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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आयकर अपीलीय अिधकरण, अहमदाबाद �ायपीठ “ए” अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD (through web-based video conferencing platform) ] BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA No. 1330/Ahd/2019 & CO No. 184/Ahd/2019 िनधा�रण वष� िनधा�रण वष�/ Assessment Year : 2010-11 िनधा�रण िनधा�रण वष� वष� Income-Tax Officer, Jasmine Jayendrabhai Thakkar, Ward-2(2)(2), Vs 4/94, Sundernagar Flats, Ahmedabad Nr. Manish Hall , Naranpura, Ahmedabad – 380 013 PAN : ADYPT 9076 C �� यथ�/ (Respondent/ अपीलाथ�/ (Appellant) Cross-Objector) ITA No. 1331/Ahd/2019 & CO No. 185/Ahd/2019 िनधा�रण िनधा�रण वष� िनधा�रण िनधा�रण वष� वष�/ Assessment Year : 2011-12 वष� Income-Tax Officer, Jasmine Jayendrabhai Thakkar, Ward-2(2)(2), Vs 4/94, Sundernagar Flats, Ahmedabad Nr. Manish Hall , Naranpura, Ahmedabad – 380 013 PAN : ADYPT 9076 C अपीलाथ�/ (Appellant) �� यथ�/ (Respondent/ Cross-Objector) Revenue by : Shri Virendra Ojha, CIT-DR & Shri S.S. Shukla, Sr. DR Assessee by : Shri Vartik Chokshi, AR सुनवाई क� तारीख/Date of Hearing : 27/07/2021 घोषणा क� तारीख /Date of Pronouncement: 02/08/2021 आदेश/O R D E R आदेश आदेश आदेश PER RAJPAL YADAV, VICE PRESIDENT : The Revenue is in appeal before the Tribunal against separate orders of learned Commissioner of Income-Tax (Appeals) of even dated 17.06.2019 passed for Assessment Years 2010-11 and 2011-12. On receipt of notice in the appeals of the Revenue, the assessee has filed Cross Objections bearing
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Nos. 184/Ahd/2019 and 185/Ahd/2019 in Assessment Years 2010-11 and 2011-12 respectively.
Since common issues are involved in all these appeals; therefore, we have heard them together and deem it appropriate to dispose of by this common order.
First we take up ITA No.1330/Ahd/2019 and CO No.184/Ahd/2019. In the Cross Objection, the assessee has challenged reopening of assessment. This ground of appeal of the assessee has been rejected by the learned First Appellate Authority. However, on merits, the additions have been deleted. Therefore, firstly, we take up the jurisdictional issue agitated in the Cross Objection. In Ground No.1 the assessee has pleaded that the learned CIT(A) has erred in upholding the validity of the reassessment proceedings initiated under Section 147/148 of the Income-tax Act.
The brief facts of the case are that the learned Assessing Officer has issued a notice under Section 148 of the Income-tax Act on 08.01.2016 after recording the reasons. The learned Counsel for the assessee, while impugning the reopening of the assessment, contended that the assessment can be reopened if the Assessing Officer is satisfied that the income has escaped assessment; however, a notice under Section 148 could be issued only after taking approval from the competent authority as contemplated under Section 151 of the Income-tax Act. He took us through the reasons recorded and the objections filed by the assessee against the reopening. He also took us through the order of the Assessing Officer dated 25.05.2016 vide which the Assessing Officer has disposed of the objections against the reopening of the assessment. The learned Counsel for the
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assessee further contended that it is Assessment Year 2010-11 and notice under Section 148 of the Income-tax Act was issued on 08.01.2016 - meaning thereby it was issued after expiry of four years from the end of the relevant assessment year. If an Assessing Officer wants to reopen an assessment where four years have expired from the end of the relevant assessment year, then, as per sub-section (1) of Section 151, the learned Assessing Officer has to obtain permission from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the case may be. In the present case, the learned Assessing Officer did not obtain such approval and, therefore, the reopening is bad in the eyes of law. For buttressing this point that the learned Assessing Officer has not taken the approval from the competent authority, he took us through own admission of the Assessing Officer in the order passed while disposing of the objections of the assessee.
On the other hand, learned Departmental Representative relied upon the order of the Assessing Officer as well as the findings of the learned CIT(A) on this issue.
We have duly considered the rival contentions. The reasons recorded by the Assessing Officer has a direct bearing on the controversy in hand; therefore, we take note of the reasons available on page no.43 of the paper- book which reads as under:- “REASONS FOR REOPENING SHRI JASMINE JAYENDRABHAI THAKKAR A.Y. 2010-11 On perusal of the bank statement of Jasmine Jayendrabhai Thakkar, obtained from bank, for account No.463009114082071 maintained with Bhuj Mecantile Co-operative Bank it has been found that cash deposits
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aggregating to Rs.11.94 Crores have been made in this bank account on various dates during the F.Y. 2009-10.
Further, the Return of income filed by Shri Jasmine J. Thakkar was examined on ITD. On perusal of the return of income filed by him it has been found that he does not have any substantial income. The details of the gross total income filed by him for various years are tabulated hereunder:
Name of Head Gross Total Income (In Rs.) Person AY AY AY AY AY 2012-13 2011-12 2010-11 2009-10 2008-09 Jasmine Income 287095 760248 512889 308398 262320 Jayendrabhai from Thakkar salary / Pension
On perusal of the gross income filed by him it has been found that he is showing income under the head “Salary” and he does not have any substantial source of income so as to deposit such huge cash in his bank account.
In view of the discussion held above, the source of deposits in the hands of Shri Jasmine J. Thakkar remains unexplained. Moreover, he does not have any creditworthiness so as to deposit such huge funds in cash in his accounts.
Considering the above returned income and keeping in mind the huge cash deposits in the bank account, to explain the same, I have reason to believe that income of Rs.11.94 crores has escaped assessment for FY 2009-10, i.e. AY 2010-11. Accordingly, it is a fit case for reopening u/s 147 of the I.T. Act. Sd/- (KAVITA P. KAUSHIK) Dy. Commissioner of Income-tax Central Circle-1(3), Ahmedabad.”
A copy of the notice issued under Section 148 of the Income-tax Act is available on page no.1 of the paper-book and, on perusal of this notice, it would reveal that it was issued on 08.01.2016. It is, therefore, assumed that the notice under Section 148 was issued on 08.01.2016. Against this
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reopening of assessment, the assessee has filed objections and those objections have been disposed of by the learned Assessing Officer vide order dated 25th May 2016. For the completeness of the facts, we deem it appropriate to take note of the order also which reads as under:- “Office of the Deputy Commissioner of Income Tax, Central Circle-1(3), 304, 3rd Floor, Aayakar Bhavan, Ahmedabad, Phone No.079-27546870
No.DCIT/CC-1(3)/JJT/AY10-11/2016-17 Date: 25.05.2016 Order of the disposal of objection raised for the AY 2010-11 PAN : ADYPT9076C To, Shri Jasmine Jayndrabhai Thakkar 4/94, Sunder Nagar Flats, Nr. Manish Hall, Naranpura, Ahmedabad 380013
Ref : Objection raised against reasons recorded for initiation of re-assessment proceedings u/s 147 of the I.T. Act for AY 2010-11 through the letter dated 21.05.2016 against the Assessment Proceedings – Reg. Please refer to the above.
The point-wise reply to the objection raised for AY 2010-11 in your case is as follows: Objection No.1 : Non satisfaction of pre-condition for invoking the provisions of Section 147: Please note that the Reasons recorded u/s 147 was already forwarded to you through the letter dated 12.05.2016, it is clearly mentioned the reasons which leads to believe that income or profit or gains chargeable to Income-tax has escaped assessment. Objection No.2 : Jurisdiction for reassessment proceedings cannot be assumed on basis of reasons to suspect: The case is re-opened on the basis of the facts which have leads to believe that the income has escaped assessment for the concerned AY, which can be seen
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from the reasons recorded, already provided to you. Hence, there is no assumption made in the case. Objection No.3: Notice issued without recording of proper satisfaction of the Pr. Chief Commissioner / Chief Commissioner / Pr. Commissioner / Commissioner that it is a fit case for the issue of such notice.
Please note that the notice u/s 148 was issued after obtaining the approval from the concerned Jt. Commissioner. Copy of the same is enclosed herewith for your reference.
As the objections raised by you are herewith dispose off, you are requested to attend the office of the undersigned on or before 30.05.2016 with reply to the notice issued u/s 142(1) of the Act dated 12.05.2016.
Your explanation should reach the undersigned on or before 30.05.2016. Please note that if you fail to furnish any explanation by the given date, assessment in your case for the assessment year may be finalized u/s 144 of the Income Tax Act, without affording any further opportunity.
Non-compliance to the notice will leads to penalty proceedings as per the provisions of Income-tax Act, 1961. Yours faithfully, Sd/- (KAVITA P. KAUSHIK) Dy. Commissioner of Income-tax Central Circle-1(3), Ahmedabad.”
At this stage, we would like to take note of Section 151 of the Income- tax Act which reads as under:- “151. Specified authority for the purposes of section 148 and section 148A shall be,— (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.]
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On the reasons reproduced above, no date is available; however, it is ascertained from the copy of the notice dated 08.01.2016. Similarly, in the opening line of the assessment order, learned Assessing Officer has recorded that notice under Section 148 was issued on 08.01.2016. This fact is necessary as we have to ascertain as to whether the notice was issued within four years from the end of the relevant assessment year or after four years. On perusal of the facts it would indicate that notice was issued after expiry of four years from the end of the Assessment Year 2010-11.
A perusal of sub-section (1) of Section 151 of the Income-tax Act would indicate that if an Assessing Officer wants to issue notice under Section 148 of the Act and four years have expired from the end of the relevant assessment year, then he cannot issue such notice unless an approval from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is obtained. In other words unless the above authorities are satisfied that it is a fit case for reopening and approved the action of the Assessing Officer, no notice under Section 148 of the Act could be issued.
Let us now explore whether such approval was taken or not. Under objection No.3 against the reopening of the assessment, the assessee took a plea that notice has been issued without recording of proper satisfaction of the Principal Commissioner of Income-tax. At the cost of repetition, we reproduce the relevant findings from the order dated 25th May 2016 which reads as under:-
“Objection No.3: Notice issued without recording of proper satisfaction of the Pr. Chief Commissioner / Chief Commissioner / Pr. Commissioner / Commissioner that it is a fit case for the issue of such notice.
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Please note that the notice u/s 148 was issued after obtaining the approval from the concerned Jt. Commissioner. Copy of the same is enclosed herewith for your reference.”
A perusal of the above would indicate that the Assessing Officer himself has rejected this objection of the assessee by observing that approval was taken from the Joint Commissioner of Income-tax. He has not recorded the finding that the approval was taken from the competent authority i.e. Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. Thus, there was no proper approval for reopening of the assessment and the reopening is, therefore, not valid in the eyes of law. For fortifying ourselves, we put reliance upon the judgement of the Hon’ble jurisdictional High Court in the case of Adani Ports & SEZ Ltd vs. DCIT, reported in [2013] 35 taxmann.com 338 wherein the Hon’ble High Court has allowed the writ petition of the assessee and quashed the reopening under identical circumstances. Similarly, we rely upon the judgment of the Hon’ble Delhi High Court in the case of CIT vs. SPL’s Siddartha Ltd, reported in [2012] 17 taxmann.com 138. In view of the above discussion, we allow this ground of cross objection and quash the assessment order. Consequently, all other proceedings would become nullity and the appeal of the Revenue thus stands dismissed. To be precise, after declaring the assessment order null and void, no addition will remain in the hands of the assessee and, therefore, for statistical purposes, ground nos. 2 & 3 of the Cross-Objection be also treated as allowed. In the result, Cross-Objection of the assessee is allowed; whereas the appeal of the Revenue is dismissed.
Now we take up the appeal filed by the Revenue bearing ITA No.1331/Ahd/2019 and Cross Objection filed by the assessee bearing CO
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No. 185/Ahd/2019 for the Assessment Year 2011-12. In this assessment year also the assessee has raised a jurisdictional issue. He has challenged the order of the learned CIT(A) vide which reopening of the assessment was upheld by the First Appellate Authority.
The brief facts of the case are that the assessee had filed his original return of income on 3rd June 2011 declaring total income at Rs.7,25,405/-. A notice under Section 148 of the Income-tax Act was issued on 8th January 2016. The learned Assessing Officer has passed the impugned assessment order under Section 143(3) r.w.s. 147 of the Income-tax Act on 20th December 2016. He determined the taxable income of the assessee at Rs.7,62,43,212/-. Dissatisfied with the additions, the assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A) has partly deleted the addition and confirmed the addition made under Section 68 of the Act to the extent of Rs.5,26,30,000/-. In ground no.2 of the Cross Objection, the assessee has challenged the confirmation of this addition; whereas, the Revenue has challenged the deletion of the addition. The learned Counsel for the assessee, while impugning the orders of the Revenue Authorities, submitted that the assessment was reopened on the ground that the assessee has made cash deposits of Rs.1.63 crores in the bank account maintained with the Bhuj Mercantile Cooperative Bank Limited. The learned Counsel for the assessee took us through the copy of the reasons recorded by the Assessing Officer which is available on page no.45 of the paper-book. The learned Counsel for the assessee thereafter took us through the assessment order and submitted that no addition was made on account of cash deposits and, therefore, it is to be construed that the addition on an issue for which the assessment was reopened was not made. If that be the case, then any other income coming to the notice of the
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Assessing Officer during the reassessment proceedings cannot be added. In other words, the income which came to the notice of the Assessing Officer as escaped income during the reassessment proceedings can only be added if addition on an issue for which assessment was reopened is being made. For buttressing his proposition and explaining the position of law, he relied upon the judgment of the Hon’ble Gujarat High Court in the case of CIT vs. Mohmed Juned Dadani, reported in [2013] 30 taxmann.com 1. He also made reliance upon the judgment of the Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd., reported in [2011] 331 ITR 236 as well as the judgement of Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd Vs. CIT, reported in [2011] 336 ITR 136. He also placed on records the copies of Tribunal orders as well as decision of Hon’ble Delhi High Court in the case of CIT vs. Adhunik Niryat Ispat Ltd in appeal No.2090 of 2010.
The learned CIT-DR, on the other hand, took us through the assessment order and submitted that if assessment order is being perused, then it would reveal that the Assessing Officer has made analysis of the account maintained by the assessee with the Bhuj Mercantile Co-op. Bank Ltd. He found certain credits entries in the account - though by account payee cheques but could not be explained by the assessee about the source of those funds as required under Section 68 of the Income-tax Act. Therefore, he has rightly made the addition. With regard to the contentions of the assessee that the assessment was reopened on account of unexplained cash deposits by the assessee in the bank account with the Bhuj Mercantile Co-op. Bank, the learned CIT-DR was unable to controvert this fact that the addition of cash amount was not made.
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We have duly considered the rival contentions and gone through the record carefully. The reasons recorded by the Assessing Officer for reopening of the assessment is available on page No.45 of the paper-book which reads as under:-
“REASONS FOR REOPENING SHRI JASMINE JAYENDRABHAI THAKKAR AY 2011-12 On perusal of the bank statement of Jasmine Jayendrabhai Thakkar, obtained from bank, for account No.463009114082071 maintained with Bhuj Mecantile Co-operative Bank it has been found that cash deposits aggregating to Rs.1.63 Crores have been made in this bank account on various dates during the F.Y. 2010-11.
Further, the Return of income filed by Shri Jasmine J. Thakkar was examined on ITD. On perusal of the return of income filed by him it has been found that he does not have any substantial income. The details of the gross total income filed by him for various years are tabulated hereunder:
Name of Head Gross Total Income (In Rs.) Person AY AY AY AY AY 2012-13 2011-12 2010-11 2009-10 2008-09 Jasmine Income 287095 760248 512889 308398 262320 Jayendrabhai from Thakkar salary / Pension
On perusal of the gross income filed by him it has been found that he is showing income under the head “Salary” and he does not have any substantial source of income so as to deposit such huge cash in his bank account. In view of the discussion held above, the source of deposits in the hands of Shri Jasmine J. Thakkar remains unexplained. Moreover, he does not have any creditworthiness so as to deposit such huge funds in cash in his accounts. Considering the above returned income and keeping in mind the huge cash deposits in the bank account, which remained to be explained in spite of the opportunity given to the assessee to explain the same, I have reason to believe
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that income has escaped assessment within the meaning of Section 147 of the I.T. Act. Considering the above returned income and keeping in mind the huge cash deposits in the bank account, to explain the same. I have reason to believe that income of Rs.1.63 crores has escaped assessment for F.Y. 2010-11 i.e. A.Y. 2011-12. Accordingly, it is a fit case for reopening u/s 147 of the Act.
Sd/- (KAVITA P. KAUSHIK) Dy. Commissioner of Income-tax Central Circle-1(3), Ahmedabad.”
A perusal of the above reasons would indicate that the Assessing Officer has reopened the assessment on the ground that the assessee had made deposits in cash aggregating to Rs.1.63 crores. This cash deposit, in the opinion of the Assessing Officer, was escaped income from the assessment. We have perused the assessment order also, but we do not find any such addition made by the Assessing Officer. He took notice of the fact that a sum of Rs.7,54,35,000/- was deposited through account payee cheque from four persons/firms namely (i) Ashish Patel, (ii) Kanji Desai, (iii) Vittal Bio and (iv) Platinum. The details of the same are as under:-
Name Amount Rs. Ashish Patel (31.05.2010 & 24.02.2011) 65,80,000/- Kanji Desai 1,62,25,000/- Vittal Bio 2,80,60,000/- Platinum 2,45,70,000/-
It is pertinent to note that these entries in the bank account were made through account payee cheques. The Assessing Officer has not made the addition of Rs.1.63 crores which was allegedly deposited in cash; rather the Assessing Officer has made some other additions. Let us evaluate the position of law propounded by the Hon’ble Jurisdictional High Court and other Hon’ble High Courts on this issue. In the case of Mohmed Juned
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Dadani (supra), the Hon’ble High Court of Gujarat has considered identical question. The question formulated by the Hon’ble High Court of Gujarat reads as under:-
“Whether the Income-tax Appellate Tribunal was right in law in coming to the conclusion that when on the ground on which the reopening of assessment is based, no additions are made by the Assessing Officer in the order of assessment, he cannot make additions on some other grounds which did not form part of the reasons recorded by him.”
And, thereafter, Hon’ble High Court made a reference to the decision of the Hon’ble Bombay High Court in the case of Jet Airways (I) Ltd (supra) as well as the decision of the Hon’ble Delhi High Court in the case of Ranbaxy Laboratories (supra). The discussions made by the Hon’ble High Court of Gujarat read as under:-
“19. In light of the above decisions, we need to answer the question framed. In order to do so, we may notice the statutory provisions applicable. Section 147 of the Act underwent significant changes w.e.f. 01.04.1989. In the present form as it stands the section reads as under: “[Income escaping assessment.] 147. Income escaping assessment.- If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or 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 this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under
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section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1. Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2. For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income- tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. Explanation 3. For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue
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have not been included in the reasons recorded under sub-section (2) of section 148.”
We may notice that Explanation 3 to Section 147 of the Act was inserted by Finance Act 2 of 2009 w.e.f. 01.04.1989. To this aspect of the matter and the effect of the explanation itself we would advert to at a later stage.
Section 148 of the Act pertains to issuance of notice where income had escaped assessment . Sub-section (1) of Section 148 pertains to the requirement of issuance of notice by the Assessing Officer before making the assessment, reassessment or recomputation of income under Section 147 of the Act. Sub-section (2) of Section 148 provides that the Assessing Officer shall before issuing any notice under the said section record his reasons for doing so.
Section 147 of the Act thus, gives power to the Assessing Officer for reopening an assessment. Such powers, however, are hedged with several conditions. First the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment. Further if the reopening is resorted beyond the period of four years from the end of the relevant assessment year, additional requirement that income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to make a return under Section 139 or in response to a notice under Section 142(1) or 148 of the Act or to disclose fully and truly all material facts necessary for the assessment must also be satisfied. If the requirements of giving jurisdiction to the Assessing Officer to reopen assessment are satisfied, he may assess or 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 the said section. 23. Section 147 of the Act, even without the aid of Explanation 3 thus enabled the Assessing Officer while framing an assessment under Section 147 of the Act, to assess or reassess such income for which he had recorded his reasons to believe had escaped assessment and also any other income which escaped assessment which came to his notice subsequently in the course of the assessment proceedings. 24. Sans explanation (3), Section 147 of the Act, however, by no stretch of imagination, can be construed as to provide that if the reason on which the assessment is reopened fails, the Assessing Officer still can proceed to assess some other income which according to him had escaped assessment and which came to his light during the course of the assessment. For assuming jurisdiction to frame an assessment under Section 147 of the Act what is
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essential is a valid reopening of a previously closed assessment. If the very foundation of the reopening is knocked out, any further proceeding in respect to such assessment naturally would not survive. 25. A question may therefore, arise whether introduction of Explanation (3) would change this position and for that purpose we need to ascertain what is true purport of Explanation 3 and the purpose for which the same was introduced. Let us have a closer look to such Explanation which provides that for the purpose of assessment or reassessment under the said section, the Assessing Officer may assess or reassess the income in respect of any issue which escaped assessment and which comes to his notice subsequently in the course of reassessment proceedings. The explanation further provides that this would be so notwithstanding that the reasons for such issue have not been included in the reasons recorded under Section 148(2). 26. If the contention of the assessee that even after introduction of Explanation 3 to Section 147 of the Act, the situation has not undergone any material change is accepted, the question that immediately would come to one s mind is, what then was the purpose of introducing such an explanation. An argument may arise that if before and after introduction of Explanation 3, the nature of jurisdiction exercised by the Assessing Officer was not to undergo any change, would Explanation 3 not be rendered redundant. Would such a situation not run counter to a well known legal principle that the Legislature cannot be seen to have enacted a redundant legislation and that every effort should be made to give such interpretation which ensures that a provision in a statute is not rendering otiose. Such question may have led to some interesting discussion. However, the entire issue has been put beyond any pale of controversy by virtue of the explanatory memorandum for introducing such explanation. Such explanatory memorandum reads as under: “Clarificatory amendment in respect of reassessment Proceeding under section 147 The existing provisions of section 147 provides, inter alia, that if the Assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may assess or reassess such income after recording reasons for re-opening the assessment. Further, he may also assess or reassess such other income which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section.
Some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the
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reasons have been recorded for reopening the assessment. He is not emplowered to touch upon any other issue for which no reasons have been recorded. The above interpretation is contrary to the legislative intent.
With a view to further clarifying the legislative intent, it is proposed to insert an Explanation in section 147 to provide that the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reason for such issue has not been included in the reasons recorded under sub-section (2) of section 148.
This amendment will take effect retrospectively from 1st April, 1989 and will, accordingly, apply in relation to assessment year 1989-1990 and subsequent years.
From the above, it can be seen that the explanation was meant to be clarificatory in nature and to put the issue beyond any legal controversy. When the Legislature found that in face of the provisions contained in Section 147 of the Act post 01.04.1989 some of the courts had taken a view that the Assessing Officer is restricted to the reassessment proceedings only on issues in respect of which the reasons were recorded for reopening the assessment, such explanation was introduced in the statute. Thus, the explanation was meant to be merely clarificatory in nature and was introduced with the purpose of putting at rest the legal controversy regarding the true interpretation of Section 147 of the Act which had arisen on account of certain judicial pronouncements. We have noticed that prior to enactment of Explanation 3 to Section 147, Punjab and Haryana High Court in case of Commissioner of Income Tax Vs. Atlas Cycle Industries reported in 180 ITR 319 (supra) had taken a restricted view of the power of the Assessing Officer to make any addition on the grounds not mentioned in the reasons recorded for reopening the assessment. We may also notice that Kerela High Court in case of Travencore Cements Ltd. Vs. Assistant Commissioner of Income-Tax and anr reported in 305 ITR 170 had taken somewhat similar stand.
Explanation 3 to Section 147 of the Act thus does not in any manner, even purport to expand the powers of the Assessing Officer under Section 147 of the Act. In any case, an explanation cannot expand the scope and sweep of the main body of the statutory provision. In case of S.Sundaram Pillai Vs. V.R.Pattabiraman reported in AIR 1985 Supreme Court 582 the Supreme Court observed that, an explanation added to a statutory provision
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is not a substantive provision but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. It was observed as under:
“52. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is-
(a) to explain the meaning and intendment of the Act itself,
(b) where there is any obscruity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve.
(c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful.
(d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and
(e) It cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same.
Above decision has been referred to and relied upon in several subsequent decisions. Above proposition being well settled, it is not necessary to refer to all such decisions.
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 all material facts for the purpose of assessment must also be established unless ofcourse some other ground viz. non-filing of the return at all etc. is available to the Assessing
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Officer. If such non-disclosure of material facts is established with respect to the reason recorded for issuing notice for reopening the assessment, it would be open for the Assessing Officer to thereafter even assess other income which might have escaped assessment but which may not necessarily satisfy the requirement of non-disclosure of true and full material facts. If in such a situation, the stand of the revenue is accepted, a very incongruent situation would come about if ultimately the Assessing Officer were to drop the ground on which notice for reopening had been issued but to chase some other grounds not so mentioned for issuance of the notice. In such a situation, even if a case where notice for reopening has been issued beyond a period of four years, the assessment would continue even though on all the grounds on which the additions are being made, there was no failure on the part of the assessee to disclose true and full material facts. In such a situation an important requirement of failure on part of the assessee to disclose truly and fully all material facts would be totally circumvented.
As already noted, except for the Punjab and Haryana High Court in case of Majinder Singh Kang Vs. Commissioner of Income-Tax and anr (supra) all courts have uniformly taken a view that Explanation 3 to Section 147 of the Act does not change the situation insofar as the present controversy is concerned. Leading decision of Bombay High Court in case of CIT. vs. Jet Airways (I) Ltd. has been followed by different High Courts. In case of CIT. vs. Jet Airways (I) Ltd.,the High Court, in its elaborate decision considering the statutory provisions, different judicial pronouncements and the explanatory memorandum for introduction of Explanation 3 to Section 147 of the Act, ruled in favour of the assessee.
Punjab and Haryana High Court in case of Majinder Singh Kang Vs. Commissioner of Income-Tax and anr (supra) ofcourse has sounded a different note. We may, however, notice that the explanatory memorandum to Explanation 3 to Section 147 of the Act was not brought to the notice of the High Court in the said decision. The High Court gave considerable importance on such Explanation 3 to Section 147 of the Act and the language used therein. 33. In the result, we answer the question in the affirmative i.e. in favour of the assessee and against the revenue. All tax appeals are dismissed.”
Since no addition was made on an issue for which the assessment was reopened, therefore, any other addition is not sustainable. We allow this ground of appeal and consequently delete all other additions made by the
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Assessing Officer and partly confirmed by the learned CIT(A). The other issues agitated by the assessee as well as by the Revenue in its appeal become redundant in view of the above decision. Therefore, we do not find any merit in the appeal of the Revenue; it is accordingly dismissed, and, Cross Objection of the assessee is thus allowed.
In the result, both the Cross-Objections of the assessee are allowed; whereas the appeals of the Revenue are dismissed.
Order pronounced in the Court on 2nd August 2021 at Ahmedabad.
Sd/- Sd/-
(WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE-PRESIDENT Ahmedabad, Dated 02/08/2021 *Bt आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु� ( ) / The CIT(A)- अपील 5. िवभागीय �ितिनिध , , राजोकट/DR,ITAT, Ahmedabad, अिधकरण अपीलीय आयकर 6. गाड� फाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण ITAT, Ahmedabad 1. Date of dictation- …30.072021…… 2. Date on which the typed draft is placed before the Dictating Member …30.07.2021… Other member …02.08.2021…………. 3. Date on which the approved draft comes to the Sr.P.S./P.S. - ……02.08.2021……… 4. Date on which the fair order is placed before the Dictating Member for Pronouncement …02.08.2021.. 5. Date on which the file goes to the Bench Clerk……02.08.2021………… 6. Date on which the file goes to the Head Clerk……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order………………… 8. Date of Despatch of the Order………………