SHIVALIK VENTURES PRIVATE LIMITED,MUMBAI vs. ACIT CC 8(1), MUMBAI, MUMBAI

3. Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) deleted the disallowance under section 40(a)(ia) made towards non-deduction of tax at source under section 194I on the payments made to slum dwellers towards alternate accommodation. The CIT(A) in this regard placed reliance on the decision of the Co-ordinate Bench in assessee's own case for AY 2012-13 (ITA No. 3429/M/2024 dated 19.09.2024). The CIT(A) confirmed the disallowance made by the AO under 36(1)(va) by placing reliance on the decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT ([2022] 143 taxmann.com 178 (SC)).

5. The ld. AR argued that the explanation to section 147 cannot go beyond the main section. To buttress the said argument the ld AR submitted that the addition under the main provisions of section 147 could be made only in respect of those income which is subject matter of section 148A(b) notice and order under section 148A(d). The ld. AR further submitted that the disallowance made under section 36(1)(va) could have been made only by invoking explanation and not under the main provisions of section 147. Accordingly it is argued that when the addition made under main provisions are deleted then the disallowance under section 36(1)(va) which is done under explanation cannot be sustained since the explanation cannot go beyond the jurisdiction of main section. The ld AR in this regard drew our attention to the following observations of the Hon'ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd (331 ITR 236) – 16…….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.

7. The ld. DR heavily relied on his written submissions which is extracted below – “2. The appellant has primarily contested the validity of the reassessment notice issued u/s 148 of the Income-tax Act, 1961 ("the Act"), arguing that once the primary issue for reopening has been dropped by CIT(A), the reassessment proceedings automatically become invalid. The appellant relies heavily on the Hon'ble Bombay High Court's decision in CIT v. Jet Airways (India) Ltd. [2011] 331 ITR 236 (Bom). It is respectfully submitted that the misconceived. On the contrary, a careful examination of Jet Airways (India) Ltd. demonstrates robust support for the Revenue's position. 3. In CIT v. Jet Airways (India) Ltd. [2011] 331 ITR 236 (Bom), the Hon'ble Bombay High Court clearly established the principle that once reassessment proceedings are validly initiated based on new tangible information indicating escapement of income, the jurisdiction of the Assessing Officer (AO) extends beyond merely addressing the original reason for reopening. The Court held categorically that reassessment proceedings do not become invalid merely because the issue triggering the reopening did not culminate in an addition, either at the assessment or appellate stage. The essential jurisdictional test is whether the reassessment was initiated based on a valid reason to believe, supported by tangible material, which is not in dispute in this instant proceeding. 4. The judgment of Jet Airways (India) Ltd. does not stipulate the automatic invalidation of reassessment proceedings upon deletion or non-sustainability of the primary addition at any subsequent appellate stage. Instead, the Court emphasizes the AO's jurisdiction to assess any escaped income discovered during 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. the reassessment proceedings, irrespective of whether the initial reason for reopening is ultimately resulted in addition or whether such addition is sustained in appeal. Kind reference is invited to relevant part of the Judgment at Para 11, Page 6, which is being reproduced as under, "If the income, the escapement of which was the basis of the formation of reason to believe, is not assessed or re-assessed, it would not open to the assessing officer to independently assess only that income which comes to his notice subsequently in the course of proceeding under section as having escaped assessment. If upon the issuance of 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 issues independently."

6. In the instant case, the reassessment proceedings were initiated based upon tangible, credible, and previously undisclosed information resulting from the survey action u/s 133A conducted on 07.10.2021. This survey clearly revealed critical facts regarding the appellant's non-deduction of TDS under Section 194- 1 on compensation payments made to slum dwellers. Thus, the AO had substantial and valid reasons to believe that income had escaped assessment. The AO has also assessed the issue of non-deduction of TDS u/s. 194-I on payments made to slum dwellers (Para-4 of the asstt. Order) and ultimately made an addition of Rs. 176,84,433/- on this issue as disallowance u/s. 40(a)(ia) of the Income Tax Act. Hence the assessing officer has duly discharged his onus of assessing the income that was sought to be escaped and subject matter for reopening of assessment. The any subsequent factor such as sustenance of such addition before CIT(A) does not affect the validity of assessment of other income and consequent addition in the course of same re-assessment proceeding.

1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd.

8. Moreover, Hon'ble Supreme Court's judgment in ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [291 ITR 500 (SC)] reinforces the position that the validity of reassessment proceedings depends exclusively upon the legitimacy and sufficiency of the reason to believe at the time the reassessment notice is issued, and not on subsequent developments or the ultimate sustainability of additions made.

9. Consequently, the appellant's reliance on Jet Airways (India) Ltd. is critically misplaced, as the judgment, rather than invalidating the Revenue's case, squarely supports the AO's jurisdiction and the legal validity of the reassessment proceedings. The Revenue, therefore, humbly submits that the reassessment proceedings initiated under Section 147 and addition made by the assessing officer in respect to the issue of disallowance of PF, ESI etc. in the course of re- assessment proceeding remain entirely valid and sustainable in law.

10. It is therefore humbly prayed that the appeal of the appellant be dismissed on the issue of unpaid liability in respect of PF, ESI dues etc.”

6. Section 147 of the Act provides that: “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…’. A bare perusal of the above provision manifests that the AO is fully empowered to bring to tax any other income which has escaped assessment and which comes to his notice subsequently in the course 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. of proceedings u/s 147, apart from the income escaping assessment on which the AO formed reason to believe about the escapement of income and issued notice u/s 148. The use of words ‘and’ between the income escaping assessment forming reasons to believe for issuing notice u/s 148 and other income chargeable to tax which escaped assessment and comes to the notice of the AO in the course of the proceeding, amply shows that the existence of the former is a pre-condition for taxing the latter. To put it simply, if the grounds set out in the re-assessment notice are nonexistent, i.e., either no addition is made on such grounds or the addition so made does not finally pass the scrutiny by the appellate forums, then, obviously, no further addition can be made for income which comes to his notice during the course of proceedings u/s 147. Without there being such a deterrent, the AO could have got unhindered powers to initiate re-assessment at the drop of a hat without any legally sustainable reasons and then made other additions resulting in multiplicity of proceedings, which the legislature has sought to curb. Any lawful jurisdiction to make addition on account of other incomes coming to the notice of the AO during the course of proceedings u/s 147 can be acquired only on the foundation of a validly acquired jurisdiction on legally sustainable items of income escaping assessment forming reasons for issuing notice u/s 148. In other words, if the AO fails to acquire a valid jurisdiction to make re- assessment on the basis of his reasons, then, he is also debarred for making additions for other incomes chargeable to tax which escaped assessment and come to his notice subsequently in the course of proceedings u/s 147. The Hon’ble Bombay High Court in CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom) has held to this extent. Similar view has been taken by the Hon’ble Delhi High Court in CIT vs. Chiel Communications India Pvt. Ltd. (2013) 354 ITR 549 (Del).

“The return filed by the assessee for the asst. yr. 1999-2000 declaring income @ Rs. 1,22,460 was processed under s. 143(1) of the IT Act (hereinafter referred to as "the Act"). However, subsequently, on the information received from the Director of IT (Inv.), New Delhi, to the effect that the assessee had accepted the following accommodation entries from M/s 1.G. Properties (P) Ltd., M/s Parivartan Capital & Financial Services (P) Ltd. and from M/s Victoria (P) Ltd. in the garb of share capital, the notices were issued under s. 148 of the Act for 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. the assessment year. The assessee filed the return, pursuant to said notices, declaring the same income as was originally written. The AO passed the reassessment order dt. 23rd Dec., 2006 making additions of Rs. 31 lacs on account of unexplained share capital including the capital subscribed by the aforesaid three applicants on the basis of which the assessment was reopened by giving reasons to believe for opening reassessment. However, during the assessment proceedings, the AO also made certain additions of the credits received from M/s Adhunik Niryat, M/s Mahadev Metals, M/s Royal International and M/s Single Finshare India Ltd. though on that basis the assessment was not reopened. The assessee filed an appeal against these additions. CIT(A) confirmed the additions of Rs. 31 lac which was the basis for reopening reassessment. Insofar as other additions are concerned, CIT(A) deleted the same. In these circumstances, both the assessee as well as the Revenue preferred appeals against the orders of CIT(A). As far as appeal of the assessee is concerned, it was allowed by the Tribunal thereby deleting the additions of Rs. 31 lac as well. Against this order, no appeal was preferred by the Revenue. Thus, the reasons which persuaded the AO to reopen the reassessment proceedings and on the basis of which additions were made were not found valid or justifiable as those additions were deleted by the Tribunal.

& 1444/Mum/2025- AY-2019-20 & 2020-21