Mir Feroz Ali Khan, Hyderabad V. Income Tax Officer, Ward-9(2), Hyderabad

ITA 1895/Hyd/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9924 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 17-12-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 20-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: B SHANTHI KUMAR
• Keywords: Question of law; Reason to believe; Reassessment proceedings; Set aside
• Section: 143(3); 143(1); 13; 148; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD SMC BENCH : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 1895 /HYD./201 7 ASSESSMENT YEAR: 20 05 - 06 & ITA NO. 189 6 /HYD./2017 ASSESSMENT YEAR: 200 8 - 09 SRI MIR FEROZ ALI KHAN VS. ITO, WARD 9 (2) HYDERABAD. HYDERABAD. PAN: ALJPK7757J (APPELLANT) (RESPONDENT) FOR ASSESSE E : S H. B. SHANTHI KUMAR, A.R. FOR REVENUE : S H. NILANJAN DEY, D.R. DATE OF HEARING : 17 / 12 /19 DATE OF PRONOUNCEMENT : 01 / 01 / 2020 O R D E R BOTH ARE ASSESSEES APPEALS FOR A.Y. 2005 - 06 AND 2008 - 09 AGAINST THE COMMON AND CONSOLIDATED ORDER OF THE LD.CIT(A) - 9, HYDERABAD DATED 24TH JANUARY, 2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIVIDUAL, ADMITTED INCOME FR OM BUSINESS DECLARING LOSS OF RS.1,19,752/ - IN THE RETURN FILED BY HIM FOR THE A.Y. 2005 - 06 ON 03.09.2006 AND GROSS INCOME OF RS.17,64,302/ - IN THE RETURN FILED FOR THE A.Y. 2008 - 09 ON 10.09.2008. T HE RETURNS WERE DULY PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (THE ACT). THEREAFTER , THE AO WAS OF THE OPINION THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. ACCORDINGLY , HE REOPENED THE ASSESSMENT BY ISSUANCE OF NOTICES U/S 148 OF THE ACT. THE REASONS RECORDED BY THE AO ARE AS UNDER: A SURVEY OPERATION WAS CONDUCTED IN THE CASE OF MIR FIROZ ALI KHAN, HYDERABAD. IT IS FOUND DURING THE COURSE OF PROCEEDINGS U/S 133 A THAT THE ASSESSEE HAD NOT ADMITTED THE INVESTMENTS IN THE INCOME TAX RETURNS. THEREFORE, I HAVE REASON TO BELIEVE THAT TH E ITA NO S . 1895 & 1896 /HYD./201 7 AY 20 05 - 06 AND 2008 - 09 SRI MIR FEROZ ALI KHAN, HYDERABAD 2 INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT TO THE ASSESSMENT OF HIS INCOME IN TERMS OF S.147 OF THE I.T.ACT, 1961. PLEASE ISSUE NOTICE U/S 148. 2.1. THEREAFTER , THE AO COMPLETED THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT BY BRINGING TO TAX THE DIFFERENCE IN SALES IN AYS 2005 - 06 AND VARIATION IN PURCHASES FOR A.Y. 2008 - 09. AGGRIEVED , THE ASSESSEE PREFERRED APPEAL S BEFORE THE CIT(A) CHALLENGING THE VALIDITY OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT ON THE GROUND THAT THE AO HAVING FAILED TO MAKE ANY ADDITION ON THE GROUNDS ON WHICH NOTICE U/S 148 HAS BEEN GIVEN, HE COULD NOT HAVE MADE ANY OTHER ADDITIONS IN THE RE - ASSESSMENT PROCEEDINGS. THE CIT(A) , HOWEVER UPHELD THE VALIDITY OF THE ASSESSMENT BY RELYING UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF N. GOVINDARAJU REPORTED IN 377 ITR 243. FURTHER HE ALSO UPHELD THE A DDITIONS MADE BY THE AO . 2.2. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL. 1. THE CIT(APPEALS) ERRED IN UPHOLDING THE VALIDITY OF RE - ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 148 OF THE I.T.ACT, 1961. 2. THE CIT(APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.13,47,402/ - 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2. 3 . AS REGARDS GROUND NO.1 RELATING TO THE VALIDITY OF RE - ASSESSMENT PROCEEDINGS, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT NOTICE U/S 148 OF THE ACT HAS BEEN ISSUED ON THE GROUND THAT THE ASSESSEE HAD NOT ADMITTED THE INVESTMENTS MADE BY HIM IN THE INCO ME TAX RETURNS. HOWEVER, WITHOUT DISCUSSING ANYTHING ON THE ISSUE, THE AO HAD OBTAINED INFORM ATION FROM CENTRAL EXCISE/SALES TAX DEPARTMENT AND ON THE BASIS OF THE INFORMATION SO OBTAINED , HE FOUND THAT THERE ARE VARIATIONS IN SALES/PURCHASE AND EXC I SE D UTY PAID AS PER C ENTRAL E XCISE AND VAT RECORDS AND THUS MADE THE ADDITIONS. HE THUS SUBMITTED THAT THE REASONS FOR WHICH THE REOPENING HAS BEEN MADE AND ADDITIONS HAVE BEEN MADE HAVE NO NEXUS WHAT - SO - EVER , AND, THEREFORE, REASSESSMENT PROCEEDINGS ARE NOT VALID. ITA NO S . 1895 & 1896 /HYD./201 7 AY 20 05 - 06 AND 2008 - 09 SRI MIR FEROZ ALI KHAN, HYDERABAD 3 2. 4 . THE LD.DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 3. HAVING REGARD TO RIVAL CONTENTIONS AND MATERIAL PLACED ON RECORD, I FIND THAT THE REASON ON WHICH THE REOPENING HAS BEEN MADE IS DIFFERENT FROM THE ADDITIONS MADE BY THE AO. THEREFORE, THERE IS NO LIVE LINK BETWEEN THE REASONS FOR REOPENING AND THE ADDITIONS MADE DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS. 3.1. I FIN D THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS LTD. REPORTED IN 331 ITR 236 HAS CONSIDERED THE ISSUE AT LENGTH AND AT PARAS 13 TO 22 HELD AS UNDER. 13. THE RIVAL SUBMISSIONS WHICH HAVE BEEN URGED ON BEHALF OF THE REVENUE AND THE ASSESSEE CAN BE DEALT WITH BOTH AS A MATTER OF FIRST PRINCIPLE, INTERPRETING THE SECTION AS IT STANDS AND ON THE BASIS OF PRECEDENT ON THE SUBJECT. INTERPRETING THE PROVISION AS IT STANDS AND WITHOUT ADDING OR DEDUCTING FROM THE WORDS USED BY PARLIAMEN T, IT IS CLEAR THAT UPON THE FORMATION OF A REASON TO BELIEVE UNDER SECTION 147 AND FOLLOWING THE ISSUANCE OF A NOTICE UNDER SECTION 148, THE ASSESSING OFFICER HAS POWER TO ASSESS OR REASSESS THE INCOME WHICH HE HAS REASON TO BELIEVE HAD ESCAPED ASSESSMENT , 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 WORDS OR RENDERING ANY PART OF THE LANGUAGE USED BY PARLIAME NT OTIOSE. PARLIAMENT HAVING USED THE WORDS ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT, THE WORDS AND ALSO CANNOT BE READ AS BEING IN THE ALTERNATIVE. ON THE CONTRARY, THE CORRECT INTERPRETAT ION WOULD BE TO REGARD THOSE WORDS AS BEING CONJUNCTIVE AND CUMULATIVE. IT IS OF SOME SIGNIFICANCE THAT PARLIAMENT HAS NOT USED THE WORD OR. THE LEGISLATURE DID NOT REST CONTENT BY MERELY USING THE WORD AND. THE WORDS AND AS WELL AS ALSO HAVE BEEN USED TOGETHER AND IN CONJUNCTION. 14. THE SHORTER OXFORD DICTIONARY DEFINES THE EXPRESSION ALSO TO MEAN FURTHER, IN ADDITION BESIDES, TOO. THE WORD HAS BEEN TREATED AS BEING RELATIVE AND CONJUNCTIVE. EVIDENTLY THEREFORE, WHAT PARLIAMENT INTENDS BY USE OF THE WORDS AND ALSO IS THAT THE ASSESSING OFFICER, UPON THE FORMATION OF A REASON TO BELIEVE UNDER SECTION 147 AND THE ISSUANCE OF A NOTICE UNDER SECTION 148(2) MUST ASSESS OR REASSESS: (I) SUCH INCOME; AND ALSO (II) ANY OTHER INCOME CHARGEABLE TO TAX WH ICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. THE WORDS SUCH INCOME REFER TO THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT, AND IN RESPECT OF WHICH THE ASSESSING: OFF ICER HAS FORMED A REASON TO BELIEVE THAT IT HAS ESCAPED ASSESSMENT. HENCE, THE LANGUAGE WHICH HAS BEEN USED BY PARLIAMENT IS INDICATIVE OF THE POSITION THAT THE ASSESSMENT OR REASSESSMENT MUST BE IN RESPECT OF THE INCOME IN RESPECT OF WHICH HE HAS FORMED A REASON TO BELIEVE THAT IT HAS ESCAPED ASSESSMENT AND ALSO IN RESPECT OF ANY OTHER INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURING THE COURSE OF THE PROCEEDINGS AS HAVING ESCAPED ASSESSMENT. IF THE INCOME, THE ESCAPEMENT OF WHICH WAS THE BASIS OF THE FORMATION OF ITA NO S . 1895 & 1896 /HYD./201 7 AY 20 05 - 06 AND 2008 - 09 SRI MIR FEROZ ALI KHAN, HYDERABAD 4 THE REASON 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 THE PROCEEDINGS UNDER THE SECTION AS HAVING ESC APED ASSESSMENT. IF UPON THE ISSUANCE OF A NOTICE UNDER SECTION 148(2), THE ASSESSING OFFICER ACCEPTS THE OBJECTIONS OF THE ASSESSEE AND DOES NOT ASSESS OR REASSESS THE INCOME WHICH WAS THE BASIS OF THE NOTICE, IT WOULD NOT BE OPEN TO HIM TO ASSESS INCOME UNDER SOME OTHER ISSUE INDEPENDENTLY. PARLIAMENT WHEN IT ENACTED THE PROVISIONS OF SECTION 147 WITH EFFECT FROM APRIL 1, 1989 CLEARLY STIPULATED THAT THE ASSESSING OFFICER HAS TO ASSESS TO REASSESS THE INCOME WHICH HE HAD REASON TO BELIEVE HAD ESCAPED ASSE SSMENT AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH CAME TO HIS NOTICE DURING THE PROCEEDING. IN THE ABSENCE OF THE ASSESSMENT OR REASSESSMENT OF THE FORMER, HE CANNOT INDEPENDENTLY ASSESS THE LATTER. 15. IN COMMISSIONER OF INCOME TAX V. SUN ENGINEERING WORKS (P) LTD. , [ 1992] 198 ITR 297 THE SUPREME COURT DEALT WITH THE FOLLOWING QUESTION OF LAW I N THE COURSE OF ITS JUDGMENT (PAGE 300): WHERE AN ITEM UNCONNECTED WITH THE ESCAPEMENT OF INCOME HAS BEEN CONCLUDED FINALLY AGAINST THE ASSESSEE, HOW FAR IN REASSESSMENT ON AN ESCAPED ITEM OF INCOME IS IT OPEN TO THE ASSESSEE TO SEEK A REVIEW OF THE CONCL UDED ITEM FOR THE PURPOSE OF COMPUTATION OF THE ESCAPED INCOME? 16. THE ISSUE WHICH AROSE BEFORE THE SUPREME COURT WAS WHETHER, IN THE COURSE OF A REASSESSMENT ON AN ESCAPED ITEM OF INCOME AN ASSESSEE COULD 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 SECTION 147, AS THEY STOOD PRIOR TO THE AMENDMENT ON APRIL 1, 1989. THE SUPREME COURT HELD THAT THE EXPRESSION ESCAPED ASSESSMENT INCLUDES BOTH NON - ASSESSMENT AS WELL AS UNDERASSESSMENT. INCOME IS SAID TO HAVE ESCAPED ASSESSMENT 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 REFERS TO A SITUATION WHERE THE ASSESSMENT OF THE ASSESSEE FOR A PARTICULAR YEAR 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 MADE BUT THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT THERE IS UNDERASSESSMENT ON ACCOUNT OF THE EXISTENCE OF ANY OF THE GROUNDS CONTEMPLATED BY EXPLANATION 1 TO SECTION 147. THE SUPREME COURT ADVERTED TO THE JUDGMENT IN V. JAGANMOHAN RAO V. CIT/EPT , [ 1970] 75 ITR 373 , WHICH HELD THAT ONCE AN ASSESSMENT IS VALIDLY REOPENED, THE PREVIOUS UNDERASSESSMENT IS SET ASIDE AND THE INCOME - TAX OFFICER HAS THE JURISDICTION AND DUTY TO LEV Y TAX ON THE ENTIRE INCOME THAT HAD ESCAPED ASSESSMENT DURING THE PREVIOUS YEAR. THE COURT HELD THAT THE OBJECT OF SECTION 147 ENURES TO THE BENEFIT OF THE REVENUE AND IT IS NOT OPEN TO THE ASSESSEE TO CONVERT THE REASSESSMENT PROCEEDINGS AS AN APPEAL OR R EVISION 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 ASSESSMENT PROCEEDINGS. 17. THE JUDGMENT IN V. JAGANMOHAN RAO'S CASE, [ 1970] 75 ITR 373 DEALT WITH THE LANGUAGE OF SECTIONS 22(2) AND 34 OF THE ACT OF 1922 WHILE THE JUDGMENT IN SUN ENGINEERING WORKS, [ 199 2] 198 ITR 297 (SC) INTERPRETS THE PROVISIONS OF SECTION 147 AS THEY STOOD PRIOR TO THE AMENDMENT ON APRIL 1, 1989. ITA NO S . 1895 & 1896 /HYD./201 7 AY 20 05 - 06 AND 2008 - 09 SRI MIR FEROZ ALI KHAN, HYDERABAD 5 18. THE EFFECT OF THE AMENDED PROVISIONS CAME TO BE CONSIDERED, IN TWO DISTINCT LINES OF PRECEDENT ON THE SUBJECT. THE FIRST LINE OF AUTHORI TY, TO WHICH A REFERENCE HAS ALREADY BEEN MADE EARLIER, ADOPTED THE PRINCIPLE 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 CERTAIN SPECIFIC ISSUES, IT WAS NO T OPEN TO HIM DURING THE COURSE OF THE PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT TO ASSESS OR REASSESS ANY OTHER INCOME, WHICH MAY HAVE ESCAPED ASSESSMENT BUT WHICH DID NOT FORM THE SUBJECT MATTER OF THE NOTICE UNDER SECTION 148. THIS VIEW WAS ADOPTED IN THE JUDGMENT OF THE PUNJAB AND HARYANA HIGH COURT IN VIPAN KHANNA, [ 2002] 255 ITR 220 AND IN THE JUDGMENT OF THE KERALA HIGH COURT IN TRAVANCORE CEMENTS LTD., [2008] 305 ITR 170 . THIS LINE OF AUTHORITY WOULD NOW CEASE TO REFLECT THE CORRECT POSITION IN LAW BY VIRTUE OF THE AMENDMENT WHICH HAS BEEN BROUGHT IN BY THE INSERTION OF EXPLANATION 3 TO SECTION 147 BY THE FINANCE (NO. 2) ACT OF 2009. THE EFFECT OF THE EXPLANATION IS THAT ONCE AN ASSESSING OFFICER HAS FORMED A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND HAS PROCEEDED TO ISSUE A NOTICE UNDER SECTION 148, IT IS OPEN TO HIM TO ASSESS OR REASSESS INCOME IN RESPECT OF ANY OTHER ISSUE THOUGH THE REA SONS FOR SUCH ISSUE HAD NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SECTION 148(2). 19. THE SECOND LINE OF PRECEDENT IS REFLECTED IN A JUDGMENT OF THE RAJASTHAN HIGH COURT IN CIT V. SHRI RAM SINGH , [ 2008] 306 ITR 343 (RAJ ). THE RAJASTHAN HIGH COURT CON STRUED THE WORDS USED BY PARLIAMENT IN SECTION 147 PARTICULARLY THE WORDS THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN T HE COURSE OF THE PROCEEDINGS UNDER SECTION 147. THE RAJASTHAN HIGH COURT HELD AS FOLLOWS (PAGE 353): 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 ADD - ON, 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 COUR SE 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, ACCO RDING 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. 20. PARLIAME NT, WHEN, IT ENACTED 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 QUESTIONS. WHEN IT EFFECTED THE AMENDMENT BY BRINGING IN EXPLANATION 3 TO SECTION 147, 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 ITA NO S . 1895 & 1896 /HYD./201 7 AY 20 05 - 06 AND 2008 - 09 SRI MIR FEROZ ALI KHAN, HYDERABAD 6 ONLY TO THE ISSUES IN RESPE CT OF WHICH REASONS WERE RECORDED FOR REOPENING THE ASSESSMENT. THE CORRECTIVE EXERCISE EMBARKED UPON BY PARLIAMENT IN THE FORM OF EXPLANATION 3 CONSEQUENTLY PROVIDES THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE WHIC H COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE 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 TRAVANCORE CEMENTS LTD., [2008] 305 ITR 170 AND OF THE PUN JAB AND HARYANA HIGH COURT IN VIPAN KHANNA, [ 2002] 255 ITR 220 WOULD, THEREFORE, NO LONGER HOLD THE FIELD. HOWEVER, IN SO FAR AS THE SECOND LINE OF AUTHORITY IS CONCERNED, WHICH IS REFLECTED IN THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN SHRI RAM SINGH, [ 2008] 306 ITR 343 , EXPLANATION 3 AS INSERTED BY PARLIAMENT WOULD NOT TAKE AWAY THE BASIS OF THAT DECISION. THE VIEW WHICH WAS TAKEN BY THE RAJASTHAN HIGH COURT WAS ALSO TAKEN IN ANOTHER JUDGMENT OF THE PUNJAB AND HARYANA HIGH COURT IN CIT V. ATLAS CYCLE INDUSTRIES , [1989] 180 ITR 319. THE DECISION IN ATLAS CYCLE INDUSTRIES, [1989] 180 ITR 319 HELD THAT THE ASSESSING OFFICER DID NOT HAVE JURISDICTION TO PROCEED WITH THE REASSESSMENT, ONCE HE FOUND THAT THE TWO GROUNDS MENTIONED IN THE NOTICE UNDER SECTION 148 WERE INCORRECT OR NONEXISTENT. THE DECISIONS OF THE PUNJAB AND HARYANA HIGH COURT IN ATLAS CYCLE INDUSTRIES, [1989] 180 ITR 319 AND OF THE RAJASTHAN HIGH COURT IN SHRI RAM SINGH, [ 2008] 306 ITR 343 WOULD NOT BE AFFECTED BY THE AMENDMENT BROUGHT IN BY THE INSERTION OF EXPLANATION 3 TO SECTION 147. 28 21. 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 J UDICIAL 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 . HOWEVE R, 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 R ENDER 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 AS SESS 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 WH ICH 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 NECES SARY, THE LEGALITY OF WHICH WOULD BE TESTED IN THE EVENT OF A CHALLENGE BY THE ASSESSEE. WE HAVE APPROACHED THE ISSUE OF INTERPRETATION THAT HAS ARISEN FOR DECISION IN THESE APPEALS, BOTH AS A MATTER OF FIRST PRINCIPLE, BASED ON THE LANGUAGE USED IN SECTIO N 147 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 AS IT STANDS POSTULATES THAT ITA NO S . 1895 & 1896 /HYD./201 7 AY 20 05 - 06 AND 2008 - 09 SRI MIR FEROZ ALI KHAN, HYDERABAD 7 UPON THE FORMATION OF A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURING THE PROCEEDINGS AS HAVING ESCAPED ASSESSMENT. THE WORDS AND ALSO ARE USED IN A CUMULATIVE AND CONJUNCTIVE SENSE. TO READ THESE WORDS AS BEING IN THE ALTERNATIVE WOULD BE TO REWRITE THE LANGUAGE USED BY PARLIAMENT. OUR VIEW HAS BEEN SUPPORTED BY THE BACKGROUND WHICH LED TO THE INSERTION TO EXPLANATION 3 TO SECTION 147. PARLIAMENT 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, [ 2008] 306 ITR 343 . PARLIAMENT HAS NOT TAKEN AWAY THE BASIS OF THAT DECISION. WHILE IT IS OPEN TO PARLI AMENT, HAVING REGARD TO THE PLENITUDE OF ITS LEGISLATIVE POWERS TO DO SO, THE PROVISIONS OF SECTION 147 AS THEY STOOD AFTER THE AMENDMENT OF APRIL 1, 1989, CONTINUE TO HOLD THE FIELD. 22. IN THAT VIEW OF THE MATTER AND FOR THE REASONS THAT WE HAVE INDICATE D, WE DO NOT REGARD THE DECISION OF THE TRIBUNAL IN THE PRESENT CASE AS BEING IN ERROR. THE QUESTION OF LAW SHALL ACCORDINGLY STAND ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. THE APPEAL IS ACCORDINGLY DISMISSED. THERE SHALL BE NO ORDER AS TO COSTS. 3.2. RESPECTFULLY FOLLOWING THE ABOVE JUDGEMENT, WHICH HAS CONSIDERED THE LATEST AMENDMENTS TO S. 147 OF THE ACT, I DEEM IT FIT AND PROPER TO HOLD THAT SINCE THERE IS NO DISCUSSION ON THE REASONS FOR RE - OPENING IN THE ASSESSMENT ORDER AND NO ADDITIONS WERE ALSO MADE ON THOSE REASONS , IN THE REASSESSMENT PROCEEDINGS, THE RE - ASSESSMENT PROCEEDINGS ARE NOT VALID. ACCORDINGLY, THE RE - ASSESSMENT PROCEEDINGS ARE SET ASIDE AND CONSEQUENTLY ADDITIONS MADE THEREUNDER ALSO GETS DELETED. 3.3. IN THE RE SULT, THE GROUNDS OF APPEAL NO.1 IS ALLOWED, AND GROUND NO.2 IS NOT ADJUDICATED ON MERITS. 4. I N THE RESULT, ASSESSEES APPEAL S ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 01/01/2020 . SD/ - (P MADHAVI DEVI) JUDICIAL MEMBER DATED: THE 01 ST JANUARY, 2020 . *GMV ITA NO S . 1895 & 1896 /HYD./201 7 AY 20 05 - 06 AND 2008 - 09 SRI MIR FEROZ ALI KHAN, HYDERABAD 8 COPY FORWARDED TO: 1. SRI MIR FEROZ ALI KHAN, C/O B.SHANTHI KUMAR, ADVOCATE, 111, TARAMANDAL COMPLEX, 5 - 9 - 13, SAIFABAD, HYDERABAD 500 004 . 2. ITO, WARD 9 ( 2 ), HYDERABAD 3. A CIT, RANGE 9 , HYDERABAD /CIT(A) - 9, HYD. 4. THE PR.CIT - 7 , HYDERABAD 5 . D.R. ITAT HYDERABAD 6 . GUARD FILE // C O P Y // ITA NO S . 1895 & 1896 /HYD./201 7 AY 20 05 - 06 AND 2008 - 09 SRI MIR FEROZ ALI KHAN, HYDERABAD 9 1. DRAFT DICTATED ON 17 /12/19 2. DRAFT PLACED BEFORE THE AUTHOR 19 /12/19 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO SRPS 6. KEPT FOR PRONOUNCEMENT 01/01/2020 7. FILE SENT TO BENCH CLERK