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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
Aforesaid appeal by the assessee is directed against the order dated 30th January 2012, passed by the learned Commissioner (Appeals)–25, Mumbai, for the assessment year 2006–07.
2 Shri Sandeep Kumar Hissaria 2. In ground no.1, assessee has challenged the validity of re– opening of assessment under section 147 of the Income Tax Act, 1961 (for short "the Act").
Briefly stated the facts are, assessee an individual derives income from business and profession. For the impugned assessment year, assessee filed his return of income on 30th October 2007, declaring total income of ` 13,97,970. Assessment in case of assessee was completed under section 143(3) of the Act, vide order dated 22nd December 2008, determining the total income at ` 34,19,250. Subsequently, the Assessing Officer on the basis of reasons recorded reopened the assessment under section 147 by issuing notice under section 148 of the Act and ultimately completed the assessment vide order dated 31st February 2009, determining the total income of ` 47,17,510, after making certain disallowance / additions. Being aggrieved of the assessment order so passed, assessee preferred appeal before the learned Commissioner (Appeals) challenging the assessment order both on the issue of re–opening under section 147 as well as on merits of the additions made. Learned Commissioner (Appeals), however, rejected assessee’s contention with regard to the validity of assessment by holding that the re–opening of assessment under section 147 is in order. Being aggrieved of the aforesaid decision
3 Shri Sandeep Kumar Hissaria of the learned Commissioner (Appeals), assessee preferred appeal before the Tribunal.
Learned Authorised Representative referring to the reasons recorded by the Assessing Officer, while re–opening assessment under section 147 of the Act, submitted that the assessment order passed under section 143(3) r/w section 147 of the Act, had absolutely no nexus with the reasons recorded for assessing the escaped income. Learned Authorised Representative submitted, as the Assessing Officer in the re–assessment has made additions of income other than the income which according to the Assessing Officer has escaped assessment as per reasons recorded, the re–assessment is nullity in the eyes of law. For such proposition, he relied upon the following decisions:–
i) CIT v/s Jet Airways India Ltd., 331 ITR 263 (Bom.) ii) Ranbaxy Laboratories Ltd v/s CIT, 336 ITR 136 (Del.) iii) ACIT v/s Major Deepak Mehta, 344 ITR 641 (Chattisgarh) iv) CIT v/s Shri Ram Singh, 306 ITR 343 (Raj.) v) CIT v/s Mohmed Juned Dadani, of 2011 dated 29.1.2013 (Guj.)
Learned Departmental Representative relied upon the reasoning of the learned Commissioner (Appeals).
4 Shri Sandeep Kumar Hissaria
We have considered the submissions of the parties and perused the material available on record. We have also carefully applied our mind to the relevant case laws cited before us by the learned Authorised Representative. At the outset, it needs to be observed the specific pleading taken before us by learned Authorised Representative challenging the validity of the re–assessment as appears, was not taken before the first appellate authority. However, the issue raised by the assessee being a purely legal issue affecting the jurisdiction of re– assessment, we propose to deal with the same. Reverting back to the facts of the present case, admittedly, assessment in case of assessee was originally completed under section 143(3) of the Act. Subsequently, the Assessing Officer re–opened the assessment under section 147, on the following reasons:– “Information has been received from ITO BW–VI(2), Chennai– 34, that Shri Sandeep Kumar Hissaria has made an investment in shares to the tune of ` 17,00,00,000 in IDFC. This investment was not considered while passing the order for A.Y. 2006–07 since such information was not available at the time of assessment proceedings.
Since I have reason to believe that income chargeable to tax has escaped assessment for A.Y. 2006–07, assessment for A.Y. 2006–07 is reopened under section 147 of the I.T. Act, 1961 by issue notice under section 148 of the I.T. Act, 1961.
5 Shri Sandeep Kumar Hissaria 7. As could be seen from the reasons recorded, assessment was re– opened for assessing the investment of ` 17 crore in the shares of IDFC which according to Assessing Officer was not considered in the original assessment. It is the specific plea of the assessee before us that the assessment order finally passed has no nexus with the escaped income referred to in the reasons recorded on the basis of which assessment was re–opened. On a careful scrutiny of the assessment order, it is observed, the Assessing Officer has made the following disallowances / additions while completing assessment under section 143(3) r/w section 147 of the Act.
Disallowance of future and option loss ` 12,98,267 Disallowance of interest ` 20,21,278 Disallowance of professional and legal ` 1,500 expenditure ` 9,265 Disallowance of Misc. expenses Disallowance of Bank charges ` 3,957
Thus, it is evident that the Assessing Officer, in the re– assessment, has made additions / disallowance which are not referred to in the reasons recorded. Whereas, income which according to the Assessing Officer has escaped assessment as per the reasons recorded has not at all been considered in the re–assessment proceedings.
6 Shri Sandeep Kumar Hissaria There is not even a whisper by the Assessing Officer about such income in the re–assessment framed.
Law is fairly well settled that thought the Assessing Officer under section 147, is empowered to re–open the assessment for assessing the income which has escaped assessment or has been under assessed but at the same time such exercise of power is subject to certain restriction and conditions imposed therein. It has been held that in the assessment proceedings under section 147 of the Act, the Assessing Officer has to deal with the escaped income which was subject matter of re–opening. While assessing such income, the Assessing Officer may consider any other escaped income which may come to his notice in course of re–assessment proceedings. However, under no circumstances, the Assessing Officer can complete the re–assessment by assessing income other than the income which was subject matter of re–assessment. In other words, while completing the re– assessment, the Assessing Officer must consider the escaped income which formed the basis of re–opening as per the reasons recorded along with other escaped income which may come to his notice in course of assessment. Ratio laid down in the catena of decisions relied upon by the learned Authorised Representative, as referred to above including the decision of Hon'ble Jurisdictional High Court in CIT v/s Jet
7 Shri Sandeep Kumar Hissaria Airways India Ltd. (supra) fully support this view. Thus, in view of the aforesaid, we have no hesitation in holding the re–assessment order to be invalid in law as the impugned assessment order is not on the basis of reasons recorded under section 147 of the Act. Accordingly, we quash the same. As we have held the assessment order invalid, grounds raised on merit having become academic are not required to be adjudicated upon.
In the result, appeal stands allowed. Order pronounced in the open Court on 04.03.2016