Khambatta Family Trust, Ahmedabad V. The ACIT.,Circle-10, Ahmedabad

ITA 2140/AHD/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57081 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-01-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 21-05-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JANGID
• Assessee Lawyers: PF JAIN
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80HHC; 133A; 80IB; 148

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI D K TYAGI - JM AND SHRI A L GEHLOT - AM ITA NO.2140/AHD/2007 (ASSESSMENT YEAR:-2002-03) M/S KHAMBHATTA FAMILY TRUST, B/4, ELLIS-BRIDGE, GYMKHANA, ELLIS-BRIDGE, AHMEDABAD V/S THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-10, AHMEDABAD PAN: AAAK 0428 P [APPELLANT] [RESPONDENT] ITA NO.2286/AHD/2007 (ASSESSMENT YEAR:-2002-03) THE DEPUTY COMMISSIONER OF INCOME- TAX, CIRCLE-10, AHMEDABAD V/S M/S KHAMBHATTA FAMILY TRUST, B/4, ELLIS-BRIDGE, GYMKHANA, ELLIS-BRIDGE, AHMEDABAD [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI P F JAIN, AR REVENUE BY:- SHRI J P JANGID, SR. DR DATE OF HEARING:- 31-01-2012 DATE OF PRONOUNCEMENT:- 31-01-2012 O R D E R PER D K TYAGI (JM) :- THESE ARE CROSS APPEALS FILED AGAINST THE ORDER OF THE LEARNED CIT(A)-XVI, AHMEDABAD FOR ASSESSMENT YEARS 2002-03. 2 2 THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN ITS AP PEAL. THE FIRST GROUND RAISED BY THE ASSESSEE READS AS UNDER: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER PASSED U/S 143(3) R.W.S. 147 WITHOUT DISPOSIN G OF THE OBJECTIONS TAKEN FOR RE-ASSESSMENT PROCEEDINGS, WIT HOUT CONFINING THE PROCEEDINGS TO ISSUES FOR WHICH REOPE NING WAS RESTORED TO. 2 THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD F ILED RETURN OF INCOME ON 31-10-2002 DECLARING INCOME OF RS.2,05 ,48,800/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 1 8-02-2003. THEREAFTER, IT WAS NOTICED THAT THE ASSESSEE HAS CL AIMED EXCESS DEDUCTION U/S 80HHC AND THEREFORE THE ASSESSMENT WA S REOPENED AFTER RECORDING THE FOLLOWING REASONS:- DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AS CLAIMED DEDUCTION AMOUNTING TO RS.48,31,566/- U/S.80IB OF T HE I.T. ACT HOWEVER, ON THE SAME PROFIT, ASSESSEE HAS CLAIMED D EDUCTION AMOUNTING TO RS.60,23,163/- U/S.80HHC OF THE I.T. A CT. AS PER SUB SECTION 13 OF SECTION 801B READ WITH SUB SECTION 9 OF SECTION 80IA. ...... WHERE ANY AMOUNT OF PROFITS AND -GAINS OF A N UNDERTAKING OR OF AN ENTERPRISE IN THE CASE OF AN ASSESSEE IS C LAIMED AND ALLOWED UNDER THIS SECTION FOR ANY ASSESSMENT YEAR, DEDUCTION TO THE EXTENT OF SUCH PROFITS AND GAINS SHOULD NOT BE ALLOWED UNDER ANY OTHER PREVISIONS OF THIS CHAPTER UNDER THE HEAD ING 'C DEDUCTIONS IN RESPECT OF CERTAIN INCOMES.. THEREFORE DEDUCTION U/S. 80HHC SHOULD BE ALLOWED O N THAT PROFIT OF BUSINESS IS COMPUTED AFTER REDUCING DEDUCTION U/S.8 0IB FROM TOTAL PROFIT OF BUSINESS. ASSESSEE FAILED TO DO SO. IT LE D TO EXCESS CLAIM OF DEDUCTION U/S 80HHC. SO I HAVE REASON TO BELIEVE TH AT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 3 3 THE AO PROCEEDED TO REOPEN THE ASSESSMENT BY NOTI NG THE FOLLOWING FACTS;- 2 ISSUE OF REOPENING OF ASSESSMENT ASSESSEE VIDE LETTER DATED 15-10-2005 THAT THE REAS ON RECORDED FOR REOPENING THE ASSESSMENT IS RELATING TO REDUCE THE DEDUCTION CLAIMED U/S.80HHC. ASSESSEE FURTHER STATED THAT JURISDICTIO N OF THE A.O IS RESTRICTED TO ISSUE ON WHICH ASSESSMENT HAS BEEN RE OPENED. BY LETTER DATED 29-10-2005 ASSESSEE FURTHER SUBMITTED THAT TH ERE WAS NO EXCESS CLAIM U/S.80HHC SINCE THE DEDUCTION CLAIMED WAS ONL Y AS PER THE PROVISIONS OF THE ACT. ASSESSEE FURTHER SUBMITTED T HE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF G.K.N. DRIVE S HAFT REPORTED IN 259 ITR 19 AND REQUESTED FOR DROPPING THE PROCEEDIN GS. THE ABOVE SUBMISSION OF THE ASSESSEE HAVE BEEN CONSIDERED IN THE LIGHT OF EXPRESSION OF SEC. 80IA(9) R.W.S 80IB AND ACCORDING LY THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SEC. 80HHC IS NOT AFT ER REDUCING THE CLAIM U/S.80IB AND THEREFORE THE INCOME HAS DEFINIT ELY ESCAPED ASSESSMENT BY WAY OF CLAIM OF EXCESSIVE DEDUCTION. SUBSEQUENTLY, A SURVEY ACTION U/S.133A WAS CONDUCTED AT THE PREMISE S OF THE ASSESSEE AND FROM THE FINDINGS OF THE SURVEY, IT IS SEEN THA T THE ASSESSEE'S CLAIM OF DEDUCTION U/S.80IB FOR BOTH THE UNITS IS PRIMA F ACIE NOT CORRECT AND ACCORDINGLY A SEPARATE NOTICE WAS ISSUED FOR WITHDR AWING SUCH CLAIM HOWEVER, WITH REGARD TO REOPENING THE ASSESSMENT AN D EXTENT OF SUCH ASSESSMENT, ASSESSEE WAS CLARIFIED AS UNDER BY LETT ER DATED 17-3-2006. 'IN THIS A. Y. WAS NOT DONE U/S. 143(3) OF I. T. AC T AND THEREFORE YOUR CASE IS COVERED BY EXPLANATION 2(B) OF SECTION 147. IN ANY CASE, SUBSEQUENT TO THE REOPENING OF ASSESSMENT, A SURVEY ACTION U/S. 133A WAS CARRIED OUT ON 21.2.2006. DURING THE COURSE OF SURVEY, EVIDENCES RELATING TO YOUR INCORRECT CLAIM OF DEDUCTION U/S. 80IB AND ALSO NON MAINTENANCE OF PROPER RECORDS WERE FOUND. SINCE THE ASSESSMENT WAS ALREADY REOPENED NO SEPARATE REOPENING IS DONE FOR THESE ASPECTS AS HELD BY VARIOUS COURTS. THAT WHERE ASSESSMENT IS RE OPENED, ASSESSMENT PROCEEDINGS WILL NOT BE LIMITED TO ANY PARTICULAR I SSUE BUT WILL BE OPENED TO ALL THE ISSUES. SINCE THE ASSESSMENT WAS REOPENED WITHIN FOUR YEARS WHERE NO SCRUTINY WAS MADE, COURTS HAVE INTERPRETED THE POWERS OF THE A.O. REOPENING THE ASSESSMENT LIBERAL LY. HON'BLE GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL P ATEL REPORTED IN 236 ITR HAS ELABORATELY DEALT THIS ASPECT. IN VIEW OF T HIS YOU ARE REQUESTED TO SUBMIT COMPLETE DETAILS AND EXPLANATION FOR THIS ASSESSMENT.' 4 2.1 ASSESSEE REPLIED ON THE ISSUE OF REOPENING BY L ETTER DATED 23- 03-2006 WHICH IS QUOTED AS UNDER: 'NOTICES U/S. 143(2)/142(1) WERE ISSUED ON DATED 05 /09/2005 AND WITH THESE NOTICES, ASSESSES WAS SUPPLIED WITH THE REASO NS RECORDED FOR RE- OPENING THE CASE U/S. 147 OF THE I.T. ACT. IN THE S UBMISSION DATED 15/10/2005, YOUR KIND ATTENTION WAS DRAWN TO THE DE CISION OF SUPREME COURT IN THE CASE OF SUN ENGINEERING WORKS 198 ITR 297 WHEREIN THE APEX COURT HAS OBSERVED THAT WHAT IS SET-ASIDE IN T HE ASSESSMENT IS ONLY THE PREVIOUS UNDER ASSESSMENT AND NOT THE WHOL E ORIGINAL ASSESSMENT. WHERE THE RE-ASSESSMENT IS MADE UNDER T HIS SECTION IN RESPECT OF INCOME WHICH HAS ESCAPED TAX, THE AO'S J URISDICTION UNDER THIS SECTION IS CONFINED TO SUCH INCOME WHICH HAS E SCAPED ASSESSMENT AND DOES NOT EXTEND TO REVISION, RE-OPENING OR RE-C ONSIDERING THE WHOLE ASSESSMENT. THEREFORE, IN VIEW OF THESE PROPO SITIONS, THE ASSESSEE WILL BE REQUIRED TO JUSTIFY THE CLAIM UNDE R SECTION 80HHC WHICH HAS BEEN CONSIDERED TO BE EXCESSIVE. FURTHER WITH REGARD TO ASSESSMENT U/S. 143(1) YOUR KIND ATTENTION WAS DRAWN TO THE CASE OF ANDERSON MARINE & SONS PVT. LT D. REPORTED IN 266 ITR 694 WHEREIN THE BOMBAY HIGH COURT HAS HELD THAT INTIMATION U/S. 143(1) IS AN ORDER OF ASSESSMENT. AGAINST THIS ORDER, S.L.P. WAS FILED BY THE DEPARTMENT IN SUPREME COURT WHICH HAS BEEN REJECTED BY THE APEX COURT AS REPORTED IN 271 ITR STATUTE P.1. THEREFORE WITHOUT PREJUDICE TO THIS DECISION, VARIOUS DETAILS ASKED F OR WAS DULY SUBMITTED. THEN VIDE SUBMISSION DATED 29/10/2C05 DU LY SUBMITTED ON 14/11/2005,THE ASSESSEE OBJECTED TO THE RE-OPENING OF ASSESSMENT U/S.147 AND REQUESTED THAT THE SAID- RE-OPENING ASS ESSMENT MAY KINDLY BE DROPPED AND THE OBJECTION FOR RE-OPENING MAY KIN DLY BE DECIDED BEFORE PASSING RE-ASSESSMENT ORDER AND THESE FACTS WERE AGAIN REPEATED IN THE SUBMISSION DATED 04/03/2006 AND AGAIN YOUR G OODSELF WAS REQUESTED 10 DISPOSE OFF OBJECTIONS FOR RE-ASSESSME NT PROCEEDINGS. AFTER FILING OF OBJECTION ON 14/11/2005, THE ASSESS EE HAS NOT RECEIVED ANY FURTHER NOTICE FOR A.Y.2002-03 EXCEPT THE SEPAR ATE NOTICE DATED 17/03/2006. IN THE NOTICE U/S. 143(2) DATED 28/02/2 006 REFERENCE TO ASST. YEAR 2002-03 WAS MADE IN THE SUBJECT BUT IN T HE FIRST PARA THERE WAS REFERENCE TO LETTER DATED 14/02/2006 AND THIS L ETTER WAS NOT ISSUED FOR ASST. YEAR 2002-03. IT IS SUBMITTED THAT THE CA SE OF THE ASSESSEE HAS TO BE DECIDED IN THE LIGHT OF VARIOUS LEGAL PROPOSI TIONS DECIDED BY THE SUPREME COURT AS MENTIONED ABOVE'. 5 2.2 REBUTTAL OF ASSESSEE'S REPLY I HAVE CONSIDERED THE ABOVE SUBMISSION OF THE ASSES SEE WITH REGARD TO THE EXTENT OF ASSESSMENT U/S.147 OF I.T. ACT. ASSES SEE SUBMITTED THAT AS PER THE SUPREME COURT'S DECISION IN THE CASE OF SUN ENGG. WORKS 198 ITR 297, WHAT IS SET ASIDE IN THE ASSESSMENT IS ONLY THE PREVIOUS UNDERASSESSMENT AND NOT THE WHOLE ORIGINAL ASSESSME NT. THE HON'BLE APEX COURT'S OBSERVATION WAS WITH REGARD TO THE ASS ESSMENT COMPLETED U/S.143(3). IN THAT CASE A PARTICULAR VIEW HAS TAKE N AFTER DETAILED EXAMINATION IN THE ORIGINAL ASSESSMENT AND IN THE R EOPENED ASSESSMENT A DIFFERENT TREATMENT WAS GIVEN EVEN WHEN THE SAME WAS NOT THE POINT OF INCOME ESCAPING ASSESSMENT. HOWEVER THE SAME DOE S NOT APPLY IN THE CASE OF ASSESSEE WHERE NO ASSESSMENT WAS COMPLE TED U/S. 143(3) OF THE I.T. ACT AND NONE OF THE ISSUE WAS EXAMINED EAR LIER THEREFORE ASSESSEE'S RELIANCE ON THIS DECISION IS MISPLACED. THERE ARE SEVERAL DECISIONS WHICH CLEARLY HELD THAT ONCE ASSESSMENT I S REOPENED, IT IS FULLY OPENED ON ALL ISSUES, SOME OF THESE DECISIONS ARE REPORTED AT: 1. 121ITR69(AP) 2. 142/877 (MADRAS) 3. 188/612(KERALA) 4. 176/529 (SC) FROM THE ABOVE, IT CAN BE SEEN THAT IN THE REOPENED ASSESSMENT, ANY ISSUE CAN BE LOOKED INTO, PARTICULARLY, WHEN ASSESS MENT WAS NOT COMPLETED U/S. 143(3) OF I.T. ACT. ASSESSEE FURTHER CITED THE DECISION OF BOMBAY HIGH COURT REPORTED IN 266 ITR 694 WHERE INTIMATION U/S. 143(1) WAS HELD T O BE AN ORDER. THE ASSESSEE'S RELIANCE ON THIS DECISION IS MISPLACED B ECAUSE THIS DECISION RELATES TO CIT'S ORDER U/S.263 REVISING INTIMATION U/S. 143(1). IT WAS HELD BY THE COURT THAT THE INTIMATION IS AN ORDER O N 'SELF ASSESSMENT. HOWEVER, IT IS NOWHERE HELD THAT IT IS ASSESSMENT O RDER. IN FACT FOR 263 ONLY 'ORDER' IS REQUIRED AND NOT ASSESSMENT. THEREF ORE THIS DECISION DOES NOT HELP ASSESSEE. ASSESSEE AGAIN ASKED FOR DISPOSING ITS OBJECTION TO THE REOPENING. IN FACT WITH THE SHOW CAUSE LETTER DATED 17-3-2006 ASS ESSEE WAS CLEARLY COMMUNICATED THAT AFTER REOPENING OF THE ASSESSMENT ON THE ISSUE OF EXCESS CLAIM U/S.80HHC, DEALT EARLIER, SURVEY ACTIO N RESULTED IN WRONG 6 CLAIMS MADE UNDER SEC.801B AND ALSO HIGHLIGHTED NON MAINTENANCE OF PROPER RECORDS. SINCE ASSESSMENT WAS ALREADY OPENED , ANOTHER REOPENING ON THE BASIS OF FINDINGS OF THE SURVEY CO ULD NOT HAVE BEEN POSSIBLE DURING PENDENCY OF THE REOPENED ASSESSMENT AND THERE IS NO JUSTIFICATION IN REOPENING THE ASSESSMENT FOR EACH ISSUE SEPARATELY, AS AND WHEN CROPPED UP. THUS ASSESSEE WAS CLEARLY COMM UNICATED THAT APART FROM THE ISSUE RELATING TO 80HHC, OTHER FINDI NGS OF THE SURVEY ALSO SUGGEST ESCAPEMENT OF INCOME AND THE SAME ARE ALSO TO BE CONSIDERED IN THE REOPENED ASSESSMENT. THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL P ATEL CLEARLY JUSTIFIES REOPENING OF ASSESSMENT WITHIN 4 YEARS IN SUCH FACT S AND CIRCUMSTANCES. IN ANY CASE NO DECISION OR LEGAL PRO VISION BAR THE DEPARTMENT IN CONSIDERING ANY FINDINGS OF INVESTIGA TIONS IN THE PENDING REOPENED ASSESSMENT. IN FACT THE FINDINGS O F SURVEY ITSELF CALLS FOR REOPENING OF ASSESSMENT BUT SINCE THE ASSESSMEN T YEAR IS ALREADY REOPENED, WHILE FINALIZING THE ASSESSMENT THE SAME IS CONSIDERED. CONSIDERING THE ABOVE, THE OBJECTIONS OF THE ASSESS EE WITH REGARD TO REOPENING THE ASSESSMENT AND THE EXTENT OF SUCH REO PENED ASSESSMENT ARE WITHOUT ANY BASIS CONSIDERING THE FACTS OF THE CASE AND LEGAL PROVISIONS. 4 THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO WITH THE FOLLOWING OBSERVATIONS:- I HAVE CAREFULLY CONSIDERED ARGUMENTS OF THE COUNS EL FOR THE APPELLANT AND THE OBSERVATIONS AND FINDINGS OF THE AO IN THE ASSESSMENT ORDER. GROUND NO.1 IS THAT OBJECTIONS TO THE REASSESSMENT PROCEEDINGS HAVE NOT BEEN DISPOSED OFF. THE ARGUMENT OF THE APPELLAN T IS THAT THE OBJECTIONS MADE IN WRITING AGAINST REASSESSMENT PRO CEEDINGS HAVE NOT BEEN CONSIDERED BY PASSING SPEAKING ORDER BEFORE PA SSING ASSESSMENT ORDER AND AS RESULT THE DECISION OF SUPREME COURT IN THE CASE OF G.K.N. DRIVESHAFT (259 ITR 19) HAS BEEN VIOLATED. T HE BOMBAY HIGH COURT IN THE CASE OF ALLANA COLD STORAGE LTD. REPOR TED IN [2006] 287 ITR 1 HAS QUASHED THE ASSESSMENT ORDER BECAUSE IN T HE SAID CASE THE OBJECTIONS AGAINST REOPENING WERE NOT CONSIDERED BY PASSING A SPEAKING ORDER. THE ARGUMENTS OF THE APPELLANT THAT THE OBJECTIONS RAISED BY THE APPELLANT HAVE NOT BEEN DISPOSED OFF ARE NOT CORRECT. THE AO HAS DISPOSED OFF THE OBJECTIONS ON PAGE 4 & 5 OF THE ASSESSMENT ORDER. THE AO HAS MENTIONED THAT THE APPELLANT WAS COMMUNICATED 7 ABOUT THE REOPENING OF THE ASSESSMENT VIDE LETTER D ATED 17.03.2006. FURTHER THE AO INFORMED THE ASSESSEE THAT THE ASSES SMENT WAS REOPENED U/S 147 EXPLANATION 2(B) AND SUBSEQUENTLY SURVEY WAS CONDUCTED ON 21.02.2006. DURING SURVEY EVIDENCE REL ATING TO INCORRECT CLAIM OF DEDUCTION U/S 80IB AND NON MAINTENANCE OF RECORDS WAS FOUND. THE AO INFORMED THE ASSESSEE THAT SINCE THE ASSESSMENT WAS ALREADY REOPENED NO SEPARATE REOPENING WAS DONE FOR DEDUCTION U/S 80IB. THE AO RELIED ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL PALEL REPORTED IN ; 236 ITR 832. THE AO FURTHER STATED THAT ONCE THE ASSESSMENT IS REOPENED IT IS O PEN FOR ALL THE ISSUES AND IS NOT RESTRICTED TO A PARTICULAR ISSUE. THUS T HE AO DISPOSED OFF THE OBJECTIONS OF THE APPELLANT BY A SPEAKING ORDER. TH E DECISION OF THE HON'BLE SUPREME COURT IN G K N DRIVESHAFT CASE HAS NOT BEEN VIOLATED. THE FIN>T GROUND OF APPEAL IS REJECTED. THE SECOND GROUND OF APPEAL IS THAT THE REASSESSMEN T PROCEEDINGS ARE REQUIRED TO BE CONFINED TO ISSUES FOR WHICH RE-OPEN ING HAS BEEN MADE. THE ARGUMENTS OF THE COUNSEL FOR THE APPELLANT ARE DEVOID OF ANY MERIT. THE AO HAS CLEARLY MENTIONED IN THE ASSESSME NT ORDER THAT THE CASE WAS REOPENED FOR ONE REASON NAMELY EXCESSIVE D EDUCTION U/S 80HHC. HOWEVER SUBSEQUENTLY DUE TO SURVEY U/S 133 A ESCAPEMENT OF INCOME ON ACCOUNT OF OILIER ISSUES ALSO GAME TO LIGHT. SINCE THE ASSESSMENT HAD ALREADY BEEN REOPENED THERE WAS NO P OINT IN REOPENING THE REOPENED ASSESSMENT. THE AO IS ABSOLUTELY RIGHT IN HOLDING THAT SINCE THE ASSESSMENT IS ALREADY REOPENED THE FINDIN GS OF SURVEY ARE ALSO CONSIDERED. EVEN OTHERWISE AS PER SECTION 147 OF THE I.T. ACT THE AO CAN ASSESS OR REASSESS ANY OTHER INCOME CHARGEAB LE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTIC E SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER SECTION 147. TH E HON'BLE SUPREME COURT IN THE CASE OF SUN ENGINEERING WORKS 198 ITR 297 HAS NOT PUT ANY RESTRICTION ON ASSESSMENT OF ANY INCOME WHICH C OMES TO THE NOTICE OF THE AO DURING REASSESSMENT PROCEEDINGS. MOREOVER AS ALREADY MENTIONED THE ASSESSMENT WAS ALREADY REOPENED AND I T WOULD MAKE NO SENSE TO REOPEN ALREADY REOPENED ASSESSMENT. THE CO NTENTION OF THE COUNSEL FOR THE APPELLANT THAT THE CASE HAS BEEN RE OPENED ON CHANGE OF OPINION IS NOT CORRECT. THE AO CONDUCTED SURVEY U/S 133A AS A RESULT OF WHICH ENTIRELY NEW FACTS CAME TO HIS NOTICE WHIC H WARRANTED REOPENING OF THE CASE. THE CASE LAWS RELIED UP ON B Y THE COUNSEL ARE NOT APPLICABLE. THE ARGUMENTS OF THE APPELLANT ARE REJECTED. THE SECOND GROUND OF APPEAL IS DISMISSED. 8 THE THIRD GROUND IS THAT THE ASSESSMENT U/S. 143(1) IS ALSO AN ASSESSMENT AS HELD BY BOMBAY HIGH COURT IN THE CASE OF ANDERSON MARINE & SONS PVT. LTD. (266 ITR 694). THE AO IS RI GHT IN HOLDING THAT THE DECISION OF THE BOMBAY HIGH COURT REPORTED IN 266 ITR 694 HAS HELD THAT INTIMATION UNDER SECTION 143(1) IS IN THE NATURE OF ORDER PASSED BY THE AO FOR THE PURPOSES OF SECTION 263. I T IS NOWHERE HELD THAT THE INTIMATION IS ALSO AN ASSESSMENT. THE THIR D GROUND IS DISMISSED. THE FOURTH GROUND IS THAT NO DISCUSSION AND NO QUER IES WERE MADE IN RESPECT OF VARIOUS ISSUES MENTIONED IN THE ORDER AN D FURTHER THE CASE LAWS CITED AND RELIED UPON IN THE ASSESSMENT ORDER WERE NEVER DISCUSSED AND NO QUERIES FOR WHICH ADDITION HAVE BE EN MADE, WERE MADE IN THE COURSE OF HEARING. THIS ARGUMENT OF THE APPELLANT IS NOT CORRECT. THE AO GAVE A VERY DETAILED SHOW CAUSE NOT ICE ON 17.03.2006. THIS GROUND IS ALSO REJECTED. 5 AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. AT THE TIME OF HEARING, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE PROCEEDI NGS U/S 147 WERE INITIATED ON THE GROUND THAT THE ASSESSEE HAS CLAIMED EXCESS DEDUCTION U/S 80HHC, THEREFORE, THE AO HAD REASON T O BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T BUT WHILE PASSING THE ORDER U/S 143(3) READ WITH SECTION 147, THE CLAIM OF DEDUCTION U/S 80HHC WAS NOT DISTURBED AND THE AO AC CEPTED THE RETURNED INCOME CLAIMING THE DEDUCTION U/S 80HHC OF THE ACT. ONCE THIS WAS DONE, THE AO HAS NO JURISDICTION TO G O ON MAKING FURTHER ADDITIONS, WHILE THE SAME HAS BEEN DONE BY THE AO IN THIS CASE. FOR MAKING THIS SUBMISSION, HE RELIED ON THE FOLLOWING CASE LAW:- 1. CIT VS. SHRI RAM SINGH (2008) 306 ITR 343 (RAJ) 2. CIT VS. JET AIRWAYS (I) LTD. (2011) 331 ITR 236 (BO M) 9 3. RANBAXY LABORATORIES LTD. VS. CIT (2011) 336 ITR 13 6 (DELHI) 4. ACIT VS. MAJOR DEEPAK MEHTA (2012) 65 DTR (CHHATTISGARH) 237 6 ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE O RDERS OF THE AO AND THE LEARNED CIT(A). 7 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS. WE HAVE ALSO GONE THROUGH VARIOUS DECISIONS RELIED UPO N BY THE LEARNED COUNSEL OF THE ASSESSEE. WE FIND THAT THE A O NOTICED THAT THE ASSESSEE HAS CLAIMED EXCESS DEDUCTION U/S 80HHC AND THEREFORE THE ASSESSMENT WAS REOPENED AFTER RECORDI NG THE REASONS STATED ABOVE. WE FURTHER FIND THAT IN THE R E-ASSESSMENT PROCEEDINGS, AO ALLOWED THE DEDUCTION U/S 80HHC AS CLAIMED BY THE ASSESSEE IN ITS COMPUTATION OF INCOME AND WENT ON TO MAKE OTHER ADDITIONS. THE LAW IS NOW SETTLED THAT AO MAY ASSESS OR REASSESS INCOME IN RESPECT OF ANY ISSUE WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF ASSESSMENT PROCEEDING S THOUGH THE REASONS FOR SUCH ISSUE WERE NOT INCLUDED IN THE NOT ICE. HOWEVER, IF AFTER ISSUING NOTICE U/S 148, THE AO ACCEPTED TH E CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAD INITIALLY FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS, AS A MATTER OF FACT, NOT ESCAPED ASSESSMENT, IT IS NOT O PEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOMES. THIS VI EW OF OURS GETS SUPPORT FROM THE FOLLOWING CASE-LAWS:- IN THE CASE OF CIT VS. SHRI RAM SINGH (2008) 306 IT R 343 (RAJ), THE HONBLE RAJASTHAN HIGH COURT HAS HELD AS UNDER: - 10 IT IS ONLY WHEN, IN PROCEEDINGS UNDER S. 147 THE A O 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 ADDITIO N, HE CAN ALSO PUT TO TAX, THE OTHER INCOME, CHARGEABLE TO TAX, WHICH HAS ESCAPED ASSESSMENT, AND WHICH HAS COME TO HIS NOTICE SUBSEQ UENTLY, IN THE COURSE OF PROCEEDINGS UNDER S. 147. TO PUT IT IN OT HER WORDS, IF IN THE COURSE OF PROCEEDINGS UNDER S. 147, THE AO WERE TO COME TO CONCLUSION, THAT ANY INCOME CHARGEABLE TO TAX, WHIC H, ACCORDING TO HIS 'REASON TO BELIEVE', HAD ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, DID NOT ESCAPE ASSESSMENT, THEN, THE MERE FACT, THA T THE AO ENTERTAINED A REASON TO BELIEVE, ALBEIT EVEN A GENUINE REASON T O BELIEVE, WOULD NOT CONTINUE TO VEST HIM WITH THE JURISDICTION, TO SUB JECT TO TAX, ANY OTHER INCOME, CHARGEABLE TO TAX, WHICH THE AO MAY FIND TO HAVE ESCAPED ASSESSMENT, AND WHICH MAY COME TO HIS NOTICE SUBSEQ UENTLY, IN THE COURSE OF LINGS UNDER S. 147. IT IS A DIFFERENT STO RY THAT FOR SUCH OTHER INCOME, THE MAY HAVE RECOURSE TO SUCH OTHER REMEDIE S, AS MAY BE AVAILABLE TO HIM UNDER AW, BUT THEN, ONCE IT IS FOU ND, THAT THE INCOME, REGARDING WHICH HE HAD 'REASON TO BELIEVE' TO HAVE ESCAPED ASSESSMENT, IS NOT FOUND TO HAVE ESCAPED ASSESSMENT , THE AO IS REQUIRED TO WITHHOLD HIS HANDS, AT THAT ONLY. ONCE THE AO E TO THE CONCLUSION, THAT THE INCOME, WITH RESPECT TO WHICH HE HAD ENTERTAINED 'REASON TO BELIEVE' TO HAVE ESCAPED ASSESSMENT, WAS FOUND TO HAVE BEEN EXPLAINED, HIS JURISDICTION CAME TO A STOP AT THAT, AND HE DID NOT CONTINUE TO POSSESS JURISDICTION, TO PUT TO TAX, AN Y OTHER INCOME, WHICH SUBSEQUENTLY CAME TO HIS NOTICE, IN THE COURSE OF R EASSESSMENT PROCEEDINGS, WHICH WERE FOUND BY HIM, TO HAVE ESCAP ED ASSESSMENT. CIT VS. ATLAS CYCLE INDUSTRIES (1989) 180 ITR 319 ( P&H) CONCURRED WITH; ASSTT. CIT VS. RAJESH JHAVERI STOCK BROKERS ( P) LTD, (2007) 210 CTR (SC) 30 : (2007) 291 ITR 500 (SC) AND JAGAN NAT H SINGHAL VS. DY. CIT (2000) 242 ITR 554 (P&.H) DISTINGUISHED. IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD. (2011) 331 ITR 236 (BOM), THE HONBLE BOMBAY HIGH COURT HAS HELD AS UN DER:- THE EFFECT OF S. 147 AS IT NOW STANDS AFTER THE AM ENDMENT OF 2009 CAN BE SUMMARIZED AS FOLLOWS: (I) THE AO MUST HAVE REAS ON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT FOR ANY 11 ASSESSMENT YEAR; (II) UPON THE FORMATION OF THAT BE LIEF AND BEFORE HE PROCEEDS TO MAKE AN ASSESSMENT, REASSESSMENT OR REC OMPUTATION, THE AO HAS TO SERVE ON THE ASSESSEE A NOTICE UNDER SUB- S. (1) OF S. 148; (III) THE AO MAY ASSESS OR REASSESS SUCH INCOME, WH ICH HE HAS REASON TO BELIEVE, HAS ESCAPED ASSESSMENT AND ALSO ANY OTH ER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEE DINGS UNDER THE SECTION; AND (IV) THOUGH THE NOTICE UNDER S. 148(2) DOES NOT INCLUDE A PARTICULAR ISSUE WITH RESPECT TO WHICH INCOME HAS E SCAPED ASSESSMENT, HE MAY NONETHELESS, ASSESS OR REASSESS THE INCOME I N RESPECT OF ANY ISSUE WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. (PARA 12) UPON THE FORMATION OF A REASON TO BELIEVE UNDER S. 147 AND FOLLOWING THE ISSUANCE OF A NOTICE UNDER S. 148, THE AO HAS T HE POWER TO ASSESS OR REASSESS THE INCOME, WHICH HE HAS REASON TO BELI EVE HAD ESCAPED ASSESSMENT AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX. THE WORDS 'AND ALSO' CANNOT BE IGNORED. THE INTERPRETATION WH ICH THE COURT PLACES ON THE PROVISION SHOULD NOT RESULT IN DILUTI NG THE EFFECT OF THESE WORDS OR RENDERING ANY PART OF THE LANGUAGE USED BY PARLIAMENT OTIOSE. PARLIAMENT HAVING USED THE WORDS 'ASSESS OR REASSES S SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS E SCAPED ASSESSMENT', THE WORDS 'AND ALSO' CANNOT BE READ AS BEING IN THE ALTERNATIVE. ON THE CONTRARY, THE CORRECT INTERPRET ATION WOULD BE TO REGARD THOSE WORDS AS BEING CONJUNCTIVE AND CUMULAT IVE. IT IS OF SOME SIGNIFICANCE THAT PARLIAMENT HAS NOT USED THE WORD 'OR'. THE LEGISLATURE DID NOT REST CONTENT BY MERELY USING TH E WORD 'AND'. THE WORDS 'AND', AS WELL AS 'ALSO' HAVE BEEN USED TOGET HER AND IN CONJUNCTION. THE WORDS 'SUCH INCOME' REFER TO THE I NCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND IN RESPECT OF WHICH THE AO HAS FORMED A REASON TO BELIEVE THAT IT HAS ESCAPED ASSESSMENT. HENCE, THE LANGUAGE WHICH HAS BEEN USED BY PARLIAMENT IS I NDICATIVE OF THE POSITION THAT THE ASSESSMENT OR REASSESSMENT MUST B E IN RESPECT OF THE INCOME IN RESPECT OF WHICH HE HAS FORMED A REASON T O BELIEVE THAT IT HAS ESCAPED ASSESSMENT AND ALSO IN RESPECT OF ANY O THER INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURING THE COURSE OF THE PROCEEDINGS AS HAVING ESCAPED ASSESSMENT. IF THE INCOME, THE ES CAPEMENT OF WHICH WAS THE BASIS OF THE FORMATION OF THE REASON TO BEL IEVE IS NOT ASSESSED OR REASSESSED, IT WOULD NOT BE OPEN TO THE AO TO IN DEPENDENTLY ASSESS ONLY THAT INCOME WHICH COMES TO HIS NOTICE SUBSEQUE NTLY IN THE COURSE 12 OF THE PROCEEDINGS UNDER THE SECTION AS HAVING ESCA PED ASSESSMENT. IF UPON THE ISSUANCE OF A NOTICE UNDER S. 148(2), THE AO ACCEPTS THE OBJECTIONS OF THE ASSESSEE AND DOES NOT ASSESS OR R EASSESS 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 S. 147 W.E.F. 1ST APRI L, 1989 CLEARLY STIPULATED THAT THE AO HAS TO OR REASSESS THE INCOM E WHICH HE HAD REASON TO BELIEVE HAD ESCAPED ASSESSMENT AND AL SO ANY OTHER INCOME CHARGEABLE TO TAX WHICH CAME TO HIS NOTICE DURING T HE PROCEEDINGS. IN THE ABSENCE OF THE ASSESSMENT OR REASSESSMENT OF TH E FORMER, HE CANNOT INDEPENDENTLY ASSESS THE LATTER. (PARA 14) PARLIAMENT, WHEN IT ENACTED THE EXPLN. 3 TO S. 147 BY THE FINANCE (NO. 2) ACT, 2009 CLEARLY HAD BEFORE IT BOTH THE LINES O F PRECEDENT ON THE SUBJECT. THE PRECEDENT DEALT WITH TWO SEPARATE QUES TIONS. WHEN IT EFFECTED THE AMENDMENT BY BRINGING IN EXPLN. 3 TO S . 147, PARLIAMENT STEPPED IN TO CORRECT WHAT IT REGARDED AS AN INTERP RETATIONAL ERROR IN THE VIEW WHICH WAS TAKEN BY CERTAIN COURTS THAT THE AO HAS TO RESTRICT THE ASSESSMENT OR REASSESSMENT PROCEEDINGS ONLY TO THE ISSUES IN RESPECT OF WHICH REASONS WERE RECORDED FOR REOPENING THE AS SESSMENT. THE CORRECTIVE EXERCISE EMBARKED UPON BY PARLIAMENT IN THE FORM OF EXPLN. 3 CONSEQUENTLY PROVIDES THAT THE AO MAY ASSE SS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE WHICH COMES TO HIS N OTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS THOUGH THE REASONS FOR SUCH ISSUE WERE NOT INCLUDED IN THE NOTICE UNDER S. 148(2). EX PLANATION 3 LIFTS THE EMBARGO, WHICH WAS INSERTED BY JUDICIAL INTERPRETAT ION, ON THE MAKING OF AN ASSESSMENT OR REASSESSMENT ON GROUNDS OTHER T HAN THOSE ON THE BASIS OF WHICH A NOTICE WAS ISSUED UNDER S. 148 SET TING OUT THE REASONS FOR THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THOSE JUDICIAL DECISIONS HAD HELD THAT WHEN THE ASSESSMENT WAS SOU GHT TO BE REOPENED ON THE GROUND THAT INCOME HAD ESCAPED ASSE SSMENT ON A CERTAIN ISSUE, THE AO COULD NOT MAKE AN ASSESSMENT OR REASSESSMENT ON ANOTHER ISSUE WHICH CAME TO HIS NOTICE DURING TH E PROCEEDINGS. THIS INTERPRETATION WILL NO LONGER HOLD THE FIELD AFTER THE INSERTION OF EXPLN. 3 BY THE FINANCE ACT (NO. 2) OF 2009. HOWEVER, EXPL N. 3 DOES NOT AND CANNOT OVERRIDE THE NECESSITY OF FULFILLING THE CON DITIONS SET OUT IN THE SUBSTANTIVE PART OF S. 147. AN EXPLANATION TO A STA TUTORY PROVISION IS INTENDED TO EXPLAIN ITS CONTENTS ARID CANNOT BE CON STRUED TO OVERRIDE IT OR RENDER THE SUBSTANCE AND CORE NUGATORY. SEC. 147 HAS THIS EFFECT THAT THE AO HAS TO ASSESS OR REASSESS THE INCOME ('SUCH INCOME') WHICH 13 ESCAPED ASSESSMENT AND WHICH WAS THE BASIS OF THE F ORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS A NY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS. HOWEVER, IF AFTER IS SUING A NOTICE UNDER S. 148, HE ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BE LIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASS ESSMENT, IT IS NOT OPEN TO HIM TO INDEPENDENTLY ASSESS SOME OTHER INCO ME. IF HE INTENDS TO DO SO, A FRESH NOTICE UNDER S. 148 WOULD BE NECE SSARY, THE LEGALITY OF WHICH WOULD BE TESTED IN THE EVENT OF A CHALLENGE B Y THE ASSESSEE. CIT VS. SUN ENGINEERING WORKS (P) LTD. (1992) 107 C TR (SC) 209 : (1992) 198 ITR 297 (SC) : (1992) 64 TAXMAN 442 (SC) RELIED ON. THE AO MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF THE ASSESSMENT PROCEEDINGS THOUGH THE REASONS FOR SUCH ISSUE WERE NOT INCLUDED IN THE NOTICE; HOWEVER, IF AFTER ISSUING A NOTICE UNDER S. 148, THE AO ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FORMED A REASON TO BE LIEVE HAD ESCAPED ASSESSMENT, HAS AS MATTER OF FACT NOT ESCAPED ASSES SMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME. 8 IN VIEW OF ABOVE AND FOLLOWING THE AFORESAID DECI SIONS, WE HAVE NO HESITATION IN HOLDING THAT THE ORDER PASSED BY THE AO IN THIS CASE IS BEYOND HIS JURISDICTION AND THE SAME I S THEREFORE QUASHED. GROUND NO.1 RAISED BY THE ASSESSEE IS ALLO WED. 9 SINCE WE HAVE QUASHED THE ASSESSMENT ORDER, THE R EMAINING GROUNDS RAISED BY THE ASSESSEE AND THE GROUNDS RAIS ED BY THE REVENUE, ARE NOT REQUIRED TO BE ADJUDICATED. 14 10 IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED AND THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 31-01-2012 SD/- SD/- (A L GEHLOT) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 31-01-2012 COPY OF THE ORDER FORWARDED TO: 1. M/S KHAMBHATTA FAMILY TRUST, B/4, ELLIS-BRIDGE, GYMKHANA, ELLIS-BRIDGE, AHMEDABAD 2. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-10, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XVI, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD