M/S. LOKMAT MEDIA PRIVATE LIMITED ,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(2)(1), MUMBAI

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: A BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA 1400/MUM/2026 िनधा�रणवष�/AssessmentYear:2011-12) M/S. LOKMAT MEDIA PRIVATE DEPUTY COMMISSIONER OF LIMITED INCOME TAX CIRCLE 3(2)(1) 126, B Wing Mittal Tower Aayakar Bhavan M.K Road, Vs. Nariman Point, Mumbai-400021, Mumbai-400020, Maharashtra Maharashtra अपीलाथ� Appellant ��थ� Respondent

Permanent Account Number of Assessee: AAACL1888J

अपीलाथ��ारा/Appellant represented by: Shri Nitesh Joshi, Advocate ��थ��ारा/Revenue represented by: Shri Manoj Kumar (CIT-DR) सुनवाईकीतारीख/Date of conclusion of hearing: 09-Jul-2026 घोषणाकीतारीख/Date of pronouncement: 15-Jul-2026 आदेश / ORDER

PER:SHRI ANIKESH BANERJEE, JUDICIAL MEMBER: The instant appeal of the assessee filed against the order of the National Faceless Assessment Centre [for brevity “Ld. CIT(A)], order passed under Section 250 of the Income Tax Act, 1961 (for brevity ‘the Act’), for Assessment Year 2011-12, date of order 30.01.2026. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income Tax-Circle 3(2)(1), Mumbai (for brevity ‘Ld. AO’), order passed under Section 143(3) r.w.s. 147 of the Act, date of order 19.12.2018. 2. The brief facts of the case are that the assessee filed its original return of income on 29.11.2011, declaring a total income of Rs. 62,25,57,073/- under the normal provisions of the Act and book profit of Rs. 78,87,52,345/- under Section 115JB of the Act. The case was selected for compulsory scrutiny, and the assessment was completed under Section 143(3) of the Act on 21.03.2014. While completing the assessment, the Ld. AO made disallowances under Section 14A read with Rule 8D and under Section 40(a)(ia) of the Act. However, after examining the submissions and supporting documents furnished by the assessee, the Ld. AO accepted the assessee's claim of depreciation on the addition to fixed assets and allowed the same in the assessment completed under Section 143(3) of the Act. Subsequently, the assessment was reopened by issuance of a notice under Section 148 of the Act dated 30.03.2018. The reasons for reopening the assessment under Section 147 of the Act were recorded by the Ld. AO on 26.03.2018. The relevant reasons recorded for initiating the reassessment proceedings are reproduced below: “Reasons for initiating proceedings u/s. 147 of the I. T. Act. 1. The assessee company is engaged in the business of Printing & Publishing of Newspapers and production & distribution of films. The return of income in this case was filed on 29/11/2011 declaring income of Rs.62,25,57,073/-. Consequently order u/s.143(3) of the I.T. Act, 1961 was passed on 21/03/2014 assessing the total income at Rs.63,30,38,940/- 2. Subsequently it was noticed that in respect of asset - Hyline Machinery added during the year under the block of assets 'Plant & Machinery' for the Mumbai Unit, the assessee has claimed addition of asset of Rs.2,77,13,013/- on which depreciation was claimed at 15%. On perusal of the copies of bills furnished in this regard, it is seen that the same amounts to only Rs.2,68,99,412/- whereas the assessee has claimed addition of asset worth Rs.2,77,13,013/-. Thus apparently the assessee has claimed excess addition of asset of Rs.8,13,601/- Further one of the invoice for addition of Rs.12.13,300/- In respect of the said asset is dated 01/10/2010 but the claim of depreciation on the same has been made at full rate instead of half rate of depreciation. 3. Thus apparently there is excess claim of depreciation on addition of plant & machinery as under:- i) 15% of Rs.8,13,601/- (excess addition) Rs.1,22,040/- i) 7.5% of Rs.12,13,300/- (excess depreciation) Rs. 90,998/- TOTAL Rs.2,13,038/- 3.1 Thus there is apparently excess claim of depreciation of Rs.2,13,038/- on Hyline Machinery added during the year for the reasons as stated above. 4. Therefore I have reason to believe that there is escapement of income of Rs.2,13,038/-by way of excess & incorrect claim of depreciation by the assessee. 5. In this case a return of income was filed for the year under consideration and regular assessment u/s.143(3) was made on 21/03/2014. Since, 4 years from the end of the relevant year has expired in this case, the requirements to initiate proceedings u/s.147 of the IT. Act, 1961 are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration. It is pertinent to mention here that reasons to believe that Income has escaped assessment for the year under consideration have been recorded above. I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the assessment proceedings and have noted that the assessee has not truly and fully disclosed the material facts necessary for his assessment for the year under consideration. 5.1 It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating re-opening u/s.147 of the I.T. Act, 1961. 5.2 It is true that the assessee has filed a copy of annual report and audited P&L A/c. and balance sheet along with return of income where various information/material were disclosed. However, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that even though the assessee has produced books of accounts, annual report, audited P&L A/c. and balance sheet or other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered with due diligence, accordingly attracting provisions of Explanation 1 of section 147 of the Act.

“16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance Act (No. 2) of 2009. However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. 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 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. Our view has been supported by the background which led to the insertion of Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh's case (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field. 18. In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand answered against the revenue and in favour of the assessee. The appeal is, accordingly, dismissed. There shall be no order as to costs.” 7. The Ld. DR strongly supported the orders of the revenue authorities. He contended that the reopening of the assessment was validly initiated on the basis of the reasons recorded by the Ld. AO, who had formed a bona fide reason to believe that income chargeable to tax had escaped assessment. It was submitted that, by virtue of Explanation 3 to Section 147 of the Act, the Ld. AO was empowered to assess or reassess any other income which came to his notice during the course of the reassessment proceedings, irrespective of whether an addition was ultimately made on the issue forming the basis of the recorded reasons. The Ld. DR further argued that the addition made on account of the change in the method of accounting was duly examined during the reassessment proceedings and was rightly brought to tax. Accordingly, it was contended that the reassessment order did not suffer from any legal infirmity and was valid in law. The Ld. DR, therefore, prayed that the order of the Ld. CIT(A) be upheld. 8. We have heard the rival submissions and perused the material available on record. The reasons recorded by the Ld. AO for reopening the assessment clearly reveal that the reassessment proceedings were initiated solely on the ground of an alleged excess claim of depreciation amounting to Rs. 2,13,038/- on the addition to plant and machinery. However, it is an undisputed fact that no addition whatsoever was ultimately made in the reassessment order on the issue forming the basis of the recorded reasons. Instead, the reassessment was concluded by making an addition of Rs. 10,56,67,577/- on an altogether different issue relating to the alleged change in the method of accounting. The Hon'ble Bombay High Court in Jet Airways (I) Ltd. (supra) has categorically held that where the Assessing Officer does not assess or reassess the income which formed the basis of the "reason to believe" recorded under Section 147 of the Act, he cannot independently assess any other income that comes to his notice during the reassessment proceedings. This principle has subsequently been followed by the Third Member of the Tribunal in Mahesh Kumar (supra). The Ld. DR was unable to place before us any judgment of the Hon'ble Supreme Court or any jurisdictional High Court taking a contrary view or overruling the ratio laid down in Jet Airways (I) Ltd. (supra). Respectfully following the binding decision of the Hon'ble jurisdictional High Court, we hold that the assumption of jurisdiction under Section 147 of the Act is unsustainable in law. Consequently, the reassessment order passed under Section 147 read with Section 143(3) of the Act is liable to be quashed and is accordingly set aside. Since we have allowed the appeal on the preliminary legal issue by quashing the reassessment proceedings, the grounds raised by the assessee on the merits of the addition have become purely academic and, therefore, do not call for any adjudication. 9. In the result the appeal of the assessee bearing ITA No.1400/Mum/2026 is allowed. Order pronounced in the open court on 15th day of July 2026 Sd/- Sd/-

(BIJAYANANDA PRUSETH) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 15/07/2026 SAUMYA Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI