ACIT, Coimbatore V. T.S.R.Khannaiyan, Coimbatore

ITA 2534/CHNY/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4863 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 01-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-10-2014
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Capital asset; Business income; Depreciation; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' ! # . $ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER . / ITA NO. 2534/MDS/2014 / ASSESSMENT YEAR : 2009-10 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-II, COIMBATORE. ( /APPELLANT) V. SHRI T S R KHANNAIYAN , 67, AVARAMPALAYAM ROAD, K R PURAM, COIMBATORE 641 006. PAN AFZPK7832C RESPONDENT) / APPELLANT BY : SHRI PATHLAVATH PEERYA, CIT / RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE ! / DATE OF HEARING : 01.02.2017 '# ! / DATE OF PRONOUNCEMENT: 19.04.2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED10. 7.2014 FOR THE ASSESSMENT YEAR 2009-10. - - ITA 2534/M/ 14 2 2. THE ONLY GRIEVANCE IN THIS APPEAL BY THE REVENUE IS WITH REGARD TO CANCELLING THE REOPENING OF THE ASSESSMEN T BY THE CIT(APPEALS). 3. THE FACTS OF THE CASE ARE THAT THE ORIGINAL ASSE SSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 22.11.2011, DETERMINING THE TOTAL INCOME AT 16,16,351/-. ALL THE DETAILS NECESSARY INCLUDING THE SALE OF LAND, ETC. WERE DULY DISCLOSE D IN THE COURSE OF THE COMPLETION OF ORIGINAL ASSESSMENT. BUT, HOW EVER, THE AO REOPENED THE ASSESSMENT U/S.147 OF THE ACT BY WAY O F ISSUE OF NOTICE U/S.148 OF THE ACT ON 31.1.2012. THE REASON FOR REOPENING WAS THAT DURING THE YEAR THE ASSESSEE HAS SOLD 16 ACRES OF AGRICULTURAL LAND FOR A CONSIDERATION OF 16,00,00,000/- AND ACCORDING TO THE AO, THE GAIN RESULTING ON SALE OF THE AGRICULTURAL LAND IS TO BE ASSESSED AS BUSINESS PRO FIT TREATING IT AS PROFIT ARISING ON THE ADVENTURE IN THE NATURE OF TRADE. AFTER ISSUE OF NOTICE U/S.143(2) OF THE ACT, THE ASSESSEE RAISED HIS OBJECTIONS IN TAXING THE AMOUNT. REJECTING THE CLA IM OF THE ASSESSEE, THE AO COMPLETED THE ASSESSMENT U/S.143(3 ) R.W. SEC.147 OF THE ACT ON 30.3.2013. IN THE RE-OPENED ASSESSMENT, THE AO BROUGHT TO TAX A SUM OF 15,25,62,800/- REPRESENTING THE - - ITA 2534/M/ 14 3 BUSINESS PROFITS ARISING ON THE SALE OF AGRICULTURA L LAND. AFTER TAXING THE AMOUNT, THE AO RAISED A TAX DEMAND OF 7,67,21,170/- AS PER THE ASSESSMENT U/S.147 OF THE ACT. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 4. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS PROVIDING INFORMATION THAT THE LANDS WERE AGRICULTURAL AND AG RICULTURAL OPERATIONS WERE CARRIED ON TILL THE DATE OF SALE. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE LANDS WERE SITUATE D BEYOND 8 KMS OF THE MUNICIPAL LIMITS OF COIMBATORE MUNICIPAL CORPORATION. THE AO HAS GIVEN SHOW CAUSE NOTICE TO TREAT THE INCOME ARISING FROM THE SALE OF LAND UNDER THE HEAD CAPITAL GAINS. HOWEVER, DURING THE COURSE OF HEARING ON 2 8.3.2013, IT WAS PUT BEFORE THE AUTHORIZED REPRESENTATIVE WHY TH E LAND TRANSACTIONS CARRIED OUT BY THE ASSESSEE SHOULD NOT BE TREATED AS ADVENTURE IN THE NATURE OF TRADE AND THE ASSESSM ENT WAS COMPLETED TREATING THE INCOME FROM ADVENTURE IN THE NATURE OF TRADE. AFTER EXAMINING ALL THE FACTS, THE CIT(APPE ALS) OBSERVED THAT THE ORIGINAL REASONS COMMUNICATED FOR REOPENIN G WERE - - ITA 2534/M/ 14 4 ABRUPTLY DROPPED BY THE AO AND HE TOOK A TOTALLY DI FFERENT STAND WITHOUT ISSUE OF ANY FRESH NOTICE. WHEN THE ORIGIN AL REASONS DID NOT SURVIVE WHILE PASSING THE REASSESSMENT ORDER, T HEN THE ORDER PASSED BY THE AO WOULD NOT BE IN TUNE WITH THE JUDG MENT OF THE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIE S LTD. V. CIT (336 ITR 136) WHEREIN THE DELHI HIGH COURT HAS ONLY FOLLOWED THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN C IT VS. JET AIRWAYS (I) LTD. IN 331 ITR 236(BOM.) AND JUDGEMEN T OF BOMBAY HIGH COURT IN THE CASE OF INDIVEST PTE. LTD., SINGA PORE VS. ADIT IN 206 TAXMAN 351 WHEREIN HELD THAT SUCH ACTION OF THE AO IN TRAVELLING BEYOND THE REASONS COMMUNICATED FOR REOP ENING OF THE ASSESSMENT IS AB-INITIO VOID. 5. ACCORDING TO LD. CIT(A), THE AO HAS TRAVELLED BEYOND THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. IN THIS CASE, THE AO COULD NOT BRING ON RECORD WITH CONCLUSIVE EV IDENCE THAT THE LAND WAS NOT AGRICULTURAL AND WAS A CAPITAL ASS ET SITUATED WITHIN 8 KMS OF THE MUNICIPAL LIMITS. THE CIT(APPE ALS) FURTHER OBSERVED THAT IF THE AO ACCEPTED THE CONTENTION OF THE ASSESSEE AND HELD THAT THE INCOME WHICH HE HAD INITIALLY HEL D AS I HAVE - - ITA 2534/M/ 14 5 REASONS TO BELIEVE HAD ESCAPED ASSESSMENT, AS A MA TTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEP ENDENTLY TO ASSESS AS BUSINESS INCOME. IF THE AGRICULTURAL L AND IS SITUATED BEYOND 8 KMS OF THE MUNICIPAL LIMITS, THEN THE QUES TION OF CAPITAL GAINS DOES NOT ARISE. HOWEVER, TREATING TH E SAME AS BUSINESS INCOME TOTALLY IS BEYOND THE REACH OF RE ASONS RECORDED U/S.148 OF THE ACT, 1961. THEREFORE, ACCO RDING TO THE CIT(APPEALS), THE REASSESSMENT IS NOT VALID BECAUSE THE BASIS FOR THE REOPENING OF THE ASSESSMENT WAS NOT THE ISS UE ON WHICH INCOME ESCAPED WAS BROUGHT TO TAX AND THE REASSESSM ENT ORDER WAS PASSED ON SEPARATE ISSUE FOR WHICH NO SEPARATE NOTICE WAS GIVEN BY THE AO. ACCORDINGLY, LD. CIT(A) ANNULLED THE REOPENING OF ASSESSMENT. AGAINST THIS, THE REVENUE IS IN APP EAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF LD.A.R IS THAT IN THIS CASE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 22- 11-2011. LATER INFORMATION HAS BEEN RECEIVED FROM THE SYSTEM IN DELHI THAT THE ASSESSEE HAS SOLD PROPERTIES FOR RS 10.76 CRORES AND RS 5.33 CRORES ON 31-03-2009 WITHOUT QU OTING PAN. - - ITA 2534/M/ 14 6 THE ASSESSEE HAS NOT DISCLOSED CAPITAL GAINS FROM T HE SALE OF ABOVE PROPERTIES WHICH ARE NOT AGRICULTURAL . HENCE , THE A.O HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T AND ASSESSMENT WAS REOPENED. WHILE FRAMING THE ASSES SMENT, THE AO VIDE QUESTIONNAIRE DATED 17.06.2011 ENQUIRED ABO UT DETAILS OF IMMOVABLE PROPERTY ACQUIRED AND SOLD DURING THE YEAR. THE ASSESSEE HAS FURNISHED ALL DETAILS TO THE AO AT TH E TIME OF ORIGINAL ASSESSMENT VIDE LETTER DATED 11-07-2011 AND THERE WAS MENTIONING OF SALE DOCUMENTS AS FOLLOWS: A) DOC. NO. 1014/09 -ANNEXURE 20 B) DOC NO. 1015/09- ANNEXURE.21 ACCORDING TO ASSESSEE, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY F OR THE PURPOSE OF ASSESSMENT. ACCORDING TO LD.A.R, THE REOPENING AFTER 4 YEARS OF END OF RELEVANT ASSESSMENT YEAR VIDE NOTICE U/S. 148 OF THE ACT DATED 31.01.2012, IT IS ONLY A CHANGE OF OPINION. HE SUBMITTED THAT THE AO GOING THROUGH THE SAME DOCUMENTS, WHICH WERE ALREADY ON RECORD, WANTED TO RE-OPEN THE ASSESSMENT , WHICH IS NOTHING BUT REVIEW OF THE EARLIER ASSESSMENT ORDER, WHICH IS NOT - - ITA 2534/M/ 14 7 POSSIBLE U/S.147 OF THE ACT. IN THIS CASE, THE ASS ESSMENT WAS REOPENED AFTER RECORDING THE REASONS VIDE NOTICE IS SUED U/S.148 DATED 31-01-2012. 6.1 ADMITTEDLY IN THIS CASE, THE ORIGINAL ASSESSME NT WAS COMPLETED U/S.143(3) OF THE ACT. IT IS A SETTLED LAW THAT ON THE BASIS OF MATERIAL, PRIMA FACIE, AVAILABLE BEFORE T HE ASSESSING OFFICER, OPINED THAT INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT CAN BE FORMED. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATI ON. IN CASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO K NOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT , ACTION U/S 148 CAN BE TAKEN. BUT OBVIOUSLY, THERE SHOULD BE RELEVA NT MATERIAL ON WHICH A REASONABLE MAN COULD HAVE FORMED A REQUI SITE BELIEF. WHETHER THIS MATERIAL(S) WOULD CONCLUSIVELY PROVE T HE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT PAR TICULAR STAGE. SO WHAT IS REQUIRED IS THE SUBJECTIVE SATISF ACTION OF THE ASSESSING OFFICER BASED ON OBJECTIVE MATERIAL EVIDE NCE. THE REASON WAS RECORDED AS DISCUSSED ABOVE. THE ARGUMEN T OF THE LD.AR IS THAT U/S 147 IN CASE THE ASSESSMENT ORDER IS COMPLETED - - ITA 2534/M/ 14 8 U/S 143(3), AS HAS BEEN DONE IN THIS CASE, NO ACTIO N COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT YEAR UNLESS THE ASSESSEE HAS DISCLOSED F ULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT FOR THAT ASSESSMENT YEAR, INTER ALIA. 6.2 AS SEEN FROM THE REASONS RECORDED, IT GIVEN A CLEAR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENCE TO FORM HIS OPINION FOR TAKING RECOURSE TO SECTION 147 R.W.S 148 OF THE ACT. THERE CANNOT BE TWO OPINIONS. THE POINT OF TIME WHEN THE REASONS ARE RECORDED AFTER FORMING OPINION OF ESCAPEMENT OF INCOME IS ONLY RELEVANT. HENCE, THIS PLEA OF TH E LD.AR IS NOT TENABLE IN THE EYES OF LAW. IT IS TRUE THAT U/S 147 , THE ASSESSING OFFICER CAN EITHER ASSESS OR RE-ASSESS BUT FOR TAKI NG ACTION THEREUNDER, HE HAS TO RECORD REASONS THAT INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT . IT IS ALSO MANDATED BY SECTION 148(2) TO RECORD REASONS IN WRITING. THE REASSESSME NT PROCEEDINGS U/S 147 IS FURTHER SUBJECT TO SECTIONS 148,149,150,151,152 AND 153. BUT IN THE PRESENT CAS E, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF - - ITA 2534/M/ 14 9 PROCEEDINGS UNDERTAKEN AFTER FOUR YEARS OF THE ASSE SSMENT YEAR IN QUESTION. THE ASSESSING OFFICER IS REQUIRED TO SEE IF THE CONDITIONS LAID IN EXPLANATION 2(C) BECAUSE IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S 143(3) ARE SATISFIED O R NOT. IN CASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER A SSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR(III) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIE F UNDER THIS ACT; OR (IV)EXCESSIVE LOSS OR DEPRECIATION ALLOWANC E OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THE ASS ESSING OFFICER WOULD HAVE VALID COGNIZANCE U/S 147 OF THE ACT. THE REASONS RECORDED BY THE ASSESSING OFFICER CLEARLY S PEAK FOR THE UNDER ASSESSMENT OF TAX HENCE, THE CONDITIONS LAID ABOVE STAND FULFILLED IN SO FAR AS RE-ASSESSMENT PROCEEDINGS AR E CONCERNED. IN SO FAR AS THE REASONS RECORDED, EXTRACTED IN THE ABOVE PORTION OF THIS ORDER, WE ARE SATISFIED THAT THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSM ENT. THIS FACT CONFERS JURISDICTION ON HIM TO REOPEN THE ASSE SSMENT. THE POWER TO RE-ASSESS POST 1ST APRIL, 1989 ARE MUCH WI DER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC IN TERPRETATION OF THE WORDS REASON TO BELIEVE FAILING WHICH SECTION 147 WOULD - - ITA 2534/M/ 14 10 GIVE ARBITRARILY POWERS TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE BASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE, PER SE A REASON TO REOPEN THE CASE. THE ACT HAS NOT GIVEN POWER TO THE ASSESSING OFFICER TO REVIEW BUT HAS ONLY GIVEN POWER TO RE-ASSESS. THERE IS A CONCEPTUAL DIF FERENCE BETWEEN THE TWO ASPECTS AS THE ASSESSING OFFICER HA S NO POWER AT ALL TO REVIEW THE ASSESSMENT. THE REASSESSMENT, AS STATED ABOVE, HAS TO BE BASED ON FULFILLMENT OF CERTAIN PR E-CONDITIONS BUT THE CONCEPT CHANGE OF OPINION HAS TO BE TAKEN INTO CONSIDERATION OTHERWISE IT MAY GIVE UNBRIDLED POWER TO AN ASSESSING OFFICER TO REOPEN ANY AND EVERY ASSESSMEN T ORDER WHICH WOULD SIMPLY AMOUNT TO A REVIEW. THE CONCEPT CHANGE OF OPINION IS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. SO, NOW ONLY WHEN THE ASSESSING OFFICER HAS A TANGIBLE MATERIAL TO BASE HIS CONCLUSION THAT THE RE IS AN ESCAPEMENT OF INCOME FROM ASSESSMENT AND THE REASON S RECORDED HAVE A LINK WITH THE FORMATION OF HIS BELI EF, HE HAS THE POWER U/S 147 OF THE ACT. - - ITA 2534/M/ 14 11 6.3 NOW THE MOST MATERIAL PART WHICH WAS ARGUED B Y THE LD.AR IS REGARDING THE TIME LAG WHICH IS PROVIDED IN FIRS T PROVISO TO SECTION 147 WHICH STATES THAT WHERE AN ASSESSMENT U /S SUB- SECTION(3) OF SECTION 143 HAS BEEN MADE FOR THE REL EVANT ASSESSMENT YEAR, WHICH IS 2008-09, IN THIS CASE, NO ACTION SHALL BE TAKEN U/S 147 AFTER THE EXPIRY OF FOUR YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY THE REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT ASSESSMENT YEAR. THERE ARE TWO OTHER CONDITIONS WHI CH ARE NOT RELEVANT FOR DECIDING THE LEGAL ISSUE UNDER APPEAL. WE HAVE TO SEE AS TO WHAT FAILURE OF THE ASSESSEE TO DISCLOS E FULLY AND TRULY ALL MATERIAL FACTS SIGNIFY. THE EXPRESSION FAILURE TO DISCLOSE MATERIAL FACTS HAS BEEN EXPLAINED IN THE TAXMANS DIRECT TAXES MANUAL VOLUME 3. IT IS TRUE THAT EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE A TRUE AND FULL DISCLOSURE. A DISCLOSURE CAN BE EVEN FALSE OR TRUE. IT MAY BE A FULL DISCLOS URE OR IT MAY - - ITA 2534/M/ 14 12 NOT BE A FULL ONE. A PART DISCLOSURE MANY A TIMES M AY BE MISLEADING ONE. WHAT IS REQUIRED UNDER THE LAW IS A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR MAKI NG ASSESSMENT FOR THAT YEAR. THIS LAW WAS LAID DOWN BY THE HON'BL E SUPREME COURT IN THE CASE OF SRI KRISHNA PVT. LTD ETC VS IT O & OTHERS, 221 ITR 538. THE WORDS OMISSION OR FAILURE TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT F OR THAT YEAR POSTULATES A FAILURE OF THE ASSESSEE TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. WHAT FACTS ARE MATERIAL AND NECESSARY FOR ASSESSMENT WILL DIFF ER FROM CASE TO CASE. THE MATERIAL SHOULD NOT ONLY BE FULL BUT ALSO BE TRUE. IF SOME MATERIAL FOUND IN THE EVIDENCE PRODUCED BEFORE THE ASSESSING OFFICER WHICH THE ASSESSING OFFICER COULD HAVE UNCOVERED BUT DID NOT, THEN IT IS THE DUTY OF THE A SSESSEE TO BRING IT TO THE NOTICE OF THE ASSESSING AUTHORITY. THIS OMISSION OR FAILURE MAY BE EITHER DELIBERATE OR EVEN INADVERTEN T, THAT IS IMMATERIAL, BUT IN CASE THERE IS OMISSION TO DISCLO SE THE MATERIAL - - ITA 2534/M/ 14 13 FACTS THEN SUBJECT TO THE OTHER CONDITIONS JURISDIC TION TO REOPEN IS ATTRACTED. 6.4 IN THE PRESENT CASE, THE ASSESSEE HAS NOT SHOW N NATURE OF LAND . THE LAND IS CLASSIFIED AS INDUSTRIES T YPE II BY THE REGISTRATION DEPARTMENT. NO AGRICULTURAL OPERATION ARE BEING UNDERTAKEN IN THE SAID LAND. THERE ARE ABOUT 20 CO CUNUT TREES IN THE ENTIRE 12 ACRES OF LAND. THE LAND IS SURROUN DED ON ALL SIDES BY FACTORIES AND INDUSTRIES. THE LAND IS LOC ATED AT A DISTANCE OF 8 KMS ONLY FROM THE MUNICIPAL LIMITS. AS PER EXPLANATION 2 OF SECTION147 IT IS VERY CLEAR THAT D UE TO NON DISCLOSE OF THESE FACTS BY THE ASSESSEE, THE INCOM E CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE ASSESSEE HAS NO T PRODUCED ANYTHING BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) TO SHOW AS TO HOW THIS FACT WAS FULLY AND TRULY DISCLOSED BEFORE THE ASSESSING AUTHORITY AND THAT T HERE WAS NOT FAILURE ON THE PART OF ASSESSEE. HENCE, THE COMMISS IONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIES IN ACTION OF VACATING THE REASSESSMENT ORDER. THE ACTION ASSESSING OFFICER I S FULLY COVERED BY THE PROVISIONS OF EXPLANATION 1 TO SECTI ON 147 OF THE INCOME TAX ACT WHICH READS AS UNDER: - - ITA 2534/M/ 14 14 PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUN TS BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD W ITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFF ICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. IT IS POSSIBLE THAT WITH DUE DILIGENCE THE ASSESSI NG OFFICER WOULD HAVE ASCERTAINED THIS FAT AT THE TIME OF ORIGINAL A SSESSMENT ALSO, BUT IN VIEW OF THE EXPLANATION (1) IT DOES NOT MEAN THAT THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE. HENCE, REOPENING U/S.147 IS HELD TO BE VALID. THE ASSESSEE HAS TRIE D TO TAKE SHELTER UNDER THE EXCEPTION PROVIDED BY THE ABOVE S TATED PROVISO WHERE AN ASSESSMENT UNDER SUB-SECTION (3) O F SECTION 143 HAS BEEN COMPLETED; NO ACTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR CAN BE TAKEN. B UT AS STATED ABOVE, WHEN THE ASSESSEE HAS NOT DISCLOSED F ULLY AND TRULY THE FACTS NECESSARY FOR THE ASSESSMENT, THIS PROVISO WILL NOT COME TO ITS RESCUE. CONSEQUENTLY, WE HOLD THAT THE ENTIRE REASSESSMENT PROCEEDING IN THIS CASE IS VALID AND T HEREFORE, THE ACTION OF THE ASSESSING OFFICER IS UPHELD. THE ASSE SSEE FAILS ON THIS LEGAL ISSUE. - - ITA 2534/M/ 14 15 6.5 THE LD.A.R ALSO ARGUED THAT THE AO TRAVELLED B EYOND THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. ACCORDING TO LD.A.R, THE ASSESSMENT WAS REOPENED FOR CONSIDE RING THE CAPITAL GAINS ON TRANSFER OF THE LAND. HOWEVER, AT THE STATE OF ASSESSMENT , HE TOOK A NEW GROUND THAT ASSESSEES I NCOME ON TRANSFER OF LAND AS BUSINESS INCOME. ACCORDING TO H IM, THE ASSESSEE DEALT WITH THE LAND AS AN ADVENTURE IN THE NATURE OF TRADE AND THIS AMOUNTS TO TAKE THE NEW ISSUE FOR WH ICH THERE WAS NO REASONS RECORDED FOR RE-OPENING OF ASSESSME NT. ACCORDINGLY, HE RELIED ON THE ORDER OF THE LD.CIT(A ), WHO HAS QUASHED THE ASSESSMENT ORDER. FOR THIS PURPOSE, HE RELIED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS. JET AIRWAYS (I) LTD., IN [2010] 331 ITR 23 6(BOM.) AND JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF RANBAX Y LABORATORIES LTD. VS. CIT IN 336 ITR 136(DELHI). T HIS ISSUE WAS CONSIDERED BY THE KARNATAKA HIGH COURT IN THE CASE OF N. GOVINDARAJU VS. ITO IN [2015] 377 ITR 243 (KAR) WHE REIN HELD THAT:- SECTION 148 OF THE INCOME-TAX ACT, 1961, REQUIRES THE ASSESSING OFFICER TO ISSUE NOTICE TO THE ASSESSEE W HERE THE INCOME HAS ESCAPED ASSESSMENT. SUB-SECTION (2), WHI CH WAS INSERTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 19 89, WITH - - ITA 2534/M/ 14 16 EFFECT FROM APRIL 1, 1989, REQUIRES THE ASSESSING O FFICER TO RECORD HIS REASONS BEFORE ISSUANCE OF ANY SUCH NOTI CE UNDER SUB-SECTION (1) OF SECTION 148 . THE ORTHODOX FUNCTION OF AN EXPLANATION IS TO EXPLA IN THE MEANING AND EFFECT OF THE MAIN PROVISION. IT IS DIF FERENT IN NATURE FROM A PROVISO, AS THE LATTER EXCEPTS, EXCLU DES OR RESTRICTS, WHILE THE FORMER EXPLAINS OR CLARIFIES A ND DOES NOT RESTRICT THE OPERATION OF THE MAIN PROVISION. AN EX PLANATION IS ALSO DIFFERENT FROM RULES FRAMED UNDER AN ACT. RULE S ARE FOR EFFECTIVE IMPLEMENTATION OF THE ACT WHEREAS AN EXPL ANATION ONLY EXPLAINS THE PROVISIONS OF THE SECTION. RULES CANNOT GO BEYOND OR AGAINST THE PROVISIONS OF THE ACT AS THEY ARE FRAMED UNDER THE ACT AND IF THERE IS ANY CONTRADICTION, TH E ACT WILL PREVAIL OVER THE RULES. THIS IS NOT THE POSITION VI S-A-VIS THE SECTION AND ITS EXPLANATION. THE LATTER, BY ITS VER Y NAME, IS INTENDED TO EXPLAIN THE PROVISIONS OF THE SECTION, HENCE, THERE CAN BE NO CONTRADICTION. A SECTION HAS TO BE UNDERS TOOD AND READ HAND IN HAND WITH THE EXPLANATION, WHICH IS ON LY TO SUPPORT THE MAIN PROVISION, LIKE AN EXAMPLE DOES NO T EXPLAIN ANY SITUATION. THE INSERTION OF EXPLANATION 3 TO SECTION 147 DOES NOT IN ANY MANNER OVERRIDE THE MAIN SECTION AND HAS BEEN ADDED WITH NO OTHER PURPOSE THAN TO EXPLAIN OR CLARIFY THE MAIN S ECTION SO AS TO ALSO BRING IN ANY OTHER INCOME (OF THE SECOND PART OF SECTION 147 ) WITHIN THE AMBIT OF TAX, WHICH MAY HA VE ESCAPED ASSESSMENT, AND COMES TO THE NOTICE OF THE ASSESSIN G OFFICER SUBSEQUENTLY, DURING THE COURSE OF THE PROCEEDINGS. CIRCULAR NO. 5 OF 2010 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES ALSO MAKES THIS POSITION CLEAR. THERE IS NO CONFLICT BET WEEN THE MAIN SECTION 147 AND ITS EXPLANATION 3 . THIS EXPLA NATION HAS BEEN INSERTED ONLY TO CLARIFY THE MAIN SECTION AND NOT CURTAIL ITS SCOPE. THE INSERTION OF EXPLANATION 3 IS THUS CLARI FICATORY AND IS FOR THE BENEFIT OF THE REVENUE AND NOT THE ASSES SEE. AFTER THE INSERTION OF EXPLANATION 3 TO SECTION 147 IT IS CLEAR THAT THE USE OF THE PHRASE AND ALSO BETWEEN THE FIRST AND THE SECOND PARTS OF THE SECTION IS NOT CONJUNCTIVE AND ASSESSM ENT OF ANY OTHER INCOME (OF THE SECOND PART) CAN BE MADE INDE PENDENT OF THE FIRST PART (RELATING TO SUCH INCOME FOR WH ICH REASONS ARE GIVEN IN NOTICE UNDER SECTION 148) , NOTWITHSTA NDING THAT THE REASONS FOR SUCH ISSUE (ANY OTHER INCOME) HAV E NOT BEEN GIVEN IN THE REASONS RECORDED UNDER SECTION 148(2) . THE ISSUANCE OF NOTICE IS JUSTICIABLE. IF THE ASSES SEE CHOOSES NOT TO CHALLENGE THE NOTICE OR IF IT IS CHALLENGED AND FOUND TO BE VALID, THEN IN EITHER CASE, SUCH NOTICE IS TO BE TR EATED AS VALID AND FINAL. SINCE THE VALIDITY OF THE NOTICE ISSUED UNDER SECTION 148(2) CAN BE CHALLENGED OR IS SUBJECT TO JUDICIAL SCRUTINY, THE - - ITA 2534/M/ 14 17 ASSESSMENT OR REASSESSMENT OF ANY OTHER INCOME IN THE CASE OF A VALIDLY ISSUED NOTICE CANNOT BE SAID TO B E A CASE OF FISHING AND ROVING ENQUIRY. 6.6 THE JUDGMENT OF THE KERALA HIGH COURT (FULL BE NCH) IN THE CASE OF CIT V. BEST WOOD INDUSTRIES & SAW MILLS (33 1 ITR 63), WHICH IS THE FULL BENCH JUDGMENT, HELD THAT IF IN T HE COURSE OF REASSESSMENT, IT COMES TO THE NOTICE OF THE AO THAT ANY ITEM OR ITEMS OTHER THAN ITEMS OF ESCAPED INCOME, FOR WHICH ORIGINALLY ASSESSMENT WAS RE-OPENED, HAVE ALSO ESCAPED ASSESSM ENT, IS BOUND TO ASSESS SUCH ITEM OR ITEMS OF SUCH ITEM OR ITEMS OF INCOME IN THE COURSE OF REASSESSMENT. 6.7 THE KARNATAKA HIGH COURT IN THE CASE OF N. GOV INDRAJU CONSIDERED THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF JET AIRWAYS (I) LTD.(SUPRA) AND IT WAS OBSERVED THAT THE AO IS EMPOWERED TO MAKE ADDITIONS EVEN ON GROUND ON WHICH REASSESSMENT NOTICE NOT EVEN ISSUED, THEREFORE, NOT ICE U/S.148(2) IS FOUND TO BE VALID THEN, ADDITION CAN BE MADE ON ALL GROUNDS OR ISSUES WHICH MAY COME TO THE NOTICE OF T HE AO. SUBSEQUENTLY, DURING THE COURSE OF PROCEEDINGS U/S. 147, EVEN THOUGH REASON WHY NOTICE FOR SUCH INCOME WHICH MA Y HAVE - - ITA 2534/M/ 14 18 ESCAPED ASSESSMENT, MAY NOT SURVIVE. IT IS NEEDLES S TO SAY THAT WHEN DIFFERENT HIGH COURTS EXPRESSED DIFFERENT OPIN IONS, ON A POINT OF LAW, NORMALLY, THE BENEFIT OF DOUBT UNDER THE TAXATION LAW WOULD GO TO THE ASSESSEE. IT IS ALSO EQUALLY SETTL ED PRINCIPLES OF LAW THAT THE JUDGMENT WHICH DISCUSSES THE POINT IN ISSUE ELABORATELY AND GIVES AN ELABORATE REASONING HAS TO BE PREFERRED WHEN COMPARED TO THE JUDGMENT WHICH HAS N O REASONING AND DISCUSSION. ADMITTEDLY, IN THE CASE OF N. GOVINDRAJU (KAR.) HIGH COURT DISCUSSED THE ISSUE EL ABORATELY AND SPECIFIC REASONING IS ALSO WAS RECORDED WHY THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF JET AIRWAYS (I) LT D.(SUPRA) AND OTHER JUDGMENTS CANNOT BE APPLIED. THEREFORE, WE ARE OF THE OPINION THAT JUDGMENT OF KARNATAKA HIGH COURT I N THE CASE OF N. GOVINDRAJU (SUPRA) AND THE KERALA HIGH COURT FUL L BENCH TO BE APPLIED RATHER THAN OTHER JUDGMENTS CITED IN THE ABOVE ORDER. BEING A HIGHER FORUM, WE ARE BOUND TO FOLLOW THE SA ME TAKING INTO CONSIDERATION THE PROVISIONS OF ARTICLES 215, 226 & 227 OF THE CONSTITUTION OF INDIA. WE ARE INCLINED TO HOLD THAT THE KERALA HIGH COURT FULL BENCH DECISION CITED SUPRA IS DIREC TLY APPLICABLE ON THE ISSUE. IN VIEW OF THE JUDGEMENT OF THE HIGH COURT, THE AO - - ITA 2534/M/ 14 19 JUSTIFIED IN CHANGING THE HEAD OF INCOME FROM LONG TERM CAPITAL GAINS TO BUSINESS INCOME. ON THIS COUNT ALSO, THE A SSESSEES PLEA CANNOT BE UPHELD. 7. IN OUR OPINION, THE CIT(A) IS NOT CORRECT IN CA NCELLING RE- ASSESSEMENT ORDER. ACCORDINGLY, WE REVERSE THE ORDE R OF LD. CIT(A) AND RESTORE TO HIM TO DECIDE THE ISSUE RAISE D BY THE ASSESSEE BEFORE HIM ON THE MERIT OF THE ADDITION MA DE BY THE AO. 8. IN THE RESULT, THE APPEAL OF REVENUE IS ALLOWE D. ORDER PRONOUNCED ON 19 TH APRIL, 2017 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 19 TH APRIL , 2017. K S SUNDARAM 9D EFGF / COPY TO: 1 . / APPELLANT 3. H- / CIT(A) 5. FIJ K / DR 2. / RESPONDENT 4. H / CIT 6. J(L / GF