Madhuri Dhananjauy Marathe, Nashik V. Income-tax Officer, Ward - 1(4), Nashik

ITA 1639/PUN/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1633 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 28-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Reopening of assessment; Question of law; Assessment record; Reason to believe; Reassessment proceedings
• Section: 44AD; 143(3); 148

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, P UNE , , , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVE DI, AM . / ITA NOS.1639 & 1640/PUN/2017 / ASSESSMENT YEARS: 2009-10 & 2010-11 SMT. MADHURI DHANANJAY MARATHE, 3, YASHODHARA APARTMENT, CHINCHKHED ROAD, AT POST PIMPALGAON (B), TALUKA- NIPHAD, NASHIK PAN : AMJPM4024B ....... / APPELLANT / V/S. THE INCOME TAX OFFICER, WARD-1(4), NASHIK. / RESPONDENT APPELLANT BY : SHRI PRAMOD SHINGTE RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 16.08.2018 / DATE OF PRONOUNCEMENT : 30.08.2018 / ORDER PER SUSHMA CHOWLA, JM THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEAL)-1, NASHIK DATED 15.05.2017 RELATING TO ASSESSMENT YEAR 2009-10 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2 ITA NOS.1639 & 1640/PUN/2017 A.YS. 2009-10 & 2010-11 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL IN ITA NO. 1639/PUN/2017: 1. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND AS PER THE LAW, THE ASSESSMENT ORDER PASSED U/S.147 OF THE ACT PLEASE BE QUASHED AS THE AO HAS NOT MADE ANY ADDITI ONS OR DISALLOWANCE TO THE INCOME OF THE APPELLANT WHICH W ERE SUBJECT MATTER OF REASONS RECORDED FOR ISSUE OF NOTICE U/S. 148 OF THE ACT. 2. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND AS PER LAW, THE COMMISSIONER OF INCOME TAX, (APPEALS)- I, NASHIK, IS NOT JUSTIFIED IN CONFIRMING ADDITION OF RS. 2,50,000/- BEING ADVANCE RECEIVED FROM MR.VINOD MARATHE BY HOLDING THE SAME TO BE NON GENUINE. 3. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NASHIK, IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS. 2,50,000/- AND DISALLOWANCE OF RS. 2,96,360/- ON ACCOUNT OF LABOUR CHARGES, PARTICULAR LY WHEN THE APPELLANT HAS DISCLOSED PROFIT MORE THAN 8% OF THE GROSS RECEIPT U/ S. 44AD OF THE ACT. 4. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NASHIK, IS NOT JUSTIFIED IN CONFIRMING THE OBSERVATION OF AO THAT THE APPELLANT HAS PRODUCED BILLS/VOUCHERS OF LABOUR CHARGES OF RS. 1,20,800/- AS AGAINST CLAIMED OF RS, 3,93,000/- IN THE PROFIT AND LOSS ACCOUNT FOR THE Y EAR UNDER APPEAL THEREBY CONFIRMING THE ADDITION OF THE DIFFE RENCE OF RS. 2,72,200/- (RS. 3,93,000/- LESS RS. 1,20,800/-), WHEREAS THE FACT IS THAT THE APPELLANT HAS CLAIMED LABOUR CHARGES ONLY RS. 65,200/- IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER APPE AL AND NOT OF RS. 3,93,000/- AS CONSIDERED BY THE AO IN THE ASSESSMEN T ORDER. 5. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NASHIK, IS NOT JUSTIFIED IN CONFIRMING AD-HOC DISALLOWANCE OF RS.24,160/- I.E. 20 % OUT OF LABOUR EXPENSES OF RS.1,20,800/-. 6. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE COMMISSIONER OF INCOME TAX, (APPEALS)-I, NASHIK, IS NOT JUSTIFIED IN DISALLOWING THE EXPENSES TOTALING TO RS.2,96,360/- WHEN THE EXPENSES ARE NOT CLAIMED BY THE APPELLANT AS DEDUCT ION FROM TOTAL INCOME BECAUSE THE SAME ARE ADDED TO CLOSING WORK I N PROGRESS OF THE PROJECT UNDER CONSTRUCTION. 7. THE APPELLANT CRAVES FOR ADDITION TO DELETION, A LTERATION, MODIFICATION, CHANGE ANY OF THE GROUNDS. 3. THESE TWO APPEALS RELATING TO THE SAME ASSESSEE ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. 3 ITA NOS.1639 & 1640/PUN/2017 A.YS. 2009-10 & 2010-11 4. THE PRELIMINARY ISSUE RAISED IN BOTH THE APPEALS BY WAY OF GROUND OF APPEAL NO. 1 IS AGAINST THE INITIATION OF RE-ASSESSMENT PR OCEEDINGS UNDER SECTION 147/148 OF THE ACT AND ORDER PASSED UNDER SECTION 143(3) R.W.S .147 OF THE ACT. 5. BRIEFLY IN THE FACTS OF THE CASE, DURING THE CO URSE OF SCRUTINY ASSESSMENT UNDER SECTION 143(3), IN THE CASE OF MAYURI INFRAST RUCTURE PVT. LTD. FOR ASSESSMENT YEAR 2010-11, IT WAS SEEN THAT THE SAID COMPANY HA D CLAIMED UNSECURED LOAN IN THE NAME OF ASSESSEE, AMOUNTING TO RS.14,20,000/-. IN S UPPORT OF THE CLAIM EXTRACT OF ASSESSEES BANK A/C WAS SUBMITTED. IN THE BANK A/C CASH DEPOSITS OF RS.4,35,000/- WERE SHOWN; BUT THE ASSESSEE HAD FAILED TO EXPLAIN SOURCE OF THE INCOME. THE ASSESSING OFFICER RECORDED REASONS FOR RE-OPENING O F ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED. THE ASSESSEE VIDE LETTER DATED 26.12.2014 STATED THAT T HE RETURN OF INCOME FILED ON 10.03.2011 MAY BE TREATED AS FILED IN RESPONSE TO N OTICE UNDER SECTION 148 OF THE ACT. IN THE SAID RETURN OF INCOME, THE ASSESSEE HAD SHOWN INCOME OF RS.1,78,172/-. THE ASSESSMENT PROCEEDINGS WERE TAKEN UP AND WHILE PASSING ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT, ADDITION WAS MADE ON ACCOUNT OF ADVANCE RECEIVED OF RS.2,50,000/- AND DISALLOWANCE OF LABOUR CHARGES OF RS.2,72,200/-. IT MAY BE POINTED OUT HEREIN ITSELF THAT NO ADDITION WAS MADE ON ACCOUNT OF REASONS RECORDED FOR RE-OPENING OF ASSESSMENT UNDER SECTION 147/148 OF THE ACT. 6. BEFORE CIT(A), THE SAID ISSUE WAS RAISED AND REL IANCE WAS PLACED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. JET AIRWAYS INDIA LIMITED., 331 ITR 236. HOWEVER, PLACING RELIANCE ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF N. GOVINDRAJU VS. ITO, IN ITA NO.504/2013 DATED 01.07.2015, THE CIT(A) HELD THAT SINCE THE HO N'BLE KARNATAKA HIGH COURT HAD DELIVERED THE DECISION AFTER CONSIDERING THE DECISI ON OF JURISDICTIONAL HIGH COURT IN 4 ITA NOS.1639 & 1640/PUN/2017 A.YS. 2009-10 & 2010-11 THE CASE OF CIT VS. JET AIRWAYS (SUPRA.), RE-OPENIN G OF ASSESSMENT UNDER SECTION 147 OF THE ACT WAS VALID. 7. NOW THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER OF CIT(A). BY WAY OF GROUND OF APPEAL NO.1, THE ASSESSEE HAS RAISED J URISDICTIONAL ISSUE. WE PROCEED TO DECIDE THE JURISDICTIONAL ISSUE RAISED BEFORE RE FERRING TO THE ISSUE RAISED ON MERITS. 8. THE LD. AR FOR THE ASSESSEE PLACED RELIANCE ON T HE DECISION OF CIT VS. JET AIRWAYS (SUPRA.) AND ALSO POINTED OUT THAT THE TRIB UNAL IN THE CASE OF HUSBAND OF THE ASSESSEE, DHANANJAY R MARATHE HAS DECIDED THE SIMIL AR ISSUE. 9. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON T HE ORDER OF CIT(A) WITH SPECIAL REFERENCE TO PARA 4.5. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE FIRST ISSUE RAISED IS AGAINST THE RE-OPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THE ASSESSEE HAD ORIGINALLY FILED THE RETURN OF INCOME. THEREAFTER, BECAUSE OF THE INFORMATION GATHERED DURING THE ASSESSMENT IN THE C ASE OF M/S. MAYURI INFRASTRUCTURE PVT. LTD., THE ASSESSING OFFICER OF THE ASSESSEE RE CORDED SATISFACTION FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THE RE ASONS RECORDED FOR REOPENING OF THE ASSESSMENT WERE IN RESPECT OF THE INVESTMENT IN THE SAID COMPANY OF RS.14,20,000/-. THE ASSESSING OFFICER WAS OF THE V IEW THAT WHERE THE ASSESSEE HAD SHOWN THE RETURN OF INCOME OF RS.1,78,172/-, THE SO URCE OF PAYMENT FOR INVESTMENT WAS UNEXPLAINED AND HENCE NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED. 11. WE FIND THAT THE ISSUE RAISED IN THE PRESENT AP PEAL STANDS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF HUSB AND OF THE ASSESSEE IN ITA 5 ITA NOS.1639 & 1640/PUN/2017 A.YS. 2009-10 & 2010-11 NO.263/PUN/2017, A.Y.2010-11, ORDER DATED 23.05.201 8. THE TRIBUNAL HAD PLACED RELIANCE ON THE DECISION OF THE HON'BLE JURISDICTIO NAL HIGH COURT AND AFTER TAKING INTO CONSIDERATION DECISION OF HON'BLE KARNATAKA HIGH CO URT IN THE CASE OF N. GOVINDRAJU VS. ITO (SUPRA.), IT WAS HELD AS UNDER : 9. ON THE PERUSAL OF THE RECORD AND AFTER HEARING BOTH THE AUTHORISED REPRESENTATIVES, THE FIRST ISSUE RAISED IS AGAINST THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THE ASSES SEE HAD ORIGINALLY FILED THE RETURN OF INCOME. THEREAFTER, BECAUSE OF THE I NFORMATION GATHERED DURING THE ASSESSMENT IN THE CASE OF M/S.MAYURI INFRASTRUC TURE PVT. LTD., THE ASSESSING OFFICER OF THE ASSESSEE RECORDED SATISFAC TION FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THE REASO NS RECORDED FOR REOPENING OF THE ASSESSMENT WERE IN RESPECT OF THE INVESTMENT IN THE PROPERTY WHICH WAS PURCHASED FOR RS.51,00,000/- PLU S OTHER CHARGES. THE ASSESSING OFFICER WAS OF THE VIEW THAT WHERE THE AS SESSEE HAD SHOWN THE RETURN OF INCOME OF RS.2,77,027/-, THE SOURCE OF P AYMENT FOR PURCHASING THE PROPERTY WAS UNEXPLAINED AND HENCE NOTICE UNDER SEC TION 148 OF THE ACT WAS ISSUED. 10. THE PERUSAL OF THE ASSESSMENT RECORDS SHOW THAT NO ADDITION WAS MADE ON ACCOUNT OF THE REASONS RECORDED FOR REOPENI NG OF THE ASSESSMENT. HOWEVER, THE ASSESSING OFFICER PASSED THE ASSESSMEN T ORDER UNDER SECTION 143(3) OF THE ACT R.W.S. 147 OF THE ACT AFTER MAKIN G ADDITIONS ON VARIOUS OTHER ISSUES. THE QUESTION WHICH ARISES IN THE PRESENT A PPEAL BY WAY OF GROUND OF APPEAL NO.1 IS WHETHER THE REASSESSMENT PROCEEDING COMPLETED IN THE HANDS OF THE ASSESSEE ARE VITIATED SINCE NO ADDITION HAD BEEN MADE ON ACCOUNT OF THE REASONS RECORDED FOR REOPENING OF ASSESSMENT. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD., (SUPRA) HAD ELABORATED UPON THE ISSUE AND HELD THAT AS PER EXPLANATION (3) TO S ECTION 147 OF THE ACT, THE ASSESSING OFFICER MAY ASSESS THE INCOME IN RESPECT OF ANY ISSUE WHICH HAD ESCAPED ASSESSMENT AND ALSO ANY OTHER INCOME, WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURING THE COURSE OF PROCEEDINGS UNDER THE SECTION. ELABORATING UPON THE PHRASE AND ALSO BETWEEN THE FIRST AND SECOND PARTS OF THE SECTION, THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT IN CASE WHERE THE REASONS ON WHICH REOPENING WAS INITIATED IN THE HAN DS OF THE ASSESSEE AND THE SAME IS FOUND TO BE FALSE OR BASELESS, THEN EVE RYTHING GOES WRONG AND THE STRUCTURE ERECTED ON SUCH FOUNDATION WOULD CRUM BLE. IN OTHER WORDS, THE HONBLE BOMBAY HIGH COURT HELD THAT ONCE NO ADDITIO N IS MADE ON ACCOUNT OF THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, THEN NO ADDITION IS TO BE MADE ON ANY OTHER ISSUE. 11. THE HONBLE KARNATAKA HIGH COURT HOWEVER IN THE CASE OF N. GOVINDARAJU VS. ITO (SUPRA) TOOK CONTRARY STAND AND HELD THAT UNDER SECTION 148(2) OF THE ACT, THE PHRASE ANY OTHER INCOME US ED IN THE SECOND PART OF THE SECTION WAS WITH REGARD TO WHERE NO REASONS COU LD HAVE BEEN RECORDED BEFORE ISSUING NOTICE AND HAS COME TO THE NOTICE OF THE ASSESSING OFFICER SUBSEQUENTLY DURING THE COURSE OF PROCEEDINGS, WHIC H INCOME COULD BE ASSESSED INDEPENDENT OF THE FIRST PART, EVEN WHEN N O ADDITION WAS MADE WITH REGARD TO SUCH INCOME. 12. SAME PROPOSITION WAS LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN A LATER DECISION IN THE CASE OF M/S. MOOKA MBIKA DEVELOPERS (SUPRA) 6 ITA NOS.1639 & 1640/PUN/2017 A.YS. 2009-10 & 2010-11 WHICH HAS BEEN RELIED UPON BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 4.5 OF HIS ORDER AND IT WAS HELD AS UNDER : 4.5....... IN VIEW OF THE AFORESAID JUDICIAL RENDITIONS WHICH HAVE BEEN DELIVERED AFTER CONSIDERING THE DECISION OF JURISDICTIONAL HI GH COURT IN THE CASE OF JET AIRWAY THE HON'BLE COURT OF KARNATAKA HAS C LEARLY HELD THAT WHILE ASSESSING INCOME UNDER SECTION 148 THE AO CAN ASSESS OTHER INCOME EVEN IF NO ADDITION IS MADE ON REASON FOR WH ICH ASSESSMENT WAS REOPENED. WHILE DELIVERING THIS DECISION THE KA RNATAKA HIGH COURT RELIED ON THE APEX COURT DECISION IN THE CASE OF SUN ENGINEERING AND ALSO THE DECISION OF PUNJAB AND HARYANA HIGH CO URT IN THE CASE OF MAJINDER SINGH KANG VS CIT (2012) CIT 344 ITR 358, WHEREIN THE SLP FILED AGAINST WAS DISMISSED BY THE SUPREME COUR T. SINCE THE SLP FILED AGAINST THE DECISION OF PUNJAB AND HARYAN A HIGH COURT IS DISMISSED, THE DECISION RENDERED IN THE CASE OF MAJ INDER SINGH KANG HAS ATTAINED FINALITY. FURTHER, IN THE INSTANT CASE , THE NOTICE ISSUED FOR REASSESSMENT IS VALID AND IT HAS NOT BEEN CHALLENGE D BY THE APPELLANT AT ANY STAGE. IN VIEW OF THE AFORESAID DISCUSSION, THE FACTUAL AND LEGAL MATRIX OF THE CASE, IN MY CONSIDERED VIEW, THE DECI SION OF THE KARNATAKA HIGH COURT IS VALID AS IT IS RENDERED AFT ER CONSIDERING THE DECISION OF JURISDICTIONAL HIGH COURT AND THE DECIS ION OF THE PUNJAB AND HARYANA HIGH COURT WHICH IS UPHELD BY THE SUPRE ME COURT BY DISMISSING THE SLP. 13. THE HONBLE SUPREME COURT IN THE CASE OF THA NA ELECTRIC SUPPLY LTD., VS. CIT REPORTED IN 206 ITR 727 (SC) HAS LA ID DOWN THAT VIEW EXPRESSED BY JURISDICTIONAL HIGH COURT TAKES PRECED ENCE OVER CONTRARY VIEW TAKEN BY NON-JURISDICTIONAL HIGH COURT. THE JURISDI CTIONAL HIGH COURT ON THE ISSUE INVOLVED HAS TAKEN A VIEW WHICH IS TO BE APP LIED FOLLOWING THE JUDICIAL PROPRIETY. THE VIEW OF THE HONBLE KARNATAKA HIGH COURT CANNOT BE APPLIED IN PREFERENCE TO THE VIEW LAID DOWN BY THE HONBLE BOM BAY HIGH COURT. THE HONBLE HIGH COURT IN THE CASE OF CIT VS. JET AIRWA YS (I) LTD., (SUPRA) HELD AS UNDER : 11. THE RIVAL SUBMISSIONS WHICH HAVE BEEN URGED ON BEHA LF OF THE REVENUE AND THE ASSESSEE CAN BE DEALT WITH, BOTH AS A MATTER OF FIRST PRINCIPLE, INTERPRETING THE SECTION AS IT STANDS AN D ON THE BASIS OF PRECEDENTS ON THE SUBJECT. INTERPRETING THE PROVISI ON AS IT STANDS AND WITHOUT ADDING OR DEDUCTING FROM THE WORDS USED BY PARLIAMENT, IT IS CLEAR THAT UPON THE FORMATION OF A REASON TO BELIEV E UNDER SECTION 147 AND FOLLOWING THE ISSUANCE OF A NOTICE UNDER SECTIO N 148 , THE ASSESSING OFFICER HAS THE POWER TO ASSESS OR REASSE SS THE INCOME, WHICH HE HAS REASON TO BELIEVE HAD ESCAPED ASSESSME NT AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX . THE WORDS 'AND ALSO' CANNOT BE IGNORED. THE INTERPRETATION WHICH THE COURT PLACES ON THE PROVISION SHOULD NOT RESULT IN DILUTING THE EFFECT OF THESE W ORDS OR RENDERING ANY PART OF THE LANGUAGE USED BY PARLIAMENT OTIOSE. PAR LIAMENT HAVING USED THE WORDS 'ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT', THE WORDS 'AND ALSO' CANNOT BE READ AS BEING IN THE ALTERNATI VE . ON THE CONTRARY, THE CORRECT INTERPRETATION WOULD BE TO REGARD THOSE WORDS AS BEING CONJUNCTIVE AND CUMULATIVE. IT IS OF SOME SIGNIFICA NCE THAT PARLIAMENT HAS NOT USED THE WORD 'OR'. THE LEGISLATURE DID NOT REST CONTENT BY MERELY USING THE WORD 'AND'. THE WORDS 'AND', AS WE LL AS 'ALSO' HAVE BEEN USED TOGETHER AND IN CONJUNCTION. 7 ITA NOS.1639 & 1640/PUN/2017 A.YS. 2009-10 & 2010-11 THE SHORTER OXFORD DICTIONARY DEFINES THE EXPRESSIO N 'ALSO' TO MEAN 'FURTHER, IN ADDITION, BESIDES, TOO'. THE WORD HAS BEEN TREATED AS BEING RELATIVE AND CONJUNCTIVE. EVIDENTLY, THEREFORE, WHA T PARLIAMENT INTENDS BY USE OF THE WORDS 'AND ALSO' IS THAT THE ASSESSIN G OFFICER, UPON THE FORMATION OF A REASON TO ' BELIEVE UNDER SECTION 14 7 AND THE ISSUANCE OF A NOTICE UNDER SECTION 148(2) MUST ASSESS OR REA SSESS: (I) 'SUCH INCOME'; AND ALSO (II) ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SU BSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. TH E WORDS 'SUCH INCOME' REFER TO THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND IN RESPECT OF WHICH THE ASSESSING OF FICER HAS FORMED A REASON TO BELIEVE THAT IT HAS ESCAPED ASSESSMENT. HENCE, THE LANGUAGE WHICH HAS BEEN USED BY PARLIAMENT IS INDIC ATIVE OF THE POSITION THAT THE ASSESSMENT OR REASSESSMENT MUST B E IN RESPECT OF THE INCOME IN RESPECT OF WHICH HE HAS FORMED A REAS ON TO BELIEVE THAT IT HAS ESCAPED ASSESSMENT AND ALSO IN RESPECT OF AN Y OTHER INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURING THE C OURSE OF THE PROCEEDINGS AS HAVING ESCAPED ASSESSMENT. IF THE IN COME, THE ESCAPEMENT OF WHICH WAS THE BASIS OF THE FORMATION OF THE SEASON TO BELIEVE IS NOT ASSESSED OR REASSESSED, IT WOULD NOT BE OPEN TO THE ASSESSING OFFICER TO INDEPENDENTLY ASSESS ONLY THAT INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF T HE PROCEEDINGS UNDER THE SECTION AS HAVING ESCAPED ASSESSMENT. IF UPON THE ISSUANCE OF A NOTICE UNDER SECTION 148(2), THE ASSE SSING OFFICER ACCEPTS THE OBJECTIONS OF THE ASSESSEE AND DOES NOT ASSESS OR REASSESS THE INCOME WHICH WAS THE BASIS OF THE NOTI CE, IT WOULD NOT BE OPEN TO HIM TO ASSESS INCOME UNDER SOME OTHER ISSUE INDEPENDENTLY. PARLIAMENT WHEN IT ENACTED THE PROVISIONS OF SECTIO N 147 WITH EFFECT FROM 1-4-1989 CLEARLY STIPULATED THAT THE ASSESSING OFFICER HAS TO ASSESS OR REASSESS THE INCOME WHICH HE HAD REASON T O BELIEVE HAD ESCAPED ASSESSMENT AND ALSO ANY OTHER INCOME CHARGE ABLE TO TAX WHICH CAME TO HIS NOTICE DURING THE PROCEEDINGS. IN THE ABSENCE OF THE ASSESSMENT OR REASSESSMENT OF THE FORMER, HE CA NNOT INDEPENDENTLY ASSESS THE LATTER. 12. IN CIT V. SUN ENGG. WORKS (P) LTD. [1992] 198 ITR 297 1 , THE SUPREME COURT DEALT WITH THE FOLLOWING QUESTION OF LAW IN T HE COURSE OF ITS JUDGMENT:- 'WHERE AN ITEM UNCONNECTED WITH THE ESCAPEMENT OF I NCOME HAS BEEN CONCLUDED FINALLY AGAINST THE ASSESSEE, HOW FAR IN REASSESSMENT ON AN ESCAPED ITEM OF INCOME IS IT OPEN TO THE ASSESSEE T O SEEK A REVIEW OF THE CONCLUDED ITEM FOR THE PURPOSE OF COMPUTATION O F THE ESCAPED INCOME?' THE ISSUE WHICH AROSE BEFORE THE SUPREME COURT WAS WHETHER, IN THE COURSE OF A REASSESSMENT ON AN ESCAPED ITEM OF INCOME COULD A N ASSESSEE SEEK A REVIEW IN RESPECT OF AN ITEM WHICH STOOD CONCLUDED IN THE ORIGINAL ORDER OF ASSESSMENT. THE SUPREME COURT DEALT WITH THE PROVISIONS OF SECT ION 147, AS THEY STOOD PRIOR TO THE AMENDMENT ON 1-4-1989. THE SUPREME COURT HEL D THAT THE EXPRESSION 'ESCAPED ASSESSMENT' INCLUDES BOTH 'NON-ASSESSMENT' AS WELL AS 'UNDER ASSESSMENT'. INCOME IS SAID TO HAVE ESCAPED ASSESSM ENT WITHIN THE MEANING OF THE SECTION WHEN IT HAS NOT BEEN CHARGED IN THE HANDS OF AN ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR. THE EXPRESSION 'ASSESS' R EFERS TO A SITUATION WHERE THE ASSESSMENT OF THE ASSESSEE FOR A PARTICULAR YEA R IS, FOR THE FIRST TIME, MADE BY RESORTING TO THE PROVISIONS OF SECTION 147. THE EXPRESSION 'REASSESS' REFERS TO A SITUATION WHERE AN ASSESSMENT HAS ALREADY BEEN MA DE BUT THE ASSESSING 8 ITA NOS.1639 & 1640/PUN/2017 A.YS. 2009-10 & 2010-11 OFFICER HAS REASON TO BELIEVE THAT THERE IS UNDER A SSESSMENT ON ACCOUNT OF THE EXISTENCE OF ANY OF THE GROUNDS CONTEMPLATED BY EXP LANATION 1 TO SECTION 147. THE SUPREME COURT ADVERTED TO THE JUDGMENT IN V. JA GANMOHAN RAO V. CFT [19701 75 ITR 373 , WHICH HELD THAT ONCE AN ASSESSMENT IS VALIDLY REO PENED, THE PREVIOUS UNDER ASSESSMENT IS SET ASIDE AND THE INCO ME-TAX OFFICER HAS THE JURISDICTION AND DUTY TO LEVY TAX ON THE ENTIRE INC OME THAT HAD ESCAPED ASSESSMENT DURING THE PREVIOUS YEAR. THE COURT HELD THAT THE OBJECT OF SECTION 147 ENSURES TO THE BENEFIT OF THE REVENUE AND IT IS NOT OPEN TO THE ASSESSEE TO CONVERT THE REASSESSMENT PROCEEDINGS AS AN APPEAL O R REVISION AND THEREBY SEEK RELIEF IN RESPECT OF ITEMS WHICH WERE REJECTED EARLIER OR IN RESPECT OF ITEMS NOT CLAIMED DURING THE COURSE OF THE ORIGINAL ASSES SMENT PROCEEDINGS. THE JUDGMENT IN V. JAGANMOHAN RAO'S CASE (SUPRA) DE ALT WITH THE LANGUAGE OF SECTIONS 22(2) AND 34 OF THE ACT OF 1922 WHILE THE JUDGMENT IN SUN ENGG. WORKS (P) LTD.'S CASE (SUPRA) INTERPRETS THE PROVISIONS OF SE CTION 147 AS THEY STOOD PRIOR TO THE AMENDMENT ON 1-4-1989. 13. THE EFFECT OF THE AMENDED PROVISIONS CAME TO BE CONSIDERED IN TWO DISTINCT LINES OF PRECEDENT ON THE SUBJECT. THE FIRST LINE O F AUTHORITY, TO WHICH A REFERENCE HAS ALREADY BEEN MADE EARLIER, ADOPTED THE PRINCIPL E THAT WHERE THE ASSESSING OFFICER HAS FORMED A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND HAS ISSUED A NOTICE UNDER SECTION 148 ON CERTAI N SPECIFIC ISSUES, IT WAS NOT OPEN TO HIM DURING THE COURSE OF THE PROCEEDINGS FO R ASSESSMENT OR REASSESSMENT TO ASSESS OR REASSESS ANY OTHER INCOME , WHICH MAY HAVE ESCAPED ASSESSMENT BUT WHICH DID NOT FORM THE SUBJE CT-MATTER OF THE NOTICE UNDER SECTION 148. THIS VIEW WAS ADOPTED IN THE JUD GMENT OF THE PUNJAB AND HARYANA HIGH COURT IN VIPAN KHANNA'S CASE (SUPRA) A ND IN THE JUDGMENT OF THE KERALA HIGH COURT IN TRAVANCORE CEMENTS LTD. 'S CAS E (SUPRA). THIS LINE OF AUTHORITY, WOULD NOW CEASE TO REFLECT THE CORRECT P OSITION IN LAW, BY VIRTUE OF THE AMENDMENT WHICH HAS BEEN BROUGHT IN BY THE INSERTIO N OF EXPLANATION 3 TO SECTION 147 BY FINANCE (NO.2) ACT OF 2009. THE EFFE CT OF THE EXPLANATION IS THAT ONCE AN ASSESSING OFFICER HAS FORMED A REASON TO BE LIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND HAS PR OCEEDED TO ISSUE A NOTICE UNDER SECTION 148, IT IS OPEN TO HIM TO ASSESS OR R EASSESS INCOME IN RESPECT OF ANY OTHER ISSUE THOUGH THE REASONS FOR SUCH ISSUE H AD NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SECTION 148(2). 14. THE SECOND LINE OF PRECEDENT IS REFLECTED IN A JUDG MENT OF THE RAJASTHAN HIGH COURT IN CIT V. SHRI RAM SINGH [2008] 306 ITR 343 . THE RAJASTHAN HIGH COURT CONSTRUED THE WORDS USED BY PARLIAMENT IN SECTION 1 47 PARTICULARLY THE WORDS THAT THE ASSESSING OFFICER 'MAY ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDING S' UNDER SECTION 147. THE RAJASTHAN HIGH COURT HELD AS FOLLOWS: ' ... IF 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 A LSO PUT TO TAX, THE OTHER INCOME, CHARGEABLE TO TAX, WHICH HAS ESCAPED ASSESSMENT, AN D WHICH HAS COME TO HIS NOTICE SUBSEQUENTLY, IN THE COURSE OF PROCEEDINGS U NDER 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 OFFICE R WERE TO COME TO THE CONCLUSION, THAT ANY INCOME CHARGEABLE TO TAX, WHIC H, ACCORDING TO HIS 'REASON 9 ITA NOS.1639 & 1640/PUN/2017 A.YS. 2009-10 & 2010-11 TO BELIEVE', HAD ESCAPED ASSESSMENT FOR ANY ASSESSM ENT 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 O THER INCOME, CHARGEABLE TO TAX, WHICH THE ASSESSING OFFICER MAY FIND TO HAVE ESCAPE D ASSESSMENT, AND WHICH MAY COME TO HIS NOTICE SUBSEQUENTLY, IN THE COURSE OF PROCEEDINGS UNDER SECTION 147.' 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 QUES TIONS. WHEN IT EFFECTED THE AMENDMENT BY BRINGING IN EXPLANATION 3 TO SECTION 1 47, 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 R ESPECT OF WHICH REASONS WERE RECORDED FOR REOPENING THE ASSESSMENT. THE COR RECTIVE EXERCISE EMBARKED UPON BY 'PARLIAMENT IN THE FORM OF EXPLANATION 3 CO NSEQUENTLY PROVIDES THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E 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 TRAVANCOR E 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 REF LECTED IN THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN SHRI RAM SINGH'S CASE (SUPR A), EXPLANATION 3 AS INSERTED BY PARLIAMENT WOULD NOT TAKE AWAY THE BASI S OF THAT DECISION. THE VIEW WHICH WAS TAKEN BY THE RAJASTHAN HIGH COURT WAS ALS O TAKEN IN ANOTHER JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT IN CIT V. ATLAS CYCLE INDUSTRIES [1989] 180 ITR 319 1 THE DECISION IN ATLAS CYCLE INDUSTRIES' CASE (SUP RA) HELD THAT THE ASSESSING OFFICER DID NOT HAVE JURISDICTIO N TO PROCEED WITH THE REASSESSMENT, ONCE HE FOUND THAT THE TWO GROUNDS ME NTIONED IN THE NOTICE UNDER SECTION 148 WERE INCORRECT OR NON-EXISTENT. T HE 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 N OT BE AFFECTED BY THE AMENDMENT BROUGHT IN BY THE INSERTION OF EXPLANATIO N 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 G ROUNDS OTHER THAN THOSE ON THE BASIS OF WHICH A NOTICE WAS ISSUED UNDER SEC TION 148 SETTING OUT THE REASONS FOR THE BELIEF THAT INCOME HAD ESCAPED ASSE SSMENT. THOSE JUDICIAL DECISIONS HAD HELD THAT WHEN THE ASSESSMENT WAS SOU GHT TO BE REOPENED ON THE GROUND THAT INCOME HAD ESCAPED ASSESSMENT ON A CERT AIN ISSUE, THE ASSESSING OFFICER COULD NOT MAKE AN ASSESSMENT OR REASSESSMEN T ON ANOTHER ISSUE WHICH CAME TO HIS NOTICE DURING THE PROCEEDINGS. THIS INT ERPRETATION WILL NO LONGER HOLD THE FIELD AFTER THE INSERTION OF EXPLANATION 3 BY T HE 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 S ECTION 147. AN EXPLANATION TO A STATUTORY PROVISION IS INTENDED TO EXPLAIN ITS CONT ENTS AND CANNOT BE CONSTRUED TO OVERRIDE IT OR RENDER THE SUBSTANCE AND CORE NUGATO RY. 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 HI S NOTICE DURING THE COURSE OF THE PROCEEDINGS. HOWEVER, IF AFTER ISSUIN G A NOTICE UNDER SECTION 148, HE ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLD S THAT THE INCOME WHICH HE 10 ITA NOS.1639 & 1640/PUN/2017 A.YS. 2009-10 & 2010-11 HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPE D ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OP EN 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. 17. WE HAVE APPROACHED THE ISSUE OF INTERPRETATION THAT HAS ARISEN FOR DECISION IN THESE APPEALS, BOTH AS A MATTER OF FIRST PRINCIP LE, BASED ON THE LANGUAGE USED IN SECTION 147(1) AND ON THE BASIS OF THE PRECEDENT ON THE SUBJECT. WE AGREE WITH THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE ASSESSEE THAT SECTION 147(1) AS IT STANDS POSTULATES THAT UPON TH E FORMATION OF A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT FOR ANY ASSESSMENT YEAR, THE ASSESSING OFFICER MAY ASSESS O R REASSESS SUCH INCOME 'AND ALSO' ANY OTHER INCOME CHARGEABLE TO TAX WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURING THE PROCEEDINGS AS HAVING ESCAP ED ASSESSMENT. THE WORDS 'AND ALSO' ARE USED IN A CUMULATIVE AND CONJU NCTIVE SENSE. TO READ THESE WORDS AS BEING IN THE ALTERNATIVE WOULD BE TO REWRI TE THE LANGUAGE USED BY PARLIAMENT. OUR VIEW HAS BEEN SUPPORTED BY THE BACK GROUND WHICH LED TO THE INSERTION OF EXPLANATION 3 TO SECTION 147. PARLIAME NT MUST BE REGARDED AS BEING AWARE OF THE INTERPRETATION THAT WAS PLACED ON THE WORDS 'AND ALSO' BY THE RAJASTHAN HIGH COURT IN SHRI RAM SINGH'S CASE (SUPR A). PARLIAMENT HAS NOT TAKEN AWAY THE BASIS OF THAT DECISION. WHILE IT IS OPEN TO PARLIAMENT, HAVING REGARD TO THE PLENITUDE OF ITS LEGISLATIVE POWERS T O DO SO, THE PROVISIONS OF SECTION 147(1) AS THEY STOOD AFTER THE AMENDMENT OF 1-4-1989 CONTINUE TO HOLD THE FIELD. 14. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS POINTED OUT THAT THE SPECIAL LEAVE PETITION HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT IN THE CASE OF MAJINDER SINGH KANG VS. CIT (SUPRA). H OWEVER, MERE DISMISSAL OF THE SPECIAL LEAVE PETITION DOES NOT SETTLE THE ISSUE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF V.M. SALGAOCAR AND BROTHERS PV T. LTD., VS. CIT REPORTED IN 243 ITR 383 (SC). 15. APPLYING THE RATIO LAID DOWN BY THE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD. (SUPRA), IT IS HELD TH AT THE REASSESSMENT PROCEEDINGS INITIATED IN THE CASE OF ASSESSEE ARE INVALID AND B AD-IN-LAW AS NO ADDITION HAS BEEN MADE ON THE GROUND ON WHICH REASONS WERE RECORDED F OR INITIATING REASSESSMENT PROCEEDINGS. THUS, GROUND OF APPEAL NO.1 RAISED B Y THE ASSESSEE IS ALLOWED. SINCE THE REASSESSMENT HAS BEEN HELD TO BE INVALID AND BAD-IN-LAW, THE ISSUES RAISED ON MERITS BECOME INFRUCTUOUS. THUS, THE APP EAL OF THE ASSESSEE IS ALLOWED. 12. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDEN TICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN THE CASE OF HUSBAND OF THE ASSESSEE AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE REASSESSMENT ORDER PASS ED IN THE PRESENT APPEAL IS INVALID AND BAD IN LAW. ACCORDINGLY, GROUND OF APPE AL NO.1 RAISED BY THE ASSESSEE IS ALLOWED. THE BALANCE GROUNDS OF APPEAL RAISED ON M ERITS ARE, THUS, DISMISSED. 11 ITA NOS.1639 & 1640/PUN/2017 A.YS. 2009-10 & 2010-11 13. THE FACTS AND ISSUES IN ITA NO.1640/PUN/2017 AR E IDENTICAL TO THE FACTS AND ISSUES IN ITA NO.1639/PUN/2017 AND OUR DECISION IN ITA NO.1639/PUN/2017 SHALL APPLY MUTATIS-MUTANDIS TO ITA NO.1640/PUN/2017. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF AUGUST, 2018. SD/- SD/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) /ACCOUNTANT MEMBER /JUDICIAL MEMBER / PUNE; ! / DATED : 30 TH AUGUST, 2018 SB ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEAL)-1, NASHIK. 4. THE PR. CIT-1, NASHIK. 5. '#$ %& , ' %& , - ()* , / DR, ITAT, SMC BENCH, PUNE. 6. $+, -. / GUARD FILE. // TRUE COPY // '/ / BY ORDER, 0 %* /PRIVATE SECRETARY ' %& , / ITAT, PUNE.