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Income Tax Appellate Tribunal, ‘B’ SMC BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN
सुनवाई क� तार�ख/Date of Hearing : 20.06.2016 घोषणा क� तार�ख/Date of Pronouncement : 22.07.2016 आदेश /O R D E R
These appeals of two different assessees are directed against the respective orders of the Commissioner of Income Tax (Appeals), Salem, dated 24.10.2014, for the assessment years 2002-03 and 2001-02. Since common issue arises for consideration in all these appeals, I heard these appeals together and disposing of the same by this common order.
Shri V. Sridharan, the Ld. representative for the assessee, submitted that for both the assessment years, the Assessing Officer reopened the assessment under Section 147 of the Income-tax Act, 1961 (in short 'the Act'). However, the reason for reopening of assessment was not provided to the assessee even though a specific request was made. According to the Ld. representative, the assessee has also filed application under the provisions of Right to Information Act requesting for copy of reason for reopening the assessment. Inspite of the application filed by the assessee under Right to Information Act, the reason for reopening the assessment was not furnished to the assessee. Since the Assessing Officer has not furnished the reasons, the reopening is invalid. Placing reliance on the judgment of Karnataka High Court in Kothari Metals v. ITO (2015) 377 ITR 581, the Ld. representative submitted that non- furnishing of reasons for reopening of assessment would render the entire assessment invalid. The Ld. representative has also placed reliance on the decision of Mumbai Bench of this Tribunal in CIT v.
Trend Electronics (2015) 61 Taxmann.com 308. Placing reliance on the decision of this Bench of the Tribunal in PVP Ventures Ltd. v.
ACIT (2016) 65 taxmann.com 221, the Ld. representative submitted that once the reopening of assessment cannot stand on the strength cannot be justified by finding some other point or post facto after reopening of assessment. According to the Ld. counsel, the reopening of assessment in all the three cases is not justified.
Therefore, the entire assessment has to be set aside.
On the contrary, Sh. P. Radhakrishnan, the Ld. Departmental Representative, submitted that the assessee filed the return of income in all the three cases and the return was lodged. The Assessing Officer found that some deposits were made in bank by the assessee. Therefore, the assessment was reopened by issuing notice under Section 148 of the Act. According to the Ld. D.R., the assessee has no source for making deposit in the bank account.
Though the assessee claims that they have agricultural income, the receipt of agricultural income was not disclosed in the return of income. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer.
I have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer reopened the assessment by issuing notice under Section 148 of the Act on the ground that there are deposits in the bank regard to deposits made in the bank account. The addition was made with regard difference in capital account. The question arises for consideration is when the assessment was reopened for the purpose of assessing the deposits made in the bank account and no such addition was made in the reopened assessment, can the Assessing Officer make assessment by including other income?
This issue was considered by the Bombay High Court in CIT v. Jet Airways Ltd. (2011) 331 ITR 236. The Bombay High Court, after considering the judgment Punjab & Haryana High Court in Vipan Khanna (2002) 255 ITR 220, found that Explanation 3 to Section 147 of the Act lifts the embargo, which was inserted by judicial interpretation, on the making of assessment or reassessment on the grounds other than those on the basis of which a notice was issued under Section 148 of the Act. Referring to Explanation 3 to Section 147 of the Act, inserted by Finance (No.2) Act of 2009, the Bombay High Court found that Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of Section 147 of the Act. It was further observed that an Explanation to a statutory provision is intended to explain its contents and cannot be construed to override or render the found that after issuing notice under Section 148 of the Act, if the Assessing Officer 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. The Bombay High Court further found that it is open to the Assessing Officer to issue a fresh notice under Section 148 of the Act and the legality of which would be tested in the event of a challenge by the assessee. In fact, the Bombay High Court observed as follows:-
“Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment of 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 (No. 2) Act 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.”
In view of the above, this Tribunal is of the considered opinion that the addition made by the Assessing Officer cannot stand in the eye of law. Moreover, the assessee has sufficient agricultural income from coffee estate. When there was difference in the capital account with regard to agricultural income, the difference has to be necessarily treated as agricultural income.
Therefore, the Assessing Officer is not justified in treating the same as unexplained cash in the capital account of the assessee.
In view of the above, this Tribunal is unable to uphold the orders of the authorities below and accordingly, the same are set aside and the addition made in all the three cases are deleted.
In the result, the appeals filed by the assessees are allowed.
Order pronounced on 22nd July, 2016 at Chennai.