PARAMJIT SINGH ,DELHI vs. AO WARD-1, KARNAL , HARYANA

PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-

2. The grievances of the assessee read as under:

“1. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in assuming jurisdiction u/s 263 of Income Tax Act, 1961 and has erred in holding the reassessment order dated 06-08-2019 as erroneous as well as prejudicial to the interest of revenue and that too by recording incorrect facts and findings and in violation of principles of natural justice.

2. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in setting aside the impugned reassessment order dated 06-08- 2019 and directing the assessing officer to pass an order, in accordance with law and that too by recording incorrect facts and findings and without observing the principles of natural justice and more particularly when all the necessary details/information/evidences were examined at the time of reassessment proceedings with regard to cash deposit.

3. That in any case and in any view of the matter, action of ld. Pr.CIT in passing the impugned order U/S 263 is bad in law and against the facts and circumstances of the case and is in violation of principles of natural justice.

4. That having regard to the facts and circumstances of the case, Ld. Pr. CIT has erred in law and on facts in assuming jurisdiction u/s 263 which is bad in law inter alia for this reason that the reassessment order passed u/s 1471143(3) dated 06.08.2019 which is sought to be revised u/s 263 itself was invalid inter alia on various grounds. as mentioned below and thus proceedings initiated u/s 263 against the invalid reassessment order is clearly bad in law.

(a) That assumption of jurisdiction uls 147 is itself is bad in law as the reason recorded would not have led to the formation of belief of escapement of Income.

(b) That no valid satisfaction/approval U/S 151 was obtained. (c) That impugned reassessment order was passed without complying with the mandatory conditions of section 147 to 151.

5. That the appellant craves the leave to add, amend, modify, delete any of the grounds of appeal before or at the time of hearing and all the above grounds are without prejudice to each other.”

4. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules.

5. The sum and substance of the submissions of the ld. counsel for the assessee is that the Assessing Officer could not have done what the PCIT expected him to do as the Assessing Officer had limited jurisdiction for completing reassessment proceedings based upon the reasons recorded for reopening the assessment.

“1. This is a case of individual. As per report generated from the AST, the assessee, Sh. Paramjit Singh Sio Sh. Amar Singh, Dera gurunanak Pura, Pingli Road, PO- Chirao, Distt. Karnal did not file his return of income for the AY.2012-13.

3. From the perusal of the ITS details, during the F.Y. 2011-12 relevant to A.Y.2012-13 it reveals that the assessee had made cash deposits to the tune of Rs. 72,00,0001- in his saving bank accounts and received interest at Rs. 7,7501- as per 26AS during the F.Y. 2011-12 relevant to AY. 2012-13.

relevant to A.Y. 2012-13 but return of income had not been filed by the assessee for the relevant period, case being worth investigation, approval was obtained uls 133(6) of IT Act, 1961 from the competent authority i.e. Pr. Commissioner of Income Tax, Karnal for further processing of the information. After getting the approval from the Worthy Pr. Commissioner of Income Tax, Karnal u/s 133(6) of IT Act, query letter was issued on 28.02.2019 for verification of transaction asking the assessee for furnishing the reply. In the letter, the assessee was asked to intimate whether the assessee had filed return of income for the A.Y. 2012-13 alongwith source of above said cash deposits of Rs. 72,00,0001- in the saving bank account and interest received at Rs. 7,7501- as discussed above. In compliance thereto, the assessee had furnished reply dated 14.03.2019. The reply filed by the assessee has been considered but not found tenable.

Keeping in view the facts narrated above, I am satisfied and have reason to believe that the income chargeable to tax on account of cash deposited in bank account 'and interest income totaling Rs. 72,07,750/- as well as any other income which comes to notice during assessment proceedings has escaped assessment by reasons of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year 2012-13 and accordingly, the provisions of Section 147 of the I.T. Act, 1901 are clearly attracted in the case-of the assessee

7. In this case no return of income was filed for the year under consideration. Accordingly, in this case no assessment was made and the only requirement to initiate proceeding u/s 147 is reason to believe, which has been recorded in the above paragraphs.

It is pertinent to mention here that in this case the assessee has chosen not to file return of income for the year under consideration although the total income of the assessee had exceeded the maximum amount which is not chargeable to tax as discussed in paragraph above and the assessee was assessable under the Act. In view of the above, the provisions .of clause (a) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment

In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Principal Commissioner of income Tax as per provisions of section 151 of the Income Tax Act, 1961.”

“Proceedings u/s 147 of the Act were initiated in this case vide notice u/s 148 of the Act dated 27.03.2019 issued

10. It can be seen from the findings of the Assessing Officer [supra] that he has considered the source of cash deposit, necessary documents have been examined/perused and placed on record which means that not only the Assessing Officer has considered the source of cash deposit, but has also examined the document of sale transaction of the land.

11. Assuming jurisdiction u/s 263 of the Act, the PCIT issued the following show cause notice:

13. These facts go on to show that specific queries were raised to which specific reply was filed. Therefore, it cannot be said that the Assessing Officer did not make any enquiry. Moreover, assessment was reopened with specific reasons for reopening and those specific reasons have been duly examined by the Assessing Officer before completing assessment.

14. In our considered opinion, for exercise of power u/s 263 of the Act, it is mandatory that the order passed by the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue. A perusal of the assessment order shows that the returned income was accepted by the Assessing Officer and no addition was made for reasons recorded at the time of issue of notice u/s 148 of the Act.

15. This is an undisputed fact that the issues which prompted the Assessing Officer to reopen the assessment were duly considered and reply of the assessee was accepted and no addition was made. This fact has also not been disturbed by the PCIT in his order u/s 263 of the Act.

“Whether the Tribunal was right in law in holding that the CIT had wrongly invoked the jurisdiction u/s 263 of the Act.”

“9. One of the contentions, which has been accepted by the tribunal is that the order of the Assessing Officer cannot be regarded as erroneous even if the Assessing Officer had failed to carry out necessary verification and required enquiries in respect of the share application money, as no addition has been made on account of the reasons for reopening, which were recorded before issue of notice under Section 148 of the Act. It has been held that the Assessing Officer could not have made an addition on account of share application money as no addition has been made on account of FDRs of Rs.20 lacs. The tribunal has noticed and recorded that in the reasons for reopening it was mentioned that the assessee had made investment in form of FDRs of Rs.20 lacs but in the assessment order passed under Section 147/143(3) of the Act it has been held that the respondent assessee had been able to show and establish the genuineness of and capacity to make the said investment.

"The effect of section 147 as it now stands after the amendment of 2009 can, therefore, be summarised as follows : (i) the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year ; (ii) upon the formation of that belief and before he proceeds to make an assessment, reassessment or recomputation, the Assessing Officer has to serve on the assessee a notice under sub- section (1) of section 148 ; (iii) the Assessing Officer may assess or reassess such income, which he has reason to believe, has escaped assessment 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 the section ; and (iv) though the notice under section 148(2) does not include a particular, issue with respect to which income has escaped assessment, he may none the less, assess or reassess the income in respect of any issue which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section."

"It is only when, in proceedings under section 147 the Assessing Officer, assesses or reassesses any income chargeable to tax which has escaped assessment for any assessment year, with respect to which he had 'reason to believe' to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under section 147.

To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the Assessing Officer were to come to the conclusion, that any income chargeable to tax, which, according to his 'reason to believe', had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the Assessing Officer entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the Assessing Officer may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147."

12. The Division Bench in Ranbaxy Laboratories Limited (supra)considered the judgment of the Supreme Court in the case of V. Jagmohan Rao versus CIT and EPT, (1970) 75 ITR 373(SC) and CIT versus Sun Engineering Works Private Limited, (1992) 198 ITR 297 (SC) and has then elucidated:

"18. We are in complete agreement with the reasoning of the Division Bench of the Bombay High Court in the case of CIT v. Jet Airways (I) Limited [2011] 331 ITR 236 (Bom). We may also note that the heading of section 147 is "income escaping assessment" and that of section 148 "issue of notice where income escaped assessment". Sections 148 is supplementary and complimentary to section 147. Sub-section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute the escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Explanation 3 if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the Legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of the escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148.

19. In the present case, as is noted above, the Assessing Officer was satisfied with the justifications given by the assessee regarding the items, viz., club fees, gifts and presents and provision for leave encashment, but, however, during the assessment proceedings, he found the deduction under sections 80HH and 80-I as claimed by the assessee to be not admissible. He consequently while not making additions on those items of club fees, gifts and presents, etc., proceeded to make deductions under sections 80HH and 80-I and accordingly reduced the claim on these accounts.

20. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under sections 80HH and 80- I which as per our discussion was not permissible. Had the Assessing Officer proceeded to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-I as well."

under Section 139(1). It is not the case of the Revenue that the assessee had tried to claim benefit of carry forward of loss on the basis of the order passed under Section 147/143(3) of the Act.

The order is pronounced in the open court on 01.12.2023.