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TMI Blog2025 (1) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... inter alia, on the ground that such course of action is not permissible at this belated stage as well as on account of the fact that all relevant records thereof nowhere found part of the case file. 4. We have given our thoughtful consideration to the foregoing vehement rival contentions qua the issue herein on admission of assessee's additional grounds. Revenue could hardly dispute the clinching fact that the assessee in his paper-book herein has filed all the relevant records for the purpose of adjudication of its additional grounds. The Hon'ble Supreme Court in NTPC Vs. CIT (1998), 229 ITR 383 (SC) has settled the issue long back that such an additional ground could very well be allowed to be raised before the tribunal in section 254 appeal proceeding in order to determine the correct tax liability subject to a proviso that all the relevant facts form part of record. We reiterate that the assessee has filed his paper-book running into 154 pages (facts) and 132 pages (case law) respectively. We accordingly reject the Revenue's instant technical objection and proceed to admit and deal with the assessee's additional ground challenging the validity of the impugned reopening. 5. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instant case. 8. In addition to this, there is one more clinching aspect which emanates from the case file that the learned Assessing Officer has admittedly recorded his reopening reasons of the assessee having received accommodation entries of Rs. 90 lakhs from the five above stated entities and it latter turned out in the course of assessment that the said loan amount had come only from one of them, namely, Bay Inland Finance Pvt. Ltd. 9. This being the case, learned Assessing Officer's reopening reasons, even if held as carrying valid approval (which is not so in the instant case), hardly satisfies the clinching test of being based on the tangible material and therefore, not sustainable in law going by CIT Vs. Indo Arab Air Services (2015) 64 taxmann.com 257 (Del). 10. We further quote Hindustan Liver Ltd. Vs. R.B. Wadkar (2004) 268 ITR 332 (Bom.) that there is no scope of any addition/deletion or substitution in the Assessing Officer's reopening reasons and validity thereof has to be decided as they were recorded at the first instance. We accordingly accept the assessee's legal arguments challenging the validity of the impugned reopening and reject the Revenue's stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors of the said companies with substantial interest and the companies have e-mail ID as that of the trust and they all function from the same address. In that view of the matter the total amount of Rs. 4,24,39,709/- was treated as income by invoking Section 13(1)(b) read with Section 11(5) of the Act. The next aspect which was enquired into/ discussed was with regard to the genuineness of the activities of the assessee as to whether it was in accordance with the objects of the trust. After taking into consideration, the statements recorded from various persons who are said to have given donations for securing admission to professional colleges, the Assessing Officer held that the assessee is not carrying out its activities as per the objects of the trust. Accordingly, the amount said to have received as donation was added back to the income of the assessee under Section 69A of the Act. Aggrieved by such order the assessee preferred appeal before the Commissioner of Income Tax (Appeals), 25, Kolkata (CIT(A)) contending that the entire proceedings initiated under Section 147 of the Act after service of notice under Section 148, is illegal, ab-initio, void and bad in law. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ads done by the Assessment Officer which were not shown as reasons for reopening ought to have been held to be illegal. Various other grounds were raised touching upon the merits of the matter. The learned Tribunal after taking note of the factual position, more particularly, that the addition of Rs. 59,42,709/- which was made in the reassessment proceedings having been deleted by the CIT(A) vide order dated 30.07.2019, the reassessment on the heads which were not part of the reasons recorded for the reopening the assessment is not sustainable. The (2010) 320 ITR 561 (SC) learned Tribunal placed reliance on the decision of the High Court of Bombay in Commissioner of Income Tax Versus Jet Airways (I) Ltd.3 and the decision of the High Court of Delhi in Ranbaxy Laboratories Ltd. Versus CIT 4. On the above grounds the appeal filed by the assessee was allowed. Challenging the said order, the revenue is before us by way of this appeal. 5. Mr. Kundalia, learned Senior Standing Counsel placed reliance on the decision of the High Court of Karnataka in Sri. N. Govindaraju Versus ITA Ward 8(2), Bangalore 82 and Anr.5 to support his contention that after the insertion of Explanation 3 to Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C) (2022) 138 taxmann.com 296 (Bombay) (2013) 355 ITR 172 (Guj.) (2012) 344 ITR 641 (Chattisgarh) (2008) 306 ITR 343 (Raj) (2017) 394 ITR 733 (Mad) (2016) 387 ITR 416 (Del) (2003) 259 ITR 19 (SC) (2017) 291 CTR 272 (P&H), said decision. It is further submitted by Mr. Bagaria that in the reasons for reopening there was no allegation made against the assessee that they failed to fully and truly disclose all material particulars for the purpose of completion of the assessment and therefore, the reopening itself is a clear case of change of opinion. In any event, it is submitted that the reason recorded for reopening having been set aside/ dropped, the Assessing Officer is precluded from assessing the income of the assessee on other heads which were not forming part of the reasons for reopening. 8. After we have elaborately heard the learned Advocates on either side, we note that the case of the revenue rests upon the decision in Sri. N. Govindaraju in which the Court had taken note of and followed the decisions in Majinder Singh Kang, Atlas Cycle Industries and CIT Versus Mehak Finvest Pvt. Ltd.21 9. In Sri. N. Govindaraju it was held that "reason to believe" that any income charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 306 ITR 343 (Raj), Parliament, when, it enacted Explanation 3 to Section 147 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. [2008] 305 ITR 170 and of the Punjab and Haryana High Court in Vipan Khhanna [2002] 255 ITR 220 would, therefore, no longer hold the field. However, in so far as the second line of au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitially 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. 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 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 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 ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs was initiated cannot be permitted to chase other grounds not mentioned in the reasons for reopening and if permitted it would result in an incongruent situation. The decision in Majinder Singh Kang was distinguished. The relevant portion of the judgment is as follows:- * We may also approach the question from a slightly different angle. It is not in dispute that once an assessment is reopened by a valid exercise of jurisdiction under section 147 of the Act, it is open for the Assessing Officer to assess or reassess any income which had escaped assessment which comes to his light during the course of his assessment proceedings which was not mentioned in the reason for issuing notice under Section 148 of the Act. In a notice for reassessment which has been issued beyond a period of four years from the end of relevant assessment year, the condition that income chargeable to tax has escaped assessment for the reason of the failure on the part of the assessee to disclose truly and fully al material facts for the purpose of assessment must also be established unless of course some ground, viz. non-filing of the return at all, etc. is available to the Assessing Officer. If such non-d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was allowed in the case of M/s. Tractors and Farm Equipment Limited. The decision in N. Govindaraju was considered in Anil Nagpal and it was held that if the notice issued under Section 148 is invalid the assessing officer cannot reopen the assessment. Further it was held that even if the reasons recorded do not refer to a particular issue, the assessing officer would be entitled to assess the income or reassess the computation of income with regard thereto, if the same comes to his notice during the course of the proceedings for reassessment, however this can be done provided there is a valid notice under Section 148 that the assessing officer the jurisdiction to adopt proceedings under Section 147 of the Act and if the notice is illegal, the reassessment proceedings are invalid. 14. While on this issue, we should bear in mind the decision in the case of GKN Driveshafts (India) Limited wherein it was held that the assessing officer is bound to furnish reasons within a reasonable time and the noticee is entitled to file their objection to such notice and the assessing officer is bound to dispose of the same by passing a speaking order. Though the Explanation 3 insert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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