TMI Blog2022 (3) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... Departmental representative ORDER N. K. BILLAIYA (ACCOUNTANT MEMBER). - 1. This appeal by the Revenue is preferred against the order of the Commissioner of Income-tax (Appeals)-14, New Delhi, dated August 12, 2016 pertaining to the assessment year 2007-08. 2. The grievances of the Revenue read as under : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in deleting the addition of ₹ 6,01,00,000 made by the Assessing Officer on account of unexplained share capital by treating it as unexplained credit in the books of the assessee within the meaning of section 68 of the Income-tax Act, 1961. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that the assessee has established the identity of the shareholders disregarding the fact that no such companies were found at the addresses given and the premises too did not belong to the companies. Inspector's report also proves it. 3. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lieve that income has escaped assessment and there is tangible material to come to the conclusion that there is escapement of income in view of the above mentioned facts and circumstances of the case. Therefore, the reopening proceedings are justified and the action of the learned Assessing Officer is confirmed. Hence, the grounds are dismissed. 5. Rule 27 of the Income-tax (Appellate Tribunal) Rules read as under : the respondent, though he may not have appealed, more support the order appealed against on any of the ground decided against him. 6. Since the challenge for reopening of the assessment goes to the root of the matter, we heard the representatives of both the sides at length on this issue. Case records carefully perused and with the assistance of the learned counsel, we have considered the relevant documentary evidence/judicial decisions relied upon. 7. Briefly stated, the facts of the case are that the return of income for the year under consideration was filed on October 31, 2007 declaring an income of ₹ 2,09,361. Assessment was completed under section 143(3) of the Act vide order dated May 29, 2009 wherein the returned income was accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29-8-2006 Total 88,00,000 I have very carefully considered the aforesaid piece of information and the modus operandi of entry operator Praveen Kumar Jain and its controlled entries. I find that the quantum of such entries received by the assessee-company M/s. Sunlight Tour and Travels Pvt. Ltd. as per details mentioned above ₹ 88,00,000. This accommodation entry taken by M/s. Sunlight Tour and Travels (P) Ltd. is earlier identified and examined by the Investigation Wing to establish that all these entry providing entities were tools in Praveen Kumar Jain business of providing accommodation entries in lieu of cash/cheques though which he had drawn a long trail of bank transaction to impart a colour of genuineness of these transactions. In view of the facts stated hereinabove, I am of the considered opinion and belief that the assessee-company managed the abovesaid transactions of accommodation entries out of its income from undisclosed sources. The assessment in this case was completed under section 143(3) of the Income-tax Act on June 29, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Whether resident or non-resident Resident 6. Nature of business 7. Date of hearing As per order sheet 8. Date of order 9-6-2014 Order rejecting the assessee's objection to reopening of the case Information was received from the office of the DGIT (Inv.) Mumbai vide letter dated March 10, 2014 which intimated that accommodation entries from entry operators were received/given by M/s. Sun Light Tour and Travels Private Limited from various entry operators/beneficiaries details of which already provided the same is being reproduced as under : '11. . . This entry has been investigated by the Investigation Wing and found to be given as accommodation entry from entities opera tors and controlled by Praveen Kumar Jain. The details of which is mentioned below : Beneficiary s name Amount Entry operator Bank Dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer, Ward-9(3), New Delhi. Copy to the assessee Income-tax Officer, Ward-9(3), New Delhi. 10. After disposing of the objections raised by the assessee for reopening the assessment, the Assessing Officer proceeded with the assessment proceedings and framed order under section 147 read with section 143(3) of the Act by making addition of ₹ 6.01 crores under section 68 of the Act. 11. A perusal of the reasons recorded, extracted hereinabove, for reopening assessment clearly shows that the Assessing Officer had reasons to believe that income to the extent of ₹ 88 lakhs, as per information mentioned in the reasons, escaped assessment in the case of the assessee for the assessment year 2007-08. 12. Strictly keeping in mind the reasons for reopening the assessment mentioned hereinabove, we find that the assessment order dated March 26, 2015, framed under section 147 read with section 143(3) of the Act, was completed as under : Income declared by the assessee ₹ 2,09,361 Add Income from undisclosed sources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me 'and also' any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under section 147. 6. The effect of Explanation 3 which was inserted by the Finance (No. 2) Act of 2009 is that even though the notice that has been issued under section 148 containing the reasons for reopening the assessment does not contain a reference to a particular issue with reference to which income has escaped assessment, the Assessing Officer may assess or reassess the income in respect of any issue which has escaped assessment, when such issue comes to his notice subsequently in the course of the proceedings. The reasons for the insertion of Explanation 3 are to be found in the Memorandum Explaining the provisions of Finance (No. 2) Bill of 2009. The memorandum treats the amendment to be clarificatory and contains the following Explanation (see [2009] 314 ITR (St.) 183, 206) : 'Some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch upon a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of section 148 is complied with. The question is whether sub-section (2) of section 148 has to be complied with if any other income chargeable to tax has escaped assessment, or which comes to his knowledge subsequently in the course of the proceedings. In other words, when proceedings are already on in respect of one item in respect of the income for which he had already recorded reasons is it necessary that he should record reasons for assessing or reassessing any of the items which are totally unconnected with the proceedings already initiated. Suppose under two heads income has escaped assessment and those two heads are inter-linked and connected, the proceedings initiated or notice already issued under sub-section (2) of section 148 would be sufficient if the escaped income on the second head comes to the knowledge of the officer in the course of the proceedings.' 10. Hence, the view of the Punjab and Haryana High Court and the Kerala High Court was that, once the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment and proceeds to issue a notice under section 148, it is not open to him to assess or, as the case may be, reass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under section 147 and following the issuance of a notice under section 148, the Assessing Officer has the power to assess or reassess the income, which he has reason to believe had escaped assessment and also any other income chargeable to tax. The words 'and also' cannot be ignored. The interpretation which the court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. Parliament having used the words 'assess or reassess such income and also any other income chargeable to tax which has escaped assessment', the words 'and also' cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word 'or'. The Legislature did not rest content by merely using the word 'and'. The words 'and', as well as 'also' have been used togeth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the objections of the assessee, and has not assessed or reassessed the income, which was the basis of the notice. Therefore, in the light of the judgment of the hon'ble High Court of Bombay (supra) it would not be open to the Assessing Officer to assess income under some other issue independently. 18. Considering the facts of the case in totality, in the light of the judgment of the hon'ble High Court of Bombay (supra) we quash the assessment order dated March 26, 2015 framed under section 147 read with section 143(3) of the Act. Since we have quashed the assessment order, we do not find it necessary to delve into the merits of the case. 19. The hon'ble jurisdictional High Court of Delhi in the case of Ranbaxy Laboratories Ltd. v. CIT [2011] 336 ITR 136 (Delhi) had occasion to consider an identical issue wherein it has been held as under (page 142) : The crux of section 147 is the escapement of income which may be assessed or reassessed as well as any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section. Explanation 3 makes it clear that the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148. (para 18). In the instant case, the Assessing Officer was satisfied with the justifications given by the assessee regarding the items, viz., club fees, gifts and presents and provision for leave encashment, but, during the assessment proceedings, he found the deduction under sections 80HH and 80-I as claimed by the assessee to be not admissible. He, consequently, while not making additions on those items of club fees, gifts and presents, etc., reduced deductions under sections 80HH and 80-I. (para 19) The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under sections 80HH and 80-I which was not permissible. Had the Assessing Officer proceeded to make disallowance in respect of the items of club fees, gifts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from assessment, in the reassessment proceedings where such income is not found to have escaped assessment, it is open to the Assessing Officer to complete the reassessment proceedings, by finding some other income, to be liable to be subjected to tax, which is found by the Assessing Officer, in the reassessment proceedings, to have been required to be taxed in the original assessment. 3. In our view, this question cannot be said to be any more res integra, in view of the judgment of this court dated May 20, 2008, rendered in Income-tax Appeal No. 65 of 2006, CIT v. Shri Ram Singh [2008] 306 ITR 343 (Raj), wherein the judgment of the Punjab and Haryana High Court, in Atlas Cycle's case (CIT v. Atlas Cycle Industries [1989] 180 ITR 319 (P H)) was considered and followed. Various aspects of the language of section 147 were examined in detail, and it was held as under (page 353) : 'If considered on that principle, leaving apart for the moment, the aspect of 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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