IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `SMC' NEW DELHI
BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER
ITA No.-5966/Del/2018
(Assessment Year: 2011-12)
Smt. Rita Singh vs ITO,
RZ-71, 3rd Floor, Indira Park, Ward-70(1), New Delhi
Uttam Nagar, New Delhi-
110057
PAN :
Assessee by Shri Shaantanu Jain, Deepanshu
Jain, Adv.
Revenue by Shri P.S.Thuinguleny, Sr. DR
Date of Hearing 13.12.2018
Date of Pronouncement 18.12.2018
ORDER
PER N.S.SAINI, ACCOUNTANT MEMBER :
This is an appeal filed by the assessee against the order of
Commissioner of Income Tax (Appeals)-32, New Delhi dated
20.04.2018 for assessment year 2011-12. The assessee raised
following grounds of appeal :-
1. "That the learned Commissioner of Income Tax
(Appeals) has erred both in law and on facts in upholding
the action of learned Assessing Officer in computing the
total income of the appellant at Rs.4,12,806/- u/s
147/144 of the Act.
2. That the learned Commissioner of Income Tax
(Appeals) has erred both in law and on facts in upholding
the action of learned Assessing Officer in framing the
2 ITA NO. 5966/Del/2018
impugned assessment order u/s 147/ 144 of the Act and
that too without assuming jurisdiction as per law and
without complying with the mandatory conditions of
Section 147 to 151 of the Income Tax Act, 1961.
2.1. That in any case and in any view of the matter, order
of learned CIT(A) in upholding the action of Ld. AO in
framing the impugned assessment order u/s 147/144 of
the Act is bad in law and against the facts and
circumstances of the case.
2.2 That the learned CIT(A) has erred in not considering
the fact that there was no escapement of income found
by the learned Assessing Officer in relation to the reasons
recorded as no addition/ disallowance is made in the
assessment order based upon the reasons recorded.
2.3 The Ld. CIT(A) has erred grossly and acted in
defiance of Hon'ble Delhi High Court judgment in the case
of Ranbaxy Laboratories vs. CIT; 336 ITR 136 (Delhi) and
Hon'ble Rajasthan High Court judgment in the case of CIT
vs. Sh. Ram Singh; 306 ITR 343 (Rajasthan) whereby the
issue as raised in ground no. 2.2 herein is squarely
covered.
2.4 That reasons recorded are based upon presumption
and guess work and these are not more than reason to
suspect and thus are not valid in the eyes of law as no
belief can be formed on the basis of the reasons
recorded.
2.5 That the Ld. AO has not recorded any reason by using
his independent application of mind to show that he has a
"reason to believe" that the income has escaped
3 ITA NO. 5966/Del/2018
assessment and as such the same are not valid in the
eyes of law.
2.6 That impugned order upholding the action of learned
Assessing Officer in passing an order u/s 147/ 144 of the
Act is bad in law as no new fresh/tangible material has
come to the knowledge of the Ld. A.O.
2.7 That the re-opening of the assessment is bad in law for
the reason that the sanction granted u/s 151 of the Act is
not valid in the eyes of the law and the same is
mechanical and has been done without independent
reasoning and application of mind by the sanctioning
authority.
3. That having regards to the facts and circumstances
of the case, the learned CIT(A) has erred in not
considering the fact that the Ld. AO has erred in law and
on facts in framing impugned assessment order without
assuming jurisdiction as per law and without serving
mandatory notice u/s 148 of the Income Tax Act, 1961.
4. That the learned CTT(A) has erred in law and on facts
in upholding the action of learned AO in making a
disallowance of deduction of Rs. 77,973/- under section
80C of the Act.
5. That the learned CIT(A) has erred in law and on facts
in upholding the action of learned AO in making an
addition of Rs. 1,25,000/- that are deposited in the bank
by treating the same as income from undisclosed sources
even though the same was capable of verification.
6. That the learned CIT(A) has erred in law and on facts
4 ITA NO. 5966/Del/2018
in upholding the action of learned AO in making an
addition of Rs. 8,967/- on account of interest income in
the bank.
7. That the lerned Commissioner of Income Tax
(Appeals) has erred both in law and on facts in upholding
the levy of interest which are not leviable on the facts and
circumstances of the case of the appellant."
2. The crux of the issue involved in ground nos. 2.2 and 2.3 of
the assessee is that the Commissioner of Income Tax (Appeals)
erred in confirming the action of the Assessing Officer in making
disallowance under other heads of income and expenditure when no
escapement of income was found by the Assessing Officer in
relation to the reasons recorded.
3. The brief facts of the case are that the Assessing Officer
issued notice u/s 148(2) of the Act to the assessee for reopening
the assessment on the ground that the assessee sold property
agriculture land of 4 Bighas and 14 Biswas in Aya Nagar, The
H.K.Mehrauli, New Delhi of which he was 1/8 share holder for
reconsideration of Rs. 53,00,000/- on 22.03.2011. The Assessee
had not filed her return of income for assessment year 2011-12
although her income exceeded the maximum amount which is not
chargeable to tax during the previous year relevant to the
assessment year 2011-12. Therefore he had reasons to believe that
income chargeable to tax has escaped assessment.
4. In the assessment framed u/s 147 r.w.s. 144 no addition was
made to the income of the assessee by the Assessing Officer on
account of sale of agriculture land. The Assessing Officer assessed
income :
5 ITA NO. 5966/Del/2018
"1)Income from Salary : Rs. 2,78,839/-
2) Income from undisclosed sources : Rs. 1,25,000/-
3) iIncome from other sources : Rs. 8,967/-
Total income : Rs. 4,12,806/-
5. The contention of the assessee before the Commissioner of
Income Tax (Appeals) was that the reason of sale of property for
which action was taken u/s 148 of the Act did not survive as no
addition thereof was made by the Assessing Officer. Hence, his
jurisdiction to make assessment came to end and hence he could
not have made any addition under other heads of income and for
this he relied on the decision of Hon'ble Rajasthan High Court in the
case of CIT vs. Sh. Ram Singh (2008) 306 ITR 343 (Raj.), on
the decision of Hon'ble Bombay High Court in the case of CIT vs.
Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom) and the
decision of Hon'ble Delhi High Court in the case of Ranbaxy
Laboratories Ltd. vs. CIT. [2011] 336 ITR 136 (Delhi).
6. The Commissioner of Income Tax (Appeals) has not
adjudicated this ground of the assessee.
7. Before me the Authorised Representative of the assessee Shri
Shantanu Jain and Shri Deepanshu Jain, Adv. Reiterated the
submissions made before the Commissioner of Income Tax
(Appeals) and submitted that following the decision of Hon'ble Delhi
High Court in the case of Ranbaxy Laboratories (supra) the
reassessment order passed by the Assessing Officer should be
cancelled.
6 ITA NO. 5966/Del/2018
8. On the other hand the Departmental Representative Shri
P.S.Thuinguleny, Sr. DR supported the order of the Commissioner
of Income Tax (Appeals).
9. I find that it is not in dispute that the reopening of the
assessment was made by the Assessing Officer by recording
reasons that income chargeable to tax has escaped assessment on
sale of agriculture land by the assessee. It is observed from the re-
assessment order passed by the Assessing Officer u/s 147 r.w.s.
144 of the Act on 26/03/2015 no addition was made to the income
of the assessee on account of sale of agriculture land by the
Assessee. The addition was made to the income of the assessee
under the head `salary, income from undisclosed sources and
income from other sources' which were not the grounds for
reopening of the assessment. The Hon'ble Delhi High Court in the
case of Ranbaxy Laboratories Ltd. (supra) has held as under :
"Held, that section 148 was supplementary and
complementary to section 147. Sub-section (2) of
section 148 mandates reasons for issuance of notice by
the Assessing Officer and sub-section (1) mandates
service of notice to the assessee before the Assessing
Officer proceeds to assess, reassess or recompute
escaped income. Section 147 mandates recording of
reasons to believe by the Assessing Officer that the
income chargeable to tax had escaped assessment. All
these conditions were required to be fulfilled to assess
or reassess the escaped income chargeable to tax.
Under Explanation 3 if during the course of the
proceedings the Assessing Officer comes to the
conclusion that some items have escaped assessment,
then notwithstanding that those items were not
included in the reasons to believe as recorded for
initiation of the proceedings and the notice, he would be
competent to make assessment of those items. For
every new issue coming before the Assessing Officer
during the course of proceedings of assessment or
reassessment of escaped income, and which he intends
to take into account, he would be required to issue a
fresh notice under section 148 . The Assessing Officer
7 ITA NO. 5966/Del/2018
was satisfied with the justifications given by the
assessee regarding the items of club fees, gifts and
presents and provision for leave encashment, but
during the assessment proceedings, he found the
deduction under sections 80HH and 80-I as claimed by
the assessee to be not admissible. He consequently
proceeded to make deductions under sections 80HH and
80-I and accordingly reduced the claim on these
accounts. The very basis of initiation of proceedings for
which reasons to believe were recorded was income
escaping assessment in respect of items of club fees,
gifts and presents, etc., but while these items were not
disturbed, the Assessing Officer proceeded to reduce
the claim of deduction under sections 80HH and 80-I
which was not permissible. The Tribunal was right in
holding that the Assessing Officer had the jurisdiction to
reassess issues other than the issues in respect of
which proceedings were initiated but he was not
justified when the reasons for the initiation of those
proceedings ceased to survive."
10. The Hon'ble Bombay High Court in the case of CIT vs. Jet
Airways (I) Ltd. (supra) has held as under :
"Explanation 3 to section 147 of the Income-tax Act,
1961, was inserted by the Finance (No. 2) Act of 2009,
with effect from April 1, 1989. The effect of the
Explanation is that even though the notice that has been
issued under section 148 containing the reasons for
reopening the assessment does not contain a reference
to a particular issue with reference to which income has
escaped assessment, the Assessing Officer may assess or
reassess the income in respect of any issue which has
escaped assessment, when such issue comes to his
notice subsequently in the course of the proceedings.
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. Evi-dently, what
Parliament intends by use of the words "and also" is that
8 ITA NO. 5966/Del/2018
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. Explanation 3 does not and cannot
override the necessity of fulfilling the conditions set out
in the substantive part of section 147 . An Explanation to
a statutory provision is intended to explain its contents
and cannot be construed to override it or render the
substance and core nugatory. 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
notice during the course of the proceedings. However, if
after issuing a notice under section 148 , he accepts the
contention of the assessee and holds that the income
which he has initially formed 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 intends to do so, a notice under
section 148 would be necessary in the event of challenge
by the assessee. The effect of section 147 as it now
stands after the amendment of 2009 can therefore, be
summarised as follows : (i) the Assessing Officer must
have reason to believe that any income chargeable to tax
has escaped assessment for any assessment year ; (ii)
upon the formation of that belief and before he proceeds
to make an assessment, reassessment or recomputation,
the Assessing Officer has to serve on the assessee a
notice under sub-section (1) of section 148 ; (iii) the
Assessing Officer may assess or reassess such income,
which he has reason to believe, has escaped assessment
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 the
section ; and (iv) though the notice under section 148(2)
does not include a particular issue with respect to which
income has escaped assessment, he may none the less,
assess or reassess the income in respect of any issue
which has escaped assessment and which comes to his
notice subsequently in the course of the proceedings
under the section."
9 ITA NO. 5966/Del/2018
11. The Hon'ble Rajasthan High Court in the case of of CIT vs.
Sh. Ram Singh (supra) has held as under :
"Pursuant to search operations, the Assessing Officer
issued a notice to the assessee under section 148 of the
Income-tax Act, 1961, on the ground that the assessee
had purchased a plot of land from undisclosed sources of
income. The assessee explained that he had purchased
the land from his agricultural income which was lying
deposited with a company and filed the return
accordingly. The Assessing Officer made an addition to
the income of the assessee on the ground of unexplained
investment. The Commissioner of Income-tax (Appeals)
upheld the addition made by the Assessing Officer on the
ground that the assessee had failed to prove the source
of the deposits. The Tribunal held that the proceedings
for reassessment under section 148 of the Act were
initiated by the Assessing Officer based on non-existing
facts. On appeal :
Held, dismissing the appeal, that the Tribunal was
justified in holding that the proceedings for reassessment
under section 148 of the Act were initiated by the
Assessing Officer based on non-existing facts, because
ultimately the assessee had been able to explain the
income, which the Assessing Officer believed to have
escaped assessment. The Assessing Officer was justified
in initiating the proceedings under section 147 of the Act.
But once the Assessing Officer reached the conclusion
that the income which he believed to have escaped
investment had been explained, the Assessing Officer did
not continue to possess jurisdiction to tax any other
income, which came to his notice subsequently in the
course of the proceedings."
12. Thus, it is observed that the Hon'ble High Courts including
the Delhi High Court has held that where the Assessing Officer
makes addition to the income of the assessee for which reasons
were recorded by the Assessing Officer for re-opening of the
assessment, then he has jurisdiction to make assessment of
other income which has escaped assessment. Where the Assesing
Officer does not make addition to the income of the assessee on
10 ITA NO. 5966/Del/2018
the ground on which reopening of assessment was made, he
ceases to have jurisdiction for making assessment u/s 147 of the
Act and therefore no addition can be made by him under other
heads of income which he comes across for escapement of
income. In the instant case also as no addition was made for
escapement of income on the ground of sale of agriculture land
by the assessee. Therefore the jurisdiction of the Assessing
Officer ceased and he could not have made assessment of income
under other heads. Thus, the re-assessment order dated
26.03.2015 passed by the Assessing Officer u/s 147 r.w.s. 144 is
bad in law and accordingly we cancel the same. Thus, these
grounds of appeal of the assessee are allowed.
13. As I have cancelled the reassessment order passed u/s 147
of the Act, the other grounds raised in this appeal on the merits
of the addition have become infructuous and hence not
adjudicated upon.
14. In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 18th December, 2018
at New Delhi.
Sd/-
(N.S.SAINI)
ACCOUNTANT MEMBER
Dated: 18.12.2018
*BR*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
11 ITA NO. 5966/Del/2018
5. DR: ITAT
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