TMI Blog2021 (9) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... erride it or render the substance and core nugatory. Section 147 has this effect that the AO 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 - 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 had escaped assessment, has as a matter 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. Therefore, we found merit in the contention of the ld. AR and the case laws relied upon by the ld DR are not applicable in the case of the assessee, therefore, we quash the proceedings initiated u/s 147 of the Act. - Decided in favour of assessee. - ITA No. 90/JP/2020 - - - Dated:- 2-9-2021 - Shri Sandeep Gosain, JM And Shri Vikram Singh Yad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The Questioned matter was triggered through an information calling from Income Tax Department in form of Notice u/s 133(6) of IT Act, whereas sought an information regarding a sale of immovable property at ₹ 7,00,000/- valued u/s 50C at ₹ 728230/- and sale at 11,00,000/- valued at 12,00,064/- which was duly replied supported with copies of registered sale deed along with other supporting financial documents existed on Page No. 41-42 of PB-1. 4. Subsequently Notice Under Section 148 issued on dated 30.03.2018 Annexed at Page No. 43 of PB-I which was sufficiently replied on dated 17.05.2018 and asked to provide reasons recorded annexed at Page no. 44 of PB-I. 5. Accordingly, reasons have been supplied with the Notice u/s 142(1) mentioning show cause notice, on dated 22.11.2018 annexed at Page No. 45 and 46 of PB-I along with Notice u/s 143(2) Annexed at Page No. 47 of PB-I. 6. Show Cause Notice and Queries of Notice U/s 142(1) have been sufficiently replied through letter dated 29.11.2018 existed at Page 49 of PB-I, describing Gross Receipts of the assessee appellant for the year under questioned as shown in audited financial statement on pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material facts. It is submitted that the proviso to section 147 is applicable only when the assessment u/s 143(3) or section 148 has taken place prior to such formation of belief of escapement of income. Thus, invoking of the first proviso indicates mechanical reopening without proper analysis of facts and law. 2.1.2 It is pertinent to note that in the reasons recorded for issuing notice u/s 148, AO mentioned as under IPB:5]: It was .. Act, 1961. It is not clear from the above reasons recorded by AO that Whether the provisions of explanation 2(a) or 2(b) of section 147 are applicable or both the sections are applicable , Id. AO had written escaped assessment within the meaning of section 147 . It is submitted that explanation =-2(R) contains the situation where no return of income was furnished by the assessee. In the present case the assessee had, well within the time, furnished his return of income [P8:6] which is evident from AO Page 2 and, therefore, explanation 2(a) does not apply on the assessee. In view of above it will be apt to hold that Id. AO had no clarity under which scenario he is reopening the assessment. 2.2 From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessment. In the present case, since the reason to believe entertained by the AC) was, with respect to the assessee having assessee made immovable property sale transaction wherein liability to pay capital gain u/s 50C arises. As per records, the assessee has sold immovable properties of ₹ 11,00,000/- and ₹ 19,51,000/-, which have been valued at ₹ 12,00,064/- and ₹ 21,83,258/- respectively for the purpose of stamp duty valuation by the Sub-Registrar, while it has been found, that section 50C is not applicable in the present case, and it was clearly established, and the AC) himself also found the same has been explained by the assessee, that being the position, the jurisdiction commenced, came to an end, at that point itself, and did not confer any jurisdiction on the AO, to further continue with the assessment proceedings, simply because, he was of the opinion, that other escaped income had come to his notice, subsequently, in the course of the proceedings. The ld AR has relied on the following judicial pronouncements: (i) CIT Vs Atlas Cycle Industries (1989) 180 ITR 319 (ii) CIT Vs Ram Singh (2008) 306 ITR 343 (Raj) (iii) CIT Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in liability to pay capital gain u/s 50C arises. As per records, the assessee has sold immovable properties of ₹ 11,00,000/- and ₹ 19,51,000/-, which have been valued at ₹ 12,00,064/- and ₹ 21,83,258/-respectively for the purpose of stamp duty valuation by the Sub-Registrar. Further, on perusal of the Trading Profit and Loss Account, the sale of flats of ₹ 96,07,000/- were shown but the details of sale of immovable properties has not been furnished. Thus, I have reason to believe that the income of ₹ 33,83,322/- has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. From perusal of the reasons recorded, we noticed that whether the provisions of explanation 2(a) or 2(b) of section 147 are applicable or both the sections are applicable . The AO had written escaped assessment within the meaning of section 147 . The explanation 2(a) contains the situation where no return of income was furnished by the assessee. In the present case the assessee furnished his return of income, which is evident from assessment order page No. 2, therefore, provisions of explanation 2(a) of Section 147 of the Act does not apply on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtained reason to believe to have escaped assessment, did not escape, or that it was not liable to tax, then merely because he had initiated proceedings, would not confer on him the continued jurisdiction, to assess the other incomes, which have come to his notice subsequently, in the course of proceedings, to have escaped assessment. In the present case, since the reason to believe entertained by the AO was with respect to the assessee having assessee made immovable property sale transaction wherein liability to pay capital gain u/s 50C arises. As per records, the assessee had sold immovable properties of ₹ 11,00,000/- and ₹ 19,51,000/-, which have been valued at ₹ 12,00,064/- and ₹ 21,83,258/- respectively for the purpose of stamp duty valuation by the Sub-Registrar, while it has been found that section 50C is not applicable in the present case and it was clearly established and the AO himself also found the same has been explained by the assessee, that being the position, the jurisdiction commenced, came to an end, at that point itself and did not confer any jurisdiction on the AO to further continue with the assessment proceedings, simply because, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion, that the income, with respect to which he had entertained reason to believe to have escaped assessment, was found to have been explained, his jurisdiction came to a stop at that, and he did not continue to possess jurisdiction, to put to tax, any other income, which subsequently came to his notice, in the course of the proceedings, which were found by him, to have escaped assessment. We also draw strength from the decision of Hon ble Bombay High Court in the case of CIT Vs Jet airways (I.) Ltd. 331 ITR 236 (Bom) wherein the Hon ble Court has held as under: 16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the 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 longe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field. Considering the totality of facts and circumstances of the case, submissions of the parties as well as the judicial pronouncements referred in this regard, we are of the view that on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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