Ad-Manum Finance Ltd., Indore V. The ACIT 5(1), Indore

ITA 266/IND/2012

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5706 (ITAT-INDORE)
• Duration Of Justice: 7 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-12-2019
• Assessment Year: 2001-2002
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUNEET KUMAR
• Assessee Lawyers: SHALINI MEHTA CAS
• Keywords: Reopening of assessment; Business income; Depreciation; Transfer pricing; Income from undisclosed sources; Double taxation relief; International transaction; Question of law; Difference of opinion; Accommodation entries; Procedural lapse; Assessment record; Block assessment; Reason to believe; Change of opinion; Reassessment proceedings; Set aside; Capital Gains
• Section: 143(3); 142(1); 92E; 133A; 14A; 143(1); 195; 292BB; 143(2); 139(1); 48; 9(1); 9(1); 9(1); 13; 153; 22; 32; 147; 148; 90; 139; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.266, 316 & 286/IND/2012 ASSESSMENT YEARS: 2001-02, 2002-3 & 2003-04 ASSESSEE BY SHRI AJAY TULSIYAN & SHALINI MEHTA, CAS REVENUE BY SHRI PUNEET KUMAR, SR. DR DATE OF HEARING 1 1 . 1 2 .2019 DATE OF PRONOUNCEMENT 29. 0 1 .20 20 O R D E R PER MANISH BORAD, AM THE ABOVE CAPTIONED APPEALS FILED AT THE INSTANCE O F THE ASSESSEE PERTAINING TO ASSESSMENT YEARS 2001-02, 20 02-3 & 2003- 04 ARE DIRECTED AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX(APPEALS)-II, (IN SHORT CIT(A)] INDORE DATED 3 1.01.2012, 24.02.2002 & 31.01.2012 WHICH ARE ARISING OUT OF TH E ORDER U/S 147/143(3) OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) BY ACIT, INDORE VIDE ORDER DATED 24.12.2008, 30.12.2009 & 27 .12.2010. AD - MANUM FINANCE LTD. 2 ND FLOOR, AGARWAL HOUSE, 5, YESHWANT COLONY, INDORE VS. ACIT,5(1) INDORE (APPELLANT) (RESPONDENT ) PAN NO.AABCA4980F AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 2 FIRST WE WILL TAKE ITANO.266/IND/2012 FOR ASSESSMEN T YEAR 2001-02: 2. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINE SS OF FINANCE. INCOME OF RS.48,05,390/- DECLARED IN THE RETURN OF INCOME FILED ON 31.10.2001. SUBSEQUENTLY, NOTICE U/S 148 OF THE ACT WAS ISSUED ON 27.03.2008. IN RESPONSE ASSESSEE STATED THAT RETURN FILED ON 31.10.2001 U/S 139(1) OF THE ACT MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. AFTER EXAMIN ING THE RECORDS ASSESSMENT U/S 147 R.W.S. 143(3) OF THE ACT COMPLET ED ON 24.12.2008, ASSESSING INCOME AT RS.58,22,650/-. APP EAL BY THE ASSESSEE BEFORE THE LD. CIT(A) DID NOT BRING ANY RE LIEF. 3. NOW ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RA ISING FOLLOWING GROUNDS OF APPEAL: 1. THAT THE RE-OPENING OF THE ASSESSMENT U/S 147, THE RE-ASSESSMENT PROCEEDINGS AND THE ORDER PASSED PURSUANT THERETO ARE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE WITHOUT JURISDICTION, WRONG AND BAD IN LAW AND THE SAME REQUIRES TO BE NOW QUASHED. 2. THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION O F THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS.10,00,000/- U/S 68 ALLEGING THAT THE APPELLANT HAS NOT BEEN ABLE TO SATISFY THE TESTS LAID BY SECTION 68. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SAID ADDITION IS WRONG AND UNCALLED FOR AND SAME MAY NOW BE VERY KINDLY DELETED. 3. 3. THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ACTIO N OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 3 RS.17,260/- ON ACCOUNT OF INTEREST PAID TO LOAN CREDITOR TREATING THE PAYMENT AS NOT GENUINE. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SAID ADDITION IS WRONG AND BAD IN LAW AND THE SAME MAY VERY KINDLY BE DELETED. 4. THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE LEVY OF INTEREST U/S 234D IS MANDATORY IN NATURE THEREBY HOLDING THE ACTION OF THE ASSESSING OFFICER IN CHARGING INTEREST U/S 234D AT RS.1,37,433/-. IT IS SUBMITTED THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE, THE APPELLANT IS NOT LIABLE FOR THE SAID INTEREST AND THE SAME MAY VERY KINDLY BE NOW DELETED. 5. THAT THE APPELLANT GRAVES LEAVE TO ADD, TO ALTER, AMEND MODIFY, SUBSTITUTE, DELETE AND/OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL ON OR BEFORE FINAL HEARING, IF NECESSARILY SO ARISES. 4. ALONG WITH PAPER BOOK FILED ON 10.12.2019 ASSESS EE HAS REQUESTED FOR ADMISSION OF ADDITIONAL GROUND THEREB Y CHALLENGING THE REASSESSMENT PROCEEDING ON THE SPECIFIC ISSUE O F NON-ISSUANCE OF STATUTORY NOTICE U/S 143(2) OF THE ACT. IN SUPPO RT OF THE CONTENTION THAT LEGAL GROUND CAN BE ADMITTED BY THE HON'BLE TRIBUNAL RELIANCE WAS PLACED ON THE JUDGMENT OF HON 'BLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (1992) 229 ITR 383 , JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. EICHER MOTORS LTD. (2007) 293 ITR 464 AS WELL AS IN THE CASE OF DCIT VS. TURQUOISE INVESTMENT & FINANCE LTD. (2008) 299 ITR 143. 5. FOR THE PROPOSITION THAT THE HON'BLE I.T.A.T., W AS JUSTIFIED IN ALLOWING TO RAISE THE ISSUE OF LEGAL GROUND FOR NON ISSUANCE OF NOTICE AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 4 U/S 143(2) FOR THE FIRST TIME AND THAT SECTION 292B B OF THE ACT IS A RULE OF EVIDENCE AND WOULD NOT APPLY SO FAR AS FAIL URE OF SERVICE OF NOTICE WAS CONCERNED AND THAT SECTION 292BB IS PROS PECTIVE AND APPLICABLE ONLY FOR A.Y. 2008-09 ONWARDS. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF PR. CIT VS. SILVER LINE IN ITA NO.578 TO 582/2015 . 6. AS REGARDS THE PROPOSITION THAT THE ISSUANCE OF NOTICE U/S 143(2) OF THE ACT IS MANDATORY BEFORE COMMENCING THE REASS ESSMENT PROCEEDINGS AND IF NOTICE U/S 143(2) OF THE ACT IS NOT ISSUED THEN THE ENTIRE REASSESSMENT PROCEEDINGS CAN BE HELD INV ALID AND VOID AB INITIO , RELIANCE WAS PLACED ON FOLLOWING JUDGMENTS: 1. CIT VS. LAXMAN DAS KHANDELWAL IN CIVIL APPEAL NO.62 61-6262 OF 2019 DATED 13.08.2019 (SC) 2. PR. CIT VS. KAMLA DEVI SHARMA IN ITANO.197/2018 DAT ED 10.07.2018(RAJASTHAN HC) 3. PR. CIT VS. OBEROI HOTELS PVT. LTD. IN ITANO.152 OF 2015 DATED 22.6.2018(CALCUTTA HC) 4. ITO VS. SHRI VINOD KUMAR JAIN IN ITANO.318/IND/2017 DATED 11.03.2019 (I.T.A.T.,INDORE) 5. ACIT KHANDWA VS. M/S. SUKHAMANI COTTON INDUSTRIES I N ITANO.222/IND/2017 DATED 21.12.2018 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE (LD. DR) THOUGH SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES COULD NOT CONTROVERT THE FACT THAT STATUTORY U/S 143(2) OF THE ACT WAS N OT ISSUED TO THE AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 5 ASSESSEE. SUFFICIENT OPPORTUNITY WAS PROVIDED TO TH E LD. DR ON VARIOUS DATES OF HEARING TO VERIFY FROM THE CASE RE CORDS THAT WHETHER THE NOTICE U/S 143(2) OF THE ACT WAS ISSUED BEFORE COMMENCING REASSESSMENT PROCEEDINGS. HOWEVER, NO SU CH EVIDENCE WAS PLACED ON RECORD. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE JUDGMENTS REFERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. THOUGH, THE ASSESSEE HAS RAISED GROUND NO.1 TO 4 ON MERITS BUT WE WILL FIRST TAKE THE LEGAL ISSUE RAISED THROUGH THE ADDITIONAL GROUND OF APPEA L FILED BY THE ASSESSEE CHALLENGING THE VALIDITY OF REASSESSMENT P ROCEEDINGS, SINCE STATUTORY NOTICE U/S 143(2) OF THE ACT WAS NOT ISSU ED. 9. SO FAR AS THE ADMISSION OF LEGAL GROUND IS CONCE RNED, AFTER PERUSING THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (1992) 229 ITR 383 , JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. EICHER MOTORS LTD. (2007) 293 ITR 464 AND THE JUDGMENT IN THE CASE OF DCIT VS. TURQUOISE INVESTMENT & FINANCE LTD. (2008) 299 ITR 143, ARE OF THE CONSIDERED VIEW THAT ADDITIONAL LEGAL GR OUND RAISED BY THE ASSESSEE DESERVES TO BE ADMITTED AS IT IS PURELY LE GAL IN NATURE AND GOES TO THE ROOT OF THE MATTER AND ALL THE MATERIAL RELATING TO THE ADDITIONAL GROUND ARE AVAILABLE ON RECORD. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 6 10. IN THE INSTANT CASE WE DIRECTED THE LD. DR TO P RODUCE THE CASE RECORD AND PROOF OF ISSUE AND SERVICE OF NOTICE U/S 143(2) OF THE ACT ON 06.03.2019 WITH RESPECT TO ADDITIONAL GROUND RAI SED BY THE ASSESSEE. THE CASE RECORDS WERE PRODUCED BY THE LD. DR AND IT WAS ADMITTED THAT NOTICE U/S 143(2) OF THE ACT WAS NOT ISSUED BY THE LD. ASSESSING OFFICER TO THE ASSESSEE. THUS, IT IS CLEA RLY EVIDENT THAT ALL THE MATERIALS RELATING TO ADDITIONAL GROUND RAISED BY THE APPELLANT IS AVAILABLE ON RECORD. COORDINATE BENCH BANGALORE IN THE CASE OF SHRI E. KRISHNAPPA VS. ITO, IN ITANO.313 TO 315/BAN G/2014 WHEREIN THE JUDGMENT OF HON'BLE MP HIGH COURT IN THE CASE O F TOLARAM HASSOMAL DATED 10.03.2006 AND THE TWO SUBSEQUENT DECISION O F THE HON'BLE MP HIGH COURT IN THE CASE OF CIT VS. EICHER MOTORS LTD. (SUPRA) AND THE JUDGMENT IN THE CASE OF DCIT VS. TURQUOISE INVESTMENT & FINANCE LTD. (SUPRA) WERE CONSIDERED, HELD THAT WHEN A LEGAL QUESTION IS RAISED THEN THE TRIBUNAL CANNOT BE PRECLUDED FROM ADMITTING THE SAME AND CONSIDERING IT IN ACCORDANCE WITH LAW. 11. THUS, IN THE LIGHT OF THE ABOVE JUDICIAL PRECED ENCE WE ADMIT ADDITIONAL LEGAL GROUNDS RAISED BY THE ASSESSEE AND PROCEED TO ADJUDICATE THE SAME. IN THIS ADDITIONAL GROUND ISSU E RAISED BY THE ASSESSEE IS THAT REASSESSMENT PROCEEDINGS ARE LIABL E TO BE QUASHED, ON THE SPECIFIC GROUND OF NON-ISSUANCE OF STATUTORY NOTICE U/S 143(2) OF THE ACT. IT IS AN ADMITTED FACT BEFORE US THAT FOR THE INSTANT YEAR UNDER APPEAL FOR THE PURPOSE OF REASSESSMENT L D. AO ONLY ISSUED NOTICE U/S 148 OF THE ACT BUT FAILED TO ISSU E STATUTORY NOTICE U/S 143(2) OF THE ACT. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 7 12. NOW WHETHER THE ISSUE OF NOTICE U/S 143(2) OF T HE ACT IS MANDATORY FOR CARRYING OUT REASSESSMENT PROCEEDINGS , WE FIND THAT HON'BLE APEX COURT IN A RECENT JUDGMENT IN THE CASE OF CIT VS. LAXMAN DAS KHANDELWAL IN CIVIL APPEAL NO.6261-6262 OF 2019 DATED 13.08.2019 ADJUDICATING SIMILAR ISSUE LAYING DOWN THE RATIO THAT THE ISSUANCE OF NOTICE U/S 143(2) OF THE ACT B EING A PREREQUISITE AND IN THE ABSENCE OF SUCH NOTICES THE ENTIRE PROCEEDING WOULD BE INVALID, OBSERVED AS FOLLOWS:- 5. AT THE OUTSET, IT MUST BE STATED THAT OUT OF TWO QUESTIONS OF LAW THAT AROSE FOR CONSIDERATION IN IN HOTEL BLUE M OONS CASE2 THE FIRST QUESTION WAS WHETHER NOTICE UNDER SECTION 143(2) WOULD BE MANDATORY FOR THE PURPOSE OF MAKING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. IT WAS OBSERVED:- 3. THE APPELLATE TRIBUNAL HELD, WHILE AFFIRMING TH E DECISION OF CIT (A) THAT NON-ISSUE OF NOTICE UNDER SECTION 143(2) IS ONLY A PROCEDURAL IRREGULARITY AND THE SAME IS CURABLE. IN THE APPEAL FILED BY THE ASSESSEE BEFORE THE GAUHATI HIGH COURT, THE FOLLOWING TWO QUESTIONS OF LAW WERE RAISED FOR CONSIDERATION AND DECISION OF THE H IGH COURT, THEY WERE: (1) WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF T HE CASE THE ISSUANCE OF NOTICE UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 WITHIN THE PRESCRIBED TIME- LIMIT FOR THE PURPOSE OF MAKING THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 IS MANDATORY? AND (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE UNDISPUTED FINDINGS ARRIVED AT BY THE COMMISSIONER OF INCOME TAX (APPEALS), THE ADDIT IONS MADE UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 SHOULD BE DELETED OR SET ASIDE? AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 8 4. THE HIGH COURT, DISAGREEING WITH THE TRIBUNAL, H ELD, THAT THE PROVISIONS OF SECTION 142 AND SUB-SECTIONS (2) AND (3) OF SECTION 143 WILL HAVE MANDATORY APPLICATION IN A CASE WHERE THE ASSESSING OFFICER IN REPUDIATION O F RETURN FILED IN RESPONSE TO A NOTICE ISSUED UNDER SECTION 158- BC(A) PROCEEDS TO MAKE AN INQUIRY. ACCORDINGLY, THE HIGH COURT ANSWERED THE QUESTION OF LAW FRAMED IN AFFIRM ATIVE AND IN FAVOUR OF THE APPELLANT AND AGAINST THE REVE NUE. THE REVENUE THEREAFTER APPLIED TO THIS COURT FOR SP ECIAL LEAVE UNDER ARTICLE 136 , AND THE SAME WAS GRANTED, AND HENCE THIS APPEAL. 13. THE ONLY QUESTION THAT ARISES FOR OUR CONSIDERA TION IN THIS BATCH OF APPEALS IS: WHETHER SERVICE OF NOTICE ON THE ASSESSEE UNDER SECTION 143(2) WITHIN THE PRESCRIBED PERIOD OF TIME IS A PREREQUISITE FOR FRAMING THE BL OCK ASSESSMENT UNDER CHAPTER XIV-B OF THE INCOME TAX AC T, 1961? 27. THE CASE OF THE REVENUE IS THAT THE EXPRESSION SO FAR AS MAY BE, APPLY INDICATES THAT IT IS NOT EXPECTED TO FOLLOW THE PROVISIONS OF SECTION 142 , SUB-SECTIONS (2) AND (3) OF SECTION 143 STRICTLY FOR THE PURPOSE OF BLOCK ASSESSMENTS. WE DO NOT AGREE WITH THE SUBMISSIONS O F THE LEARNED COUNSEL FOR THE REVENUE, SINCE WE DO NOT SE E ANY REASON TO RESTRICT THE SCOPE AND MEANING OF THE EXP RESSION SO FAR AS MAY BE, APPLY. IN OUR VIEW, WHERE THE ASSESSING OFFICER IN REPUDIATION OF THE RETURN FILE D UNDER SECTION 158- BC(A) PROCEEDS TO MAKE AN ENQUIRY, HE HAS NECESSARILY TO FOLLOW THE PROVISIONS OF SECTION 142 , SUB- SECTIONS (2) AND (3) OF SECTION 143 . 6. THE QUESTION, HOWEVER, REMAINS WHETHER SECTION 292BB WHICH CAME INTO EFFECT ON AND FROM 01.04.2008 HAS EFFECTED ANY CHANGE. SAID SECTION 292BB IS TO THE FOLLOWING EFFECT:- AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 9 292BB. NOTICE DEEMED TO BE VALID IN CERTAIN CIRCUMSTANCES. WHERE AN ASSESSEE HAS APPEARED IN ANY PROCEEDING OR COOPERATED IN ANY INQUIRY RELATING TO AN ASSESSMENT OR REASSESSMENT, IT SHALL BE DEEMED THAT ANY NOTICE UNDER ANY PROVISION OF THIS ACT, WHICH IS RE QUIRED TO BE SERVED UPON HIM, HAS BEEN DULY SERVED UPON HIM I N TIME IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT AND SUCH ASSESSEE SHALL BE PRECLUDED FROM TAKING ANY OBJECTI ON IN ANY PROCEEDING OR INQUIRY UNDER THIS ACT THAT THE N OTICE WAS (A) NOT SERVED UPON HIM; OR (B) NOT SERVED UPON HIM IN TIME; OR (C) SERVED UPON HIM IN AN IMPROPER MANNER: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY WHERE THE ASSESSEE HAS RAISED SUCH OBJECTION BEFORE THE COMPLETION OF SUCH ASSESSMENT OR REASSESSMENT. 7. A CLOSER LOOK AT SECTION 292BB SHOWS THAT IF THE ASSESSEE HAS PARTICIPATED IN THE PROCEEDINGS IT SHALL BE DEE MED THAT ANY NOTICE WHICH IS REQUIRED TO BE SERVED UPON WAS DULY SERVED AND THE ASSESSEE WOULD BE PRECLUDED FROM TAKING ANY OBJ ECTIONS THAT THE NOTICE WAS (A) NOT SERVED UPON HIM; OR (B) NOT SERVED UPON HIM IN TIME; OR (C) SERVED UPON HIM IN AN IMPR OPER MANNER. ACCORDING TO MR. MAHABIR SINGH, LEARNED SENIOR ADVO CATE, SINCE THE RESPONDENT HAD PARTICIPATED IN THE PROCEEDINGS, THE PROVISIONS OF SECTION 292BB WOULD BE A COMPLETE ANSWER. ON THE OTHER HAND, MR. ANKIT VIJAYWARGIA, LEARNED A DVOCATE, APPEARING FOR THE RESPONDENT SUBMITTED THAT THE NOT ICE UNDER SECTION 143(2) OF THE ACT WAS NEVER ISSUED WHICH WAS EVIDENT FROM THE ORDERS PASSED ON RECORD AS WELL AS THE STAND TAKEN BY THE APPELLANT IN THE MEMO OF APPEAL. IT WA S FURTHER SUBMITTED THAT ISSUANCE OF NOTICE UNDER SECTION 14 3(2) OF THE ACT BEING PREREQUISITE, IN THE ABSENCE OF SUCH NOTI CE, THE ENTIRE PROCEEDINGS WOULD BE INVALID. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 10 8. THE LAW ON THE POINT AS REGARDS APPLICABILITY OF THE REQUIREMENT OF NOTICE UNDER SECTION 143(2) OF THE ACT IS QUITE CLEAR FROM THE DECISION IN BLUE MOONS CASE2. THE I SSUE THAT HOWEVER NEEDS TO BE CONSIDERED IS THE IMPACT OF SECTION 292BB OF THE ACT. 9. ACCORDING TO SECTION 292BB OF THE ACT, IF THE ASSESSEE HAD PARTICIPATED IN THE PROCEEDINGS, BY WAY OF LEGAL FI CTION, NOTICE WOULD BE DEEMED TO BE VALID EVEN IF THERE BE INFRAC TIONS AS DETAILED IN SAID SECTION. THE SCOPE OF THE PROVISIO N IS TO MAKE SERVICE OF NOTICE HAVING CERTAIN INFIRMITIES TO BE PROPER AND VALID IF THERE WAS REQUISITE PARTICIPATION ON PART OF THE ASSESSEE. IT IS, HOWEVER, TO BE NOTED THAT THE SECTION DOES NOT SAVE COMPLETE ABSENCE OF NOTICE. FOR SECTION 292BB TO APPLY, THE NOTICE MUST HAVE EMANATED FROM THE DEPARTMENT. IT IS ONLY THE I NFIRMITIES IN THE MANNER OF SERVICE OF NOTICE THAT THE SECTION SE EKS TO CURE. THE SECTION IS NOT INTENDED TO CURE COMPLETE ABSENC E OF NOTICE ITSELF. 10. SINCE THE FACTS ON RECORD ARE CLEAR THAT NO NOT ICE UNDER SECTION 143(2) OF THE ACT WAS EVER ISSUED BY THE DEPARTMENT, THE FINDINGS RENDERED BY THE HIGH COURT AND THE TRIBUNAL AND THE CONCLUSION ARRIVED AT WERE CORRECT . WE, THEREFORE, SEE NO REASON TO TAKE A DIFFERENT VIEW I N THE MATTER. 13. WE, THUS, RESPECTFULLY FOLLOWING THE JUDGMENT O F HON'BLE APEX COURT AND EXAMINING THE FACT OF THE INSTANT APPEAL OBSERVE THAT SINCE NOTICE U/S 143(2) OF THE ACT WAS NOT ISSUED T O THE ASSESSEE, BEFORE COMMENCING REASSESSMENT PROCEEDINGS THE ERRO R BEING FATAL AND UNCORRECTABLE RENDERS THE REASSESSMENT PROCEEDI NGS VOID AB INITIO AND THUS LIABLE TO BE QUASHED. HENCE THE ASSESSMEN T SO FRAMED WITHOUT ISSUANCE OF NOTICE U/S 143(3) OF THE ACT IS HEREBY QUASHED BEING CONTRARY TO LAW. WE, THUS ALLOW ASSES SEES ADDITIONAL LEGAL GROUND RAISED IN GROUND NO.5. ADJUDICATION OF THE REMAINING GROUNDS ON MERITS WILL BE MERELY ACADEMIC IN NATURE AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 11 SINCE WE HAVE QUASHED REASSESSMENT PROCEEDINGS. THU S, GROUND NO.1 TO 4 RAISED BY ASSESSEE ON MERITS ARE DISMISSE D BEING INFRUCTUOUS. 14. AS A RESULT, APPEAL OF THE ASSESSEE FOR A.Y. 20 01-02 IS ALLOWED. NOW WE TAKE ITA NO.316/IND/2012 FOR A.Y. 2002-03 15. BRIEF FACTS RELATING TO THIS APPEAL FOR ASSESSM ENT YEAR 2002-03 ARE THAT ON 30.10.2002 RETURN OF INCOME WAS FILED D ECLARING INCOME OF RS.78,65,480/-. RETURN WAS PROCESSED U/S 143(1)( A) OF THE ACT ON 20.12.2002 ACCEPTING THE RETURNED INCOME. THEREAFTE R, NOTICE U/S 148 OF THE ACT WAS ISSUED DATED 30.03.2009 DULY SER VED ON 30.03.2009 VIDE LETTER DATED 05.04.2009. ASSESSEE S TATED THAT THE RETURN FILED ON 30.10.2002 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. REASSESSMENT PROCEEDINGS WERE CARRIED OUT ASSESSING INCOME AT RS.89,44,540/- AFTER MAKING VARIOUS ADDITIONS FOR UNSECURED LOAN, UNEXPLAINED C ASH CREDIT AND DISALLOWANCE U/S 14A OF THE ACT. 16. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT BUT COULD NOT SUCCEED AND NOW ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL RAISING FOLLOWING GROUNDS: 1. THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ACTIO N OF THE ASSESSING OFFICER IN RE-OPENING OF THE ASSESSMENT U/S 148, THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE NOTICE ISSUED U/S 148 AS WELL AS THE SUBSEQUENT AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 12 RE-ASSESSMENT PROCEEDINGS ARE UNWARRANTED, INVALID AND VOID AB INITIO. IT IS THEREFORE PRAYED THAT THESE PROCEEDINGS AND THE ASSESSMENT ORDER MAY KINDLY BE QUASHED. 2. THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ACTIO N OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS.10,00,000/- U/S 68 ALLEGING THAT IT IS THE UNACCOUNTED MONEY OF THE APPELLANT CREDITED IN THE BOOKS OF ACCOMMODATION ENTRY AND THAT THE ASSESSEE HAS NOT ABLE TO SATISFY THE TESTS LAID BY SECTION 68. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE SAID ADDITION IS WRONG AND UNCALLED FOR AND SAME MAY NOW BE VERY KINDLY DELETED. 3. THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ACTIO N OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS.10,06,378/- TREATING RETURNED LONG TERM CAPITAL GAIN TAXABLE @ 10% AS INCOME FROM OTHER SOURCES SUBJECT TO NORMAL RATE OF TAX. THAT ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE, THE SAID TREATMENT IS WRONG AND UNCALLED FOR. IT IS PRAYED THAT THE SAID INCOME BE DIRECTED TO BE ASSESSED AS LONG TERM CAPITAL GAINS TAXABLE @ 10%. 4.THAT THE LD. CIT(A) ERRED IN MAINTAIN THE DISALLOWANCE OF RS.79056/- MADE BY THE ASSESSING OFFICER U/S 14A. IT IS SUBMITTED THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE SAID DISALLOWANCE IS WRONG AND BAD IN LAW AND THE SAME MAY VERY KINGLY BE DELETED OR IN THE ALTERNATE BE CONSIDERABLE REDUCED. 5. THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE LE VY OF INTEREST U/S 234D IS MANDATORY IN NATURE THEREBY UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN CHARGING INTEREST U/S 234D AT RS.79,056/-. IT IS SUBMITTED THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE, THE APPELLANT IS NOT AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 13 LIABLE FOR SAID INTEREST AND THE SAME NAY VERY KINDLY BE NOW DELETED. 17. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE REL YING ON THE DECISION OF I.T.A.T., INDORE IN THE CASE OF SHRI SANJAY AGRAWAL VS. ACIT 5(1), INDORE IN ITANO.182/IND/2012 SUBMITTED THAT THE LEGAL ISSUE RAISED IN GROUND NO.1 OF THIS APPEAL IS IDEN TICAL TO THE ISSUE ADJUDICATED BY COORDINATE BENCH HOLDING THAT IN THE ABSENCE OF ANY ADDITION HAVING BEEN MADE ON INCOME WHICH THE A O HAD REASON TO BELIEVE HAD ESCAPED ASSESSMENT, NO ADDITION OF A NY OTHER INCOME COULD HAVE BEEN MADE AND THAT THE AO HAD EXCEEDED H IS JURISDICTION IN PASSING THE IMPUGNED ASSESSMENT U/S 147 . 18. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE R EASONS RECORDED IN THE CASE OF ASSESSEE SUBMITTED THAT ASSESSEES CASE WAS REOPENED FOR THE ALLEGED ESCAPEMENT OF INCOME ON ACCOUNT OF LOAN OF RS.1097,920/- RECEIVED FROM M/S SUNIL SHARES & STOC K PVT. LTD. BUT IN THE REASSESSMENT COMPLETED AFTER RECORDING T HE REASONS NO ADDITION WAS MADE FOR THE ALLEGED LOAN RECEIVED FRO M M/S SUNIL SHARES & STOCK PVT. LTD. HOWEVER THE ADDITIONS WERE MADE FROM LOAN RECEIVED FROM M/S K.K. FINTRADE & M/S MOTIKA F INANCE LTD. AT RS.5,00,000/- EACH AND ALSO ADDITION FOR LONG TERM CAPITAL GAIN ON SALE OF SHARES OF INTER LINK FINANCE SERVICES LT D. OF RS.10,06,378/-. BUT THESE ADDITIONS MADE IN THE HAN DS OF ASSESSEE WERE NOT FORMING PART OF THE REASONS RECORDED. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 14 19. LD. COUNSEL FOR THE FURTHER CONTENDED THAT VER Y BASIS FOR REASSESSMENT PROCEEDINGS WAS A FLUKE AND THUS BASIC UNDERSTANDING OF THE MATTER AND VERY FINDING OF REA SSESSMENT IS IMPROPER AND NOT IN ACCORDANCE WITH LAW. RELIANCE P LACED ON FOLLOWING DECISIONS FOR THE PROPOSITION THAT IF THE AO DOES NOT ASSESS THE INCOME FOR WHICH REASONS WERE RECORDED U/S 147 OF THE ACT THEN HE CANNOT ASSESS OTHER INCOME U/S 147 OF THE ACT: 1 . CIT VS. JET AIRWAYS (I) LTD. (2011) 331 ITR 236 ( HON'BLEBOMBAY HC) 2. RANBAXY LABORATORIES LTD. VS. CIT (2011) 336 ITR 136 (HON'BLE DELHI HC) 3. CIT VS. ADHUNIK NIRYAT ISPAT LTD. (2011) 63 DTR 212 4. ANUGRAH VARSHNEY VS. ITO (2016) 46 CCH 462( AGRA TRIB.) 5. ITO VS. M/S BIBHANJAN INVESTMENT TRADING & COM. P. LTD. IN ITANO.6449/MUM/2007(I.T.A.T., MUMBAI) 6. DCIT VS. TAKSHILA EDUCATION SOCIETY (2015) 378 I TR 520 (PATNA HC) 7. CIT VS. DR. DEVENDRA GUPTA (2011) 336 ITR 59 (HON'BLERAJASTHAN, HC) 8. SHRI SANJAY AGRAWAL VS. ACIT 5(1) IN ITANO.182/IND/2012(I.T.A.T.,INDORE) 9. CIT VS. LARK CHEMICAL PVT. LTD. IN ITANO.1083/20 15 (BOMBAY HIGH COURT) 10. PR. CIT VS. M/S LARK CHEMICAL PVT. LTD. (HON'BL E SC) AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 15 20. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE(DR) THOUGH VEHEMENTLY ARGUED SUPPORTING ORDER OF BOTH LOWER AU THORITIES BUT FAILED TO CONTROVERT THE FACT THAT NO ADDITION WAS MADE BY THE LD. AO FOR THE REASONS RECORDED IN THE NOTICE ISSUED U/S 1 48 OF THE ACT. 21. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THOUGH, THE ASSESSEE HAS RAISED SIX GROU NDS OF APPEAL BUT WE WILL FIRST TAKE UP GROUND NO.1 RAISING A LEG AL ISSUE THEREBY CHALLENGING THE VALIDITY OF THE REASSESSMENT PROCEE DINGS. MAIN CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE WITH REGARD TO THIS GROUND IS BY WAY OF DRAWING SUPPORT FROM VARIOUS JU DICIAL PRONOUNCEMENTS CONTENDING THAT THE REASONS FOR WHIC H THE ASSESSMENT WAS REOPENED SEIZED TO EXIST AS THE LD. ASSESSING OFFICER HAS NOT MADE ANY ADDITION ON THE BASIS OF R EASONS RECORDED. HOWEVER, OTHER ADDITIONS HAVE BEEN MADE WITH REFERR ING TO THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF RAJESH K. JHAVERI STOCK BROKERS P. LTD. 291 ITR 500 . IT WAS SUBMITTED THAT JUDGMENT OF HON'BLE APEX COURT ONLY SPEAKS ABOUT WHETHER REA SSESSMENT IS VALID WHEN THERE IS ONLY PROCESSING OF THE RETURN U /S 143(1) OF THE ACT AND THERE IS FAILURE ON THE PART OF THE ASSESSI NG OFFICER TO TAKE STEPS U/S 143(3) OF THE ACT. THE APPELLANT HAS NOT CHALLENGED THE REOPENING ON THE PREMISE THAT IT CANNOT BE DONE SO WHEN THERE IS ONLY A SUMMARY ASSESSMENT U/S 143(1) AND THE ASSESS EE IS NOT SUBJECTED TO REGULAR ASSESSMENT U/S 143(3) OF THE A CT. THUS, IT WAS CONTENDED THAT LD. CIT(A) WAS NOT JUSTIFIED IN UPHO LDING THE ACTION OF THE LD. AO ON THIS GROUND. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 16 22. BEFORE PROCEEDING FURTHER WE WILL FIRST LIKE TO REPRODUCE THE COPY OF REASONS RECORDED BY THE ASSESSING OFFICER ALONG WITH ISSUANCE OF NOTICE U/S 148 OF THE ACT:- ANNEXURE THE ASSESSEE HAS TAKEN UNSECURED LOAN TO THE EXTENT OF RS.10,97,920/- FROM M/S SUNIL SHARES & STOCKS PVT. LTD. DURING THE ASSESSMENT PROCEEDINGS OF A.Y. 2004-05 IN THE CASE OF SHRI SANJAY KUMAR AGRAWAL THE IDENTITY, CREDITWORTHINESS AND GE NUINENESS OF SAID ASSESSEE M/S SUNIL SHARE & STOCK PVT. LTD. WAS NOT ESTABLISHED AND PROVED IT IS BOGUS AND JUST GIVING BOOKS ENTRIE S. HENCE, I HAVE REASON TO BELIEVE RS.10,97,920/- HAS ESCAPED ASSESS MENT. IN VIEW OF THE ABOVE I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX RS.10,97,920/- HAS ESCAPED ASSESSMENT. ACCOR DINGLY, A NOTICE UNDER SECTION 148 OF IT ACT NEEDS TO BE ISSUE TO RE ASSESS SUCH INCOME AND ALSO NAY OTHER INCOME CHARGEABLE TO TAX HAS ESC APED ASSESSMENT AND WHICH COMES TO NOTICE OF THE UNDERSI GNED SUBSEQUENTLY DURING THE COURSE OF REASSESSMENT PROC EEDINGS. CASE IS PUT UP FOR KIND APPROVAL U/S 151 OF THE IT ACT, 1961 FOR ISSUING NOTICE U/S 148 OF THE IT ACT 1961. SD/- ACITS(1) INDORE ADDL. CIT, PLEASE I HAVE GONE THROUGH THE REASON RECORDED BY THE AO, AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND I AM SATISFIED WITH THE REASONS RECORDED BY AO. CIT PLEASE. SD/- (APARNA KARAN) ADDL. COMMISSIONER OF INCOME TAX, RANGE-5 INDORE AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 17 23. NOW SO FAR AS REOPENING OF THE ASSESSMENT PROCE EDINGS IS CONCERNED ASSESSEE HAS NOT CHALLENGED THE VALIDITY OF THE NOTICE U/S 148 OF THE ACT. THUS, COMMENCEMENT OF THE REASSESSM ENT PROCEEDINGS IS NOT IN DISPUTE. NOW WHAT IS CHALLENG ED BEFORE US IS THAT THE ASSESSING OFFICER THOUGH HAS MADE MANY ADD ITIONS WHILE FINALIZING REASSESSMENT PROCEEDING BUT HAS NOT MADE ANY ADDITION ON ACCOUNT OF THE REASONS RECORDED FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT. FROM PERUSAL OF THE ABOVE ANNEXURE WE FIND THAT THE ASSESSING OFFICER HAS MENTIONED ABOUT THE ALLEGED E SCAPEMENT OF INCOME ON ACCOUNT OF UNSECURED LOAN OF RS.10,97,920 /- RECEIVED FROM M/S. SUNIL SHARES & STOCK PVT. LTD. AND ALSO ALLEGING THAT SINCE THE IDENTITY, CREDITWORTHINESS AND GENUINENES S OF M/S SUNIL SHARES & STOCK PVT. LD. IS NOT ESTABLISHED DURING T HE ASSESSMENT PROCEEDINGS FOR A.Y. 2004-05 IN THE CASE OF SANJAY AGRAWAL(SUPRA) THUS, THE LOAN RECEIVED BY THE ASSESSEE IS BOGUS AN D MERELY BOOK ENTRIES. AFTER RECORDING THE ABOVE REASONS THE REAS SESSMENT PROCEEDINGS U/S 143(3) OF THE ACT R.W.S. 148 OF THE ACT WERE COMPLETED AND THE ADDITIONS WERE MADE FOR UNSECURED LOAN OF RS.5,00,000/- FROM M/S K.K. FINTRADE & M/S MOTIKA F INANCE LTD., UNEXPLAINED LONG TERM CAPITAL GAIN OF RS. 10,06,378 /- AND DISALLOWANCE U/S 14A AT RS. 79,056/-. THUS, THERE W AS NO ADDITION MADE FOR THE UNSECURED LOAN OF RS.10,97,920/- RECEI VED FROM M/S. SUNIL SHARES & STOCK PVT. LTD. EVEN IN THE ASSESSME NT ORDER DATED 30.12.2009 THERE IS NO MENTION OF THE LOAN PROVIDER M/S. SUNIL SHARES & STOCK PVT. LTD. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 18 24. NOW IN THE ABOVE STATED FACTS WHEREIN THOUGH T HE ADDITIONS HAVE BEEN MADE IN THE ASSESSMENT PROCEEDINGS COMPLE TED AFTER ISSUANCE OF NOTICE U/S 148 OF THE ACT BUT NO ADDITI ON HAS BEEN MADE FOR THE REASONS RECORDED IN THE NOTICE ISSUED U/S 148 OF THE ACT, WHETHER SUCH REASSESSMENT PROCEEDINGS FAILED I N THE EYES OF LAW NEEDS TO BE TESTED IN THE LIGHT OF JUDICIAL PRO NOUNCEMENTS. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE PLACI NG RELIANCE ON VARIOUS JUDGMENTS BUT MORE PRECISELY CONTENDED THAT ISSUE STANDS SQUARELY COVERED BY THE DECISION OF THIS COORDINATE BENCH IN THE CASE OF SANJAY AGRAWAL IN ITANO.182/IND/2012 DATED 28.06.20 17 WHICH AFTER CONSIDERING THE CATENA OF JUDGMENTS REF ERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSESSEE HAS HELD IN FAV OUR OF THE ASSESSEE OBSERVING AS FOLLOWS: 21. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE PERUS AL OF PAPER BOOK PAGE NO. 95 SHOWS THAT THE REASONS FOR REOPENI NG OF ASSESSMENT HAS BEEN RECORDED ON THE BASIS OF THAT T HERE WAS A REPORT RECEIVED FROM ADDL. CIT RANGE- 3 INDORE, WHE REIN IT HAS BEEN INTIMATED THAT THE ASSESSEE IS BRINGING BACK H IS UNACCOUNTED INCOME IN THE BOOKS OF ACCOUNTS BY WAY OF ACCOMMODATION ENTRIES PROVIDED BY LUNKAD GROUP O F COMPANIES WHERE ACTION UNDER SECTION 133A WAS CARR IED OUT ON 02-05-2006. THE TOTAL OF SUCH ENTRIES COMES TO RS.4,16,066/-. THE PERUSAL OF THESE REASONS AS RECO RDED AND APPEARING AT PAPER BOOK PAGE NO. 95 AND QUOTED ABOV E, SHOWS THAT THERE IS NO DATE IS MENTIONED ON THE SAID REAS ONS, THEREFORE, THE APPREHENSION OF THE ASSESSEE THAT TH E REASONS WERE RECORDED AFTER ISSUE OF NOTICE UNDER SECTION 1 48 OF THE ACT, ON 30-03-2007 COULD NOT BE SAID AS UNFOUNDED, AND S AME IS NOT DISAPPROVED BY THE REVENUE ON THE BASIS MATERIAL A VAILABLE ON RECORD. FURTHER THE COPY OF NOTICE UNDER SECTION 14 8 PLACED AT AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 19 PAPER BOOK PAGE NO. 74, DOES NOT INDICATE WHETHER T HE NOTICE WAS ISSUED AFTER OBTAINING OF APPROVAL OF THE JCIT OR CIT CONCERNED AS THERE IS NO REFERENCE ON THE NOTICE TH AT THE SAID NOTICE IS BEING ISSUED AFTER OBTAINED APPROVAL. WE FURTHER FIND THAT THE AO HAS PICKED UP FIGURE OF RS. 4,16,066/- ON THE BASIS OF REPORT OF ADDL. CIT WITHOUT MENTIONING THE NAME OF COMPANIES AND USED GENERAL TERM LUNKAD GROUP OF COMPANIES WHICH IS WITHOUT ANY BASIS, HENCE, THERE APPEARS NO APPLICATION OF MIND. WE ALSO NOTE THAT ANOTHER N OTICE UNDER SECTION 148 WAS ALSO ISSUED IN THE NAME OF M/S. AGA RWAL MONEY FINANCE WHICH IS A PROPRIETORSHIP CONCERN OF THE ASSESSEE AND WAS NOT INDEPENDENT ASSESSEE. THIS SHO WS THAT THE AO HAS NOT LOOKED IN THE RETURN OF INCOME FILED BY THE ASSESSEE BEFORE ISSUE OF NOTICE UNDER SECTION 148. THUS, THERE WAS NO BELIEF AND THE PROCEEDING UNDER SECTION 148 WERE INITIATED MERELY ON SUSPICION, WITHOUT GOING THROUG H ASSESSMENT RECORDS AND THE RETURN. ASSESSMENT REOPENED ON MERE SUSPICION IS NOT VALID AS HELD BY HON`BLE SUPREME COURT IN TH E CASE OF INDIAN OIL CORPORATION V. ITO [1986] 159 ITR 956 (S C)/ 26 TAXMAN 336(SC). IT IS FURTHER SEEN THAT THE REASONS FOR REOPENING OF ASSESSMENT SAYS THAT THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES OF RS. 4,16,066/- FROM LUN KAD GROUP OF COMPANIES BUT THERE IS NO WHISPER IN THE ASSESS MENT ORDER REGARDING THE WORD LUNKAD GROUP OF COMPANIES AND AS SUCH NO ADDITION ON THIS ACCOUNT HAS BEEN MADE. RATHER T HE ADDITION IS MADE IN RESPECT OF AMOUNT OF RS. 10 LAKH RECEIVE D AS LOANS FROM M/S. SUNIL SHARES AND STOCK PVT. LTD. THUS, T HESE FACTS WOULD SHOW THAT THE REASON WERE FLIMSY, UNTRUE AND UNFOUNDED. WE FIND THAT THAT THE ASSESSMENT HAS BE EN FRAMED BY MAKING ADDITION OF RS. 10 LAKH BEING UNSECURED L OAN FROM SUNIL SHARES AND STOCK PVT. LTD. FOR WHICH NO REAS ONS WERE RECORDED WHEREAS NO ADDITION HAS BEEN MADE ON ACCOU NT OF ACCOMMODATION ENTRIES OF RS. 4,16,066/- ALLEGED T O HAVE BEEN RECEIVED FROM LUNKAD GROUP OF COMPANIES WHICH WER E FOUND TO HAVE BEEN ESCAPED ASSESSMENT AS PER THE REASON R ECORDED. THEREFORE, WE ARE OF THE OPINION THAT THE AO HAD NO JURISDICTION TO SUBJECT TAX THE UNSECURED LOAN FROM SUNIL SHARES AND STOCK PVT. LTD. AND FRAMED THE ASSESSMENT AS HELD BY THE HON`BLE BOMBAY HIGH COURT IN THE CASE OF CIT-5 MUMBAI V. JE T AIRWAYS AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 20 (I) [2010] 195 TAXMAN 117(BOM): [2011] 331 ITR 236 (BOM) WHEREIN IT WAS HELD THAT THE EXPLANATION 3 TO SECTION 147 LIFTS THE EMBARGO INSERTED BY JUDICIAL INTERPRETATION ON THE MAKING O F AN ASSESSMENT OR REASSESSMENT ON GROUNDS OTHER THAN THOSE ON THE BASIS OF WHICH A NOTICE WAS ISSUED UND ER SECTION 148 SETTING OUT THE REASONS FOR THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THOSE JUDICIAL 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 ASSESSIN G OFFICER COULD NOT MAKE AN ASSESSMENT OR REASSESSMEN T ON ANOTHER ISSUE WHICH CAME TO HIS NOTICE DURING TH E PROCEEDINGS. THIS INTERPRETATION WILL NO LONGER HOL D THE FIELD AFTER THE INSERTION OF THE EXPLANATION 3 BY T HE FINANCE (NO. 2) ACT, 2009. HOWEVER, THE EXPLANATION 3 DOES NOT AND CANNOT OVERRIDE THE NECESSITY OF FULFILLING THE CONDITIONS SET OUT IN THE SUBSTANTIV E PART OF SECTION 147. AN EXPLANATION TO A STATUTORY PROVISIO N IS INTENDED TO EXPLAIN ITS CONTENTS AND CANNOT BE CONSTRUED TO OVERRIDE IT OR TO RENDER THE SUBSTANCE AND CORE NUGATORY. SECTION 147 HAS THE EFFECT THAT THE ASSESSING OFFICER HAS TO ASSESS OR REASSESS THE INC OME ('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 HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS. HOWEVE R, IF AFTER ISSUING A NOTICE UNDER SECTION 148, HE ACCEPT S THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOM E FOR WHICH HE HAD INITIALLY FORMED A REASON TO BELIEVE T HAT IT HAD ESCAPED ASSESSMENT, HAS, AS A MATTER OF FACT, N OT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM TO INDEPENDENTLY ASSESS SOME OTHER INCOME, AND 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. [PARA 16 ] AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 21 22. THE HON`BLE DELHI HIGH COURT FOLLOWING THE ABOV E DECISION OF HON`BLE BOMBAY HIGH COURT HAS ALSO UPHELD THIS VIEW IN THE CASE OF RANBAXY LABORATORIES LTD. V. CIT [2011] 336 ITR 136 (DEL) /211 TAXMAN 242 (DEL). THE HON`BLE DELHI HIG H COURT HAS REFERRED JUDGMENT OF CIT-5 MUMBAI V. JET AIRWAYS (I ) [2010] 195 TAXMAN 117(BOM): [2011] 331 ITR 236 (BOM) AND FURTH ER HELD THAT EXPLANATION 3 TO SECTION 147 ONLY LIFTS THE EM BARGO PLACED BY JUDICIAL DECISION IN MAKING OF AN ASSESSMENT OR REASSESSMENT ON GROUNDS OTHER THAN THOSE RECORDED I N THE REASONING FOR REOPENING AS FOLLOWS : 13. THE EFFECT OF THE AMENDED PROVISIONS CAME TO BE CONSIDERED IN TWO DISTINCT LINES OF PRECEDENT ON TH E SUBJECT. THE FIRST LINE OF AUTHORITY, TO WHICH A REFERENCE HAS A LREADY 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 14 8 ON CERTAIN SPECIFIC ISSUES, IT WAS NOT OPEN TO HIM DUR ING THE COURSE OF THE PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT T O ASSESS OR REASSESS ANY OTHER INCOME, WHICH MAY HAVE ESCAPED ASSESSMENT BUT WHICH DID NOT FORM THE SUBJECT-MATTE R OF THE NOTICE UNDER SECTION 148. THIS VIEW WAS ADOPTED IN THE JUDGMENT OF THE PUNJAB AND HARYANA HIGH COURT IN VI PAN KHANNA'S CASE (SUPRA) AND IN THE JUDGMENT OF THE KE RALA HIGH COURT IN TRAVANCORE CEMENTS LTD.'S CASE (SUPRA). TH IS LINE OF AUTHORITY, WOULD NOW CEASE TO REFLECT THE CORRECT P OSITION IN LAW, BY VIRTUE OF THE AMENDMENT WHICH HAS BEEN BROUGHT I N BY THE INSERTION OF EXPLANATION 3 TO SECTION 147 BY FINANC E (NO. 2) ACT OF 2009. THE EFFECT OF THE EXPLANATION IS THAT ONCE AN ASSESSING OFFICER HAS FORMED A REASON TO BELIEVE TH AT 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 REASSESS INCOME IN RESPECT OF ANY OTHER ISSUE TH OUGH THE REASONS FOR SUCH ISSUE HAD NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SECTION 148(2). 14. THE SECOND LINE OF PRECEDENT IS REFLECTED IN A JUD GMENT 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 147 PARTICULARLY THE WORDS THAT AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 22 THE ASSESSING OFFICER 'MAY ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS E SCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS' UNDER SECTION 147. THE R AJASTHAN HIGH COURT HELD AS FOLLOWS : '. . . IF IS ONLY WHEN, IN PROCEEDINGS UNDER SECTIO N 147 THE ASSESSING OFFICER, ASSESSES OR REASSESSES ANY INCOM E CHARGEABLE TO TAX, WHICH HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, WITH RESPECT TO WHICH HE HAD 'REAS ON TO BELIEVE' TO BE SO, THEN, ONLY IN ADDITION, HE CAN A LSO PUT TO TAX, THE OTHER INCOME, CHARGEABLE TO TAX, WHICH HAS ESCA PED ASSESSMENT, AND WHICH HAS COME TO HIS NOTICE SUBSEQ UENTLY, IN THE COURSE OF PROCEEDINGS UNDER SECTION 147. TO CLARIFY IT FURTHER, OR TO PUT IT IN OTHER WORDS, IN OUR OPINION, IF IN THE COURSE OF PROCEEDINGS UNDER SECTION 147, THE ASSESSING OFFICER WERE TO COME TO THE CONCLUSION, THAT ANY IN COME CHARGEABLE TO TAX, WHICH, ACCORDING TO HIS 'REASON TO BELIEVE', HAD ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, DID NOT ESCAPE ASSESSMENT, THEN, THE MERE FACT THAT THE ASS ESSING OFFICER ENTERTAINED A REASON TO BELIEVE, ALBEIT EVE N A GENUINE REASON TO BELIEVE, WOULD NOT CONTINUE TO VEST HIM W ITH THE JURISDICTION, TO SUBJECT TO TAX, ANY OTHER INCOME, CHARGEABLE TO TAX, WHICH THE ASSESSING OFFICER MAY FIND TO HAVE E SCAPED ASSESSMENT, AND WHICH MAY COME TO HIS NOTICE SUBSEQ UENTLY, 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 BE FORE IT BOTH THE LINES OF PRECEDENT ON THE SUBJECT. THE PRECEDEN T DEALT WITH TWO SEPARATE QUESTIONS. WHEN IT EFFECTED THE AMENDM ENT BY BRINGING IN EXPLANATION 3 TO SECTION 147, PARLIAMEN T STEPPED IN TO CORRECT WHAT IT REGARDED AS AN INTERPRETATIONAL ERROR IN THE VIEW WHICH WAS TAKEN BY CERTAIN COURTS THAT THE ASS ESSING OFFICER HAS TO RESTRICT THE ASSESSMENT OR REASSESSM ENT PROCEEDINGS ONLY TO THE ISSUES IN RESPECT OF WHICH REASONS WERE RECORDED FOR REOPENING THE ASSESSMENT. THE CORRECTI VE EXERCISE EMBARKED UPON BY 'PARLIAMENT IN THE FORM OF EXPLANA TION 3 CONSEQUENTLY PROVIDES THAT THE ASSESSING OFFICER MAY ASSESS AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 23 OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE WHIC H COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEE DINGS THOUGH THE REASONS FOR SUCH ISSUE WERE NOT INCLUDED IN THE NOTICE UNDER SECTION 148(2). THE DECISIONS OF THE KERALA HIGH CO URT IN TRAVANCORE CEMENTS LTD.'S CASE (SUPRA) AND OF TH E PUNJAB & HARYANA HIGH COURT IN VIPAN KHANNA'S CASE (SUPRA) W OULD, THEREFORE, NO LONGER HOLD THE FIELD. HOWEVER, INSOF AR 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 (SUPRA), 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 TAKE N 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 (SUPRA) HE LD THAT THE ASSESSING OFFICER DID NOT HAVE JURISDICTION TO PROC EED WITH THE REASSESSMENT, ONCE HE FOUND THAT THE TWO GROUNDS ME NTIONED IN THE NOTICE UNDER SECTION 148 WERE INCORRECT OR NON- EXISTENT. THE DECISIONS OF THE PUNJAB & HARYANA HIGH COURT IN ATL AS CYCLE INDUSTRIES' CASE (SUPRA) AND OF THE RAJASTHAN HIGH COURT IN SHRI RAM SINGH'S CASE (SUPRA) WOULD NOT BE AFFEC TED BY THE AMENDMENT BROUGHT IN BY THE INSERTION OF EXPLANATIO N 3 TO SECTION 147.- 16. EXPLANATION 3 LIFTS THE EMBARGO, WHICH WAS INSERTE D BY JUDICIAL INTERPRETATION, ON THE MAKING OF AN ASSESS MENT OR REASSESSMENT ON GROUNDS OTHER THAN THOSE ON THE BAS IS OF WHICH A NOTICE WAS ISSUED UNDER SECTION 148 SETTING OUT THE REASONS FOR THE BELIEF THAT INCOME HAD ESCAPED ASSE SSMENT. THOSE JUDICIAL DECISIONS HAD HELD THAT WHEN THE ASS ESSMENT WAS SOUGHT TO BE REOPENED ON THE GROUND THAT INCOME HAD ESCAPED ASSESSMENT ON A CERTAIN ISSUE, THE ASSESSIN G OFFICER COULD NOT MAKE AN ASSESSMENT OR REASSESSMENT ON ANO THER ISSUE WHICH CAME TO HIS NOTICE DURING THE PROCEEDIN GS. THIS INTERPRETATION WILL NO LONGER HOLD THE FIELD AFTER THE INSERTION OF EXPLANATION 3 BY THE FINANCE ACT (NO. 2) OF 2009 . HOWEVER, EXPLANATION 3 DOES NOT AND CANNOT OVERRIDE THE NECESSITY OF FULFILLING THE CONDITIONS SET OUT IN T HE SUBSTANTIVE PART OF SECTION 147. AN EXPLANATION TO A STATUTORY PROVISION IS AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 24 INTENDED TO EXPLAIN ITS CONTENTS AND CANNOT BE CONS TRUED 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 A SSESSMENT AND WHICH WAS THE BASIS OF THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER I NCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH, COMES TO HIS NOTI CE DURING THE COURSE OF THE PROCEEDINGS. HOWEVER, IF AFTER IS SUING A NOTICE UNDER SECTION 148, HE ACCEPTED THE CONTENTION OF TH E ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FO RMED 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 IN TENDS 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. 17. WE HAVE APPROACHED THE ISSUE OF INTERPRETATION THA T HAS ARISEN FOR DECISION IN THESE APPEALS, BOTH AS A. MA TTER OF FIRST PRINCIPLE, BASED ON THE LANGUAGE USED IN SECTION 14 7(1) AND ON THE BASIS OF THE PRECEDENT ON THE SUBJECT. WE AGREE WITH THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE AS SESSEE THAT SECTION 147(1) AS IT STANDS POSTULATES THAT UP ON THE FORMATION OF A REASON TO BELIEVE THAT INCOME CHARGE ABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOM E 'AND ALSO' ANY OTHER INCOME CHARGEABLE TO TAX WHICH COME S TO HIS NOTICE SUBSEQUENTLY DURING THE PROCEEDINGS AS HAVIN G ESCAPED ASSESSMENT. THE WORDS 'AND ALSO' ARE USED IN A CUMU LATIVE AND CONJUNCTIVE SENSE. TO READ THESE WORDS AS BEING IN THE ALTERNATIVE WOULD BE TO REWRITE THE LANGUAGE USED B Y PARLIAMENT. OUR VIEW HAS BEEN SUPPORTED BY THE BACK GROUND WHICH LED TO THE INSERTION OF EXPLANATION 3 TO SECT ION 147. PARLIAMENT MUST BE REGARDED AS BEING AWARE OF THE INTERPRETATION THAT WAS PLACED ON THE WORDS 'AND AL SO' BY THE RAJASTHAN HIGH COURT IN SHRI RAM SINGH'S CASE (SUPR A). PARLIAMENT HAS NOT TAKEN AWAY THE BASIS OF THAT DEC ISION. WHILE IT IS OPEN TO PARLIAMENT, HAVING REGARD TO THE PLEN ITUDE OF ITS LEGISLATIVE POWERS TO DO SO, THE PROVISIONS OF SECT ION 147(1) AS AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 25 THEY STOOD AFTER THE AMENDMENT OF 1-4-1989 CONTINUE TO HOLD THE FIELD. 18. IN THAT VIEW OF THE MATTER AND FOR THE REASONS THA T WE HAVE INDICATED, WE DO NOT REGARD THE DECISION OF THE TRI BUNAL 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, DISMIS SED. THERE SHALL BE NO ORDER AS TO COSTS. 23. THEREFORE, IN THE LIGHT OF ABOVE DECISION, THE REOP ENING OF ASSESSMENT IN THE CASE OF THE ASSESSEE IS NOT VALID AND DESERVES TO BE QUASHED. THE LD. A.R. HAS RELIED ON THE DECISION OF HON`BLE PATNA HIGH COURT IN THE CASE OF DCIT V. TAKSHILA EDUCATION SOCIETY [ 2015] 378 ITR 520(PAT): [2016] 284 CTR 306 (PAT) WHEREIN IT WAS HELD THAT ONCE IT IS FOUND T HAT NONE OF THE REASONS RECORDED BY THE ASSESSING OFFICER FOR INITI ATING PROCEEDINGS UNDER SECTION 147 WAS GERMANE TO INITIA TION OF SUCH PROCEEDINGS, THEN IT HAS TO BE HELD THAT HE HA D NO REASON TO BELIEVE THAT ANY INCOME HAD ESCAPED ASSESSMENT A ND THEREFORE, ANY FURTHER PROCEEDING WOULD BE WITHOUT ANY JURISDICTION. THUS, THIS DECISION IS ALSO SUPPORT OUR VIEW THAT ONE ADDITION IS NOT MADE ON THE BASIS OF REASONS RE CORDED THEN NO ADDITION OF OTHER INCOME CAN BE MADE. 24. FURTHER RELIANCE IS PLACED IN THE CASE OF CIT V . DR. DEVENDRA GUPTA [2008] 336 ITR 59 (RAJ): 174 TAXMAN 438: 220 CTR 629 (RAJ) WHEREIN IT WAS HELD THAT INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT IN REASONS RECORDED NOT HAVING BEEN ACTU ALLY FOUND TO HAVE ESCAPED ASSESSMENT IN THE COURSE OF REGULA R ASSESSMENT PROCEEDINGS, AO HAS NO JURISDICTION TO A DD OTHER SOURCE OF INCOME FOUND TO HAVE ESCAPED ASSESSMENT. 25. THE LD. AR FURTHER PLACED RELIANCE ON THE DECIS ION OF COORDINATED BENCH IN THE CASE OF ITO 5(1)92) V. M/S . BIDHBHAJAN INVESTMENT & TRADING CO PVT. LTD. [I.T.A. NO. 6449/MUM/2007(A.Y. 2000-01) DATED 23-03-2011. , ANU GRAH VARSHNEY V. ITO [2016] 46 CCH 462(AGRA TRIB), WHICH ALSO SUPPORTS THE CASE OF THE ASSESSEE. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 26 26. THE LD. AR FURTHER RELIED IN THE CASE OF CIT V. ADHUNIK NIRYAT ISPAT LTD. [2011] 79 CCH 581 DEL HC: 63 DTR 212 (DEL) WHEREIN THE HON`BLE HIGH COURT HELD THE ONCE THE RE ASONS WHICH PERSUADED THE AO TO REOPEN THE ASSESSMENT WER E NOT FOUND VALID AND NO ADDITION WERE ULTIMATELY SUSTAIN ED ON THAT ACCOUNT , THE ADDITIONS IN RESPECT OF OTHER ITEMS W HICH WERE NOT PART OF REASON TO BELIEVE CANNOT BE MADE. 27. IN THE INSTANT CASE, THE AO HAS NOT COMPLETED T HE ASSESSMENT ON THE STRENGTH OF REASONS RECORDED THA T THE ASSESSEE RECEIVED HIS UNACCOUNTED INCOME BY WAY OF ACCOMMODATION ENTRIES AMOUNTING TO RS. 4,16,066/ - FROM LUNKAD GROUP OF COMPANIES THE REASON FOR REOPENI NG OF THE ASSESSMENT BUT ON ALTOGETHER DIFFERENT GROUNDS ON U NEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT, AND HENCE , REOPENING OF ASSESSMENT IS BAD-IN-LAW. THUS, THE ASSESSMENT HAS BEEN REOPENED ON FLIMSY , ARBITRARY, UNTRUE UNFOUNDED GR OUNDS AND SINCE NO ADDITION WAS MADE ON THE STRENGTH OF SUCH REASONS. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE MENTION ED JUDGEMENTS , WE HOLD THAT IN ABSENCE OF ANY ADDITIO N HAVING BEEN MADE ON INCOME WHICH THE AO HAD REASON TO BELI EVE HAD ESCAPED ASSESSMENT, NO ADDITION OF ANY OTHER INCOME COULD HAVE BEEN MADE AND THAT THE AO HAD EXCEEDED HIS JUR ISDICTION IN PASSING THE IMPUGNED ASSESSMENT U/S.147. OUR VIE W IS ALSO FORTIFIED BY THE NUMBER OF JUDICIAL PRONOUNCEMENTS RELIED AS DISCUSSED ABOVE. HENCE, THE SAME REASSESSMENT PROCE EDINGS ARE LIABLE TO BE QUASHED AND WE ORDER ACCORDINGLY. 28. THE RELIANCE OF CIT(A) IN THE CASE OF RAJESH JA VERI (SUPRA) IS ON DIFFERENT CONTEXT OF SUFFICIENCY OF REASONS RECO RDED BY THE AO, WHEN IF THERE IS NO FAILURE ON THE PART OF THE ASSESSEE, BUT IN THE PRESENT CASE, THE ISSUE IS WHETHER REOPENING WOULD BE VALID, IF WHERE THE BASIS ON THE REASONS ON WHICH R EOPENING IS DONE CEASE TO EXIST AND NO ADDITION THEREON HAS BEE N MADE. 29. SINCE THE ASSESSMENT ORDER HAS BEEN QUASHED ON LEGAL ISSUE, THE GROUND NO. 2 RELATING TO ADDITION OF RS. 10 LAKH AND GROUND NO. 3 OF INTEREST OF RS. 20,697/- THEREON HA VE BECOMES ACADEMIC. HENCE, SAME ARE NOT REQUIRED OUR ADJUDICA TION ON MERITS OF THE CASE. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 27 25. WE, AFTER EXAMINING THE FACTS IN THE LIGHT OF A BOVE DECISIONS, ARE OF THE CONSIDERED VIEW THAT ISSUE STANDS SQUARELY C OVERED BY THE ABOVE DECISION AND THUS, RESPECTFULLY FOLLOWING THE SAME HOLD THAT THE ASSESSMENT HAS BEEN REOPENED ON FLIMSY, ARBITRA RY, UNTRUE UNFOUNDED GROUNDS AND SINCE NO ADDITION WAS MADE ON THE STRENGTH OF SUCH REASONS RECORDED WE HOLD THAT IN A BSENCE OF ANY ADDITION MADE BY AO FOR WHICH HE HAD REASON TO BEL IEVE HAD ESCAPED ASSESSMENT, NO OTHER ADDITIONS OF ANY OTHER INCOME COULD HAVE BEEN MADE. IN OUR VIEW THE LD. AO HAD EXCEEDED HIS JURISDICTION IN PASSING THE IMPUGNED ASSESSMENT U/S .147 R.W.S. 148 OF THE ACT AND THEREFORE, ASSESSMENT PROCEEDING S CARRIED OUT U/S 143(3) R.W.S. 148 OF THE ACT DATED 30.12.2009 A RE HELD TO BE INVALID AND THUS, DESERVES TO BE QUASHED. ACCORDING LY GROUND NO.1 OF THE ASSESSEES APPEAL IS ALLOWED. 26. SINCE THE ASSESSMENT ORDER HAS BEEN QUASHED ON LEGAL ISSUE ITSELF ADJUDICATING OF REMAINING GROUNDS RAISED ON MERITS RUNNING FROM GROUND NO.2 TO 4 WILL BE MERELY ACADEMIC IN NA TURE AND THUS BECOMES INFRUCTUOUS THEREBY, REQUIRING NO ADJUDICAT ION ON MERITS. GROUND NO.5 IS CONSEQUENTIAL IN NATURE. GROUND NO.6 IS GENERAL IN NATURE WHICH NEED NO ADJUDICATION. 27. IN THE RESULT, APPEAL OF THE ASSESSEE FOR A.Y. 2002-03 IS ALLOWED AS PER TERMS INDICATED ABOVE. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 28 NOW WE TAKE ITANO.286/IND/2012 FOR A.Y. 2003-04 28. THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APP EAL: 1.THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER OF REOPENING THE ASSESSMENT U/S 147 WITHOUT BRINGING ANY MATERIAL ON RECORD. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE REASSESSMENT PROCEEDINGS AND THE ORDER PASSED PURSUANT THERETO ARE WITHOUT JURISDICTION, WRONG AND BAD IN LAW AND THE SAME REQUIRE TO BE QUASHED. 2. THAT THE LD.CIT(A) ERRED UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE LONG TERM CAP ITAL GAINS OF RS.18,77,462/- EARNED ON SALE OF LISTED SHARES AS INCOME FROM UNDISCLOSED SOURCES. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPELLANT HAS FULFILLED ALL THE CONDITIONS LAID DOW N U/S 112 AND HENCE RIGHTLY PAID TAXES @ 10% THEREON AND THE TREATMENT SO GIVEN TO THE IMPUGNED TRANSACTION IS UNCALLED FOR AND REQUIRES TO BE ACCEPTED AS LONG TERM CAPITAL GAIN. 3. THAT THE APPELLANT GRAVES LEAVE TO ADD, TO ALTER , AMEND MODIFY, SUBSTITUTE, DELETE AND/OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL ON OR BEFORE FINAL HEARING, IF NECESSARILY SO ARISES. 29. BRIEF FACTS RELATING TO THIS APPEAL ARE THAT FO R A.Y. 2003-04 ASSESSEE FILED RETURN OF INCOME U/S 139(1) ON 31.10 .2003 DECLARING AN INCOME OF RS.91,44,420/- WHICH INTERALIA INCLUDE LONG TERM CAPITAL GAIN FROM SALE OF EQUITY SHARES OF PRIYANSH SAREES INDUSTRIES LTD. AT RS.18,77,462/-. ASSESSEE PAID TA X OF AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 29 RS.28,69,827/-. SUBSEQUENTLY, NOTICE U/S 148 WAS IS SUED ON 26.03.2010 DULY SERVED UPON THE ASSESSEE. IN RESPON SE THERETO THE ASSESSEE REQUESTED TO TREAT THE RETURN FILED U/S 13 9(1) OF THE ACT AS RETURN IN RESPONSE OF NOTICE U/S 148 OF THE ACT. LD . ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 147/143(3) OF THE ACT THOUGH DID NOT MADE ANY SEPARATE ADDITION BUT TREAT ED THE LONG TERM CAPITAL GAIN AT RS.18,77,462/- AS INCOME FROM UNDISCLOSED SOURCES. 30. THE ABOVE ACTION OF THE ASSESSING OFFICER WAS C HALLENGED BY THE APPELLANT BEFORE THE LD. CIT(A) BUT IT FAILED TO SU CCEED. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL FIRSTLY R AISING LEGAL GROUND CHALLENGING REASSESSMENT OF ASSESSMENT U/S 147 OF T HE ACT AND ALSO RAISING GROUND NO.2 CHALLENGING THE ACTION OF THE BOTH LOWER AUTHORITIES OF TREATING LONG TERM CAPITAL GAIN OF R S. 18,77,462/- FROM UNDISCLOSED SOURCES EVEN WHEN THE ASSESSEE HAD OFFERED IT TO TAX @ 10% IN THE RETURN OF INCOME FILED U/S 139(1) OF THE ACT. 31. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE TAK ING UP THE LEGAL GROUND SUBMITTED THAT THE LEGAL ISSUE RAISED IN GRO UND NO.1 OF THE ASSESSEES APPEAL IS SQUARELY COVERED BY THE DECISI ON OF COORDINATE BENCH, HYDERABAD IN THE CASE OF GFA ANLAGENBAU GMBH VS. ACIT (2014) 40 CCH 407(HYD TRIB.). R EFERRING TO THE PROVISIONS OF SECTION 147, EXPLANATION 2 OF THE INCOME TAX ACT 1961, IT W AS SUBMITTED THAT THE ASSESSEES CASE NEEDS TO BE EXAMINED IN TH E LIGHT OF CLAUSE (B) OF EXPLANATION 2 AS PER WHERE A RETURN OF INCOM E HAS BEEN FURNISHED BY THE ASSESSEE BUT ASSESSMENT IS NOT COM PLETED U/S AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 30 143(3) OF THE ACT AND IF IT IS NOTICED BY THE ASSES SING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN, THEN, ALSO IT CAN BE DEEMED THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT WHICH THUS REQUIRE REASSESSMENT OF THE ASSESSEES R ECORDS. IT WAS FURTHER SUBMITTED THAT IN THE CASE OF ASSESSEE NO ADDITION HAS BEEN MADE BUT ONLY THE INCOME OF LONG TERM CAPITAL GAIN WHICH HAS BEEN DULY STATED AND OFFERED TO TAX IN THE REGULAR RETURN OF INCOME HAS BEEN HELD TO BE INCOME FROM UNDISCLOSED SOURCES . THERE IS NO CASE AGAINST THE ASSESSEE OF UNDERSTATING THE INCOM E OR CLAIMING EXCESSIVE LOSS, DEDUCTION ALLOWANCE OR RELIEF IN TH E RETURN. 32. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE(DR) STRONGLY OPPOSED THE ARGUMENTS MADE BY THE LD. COUNSEL FOR T HE ASSESSEE REFERRING AND RELYING TO FINDING OF BOTH THE LOWER AUTHORITIES AND SUBMITTED THAT THE ALLEGED LONG TERM CAPITAL GAIN W AS SAME TRANSACTION AND THUS LD. AO HAS RIGHTLY TREATED AS INCOME FROM UNDISCLOSED SOURCES. 33. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DECISION O F COORDINATE BENCH, HYDERABAD IN THE CASE OF GFA ANLAGENBAU GMBH VS. ACIT(SUPRA) REFERRED BY THE LD. COUNSEL FOR THE ASSESSEE. UNDISPUTED FACTS IN THIS CASE ARE THAT IN THE RETUR N OF INCOME FILED U/S 139(1) OF THE ACT FILED ON 31.10.2003 TOTAL INC OME DECLARED AT RS.91,44,420/- ALSO INCLUDED LONG TERM CAPITAL GAIN OF RS.18,77,462/- EARNED BY THE ASSESSEE FROM SALE OF EQUITY SHARES OF AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 31 PRIYANSH SAREES INDUSTRIES LTD. ASSESSEE PAID TAX @ 10% U/S 112 OF THE ACT OF RS.18,69,232/-. ASSESSEES CASE WAS PROCESSED U/S 143(1)(A) OF THE ACT. RETURN OF THE ASSESSEE WAS NO T SELECTED FOR SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT. AFTER TH E ISSUANCE OF NOTICE U/S 148 OF THE ACT AND CARRYING OUT THE REAS SESSMENT PROCEEDINGS U/S 147 OF THE ACT, THE OUTCOME WAS THA T NO NEW ADDITION WAS MADE AND ONLY THE LONG TERM CAPITAL GA IN OFFERED BY THE ASSESSEE IN THE REGULAR INCOME TAX RETURN WAS T REATED AS INCOME FROM UNDISCLOSED SOURCES SUBJECT TO NORMAL R ATE OF TAX. 34. NOW THE ISSUE RAISED BEFORE US IS THAT WHETHER THE REASSESSMENT PROCEEDINGS ARE WITHOUT JURISDICTION, WRONG AND BAD IN LAW SINCE THERE WAS NO ESCAPEMENT OF INCOME AS THE ASSESSING OFFICER WAS UNABLE TO PROVE THAT ASSESSEE HAD UNDERSTATED THE I NCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION ALLOWANCE OR REL IEF IN THE RETURN. IT WILL BE WORTHWHILE TO PRIMARILY GO THROUGH THE P ROVISIONS OF SECTION 147 OF THE ACT AND THE EXPLANATIONS MENTION ED THEREIN: INCOME ESCAPING ASSESSMENT. 147. IF THE [ASSESSING] OFFICER [HAS REASON TO BELIEVE] THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER I NCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF T HE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LO SS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS T HE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEV ANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMEN T UNDER AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 32 SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TA KEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM TH E END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR: 81[PROVIDED FURTHER THAT NOTHING C ONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY I NCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAP ED ASSESSMENT FOR ANY ASSESSMENT YEAR:] [PROVIDED [ALSO] THAT THE ASSESSING OFFICER MAY ASS ESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVI NG MATTERS WHICH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERE NCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPE D ASSESSMENT.] EXPLANATION 1.PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY TH E ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE W ITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY : (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN R ESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PR EVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOS S, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN ; [(BA ) WHERE THE AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 33 ASSESSEE HAS FAILED TO FURNISH A REPORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E;] (C) WHERE AN ASSESSMENT HAS BEEN MADE , BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSED ; O R (I) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE ; OR (II I) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTH ER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED;] 87[(D) WHERE A P ERSON IS FOUND TO HAVE ANY ASSET (INCLUDING FINANCIAL INTERE ST IN ANY ENTITY) LOCATED OUTSIDE INDIA.] [EXPLANATION 3.FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT86 UNDER THIS SECTION, THE ASSESSING OF FICER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISS UE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SUB -SECTION (2) OF SECTION 148.] [EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION, AS AMENDED BY THE FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSM ENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012.] 35. FROM PERUSAL OF THE ABOVE PROVISION IT CONTEMPL ATES THAT AS PER THE FIRST PROVISO TO SECTION 147 OF THE ACT IF THE ASSESSEES CASE IS TO BE SELECTED FOR REASSESSMENT AND THE ACTION IS TO B E TAKEN AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSE SSMENT YEAR THEN SUCH ACTION CAN BE TAKEN ONLY IN CASE ANY INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N U/S 139 OR IN RESPONSE TO NOTICE ISSUED U/S 142(1) OR 148 OF THE ACT OR TO DISCLOSE FULLY AND TRULY, ALL MATERIAL FACTS NECESSARY FOR H IS ASSESSMENT, FOR THAT ASSESSMENT YEAR. FURTHER EXPLANATION (2) SECTI ON 147 OF THE ACT AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 34 ENUMERATES CERTAIN SITUATION WHERE IT CAN BE DEEMED THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT . THE CASE OF ASSESSEE NEEDS TO BE EXAMINED IN THE LIGHT OF CLAUS E (B) OF EXPLANATION 2. WE FIND THAT THE ASSESSEE FILED RETU RN OF INCOME U/S 139(1) OF THE ACT AND THERE WAS NO DEFAULT ON ITS P ART TO RESPOND TO NOTICE U/S 142(1) OR 148 OF THE ACT THEN THE ONLY C ONDITION UNDER WHICH IT COMES UNDER THE SCANNER OF SECTION 147 OF THE ACT IS THAT WHETHER THE ASSESSEE FAILED TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS. 36. AS FAR AS, EXAMINING THE CASE OF ASSESSEE UNDER THE LIGHT OF CLAUSE (B) OF EXPLANATION 2 OF SECTION 147 OF THE A CT, WE FIND THAT THE ASSESSEE HAD FURNISHED INCOME TAX RETURN WHICH WAS PROCESSED U/S 143(1)(A) OF THE ACT, WHICH CANNOT BE CONSIDERED AS REGULAR ASSESSMENT AND FURTHER NO ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED AND IN THE REASSESSMENT PROCEEDINGS THE A SSESSING OFFICER EXCEPT FOR TREATING THE DECLARED LONG TERM CAPITAL GAIN AS INCOME FROM UNDISCLOSED SOURCES HAS NOT MADE ANY OTHER ADDITION WHICH SHOWS THAT ASSESSEE HAS NEITHER UNDERSTATED T HE INCOME NOR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN. 37. SITUATION WOULD HAVE BEEN DIFFERENT IF THE ASSE SSEES CASE HAS BEEN SELECTED FOR ASSESSMENT PROCEEDINGS IN THE FIR ST ROUND THEN TO EXAMINE WHETHER INCOME HAS ESCAPED ASSESSMENT, CLAU SE (C) OF EXPLANATION 2 OF SECTION 147 WOULD HAVE BEEN COME I NTO OPERATION AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 35 UNDER WHICH IF ANY INCOME HAS BEEN ASSESSED AT TOO LOWER RATE THEN ALSO IT CAN BE DEEMED AS INCOME HAS ESCAPED ASSESSM ENT. 38. BUT IN THE CASE OF ASSESSEE NO ASSESSMENT WAS CARRIED OUT AND THUS THE ASSESSEES CASE CAN ONLY BE EXAMINED REFER RING TO CLAUSE (B) OF EXPLANATION 2 OF SECTION 147 OF THE ACT. 39. IN THE INSTANT CASE OF ASSESSEE LONG TERM CAPIT AL GAIN INCOME WAS DULY OFFERED IN THE REGULAR RETURN OF INCOME. N O ADDITION HAS BEEN MADE BY THE ASSESSEE IN THE REASSESSMENT PROCE EDINGS SO THERE IS NO UNDERSTATEMENT OF INCOME. LD. AO HAS OB SERVED THAT THE INCOME OF THE ASSESSEE WAS ASSESSED AT TOO A LOWER RATE AS THE ASSESSEE HAS DECLARED TAX @ 10% ON THE LONG TERM CA PITAL GAIN BUT THE ASSESSING OFFICER IN THE REASSESSMENT PROCE EDINGS COME TO CONCLUSION THAT IT WAS INCOME FROM UNDISCLOSED SOUR CES LIABLE FOR NORMAL RATE OF TAX, THUS IT WAS ONLY A CARE OF ASSE SSING INCOME AT TOO LOW RATE. 40. LD. COUNSEL FOR THE ASSESSEE PLACED HEAVY RELIA NCE ON THE DECISION OF COORDINATE BENCH, HYDERABAD GFA ANLAGENBAU GMBH VS. ACIT(SUPRA) W HERE IN ALSO SIMILAR ISSUE CAME FOR ADJUDICATION. WE FIND THAT IN THE CASE OF GFA ANLAGENBAU GMBH VS. ACIT(SUPRA) LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN TH E ENTIRE RECEIPTS ARE DECLARED AS INCOME AND TAX WAS PAID AT REGULAR RATE THERE IS NO SCOPE OF ALLEGING ASSESSMENT OF INCOME. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 36 41. FOR BETTER UNDERSTANDING WE REPRODUCE RELEVANT SUBMISSION OF BOTH THE SIDES AND DECISIONS OF THE TRIBUNAL ADJUDI CATING THIS VERY SAME ISSUES: 16. HAVING CONSIDERED THAT ON MERITS THERE IS NO CA SE FOR TREATING THE FEES FOR TECHNICAL SERVICES RECEIVED B Y THE ASSESSEE AS BUSINESS INCOME, WE NOW DEAL WITH OTHER ISSUE OF REOPENING UNDER SECTION 148 FOR A.YS. 2005-06, 2006-07 AND 2008-09. CONSEQUENT TO THE FINDINGS IN A.Y. 2007-08, THE A.O . REOPENED THE ASSESSMENT IN OTHER YEARS WHICH WERE ORIGINALLY ACCEPTED UNDER SECTION 143(1) . 16.1. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT WHEN THE ENTIRE RECEIPTS ARE DECLARED AS INCOME AND TAX WAS PAID AT A PARTICULAR RATE, THERE IS NO SCOPE FOR ALLEGING ANY ESCAPEMENT OF INCOME. TAKING US THROUGH THE PROVISIONS OF SECTION 147 , LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE MAIN PROVISIONS OF S.147 WOULD NOT APPLY AT ALL IN THIS CASE AS 'NO INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT'. H E ALSO INVITED OUR SPECIFIC ATTENTION TO THE EXPLANATION 2 TO OF S.147, WHICH READS AS FOLLOWS- 'S.147....... EXPLANATION 2.--FOR THE PURPOSES OF THIS SECTION, T HE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY :-- (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INC OME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE U NDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUN T WHICH IS NOT CHARGEABLE TO INCOME-TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERST ATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, AL LOWANCE OR RELIEF IN THE RETURN ; AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 37 (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REP ORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO RE QUIRED UNDER SECTION 92E ; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT-- (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER-ASSESSE D; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RAT E ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED; (D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INCL UDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE I NDIA.' HE SUBMITTED THAT NEITHER CLAUSE (B) NOR CLAUSE (C) OF THE ABOVE EXPLANATION WOULD APPLY, AS THE ASSESSEE HAD NOT UN DERSTATED THE INCOME OR CLAIMED ANY EXCESSIVE LOSS OR DEDUCTI ON OR ALLOWANCE OR RELIEF IN THE RETURN, AS STATED IN THE SAID CLAUSE. HE THEREFORE, SUBMITTED THAT THE REOPENING OF THE ASSE SSMENT IS NOT VALID. 16.2. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON TH E OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES, TAKI NG US THROUGH THE RELEVANT PORTIONS OF THE DETAILED ORDER OF THE DISPUTES RESOLUTION PANEL DATED 12.4.2011 FOR THE ASSESSMENT YEAR 2005-06. 16.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON TH E ISSUE OF LEGALITY AND VALIDITY OF REOPENING OF THE ASSESSMEN T AND PERUSED THE ORDERS OF THE AUTHORITIES AND OTHER MAT ERIAL ON RECORD. THE DISPUTES RESOLUTION HAS CONSIDERED THE OBJECTIONS OF THE ASSESSEE TO THE REOPENING OF THE ASSESSMENT AND REJECTED THE SAME. THE DISPUTES RESOLUTION PANEL HAS HELD IN PARA 4.3 AS FOLLOWS- '4.3 WE ALSO DO NOT AGREE WITH THE ASSESSEE'S CLAIM THAT ASSESSEE'S CASE IS NOT COVERED UNDER CLAUSE (B) OF EXPLANATION 2 AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 38 OF SECTION 147 IN ORDER TO EXAMINE THIS ISSUE, THE EXPLANATION 2 TO SEC 147 [CLAUSE (B)] IS REPRODUCED AS UNDER 'EXP LANATION 2.- FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHA LL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT, NAMELY:- . (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERST ATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, AL LOWANCE OR RELIEF IN THE RETURN; ON GOING THROUGH THE FACTS OF THE PRESENT CASE, THE FOLLOWING FACTS ARE NOTICED I) RETURN OF INCOME WAS FILED BY THE ASSESSEE II) NO ASSESSMENT WAS MADE AS PROCESSING UNDER SECTION 143(1)(A) CANNOT BE CONSIDERED AS ASSESSMENT IN VIEW OF HON'BLE SUPREME COURT'S DECISION IN THE CASE OF ACI T VS RAJESH JAVERI STOCK BROKERS (P) LTD (291 ITR 500) . THEREF ORE, THERE WAS NO APPLICATION OF MIND BY THE ASSESSING OFFICER AT THE PROCESSING STAGE OF THIS CASE OF THE ASSESSEE, AND THUS THERE IS NO CHANGE OF OPINION BY THE ASSESSING OFFICER WHILE ISSUING NOTICE U/S 147 OF THE IT ACT . III) DURING THE COURSE OF PROCEEDINGS IN THE CASE O F THE ASSESSEE FOR AY 2007-08, IT WAS OBSERVED BY THE ASSESSING OF FICER THAT THE ASSESSEE IS HAVING PE IN INDIA AND HENCE IN VIE W OF DTAA PROVISIONS. THE AMOUNTS RECEIVED BY THE ASSESSEE SH OULD HAVE BEEN TAXED UNDER THE HEAD BUSINESS INCOME WHILE THE ASSESSEE HAD OFFERED THE SAME UNDER THE HEAD FEE FROM TECHNI CAL SERVICES, I.E. THE INCOME SHOULD HAVE TAXED AT THE RATE OF 40% WHEREAS THE SAME HAS BEEN TAXED AT THE RATE OF 10%. THUS THE ASSESSEE HAS CLAIMED EXCESS RELIEF U/S 90 READ WITH DT AA PROVISIONS. IN VIEW OF THE ABOVE OBSERVATIONS IT CAN BE CONCLUD ED THAT THE PRESENT CASE IS SQUARELY COVERED UNDER CLAUSE (B) O F EXPLANATION 2 OF SECTION 147 OF THE IT ACT AND HENCE THE ASSESSEE'S CLAIM AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 39 THAT THE PROCEEDINGS U/S 147 ARE INVALID AND INITIA TED WITHOUT SANCTION OF LAW IS NOT TENABLE. 16.4 WE ARE OF THE CONSIDERED OPINION THAT DRP HAS ERRED IN CONSIDERING THAT THE CASE IS COVERED UNDER CLAUSE(B ) OF EXPLANATION- 2 TO SECTION 147 . AS CAN BE SEEN FROM THE PROVISION EXTRACTED ABOVE, EXPLANATION 2(B) CAN ONL Y BE INVOKED WHERE ASSESSEE HAS 'UNDERSTATED THE INCOME OR HAS C LAIMED EXCESSIVE LOSS OR DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN'. THIS IS NOT A CASE OF 'UNDERSTATING THE INCOME' AS THE SAME INCOME RECEIVED BY THE ASSESSEE WAS BROUGHT TO TAX AT A DIFFERENT RATE. THERE IS NO DIFFERENCE BETWEEN THE RETURNED INCOME AND ASSESSED INCOME, UP TO THE DRAFT ORDER S TAGE. IT IS ALSO NOT A CASE WHERE ASSESSEE CLAIMED EXCESS LOSS OR DEDUCTION OR ALLOWANCE. THE ISSUE WAS CONSIDERED BY THE DRP AS 'EXCESS RELIEF IN RETURN'. HOWEVER, THE WORD 'RE LIEF' CANNOT BE USED IN THE CONTEXT OF AVAILING LESSER RATE OF TAX. IF ONE COMPARES THE SUB-CLAUSE-II IN CLAUSE (C) OF EXPLANATION-2, I T SPECIFICALLY STATES THAT 'INCOME HAS BEEN ASSESSED TO A LOW RATE ' AND SUB- CLAUSE-III SPECIFICALLY FOR A SITUATION WHERE SUCH 'INCOME HAS BEEN MADE SUBJECT OF EXCESSIVE RELIEF' UNDER THIS A CT. THEREFORE, UNDER CLAUSE-(C) WHERE ASSESSMENT HAS BEEN MADE, RE OPENING CAN BE DONE WHERE INCOME HAS BEEN ASSESSED TO A LOW RATE OR EXCESSIVE RELIEF WAS ALLOWED. HOWEVER, SUCH SEGREGA TION WAS NOT MADE OUT IN CLAUSE (B) WHERE ONLY 'RELIEF' WAS MENTIONED AND NOT 'AT TOO LOW A RATE' IF AT ALL, IT CAN ONLY BE C ATEGORISED AS A CASE OF ASSESSING AT 'TOO LOW A RATE'. ASSESSEE HAS OFFERED THE INCOME UNDER PROVISIONS OF SECTION 9(1)(VII) OFFERING GROSS RECEIPTS TO TAX AT 10% OF THE GROSS RECEIPTS WHEREA S THE A.O. CONSIDERED THE INCOME AT 42.23% ON THE NET INCOME. IN FACT, STRICTLY SPEAKING THE DRP DIRECTIONS IN ALLOWING 50 % OF THE AMOUNT AS EXPENDITURE FOR EARNING INCOME HAS RESULT ED IN TOTAL INCOME BEING DETERMINED AT 50% OF THE AMOUNT OFFERE D BY THE ASSESSEE AS TOTAL INCOME. IN OUR CONSIDERED OPINION , THE DRP HAS WRONGLY CONSIDERED ASSESSEE'S CASE AS A CASE OF CLAIMING EXCESS RELIEF IN THE RETURN WHICH SITUATION WAS NOT CONSIDERED IN CLAUSE (B) OF THE PROVISIONS OF SECTION 147 . THEREFORE, ASSESSEE'S CONTENTION THAT NEITHER CLAUSE (B) NOR C LAUSE (C) OF THE EXPLANATION WOULD APPLY IS A VALID CONTENTION. MORE OVER DRP AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 40 ALSO RELIED ON A DECISION GIVEN IN THE CONTEXT OF MOTOR VEHICLE ACT WHERE THE PROVISION REFER TO TAX BUT NOT INCOME AS IS THE CASE UNDER IT ACT 1961. THE DECISIONS RELIED ON BY DRP ALSO WERE CONSIDERED OUT OF CONTEXT. IN VIEW OF THIS, WE ARE OF THE OPINION THAT REOPENING OF ASSESSMENT ON THE FACTS O F THE CASE IS NOT JUSTIFIABLE. HOWEVER, THIS ENTIRE DISCUSSION BECOMES ACADEMIC IN NATURE AS WE HAVE ALREADY UPHELD THE ASSESSEE'S CONTENTION TH AT THE AMOUNT CAN ONLY BE BROUGHT TO TAX AS FEES FOR TECHN ICAL SERVICES AND CANNOT BE CONSIDERED AS BUSINESS INCOME. THE RE SPECTIVE GROUNDS ON THIS ISSUE ARE CONSIDERED ALLOWED. 42. FROM GOING THROUGH THE ABOVE DECISION WE ARE OF THE CONSIDERED VIEW THAT LEGAL ISSUE RAISED IN GROUND NO.1 IN THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THIS DECISION OF H YDERABAD TRIBUNAL AND THUS THE ASSESSEE DO NOT FALL IN CLAUS E (B) OF EXPLANATION 2 TO 147 OF THE ACT. SINCE THERE IS NO UNDERSTATEMENT OF INCOME AND THE ASSESSEE CASE CANNOT FALL IN CLAUSE (C) OF EXPLANATION 2 OF SECTION 147 OF THE ACT. SINCE THE ASSESSEES CASE WAS NOT WAS NOT SELECTED FOR SCRUTINY ASSESSMENT U/ S 143(3) OF THE ACT. THUS, THE SUBMISSION OF LD. COUNSEL FOR THE AS SESSEE THAT NEITHER CLAUSE (B) OR CLAUSE (C) OF EXPLANATION 2 T O SECTION 147 WOULD APPLY HAVE MERITS. WE, THEREFORE, RESPECTFULLY FOLL OWING DECISION OF COORDINATE BENCH, HYDERABAD IN THE CASE OF GFA ANLAGENBAU GMBH VS. ACIT(SUPRA) ALLOW LEGAL ISSUE RAISED BY ASSESSEE IN GROUND NO.1 AND QUASH REASSESSMENT PROCEEDINGS BEIN G WITHOUT JURISDICTION, WRONG BAD IN LAW. GROUND NO.1 OF THE ASSESSEES APPEAL STANDS ALLOWED. AD-MANUM FINANCE LTD. . ITA NOS.266, 286 & 316 /IND/12 41 43. APROPOS TO GROUND NO.2 ON MERITS OF THE CASE WE FIND THE SAME AS MERELY ACADEMIC IN NATURE TO DEAL WITH THIS GROU ND SINCE WE HAVE ALREADY ALLOWED ASSESSEES LEGAL GROUND NO.1 A ND QUASHED THE REASSESSMENT PROCEEDINGS COMPLETED BY ASSESSING OFF ICER ON 27.12.2010. THUS, WITHOUT GOING FOR THE ADJUDICATIO N OF THE ISSUES RAISED ON MERITS IN GROUND NO.2, WE DISMISS THE SAM E BEING INFRUCTUOUS. 44. GROUND NO.3 IS GENERAL IN NATURE WHICH NEEDS TO ADJUDICATION. 49. AS A RESULT, APPEAL OF THE ASSESSEE FOR A.Y. 20 03-04 IS ALLOWED. 50. IN THE RESULT, ALL THESE APPEALS OF THE ASSESSE E FOR A.YS. 2001- 02, 2002-03 & 2003-04 ARE PARTLY ALLOWED AS PER TER MS INDICATED ABOVE. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.01.202 0. SD/- SD/- ( KUL BHARAT) (MANISH BOR AD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 29 TH JANUARY, 2020 PATEL/PS COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE