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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI B R BASKARAN, AM & MS. KAVITHA RAJAGOPAL, JM
objections of the assessee and had passed the impugned assessment order u/s. 144 r.w.s.
147 of the Act for the reason that the assessee has not filed any reply or submission in rebuttal of the reopening proceeding. The ld. A.O. has also stated that the summons u/s. 131 of the Act could not be served on ADB for the reason that the bank had closed its operation at the specific address and that the current address was not accessible due to the reason that ADB must have closed its operation at Mumbai and for this reason cross
(A.Y. 2010-11) M/s. Minestone vs. ACIT examination to the assessee could not be availed. The ld. A.O. relied on the report of the Investigation Wing that the assessee has not repaid the said loan and had also not initiated any legal proceeding to recover its dues from the defaulting buyers nor has the assessee requisitioned for extension of the period of realization of the export bills. The ld. A.O. had also stated that M/s. Rolling Stone one of the buyers of the assessee was only pass through entity through whom diamonds have been shifted to Turkey, UAE and Russia.
The ld. A.O. had also noted that the assessee refused to sign the deed of assignment of debt favoring ADB for the exports made through direct bill which further corroborated the fact that the assessee does not intend to repay the said loan to ADB. The A.O. then proceeded to make an addition of Rs.107,53,11,047/- being the outstanding liability to the sundry creditors during the year consideration for the reason that the assessee had failed to furnish the name, address, amount-wise break up and the duration of the outstanding amount to the sundry creditors, thereby failing to prove the genuinety of such liabilities. The ld. A.O. considered the same as trading liability which normally should have been settled within a month or two and not prolong for years as in assessee’s case, thereby inferring that the liabilities has ceased to exist u/s. 41(1) of the Act. The ld. CIT(A) upheld the order of the ld. A.O. for the reason that the assessee has failed to substantiate whether the outstanding liability to sundry creditors has ceased to exist.
The ld. AR for the assessee contended that on the facts of the assessee, the ld. A.O. had reopened the assessment for the reason that the assessee has failed to repay the loan availed from ADB and has stated that income amounting to Rs.86 crores has escaped the assessment in the form of cessation of liability. However, the ld. A.O. has (A.Y. 2010-11) M/s. Minestone vs. ACIT added sundry creditors balance of Rs.107.00 crores but has not assessed bank loan of Rs.86.00 crores for which the reopening was done. The ld. AR relied on the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Jet Airways (I) Limited (supra), wherein it was held that the A.O. has to assess or reassess such income for which reopening was made along with any other income chargeable to tax which comes to the notice during the assessment proceeding and failure to make an addition on the grounds for which the reopening was done while passing the assessment order will make it null and void. The relevant extract of the said decision is cited hereunder for ease of reference:
The rival submissions which have been urged on behalf of the Revenue and the assessee can be dealt with both as a matter of first principle, inter-preting the section as it stands and on the basis of precedent on the sub-ject. 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 belhieve under section 147 and following the issuance of a notice under section 148, the Assessing Officer has 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 together and in conjunction. The Shorter Oxford Dictionary defines the expression "also" to mean further, in addition besides, too. The word has been treated as being relative and conjunctive. Evidently therefore, what Parliament intends by use of the words "and also" is that the Assessing Officer, 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: (1) such income ; and also (1) 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 Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of the position that 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. If (A.Y. 2010-11) M/s. Minestone vs. ACIT upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of section 147 with effect from April 1, 1989 clearly stipulated that the Assessing Officer has to assess to reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which carne to his notice during the proceeding. In the absence of the assessment or reassessment of the former, he cannot independently assess the latter.
From the above observation, it is evident that the ld. A.O. cannot make an addition on any other income chargeable to tax without making an addition on the grounds for which the reopening was done. In the present case in hand, the ld. A.O. in the last paragraph of the reasons for reopening has belief that income has escaped assessment amounting to Rs.86.00 crores in the form of cessation of liability along with any other income and the said amount being the loan taken from ADB by the assessee for which the repayment was not made resulting in cessation of liability. It is also observed that at pg. no. 106 of paper book no. 2, the assessee has given the list of Sundry Creditors as on 31.03.2009 and at pg. no. 727 of paper book no. 4, the onetime settlement offer given by the assessee to ADB had stated that the outstanding due was Rs.142 crores. It is also evident from OTS offer that the assessee has paid interest and other charges to ADB as
per the letter dated 28.09.2011 and has also undertaken to make payment subsequently.
Both the A.O. as well as the first appellate authority has failed to elaborate as how they have arrived at the impugned addition of Rs.107,53,11,047/-. Hence, it is evident that the ld. A.O. has not made addition for the reason for which the reopening was made but had only made addition on the outstanding sundry creditor declared by the assessee.
From the above observation and by respectfully following the proposition laid down by the Hon'ble Apex Court in Jet Airways (supra), we hereby hold the assessment order to be null and void.
(A.Y. 2010-11) M/s. Minestone vs. ACIT 13. As we have held the assessment order to be invalid, the other grounds of appeal raised by the assessee becomes academic in nature.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 22.09.2023.