TMI Blog2021 (7) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... st income declared by the assessee under the head income from capital gains but said addition is not part of reasons recorded for reopening of assessment. Therefore, we are of the considered view that the reasons for reopening of assessment is fails and hence, the AO is not permitted to assess any other income which has escaped from tax and come to his knowledge subsequently during the course of reassessment proceedings. Therefore, we quash reassessment order passed by the AO. - Decided in favour of assessee. - ITA No.: 3414/CHNY/2016 - - - Dated:- 23-7-2021 - Shri V. Durga Rao, Judicial Member And Shri G. Manjunatha, Accountant Member For the Appellant : Shri T. Banusekar, CA For the Respondent : Shri G. Johnson, Addl.CIT ORDER PER G. MANJUNATHA, AM: This appeal filed by the assessee is directed against order of learned Commissioner of Income Tax (Appeals)-4, Chennai, dated 27.09.2016 and pertains to assessment year 2008-09. 2. The assessee has raised the following grounds of appeal:- 1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case to the extent prejudicial to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For that the Commissioner of Income Tax (Appeals) failed to appreciate that where the reason for reopening fails, the reopening fails. 4. The ld.AR for the assessee at the time of hearing submitted that the assessee has raised additional grounds and said grounds are purely legal in nature and facts related to said grounds were already on record and hence, the additional grounds filed by the assessee may be admitted to decide the issue in accordance with law. In this regard, he relied upon the decision of the Hon ble Supreme Court in the case of M/s.National Thermal Power Co. Ltd. vs. CIT, [1998] 229 ITR 383 and the decision of the Hon ble High Court of Madras in the case of CIT vs. M/s. Indian Bank, [2015] 55 taxmann.com 372. 5. The ld.DR on the other hand strongly opposing additional grounds filed by the assessee submitted that the assessee has failed to prove with necessary evidence that facts with regard to additional grounds raised were already on record at the time of assessment proceedings and hence, there is no merit in arguments of the assessee that additional grounds can be raised at any time. In this regard, he relied upon para 31 of the decision of the ITAT, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time of framing assessment. Therefore, we are of the considered view that the case of the assessee is squarely covered by the decision of the Hon ble Supreme Court in the case of M/s. National Thermal Power Co. Ltd. vs. CIT, supra, and hence, we deem it appropriate to admit additional grounds of appeal filed by the assessee and hence, we admit additional grounds to decide the issue on merits. 7. The brief facts of the case are that the assessee is an individual and was deriving income from salary and other sources, filed his return of income for the assessment year 2008-09 declaring total income of ₹ 84,76,770/-. During the year under consideration, the assessee has sold certain lands at Padur giving rise to capital gains. The case has been subsequently reopened u/s.147 of the Income Tax Act, 1961 (hereinafter the Act ) on the ground that income chargeable to tax had been escaped assessment for the reasons recorded, as per which the assessee had lent a sum of ₹ 2.5 crores to his wife Smt. Sulochana for purchase of agricultural land. Since, the assessee has not admitted loan transactions and interest thereon, the AO had reason to believe that income chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons made by the AO to any other income which comes to his knowledge during reassessment proceedings cannot survive under the law. The ld.AR for the assessee referring to reasons recorded for reopening of assessment, which is part of paperbook filed by the assessee submitted that as per reasons recorded by the AO, the assessment has been reopened to tax escapement of income on account of non-disclosure of loan given by the assessee to his wife Smt. Sulochana for purchase of agricultural land, whereas if you go through the reassessment order passed by the AO, it is very clear that the AO has not made any additions towards loan transactions referred to in reasons recorded for reopening of assessment, but has made additions towards income deriving from sale of lands under the head income from business as against income admitted by the assessee under the head income from capital gains . From the above, it is very clear that the reason recorded for reopening of assessment fails and thus, once reasons for reopening of assessment fails, the AO has no jurisdiction to make additions towards any other income which comes to his knowledge during reassessment proceedings. In this regard, he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions made on other grounds also fails. 11. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The provisions of Section 147 of the Act, deals with reassessment of income escaped assessment from tax. The basis for reopening of assessment is formation of belief by the AO and such belief should be recorded in writing. The crux of section 147 of the Act is escapement of income which may be assessed or reassessed as well as any other income chargeable to tax which had escaped assessment and which comes to the notice of the AO subsequently in the course of proceedings under the section. Similarly, Explanation 3 to section 147 of the Act, makes it clear that the AO may assess or reassess the income in respect of issue which has escaped assessment, if such issue comes to his notice in the course of proceedings under this section even though said issue did not find mention in the reasons recorded and the notice issued u/s.148 of the Act. In this case, the AO has assessed income escaped from tax, which is different from income escaped from tax for formation of belief of escapement of income, as per reasons recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. The Hon ble High Court of Delhi in the said case has considered Explanation 3 inserted in section 147 and after considering said Explanation has held that for every new issue coming before AO during the course of proceeding of assessment or reassessment of escapement of income and which he intends to take into account, he would be required to issue a fresh notice u/s.148 of the Act. The Hon ble Jurisdictional High Court of Madras in the case of Martech Peripherals Pvt. Ltd. v. DCIT, [2017] 394 ITR 733 had considered an identical issue and by following the decision of the Hon ble High Court of Bombay in the case of CIT v. Jet Airways, supra, held that purported income discovered subsequently during the course of reassessment proceedings, can be brought to tax, if the escaped income, which caused, in the first instance, the issuance of notice u/s 148 of the Act, is assessed to tax. The Hon ble High Court of Madras in yet another case of PVP Ventures Ltd v. ACIT, [2015] 94 CCH 147 after considering Explanation 3 to section 147 of the Act had held that Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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