JAY KISHORE CHOUBEY,RAIRANGPUR vs. ACIT, CIRCLE-1, ASANSOL

IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK , CUTTACK (through virtual hearing) BEFORE BEFORE S/SHRI GEORGE MATHAN, JUDICIAL JUDICIAL MEMBER AND GIRISH AGRAWAL, ACCOUNTANT MEMBER , ACCOUNTANT MEMBER ITA No.2/CTK/2023 Assessment Year : 2010-2011 2011 Jay Jay Kishore Kishore Choubey, Choubey, Vs. ACIT, Circle ACIT, Circle-1, Asansol. Rairangpur Bazar, Rairangpur, Rairangpur Bazar, Rairangpur, Mayurbhanj. PAN/GIR No. PAN/GIR No.ACMPC 1759 N (Appellant) .. ( Respondent Respondent) Assessee by : Shri P.R.Mohanty P.R.Mohanty, Adv Revenue by : Shri Charan Das, Sr. Das, Sr. DR Date of Hearing : 29/11 11/2023 Date of Pronouncement : 29/11 /11/2023 O R D E R Per Bench

This is an appeal filed by the assessee against the order of the ld This is an appeal filed by the assessee against the order of the ld This is an appeal filed by the assessee against the order of the ld CIT(A), NFAC, Delhi , NFAC, Delhi dated 4.11.022 in Appeal No. in Appeal No.CIT(A), Asansol/10156/2016 /10156/2016-17 for the assessment year 2010 2010-2011.

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“The amount of royalty paid/payable against mining is lesser than the amount of royalty payable with respect to the quantity of production of mining ore. Hence, such an affair leads to inference that income has escaped assessment and therefore, to assess the escaped income, issuance of notices u/s.148 is warranted for A.Y. 2008-09 to 2012-13.”

“It is also noted that the AO had computed the income on the basis of return of income filed by the assessee trust which as per the reasons recorded was said to be have not been filed by the assessee trust. Hence, from the above facts and circumstances, we find that the jurisdiction u/s.147 is wrongly assumed and thus entire P a g e 2 | 15

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assessment proceedings is without jurisdiction and thus it is quashed in view of the following decisions: i) Narain Dutt Sharma vs ITO, 91 Taxmann.co. 463 (Jaipur Trib) ii) Satish Kumar Khandelwal vs ITO, 127 Taxmann.com 683 (Jaipur Trib).”

Further the Bench noted that in the present case the assessment was reopened for the following two reasons:- A Cash Deposit in Bank Rs.68,48,216/- B Interest income from Bank Rs. 5,21,152/- It is also imperative to mention the Reasons for the belief that income has escaped assessment by the Income Tax Officer (Exemption), Ward-1, Jaipur as under:- "On perusal of ITS details, it is noticed that the assessee society has deposited cash amounting to Rs.68,48,216/- in its bank account during the financial year 2009-10 relevant to assessment year 2010- 11. The assessee has also received interest of Rs.5,21,152/- from Bank. Further, the assessee's income as per information received in form of cash deposit and interest were Rs.73,69,368/- i.e. exceeding maximum amount which was not chargeable to income tax. The assessee society has not filed its return of income for the A.Y. 2010- 11 which the assessee was under statutory obligation to file In view of the above facts and circumstances, I have sufficient reason to believe that income of Rs.73,69,368/- has escaped assessment for A.Y. 2010-11 within the meaning of Section 147 of the I.T. Act, 1961. As such, it is a fit case for issuance of notice u/s 148 of the I.T. Act, 1961 for A.Y. 2010-11 Sd/- (Ajay Kumar Gupta) Income Tax Officer (Exemption) Ward - 1 , Jaipur It is also noted that none of the additions based on the above reasons had been made in the assessment proceedings. The additions made are on the following reasons:- 1. Accumulation of Income under section 11(2) Rs. 1,11,000 2. Income from House Property under section 24(a) Rs. 1,48,031 3. Depreciation under section 32 Rs.1,89,824 The condition precedent to the exercise of the jurisdiction under section 147 is the formation of a reason to believe by the Assessing P a g e 3 | 15

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Officer. Upon the formation of the reason to believe that income chargeable to tax has escaped assessment, the AO is empowered to assess or to reassess such income '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 .Explanation 3 to section 147 provides that even though the notice 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, yet the AO 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. It is noted that the words 'and also' cannot be read as being in the alternative. These words are conjunctive and cumulative. Therefore, meaning of the words 'and also' is that the AO, upon the formation of a reason to believe under section 147 and the issuance of a notice under section 148(2), must assess or reassess: (i) 'such income'; and also (ii) any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the AO has formed a reason to believe that it has escaped assessment. Hence, the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe, is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. Reliance is placed on the following judgments: •Jet Airways Ltd [2011] 331 ITR 236 (Bombay) - Copy enclosed [CLC 15-23]. Ranbaxy Laboratories Ltd. [2011] 12 taxmann.com 74 (Delhi) – In view of the above factual position of the case, it is found that reopening of assessment is patently illegal and deserves to be quashed. Since we are disposing off this appeal on legal issues, therefore the other grounds raised by the assessee are not

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adjudicated upon on merits and thus infructuous. Thus the appeal of the assessee is disposed off as indicated hereinabove. 4. In the result appeal of the assessee is partly allowed” 5. Ld AR has also relied on the decision of the Mumbai Benches of the Tribunal in the case of Jowheri Jalaluddin Mullick vs ITO in ITA No.60/Mum/2023 for A.Y. 2013-14 order dated 21.3.2023, wherein, the Co- ordinate Bench of this Tribunal has held as follows:

“9. As per the learned DR, the reassessment proceedings were initiated on the basis of the information that the assessee has sold the property, which fact has also not been disputed by the assessee and the amount of sale consideration can differ. We however do not find merit in the aforesaid submission of the learned DR, as from the perusal of 2nd paragraph of the reasons for reopening the assessment we find that the Assessing Officer has taken due note of the capital gains offered by the assessee from sale of property with sale consideration amounting to Rs. 12,80,00,000. However, the Assessing Officer sought to tax the capital gains on the transaction of sale of property with sale consideration of Rs.2,65,45,504, which as per the Assessing Officer was not offered to tax by the assessee. Therefore, the income which was initially alleged to have escaped assessment was not ultimately added by the Assessing Officer while passing the assessment order and rather the transaction already disclosed by the assessee was re-examined and the capital gains computed by the assessee was recalculated in the assessment order without issuing a fresh notice under section 148 of the Act. In this regard, it is relevant to note the following observations of the Hon'ble jurisdictional High Court in CIT vs Jet Airways India Ltd [2011] 321 ITR 236 (Bom.):

"16 Section 147 has this effect that the Assessing Officer 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. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds P a g e 5 | 15

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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. 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. 10. Further, it is trite law that the reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis to determine the validity of proceedings under section 147 of the Act. In this regard, it is relevant to note the following observation of Hon'ble Jurisdictional High Court in Hindustan Lever Ltd. vs R.B.Wadkar: [2004] 268 ITR 332 (Bom.): "20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and

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unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced." (emphasis supplied) 11. In view of the above discussion and respectfully following the decisions of the Hon'ble jurisdictional High Court cited supra, we hold that the reopening of assessment in the present case is unsustainable in law. The impugned reassessment proceedings are set aside for this short reason alone. As we have quashed the reassessment proceedings for this short reason, we see no need to deal with other issues raised in the appeal or on merits. Those aspects of the matter are, as of now, academic and infructuous.” 12. In the result, the appeal by the assessee is allowed.” 6. Ld AR has also filed a written short note to his arguments as follows:

“Jowheri Jalaluddin Mullick v Income Tax Officer, 2023 SCC OnLine ITAT 257, decided on 21-03-2023... Placing reliance on Hindustan Lever Ltd. v. R.B. Wadkar, [2004] 268 ITR 332 (Bom.), the Tribunal said that, it is trite law that the reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis to determine the validity of proceedings under section 147 of the Act....

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There should be 'reasons' and 'belief. "Reasons" refer to the cause like document, statement, third party confirmation etc and "belief" refers to the conclusion. The "reason to believe" is different from "reason to suspect" or from "to have an opinion". The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded reason. Live link or close nexus between material obtained and formation of belief. ITO v Lakshmani 103 ITR 437 (SC). Information to form Reason to believe available at the time of reopening not subsequent to it. CIT Vs Smt. Paramjit Kaur 311 ITR 38 (P&H) No New Tangible Material even within 4 years, reopening not valid. NDT systems v. ITO 363 ITR 603 Explanation 3 to s. 147 was inserted to supersede the judgements in Vipin Khanna 255 ITR 220 (P&H) & Travancore Cements 305 ITR 170 (Ker) where it was held that the AO could not assess income in respect of issues unconnected with the issue for which the notice was issued. However, Explanation 3 does not affect the judgements in Ram Singh 306 ITR 343 (Raj) & Atlas Cycle Industries 180 ITR 319 (P&H) where it was held that if the AO accepted that the reasons for which the notice was issued were not correct, he would cease to have jurisdiction to proceed with the reassessment Explanation 3 lifts the embargo inserted by judicial interpretation on the making of a s. 147 assessment in respect of items not referred to in the recorded reasons. However, it does not and cannot override the substantive part of s. 147 that the income for which the notice was issued must be assessable. Hence this judgement clearly states that AO has vested with powers (to assess other income) but within the Sphere of the authority i.e. the limits within which the vested power can be exercised. (Hotel Regal International & Anr. Vs. ITO (2010) 320 ITR 573 (Cal.), ITO v BidbhanjanInvestment & Trading CO (P ) Ltd ( 2011) 59 DTR 345 ( Mum) (Trib)

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Reassessment u/s 147: No addition can be made on other grounds when the reasons for which reassessment undertaken cease to survive IN THE HIGH COURT OF DELHI AT NEW DELHI ITA No. 148/2008 Judgment reserved on : 2nd MAY, 2011 Judgment delivered on : 3rd JUNE, 2011 RANBAXY LABORATORIES LIMITED Versus COMMISSIONER OF INCOME TAX The Honorable Delhi High Court in the case of Ranbaxy Laboratories Ltd. Vs CIT was faced with two substantial questions of law. 1. Can Assessing Officer undertake assessment of issues other than the issues for which Reassessment u/s 147 was opened 2. Can Assessing Officer make additions on such other grounds if the primary ground, on the basis of which reassessment proceeding u/s 147 were initiated, cease to exist? The Honorable Delhi High Court in respect of Question 1 has upheld that the Assessing Officer has powers u/s 147 to undertake assessment of other issues which also come into light as having escaped assessment, other than the primary issue on the basis of which Reassessment proceeding were initiated u/s 147. In reply to Question No. 2, the Honorable Delhi High Court has held that Additions / Assessment cannot be made by the Assessing Officer on other grounds, if the primary ground on which the proceeding u/s 147 were initiated, cease to survive.”

“ON REASON RECORDED U/S 148 Reasons are not vague or irrelevant. 1 [Ramond wollen Mills vs ITO (1999) 236ITR 34 (SC)] 2 (b) At the initiation stage, what is required is reason to believe, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage.

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3 (ACIT vs Rajesh Jaweri stock brokers (P) ltd (2007) 291ITR 500(SC) 4 Ito vs selected coal co Sc 217 ITR 597- reopening valid on information of estimate of excessive coal mining (underreporting of coal figures . 5 ITO vs Parsotam dass b angur 1997 90 taxman 541- 224 itr 362 SC - reopening valid on lower production of iron ore reported by DMG - 6 Central province manganine vs ITO 191 ITR 662- Sc reopening valid systematic suppression of mining production. 7 Phool chand Bajrang lal vs ito 1993 203 itr 456- We have to look to the purpose and intent of the provisions. One of the purposes of Section 147, appears to us to be, to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say "you accepted my lie, now your hands are tied and you can do nothing". It would be travesty of justice to allow the assessee that latitude. (ii) From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of the Income Tax 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which where not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material

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available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if one the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment. The High Courts which have interpreted Burlop Dealer's case (Supra) as laying down law to the contrary fell in error and did not appreciate the import of that judgment correctly. 8 Parsanva v gottage vs dcit 79 taxmann.com 103 Karnataka - reopening valid on report of committee on account of under invoicing and illegal mining- 9 (Grover nursing Home vs ITO -248ITR 493-2001(P&H)) It is further held by following the case of raymond wollen mills vs ITO (1999)236 ITR 34 SC, that court can invalidate a notice issued u/s 148 only if it is satisfied that no material was available before the A.O on the basis of which he could form a belief or that the said belief was not at all bonafide or was based on wage ,arbitrary or non specific information. Thus exception to reason only when no material available with Assessing Officer- belief can be made on any material whatsoever 10 Varshman spinining mills vs IAC (P&H) - mere production of record before AO was not enough since some material requiring clarification lay embedded in that evidence and reasons were given for reopening. 11 It is also held that satisfaction arrived at by any relevant material after following due procedure, It cannot be assailed. it may involve change of opinion but not at par with mere change of opinion. (Tilak raj bedi vs JCIT (2009) 319 ITR 385-P&H) 12 (AIA firm vs cit (1991) 189 ITR 285(sc) -The expression 'information' In the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source

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concerning facts or particulars, or as to law relating to a matter bearing on the assessment... Jurisdiction of the Income-tax Officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information, must, it is true, have come into the possession of the Income-tax Officer after the previous assessment, but even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income-tax Officer is not affected. 13 Reassessment is permissible even without any new material and on the basis of return. 14 SEWAK RAM vs. INCOME TAX OFFICER 236 CTR 462(P&H) 2010- No doubt, mere change of opinion by itself is not a ground for reassessment as held in the judgments relied upon on behalf of the assessee but if there are reasons to believe that tax has escaped, reassessment is permissible. Reasons can be even on the basis of particulars of the return without any new material. Even if proceedings under s. 143(2) are not taken, reassessment proceedings can be taken. On sanction u/sl51 1 satisfaction cannot be invalid if reasons are valid as held as under. (i) Prem chand shah vs ACIT, 2016 Koklkata-67 taxman .com 339- MP high court additional commission did not record his satisfaction cannot render proceeding u/s 148 invalid when reasons are valid - (ii) Information received on 5.47 pm and approved on 10.49 pm is valid . Bobbay 2022 136 taxmann.com 24 (iii) Rakesh gupta vs cit 2018 (considering case of chhagumal raj pal) held that as the cit agreed with reasons recorded which were valid a and it was not necessary for him to reiterate the reasons furnished by AO and sanction was valid when in chhagumal case reasons were not in accordance with law and valid reasons, (iv) Premlata soni vs nee 2021- 283 taxman 416- issue of notice u/s 148 does not envisage the sanctioning authority to separately give reason while approving the reasons. he is only to satisfied with reason recorded.”

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with powers of contempt. But that does not mean that the Tribunal can be insulted without there being consequences.

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Order dictated and pronounced in the open court on 29/11/2023.

SD/- SD/- (Girish Agrawal) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 29/11/2023 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : Jay Kishore Choubey, Rairangpur Bazar, Rairangpur, Mayurbhanj 2. The Respondent: ACIT, Circle-1, Asansol 3. The CIT(A)-MFAC,. Delhi, 4. Pr.CIT-, 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//

By order

Sr.Pvt.secretary ITAT, Cuttack

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