DHOOT COMPACK PRIVATE LIMITED,AHMEDNAGAR vs. THE DEPUTY COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR

Assessment Year: 2014-15 Dhoot Compack Private Vs. DCIT, Ahmednagar Limited, Circle, Ahmednagar. D-88, MIDC, Nagapur, Ahmednagar- 414111. PAN : AAACD8904B Appellant Respondent Assessee by : Shri Prasad S. Bhandari Revenue by Shri Ramnath P. Murkunde : Date of hearing 18.11.2024 : Date of pronouncement : 13.12.2024 आदेश / ORDER

PER VINAY BHAMORE, JM:

2. The appellant has raised the following grounds of appeal :-

1. On the facts and in the prevailing circumstances of the case and in law the Resp. CIT(A)-NFAC erred in confirming the addition made by the Ld. Assessing Officer on the ground which was not forming the reason for issue of notice under section 148 of the Act and there is no 148 was issued. Thus the Ld. Assessing Officer failed to issue a fresh notice under section 148. Hence the reassessment becomes bad in law and accordingly the addition made of Rs. 726485/- may please be deleted. Without prejudice to the above ground following grounds may please be considered.

2. On the facts and in the prevailing circumstances of the case and in law the Resp. CIT(A)-NFAC erred in confirming the addition made by the Ld. Assessing Officer without appreciating the submission made by the assessee. Hence such addition of Rs. 726485/- may please be deleted.

3. The Appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal.”

3. Facts of the case, in brief, are that the assessee is a private limited company engaged in manufacturing business. The return of income was filed on 23.09.2014 declaring total income of Rs.4,51,55,230/-. The case was selected for scrutiny and the assessment was completed u/s 143(3) on 23.12.2016 determining total income of Rs.4,84,34,560/-.

4. Subsequently, the Department received information that the assessee company has purchased shares from Navratanmal Gupta and Borosil Glass Works but the shares are not reflected in current assets of the assessee company. Therefore, the case was reopened and notice u/s 148 and 143(2) were issued to the assessee. During the course of reassessment proceedings, the assessee company denied from making any such purchase of shares. However, it was noted by the Assessing Officer that the assessee company has undertaken commodity trading on National Spot Exchange Ltd. through its broker M/s. Anand Rathi Commodities Ltd.. From a perusal of Sauda Summary Report provided by M/s. Anand Rathi Commodities Ltd., the Assessing Officer observed that the assessee company has earned profit of Rs.16,68,485/- in commodity trading but have only disclosed the profit of Rs. 9,41,200/- on this account. On enquiry, the assessee company replied that the profit of Rs.16,68,485/- included notional profits also but the assessee company has disclosed the actual profit of Rs.9,42,000/- only.

5. Being unsatisfied with the reply of the assessee, the Assessing Officer made addition of Rs.7,26,485/- and determined the total income at Rs.4,91,61,045/- as against the income already assessed u/s 143(3) at Rs.4,84,34,560/-. The above assessed income includes Rs.7,26,485/- [i.e. difference of Rs.16,68,485/- minus Rs.9,42,000/-].

6. In first appeal, after considering the reply of the assessee, Ld. Addl./JCIT(A), Thiruvanantpuram dismissed the appeal of the assessee and confirmed the addition made by the Assessing Officer by observing as under :- “1. The Appeal was filed by the appellant on 31-01-2020 for the AY 2014-15 against the Order of AO passed u/s 143(3) r.w.s. 147 on 26-12-2019 and served on 02-01-2020. In this case, an amount of Rs. 7,26,485/- was added being the amount of profit not disclosed by the appellant. The appellant company had undertaken commodity trading on National Spot Exchange Ltd through its broker M/s Anand Rathi Commodities Ltd. As per the Sauda summary report provided by Anand Rathi Commodities Ltd u/s 133(6) of the act. There were sales in the case of the applicant of Rs. 10,93,33,955/- and purchases of Rs.10,76,65,470/-. Appellant earned profit of Rs. 16,68,485/- on these transaction but the appellant offered profit of Rs. 9,41,200/-.

8. Ld. AR appearing from the side of the assessee company submitted before us that the order passed by Ld. Addl./JCIT(A), Thiruvanantpuram is not justified. Ld. AR submitted before us that only two effective grounds were raised before Ld. Addl./JCIT(A), Thiruvanantpuram, first was legal ground & second was factual ground. But Ld. Addl./JCIT(A), Thiruvanantpuram has only decided the factual ground and the legal ground was not adjudicated by him which is in favour of the assessee by the decision of Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. reported in 331 ITR 236 (Bombay). Accordingly, it was requested before the Bench to set- aside the order passed by Ld. Addl./JCIT(A), Thiruvanantpuram and further requested to delete the addition made by the Assessing Officer on the basis of reason other than that which was subject matter of proceedings u/s 147/148 of the IT Act. It is contended that in the light of judgement in the case of CIT vs. Jet Airways (I) Ltd., the Assessing Officer was bound to issue fresh notice u/s 148 of the IT Act on the basis of new reason.

9. Ld. DR appearing from the side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.

. Accordingly, the order passed by Ld. Addl./JCIT(A), Thiruvanantpuram becomes bad in law to the extent in not deciding each and every ground of appeal raised by the assessee.

12. We find that the assessee has relied on the judgement passed in the case of CIT vs. Jet Airways (I) Ltd. 331 ITR 236, wherein necessity of fresh notice u/s 148 was directed by observing as under :- “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 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.”