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Income Tax Appellate Tribunal, D BENCH, MUMBAI
In order to bring to tax above mentioned escaped Income, as well as any other income which might have escaped assessment, found (Assessment Year: 2010-11) during the course of proceedings, notice u/s.148 is issued.” (Emphasis Supplied) On perusal of the above we find that as per paragraph 3 of the 11. reasons recorded the Assessing Officer had concluded that (a) the Appellant had failed to disclose fully and truly all material facts in respect of profit/loss for the Assessment Year 2010-11, and (b) the Assessing Officer had reasons to believe that income to the extent of INR 7,27,33,427/-had escaped assessment on account of the aforesaid failure. Whereas on perusal of the paragraph 6 of the Assessment Order [reproduced in paragraph 4 above] , we find that the Assessing Officer has made an addition of INR 21,82,003/- being 3% of the aforesaid amount of INR 7,27,33,427/- by treating the same as unexplained expenditure. The Assessing Officer has also returned a finding that the Appellant had paid aforesaid amount as commission. Thus, clearly, the reasons recorded for reopening the assessment and income that was believed to have escaped assessment are different from with the addition made by the Assessing Officer and the reasons thereof. In our view, the judgment in the case of Jet Airways (India) Private Limited (supra) would apply to the facts of the present case wherein it was held by the Hon’ble Bombay High Court as under:
“15. Parliament, when it enacted the Explanation (3) to section 147 by the Finance (No. 2) Act, 2009 clearly had before it both the lines of precedent on the subject. The precedent dealt with two separate questions. When it effected the amendment by bringing in Explanation 3 to section 147, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain courts that the Assessing Officer has to restrict the assessment or reassessment proceedings only to the issues in respect of which reasons were recorded for reopening the assessment. The corrective exercise embarked upon by "Parliament in the form of Explanation 3 consequently provides that the Assessing Officer may assess or reassess the income in respect of (Assessment Year: 2010-11) any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice under section 148(2). The decisions of the Kerala High Court in Travancore Cements Ltd.'s case (supra) and of the Punjab & Haryana High Court in Vipan Khanna's case (supra) would, therefore, no longer hold the field. However, insofar as the second line of authority is concerned, which is reflected in the judgment of the Rajasthan High Court in Shri Ram Singh's case (supra), Explanation 3 as inserted by Parliament would not take away the basis of that decision. The view which was taken by the Rajasthan High Court was also taken in another judgment of the Punjab & Haryana High Court in CIT v. Atlas Cycle Industries [1989] 180 ITR 3191. The decision in Atlas Cycle Industries' case (supra) held that the Assessing Officer did not have jurisdiction to proceed with the reassessment, once he found that the two grounds mentioned in the notice under section 148 were incorrect or non-existent. The decisions of the Punjab & Haryana High Court in Atlas Cycle Industries' case (supra) and of the Rajasthan High Court in Shri Ram Singh's case (supra) would not be affected by the amendment brought in by the insertion of Explanation 3 to section 147.- 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 (Assessment Year: 2010-11) 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”(Emphasis Supplied).
In the above judgment the Hon’ble Bombay High Court has held 12. that in case after issuing a notice under Section 148 of the Act, the assessing officer holds that the income in relation to which the Assessing Officer had formed reason to believe that had escaped assessment has not escaped assessment and does not make addition in respect of the same, it was not open to the assessing officer to independently assess some other income. In the present case, the Assessing Officer was of the view that income of INR 7,27,33,427/- being artificial profit/loss created by misuse of CCM facility had escaped assessment. However, while making the reassessment no addition was made on this account. The Assessing Officer made a disallowance of INR 21,82,003/- being 3% of the aforesaid amount of INR 7,27,33,427/- holding the same to be the commission paid by the Appellant for obtaining the artificial profit/loss entry by way of CCM. In the aforesaid facts and circumstances, we hold that as per the judgment of Hon’ble jurisdictional High Court in the case of Jet Airways (India) Pvt. Ltd. (supra) the Assessing Officer could not have made addition of INR 21,82,003/- in the hands of the Appellant on account of change in the quantum as well as nature of the addition. Accordingly, Ground No. 1(b) raised by the Appellant is allowed. In view of the aforesaid, all the other grounds raised by the Appellant are disposed off as being infructuous.
(Assessment Year: 2010-11) 13. In result, in terms of paragraph 12 above, the present appeal is allowed.
Order pronounced on 30.01.2024.