IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES: "G" New Delhi
BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No: 5234/Del/2010
AY: - 1992-93
Salim Khan L/H of Late Amanullah Khan vs. ITO
Pathanpura Ward-1
Roorkee Roorkee
(PAN ADYPK3527D)
(Appellant) (Respondent)
CO No: 413/Del/2010
AY: - 1992-93
ITO vs. Salim Khan L/H of Late Amanullah Khan
Ward-1 Pathanpura
Roorkee Roorkee
(PAN ADYPK3527D)
(Appellant) (Respondent)
Appellant by : Shri Ved Jain, CA
Respondent by : Shri Sujit Kumar, Sr.DR
Date of Hearing : 11.09.2015
Date of pronouncement : .11.2015
ORDER
PER SUDHANSHU SRIVASTAVA JUDICIAL MEMBER
The present appeal has been filed by the assessee against the order dated
24.08.2010 passed by the Ld. CIT (A)-1, Dehradun whereas the CO has been filed
by the Department.
ITA No. 5234/Del/2010
CO No. 413/Del/2010
ITA 5234/Del/2010
2. The brief facts of the case are as under:-
The assessee had filed his return of income for the year under consideration
declaring an income of Rs. 72,650/-. Subsequently, the assessee received additional
compensation along with interest in respect of the land acquired by the State
Government. The AO issued notice u/s 148 of the Income Tax Act, 1961 on the
ground that he had reason to believe that the income pertaining to additional
compensation was taxable and had escapement assessment. However in the
assessment order, only a disallowance of depreciation on car, amounting to Rs.
13,250/- was made, and no addition or disallowance was made with regard to the
reasons recorded i.e. on account of compensation. This action of the AO was
challenged before the Ld. CIT (A) on the ground that since the AO had made no
addition on account of additional compensation i.e. the reason for which the
reassessment proceedings were initiated, the proceedings u/s 148 must be declared
void. However, the Ld. CIT (A) was of the opinion that if the AO had reason to
believe that income had escaped assessment, he was competent to initiate
proceedings u/s 147 of the Act and what was required at that stage was the
existence of the prime facie reason to believe and not the conclusive finding. The Ld.
CIT (A) accordingly dismissed the appeal of the assessee.
3. In the present appeal before the assessee has raised three grounds of appeal
which are as under:-
1. "That the order is against law and facts of the case.
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2. That the income on which tax was deducted if not found taxable, the
amount of TDS is refundable to the appellant and it can't be retained
on the vague interpretation of Law given by the A/o and the learned
CIT (A). TDS is advance payment of tax and the same is refundable
where even the Income is not found taxable.
3. That the 1st Appeal Authority was bound by the decision already
given by their predecessor and the method adopted in case of Co-
Shares. "
4. However, at the time of hearing, the Ld. AO of the Counsel submitted that
he is not pressing ground No. 2, so this ground is dismissed as not pressed. The
remaining ground, in effect, pertains to the issue as to whether the reopening of
assessment u/s 148 is legal or not. The Ld. AR for the assessee submitted that in
absence of fresh tangible material, the AO cannot make additions other than those
based on the reasons recorded for reopening. He submitted that when the
assessment is reopened by issuance of a notice u/s 148, the previous assessment is
set aside and the whole assessment proceedings start afresh. But where no addition
has been made on issues on which reasons to believe are recorded, then addition is
not permissible without recording of fresh reasons. The Ld. AR relied on the decision
of the Hon'ble High Court of Delhi in the case of Ranbaxy Laboratories Ltd. vs. CIT
336 ITR 136 (Del) and of the Hon'ble Bombay High Court in the case of
Commissioner of Income Tax vs. M/s. Jet Airways (I) Ltd. 331 ITR 236 (Bom).
Placing reliance on these decisions he submitted that the reassessment proceedings
were bad in law and hence liable to be quashed.
5. Ld. DR on the other hand supported the orders of the AO as well as the Ld. CIT
(A).
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CO No. 413/Del/2010
6. We have heard the rival submissions and have perused the documents on
record. It is seen that the only addition made during the reassessment is on account
of depreciation amounting to Rs. 13,250/- and no other addition/disallowance has
been made although the assessment was reopened for the reason that additional
compensation along with interest thereon has not been offered to tax by the
assessee. Reference may be made to sections 147 and 148 which read as under:-
"147. Income escaping assessment.-If the Assessing Officer has reason to
believe that any income chargeable to tax has escaped assessment for any
assessment year, he may, subject to the provisions of sections 148 to 153,
assess or reassess such income and also any other income chargeable to tax
which has escaped assessment and which comes to his notice subsequently in
the course of the proceedings under this section, or recompute the loss or the
depreciation allowance or any other allowance, as the case may be, for the
assessment year concerned (hereafter in this section and in sections 148 to
153 referred to as the relevant assessment year) :
Explanation 2 For the purposes of the section, the following shall also be
deemed to be cases where income chargeable 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
respect of which he is assessable under this Act during the previous
year exceeded the maximum amount which is not chargeable to
income-tax ;
(b) Where a return of income has been furnished by the assesee 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
loss, deduction, allowance or relief in the return ;
(c) Where an assessment has been made, but
(i) income chargeable to tax has been underassessed ; or
(ii) such income has been assessed at too low a rate ; or
(iii) such income has been made the subject of excessive relief under
this Act ; or
(iv) excessive loss or depreciation allowance or any other allowance
under this Act has been computed.
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Explanation 3 For the purpose of assessment or reassessment under
this section the Assessing Officer may assess or reassess the income in
respect of any issue, 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.
148. Issue of notice where income escaped assessment (1) Before
making the assessment, reassessment or recomputation under section
147, the Assessing Officer shall serve on the assessee a notice requiring
him to furnish within such period, as may be specified in the notice, a
return of his income or the income of any other person in respect of
which he is assessable under this Act during the previous year
corresponding to the relevant assessment year, in the prescribed form
and verified in the prescribed manner and setting forth such other
particulars as may be prescribed ; and the provisions of this Act shall,
so far as may be, apply accordingly as if such return were a return
required to be furnished under section 139... (2) The Assessing Officer
shall, before issuing any notice under this section, record his reasons
for doing so."
7. Reference may be made on this juncture to the decision rendered by the
Honble High Court of Bombay in CIT vs. M/s. Jet Airways (I) Ltd. (supra) which has
been approved and applied by the Hon'ble Delhi High Court in Ranbaxy Laboratories
Ltd. vs. CIT (supra) as under :-
17. Now, coming back to the interpretation which was given by the Bombay
High Court to sections 147 and 148 in view of the precedent on the subject,
the court held as under (pages 243 and 247 of 331 ITR) :
"Interpreting the provision as it stands and without adding or
deducting from the words used by Parliament, it is clear that upon the
formation of a reason to believe under section 147 and following the
issuance of a notice under section 148, the Assessing Officer has the
power to assess or reassess the income which he has reason to believe
had escaped assessment, and also any other income chargeable to tax.
The words 'and also' cannot be ignored. The interpretation which the
court places on the provision should not result in diluting the effect of
these words or rendering any part of the language used by Parliament
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otiose. Parliament having used the words 'assess or reassess such
income and also any other income chargeable to tax which has
escaped assessment', the words 'and also' cannot be read as being in
the alternative. On the contrary, the correct interpretation would be to
regard those words as being conjunctive and cumulative. It is of some
significance that Parliament has not used the word 'or'. The Legislature
did not rest content by merely using the word 'and'. The words 'and' as
well as 'also' have been used together and in conjunction.
Evidently, therefore, what Parliament intends by use of the
words 'and also' is that the Assessing Officer, upon the formation of a
reason to believe under section 147 and the issuance of a notice under
section 148(2) must assess or reassess: (i). 'such income'; and also (ii)
any other income chargeable to tax which has escaped assessment
and which comes to his notice subsequently in the course of the
proceedings under the section. The words 'such income' refer to the
income chargeable to tax which has escaped assessment and in
respect of which the Assessing Officer has formed a reason to believe
that it has escaped assessment. Hence, the language which has been
used by Parliament is indicative of the position that the assessment or
reassessment must be in respect of the income in respect of which he
has formed a reason to believe that it has escaped assessment and
also in respect of any other income which comes to his notice sub-
sequently during the course of the proceedings as having escaped
assessment. If the income, the escapement of which was the basis of
the formation of the reason to believe is not assessed or reassessed, it
would not be open to the Assessing Officer to independently assess
only that income which comes to his notice subsequently in the course
of the proceedings under the section as having escaped assessment. 'If
upon the issuance of a notice under section 148(2), the Assessing
Officer accepts the objections of the assessee and does not assess or
reassess the income which was the basis of the notice, it would not be
open to him to assess income under some other issue independently.
Parliament when it enacted the provisions of section 147 with effect
from April 1, 1989 clearly stipulated that the Assessing Officer has to
assess or reassess the income which he had reason to believe had
escaped assessment and also any other income chargeable to tax
which came to his notice during the proceedings. In the absence of the
assessment or reassessment the former, he cannot independently
assess the latter' .
Section 147 has this effect that the Assessing Officer has to
assess or reassess the income ('such income') which escaped
assessment and which was the basis of the formation of belief
and if he does so, he can also assess or reassess any other
income which has escaped assessment and which comes to his
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notice during the course of the proceedings. However, if after
issuing a notice under section 148, he accepted the contention
of the assessee and holds that the income which he has
initially formed a reason to believe had escaped assess- ment,
has as a matter of fact not escaped assessment, it is not open
to him independently to assess some other income. If he
intends to do so, a fresh notice under section 148 would be
necessary, the legality of which would be tested in the event
of a challenge by the assessee.'" (Emphasis supplied)
8. In the present appeal, the very basis of initiation of proceedings for which
reasons to believe were recorded was income escaping assessment in respect of
additional compensation along with interest. But although the AO did not make any
addition on account of additional compensation/interest, the AO proceeded to
reduce the assessee's claim of depreciation without taking recourse to fresh
recording of reasons. This, as per the ratio of the decisions laid down by the Hon'ble
Delhi and Bombay High Courts, is not permissible. Had the AO proceeded to make
addition in respect of additional compensation / interest etc. also, then in view of the
decisions of the two Hon'ble High Courts, he would have been justified to disallow
the claim of depreciation also. However, addition only on account of depreciation
without recording of reasons afresh vitiates the entire reassessment proceedings.
In the result we quash the reassessment proceedings and allow the appeal of the
assessee.
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CO No. 413/Del/10
9. The CO of the Department pertains to ground No. 2 of the assesee's appeal
regarding tax deduction at source. Since the assessee has already not pressed this
ground of appeal, the CO also is not being adjudicated.
10. In the result the CO of the Department is dismissed.
11. In the combined result, the appeal of the assessee is allowed and the CO of
the Department is dismissed.
Pronounced in the open court On 30th November, 2015.
sd/- sd/-
(J.SUDHAKAR REDDY) (SUDHANSHU SRIVASTAVA)
ACCOUTANT MEMEBR JUDICIAL MEMBER
Dated: the 30. 11. 2015
`veena'
Copy of the Order forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
6. Guard File By order
Dy. Registrar
Sl. Description Date
No.
1. Date of dictation by the Author 26.11.2015
2. Draft placed before the Dictating Member 27.11. 2015
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3. Draft placed before the Second Member
4. Draft approved by the Second Member
5. Date of approved order comes to the Sr. PS
6. Date of pronouncement of order
7. Date of file sent to the Bench Clerk
8. Date on which file goes to the Head Clerk
9. Date of dispatch of order
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