ld. CIT(A) should have considered that the amount that has been received by the assessee is not a large sum if we consider individual transactions. If these farmers are not having bank accounts, having 5 lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO be directed to be deleted. 7. Per contra, the ld DR submitted that it is a case where the notice u/s 148 was issued to verify the source of investment in purchase of the agriculture land as the AO had a reason to believe that income to that extent has escaped assessment. It was submitted that the assessee has challenged the reopening u/s 147 before the ld CIT(A) who had dismissed the said ground of appeal and before the Tribunal, the assessee has not pressed the said ground. Therefore, as far as assumption of jurisdiction u/s 147 is concerned, the same has attained finality. It was submitted that during the course of reassessment proceedings, the assessee was asked to explain the source of investment and in response, the assessee has submitted that she has received the advance from these nine persons and one company. The AO has recorded a finding that these nine persons presented by the assessee donot have the financial networth to purchase such an expensive piece of land and the assessee failed to prove the creditworthiness of these persons and the additions have rightly been made by the AO u/s 68 and confirmed by the ld CIT(A). It was submitted that though the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agriculturists were recorded by the Assessing Officer. The Assessing Officer however held that these agriculturist do not have any financial networth for purchase of such expensive piece of land and therefore, their credit worthiness could not proved and the amount of ₹ 45,33,000/- was treated as unexplained cash credit u/s 68 of the Act. Further, the assessee submitted that she has received gift of ₹ 2,51,000/- from her father and ₹ 5,51,000/- from her father-in-law and a copy of gift deeds were submitted during the course of assessment proceedings, however, for the reason that the financial networth of the doners was not proved, the amount of ₹ 8,02,000/- was also treated as unexplained cash credit u/s 68 of the Act which on appeal has been confirmed by the ld. CIT(A). 10. We therefore find that the reasons for initiating the reassessment proceedings were in relation to examination of source of investments in purchase of agricultural land amounting to ₹ 1,07,00,000/- and where the explanation offered by the assessee was not found satisfactory, the addition could have been made u/s 69 of the Act which reads as under:- 69. Where in the financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions to tax u/s 68 of the Act during such reassessment proceedings where the invocation of these two sections is in entirely different set of circumstances as it clear from the wordings of these two sections. In this regard, useful reference can be drawn to the decision of Hon ble Rajasthan High Court in case of CIT vs Shri Ram Singh (Supra) wherein it was held as under: 24. Reverting back to language of section 147, this much is clear, that the sine qua non for conferment of jurisdiction on the AO, to initiate proceedings under that section is, that he should have reason to believe that any income chargeable to tax has escaped assessment for any assessment year and that, being that situation, being available, i.e., the AO having entertained a reason to believe , obviously on valid grounds, he acquires the jurisdiction to assess or reassess such income , which obviously means, the income, which was chargeable to tax, and had escaped assessment for any assessment year, according to his reason to believe , and while so assessing or reassessing, he can also, in addition, assess or reassess any other income chargeable to tax which has escaped assessment and which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation of the word and as or , the existence of the word also is of a great significance, being of conjunctive nature, and leaves no manner of doubt in our opinion, that it is only when, in proceedings under section 147 the AO, 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. 29. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the AO were to come to 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 AO 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 AO may find to have escaped assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Finance (No. 2) Act, 2009 clearly had before it both the lines of precedent on the subject. The precedent dealt with two separate questions. When it effected the amendment by bringing in Explanation 3 to section 147, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain courts that the Assessing Officer has to restrict the assessment or reassessment proceedings only to the issues in respect of which reasons were recorded for reopening the assessment. The corrective exercise embarked upon by Parliament in the form of Explanation 3 consequently provides that the Assessing Officer may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice under section 148(2). The decisions of the Kerala High Court in Travancore Cements Ltd.'s case (supra) and of the Punjab Haryana High Court in Vipan Khanna's case (supra) would, therefore, no longer hold the field. However, insofar as the second line of authority is concerned, which is reflected in the judgment of the Rajasthan High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a challenge by the assessee. 17. We have approached the issue of interpretation that has arisen for decision in these appeals, both as a matter of first principle, based on the language used in section 147(1) 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(1) 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 reassess such income and also any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words and also are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Explanation 3 to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
