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From the Courts »
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 ITO vs. Vikram A. Pradhan (ITAT Mumbai)

ITO Ward-1 Roorkee Vs. Salim Khan L/H of Late Amanullah Khan Pathanpura Roorkee
December, 01st 2015
                     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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                                                             CO No. 413/Del/2010



              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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                                                            CO No. 413/Del/2010



             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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                                               CO No. 413/Del/2010






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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                                                             CO No. 413/Del/2010



              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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                                                                  ITA No. 5234/Del/2010
                                                                    CO No. 413/Del/2010



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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                                                  ITA No. 5234/Del/2010
                                                    CO No. 413/Del/2010



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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