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01-04-2019, TROPEX PROMOTION, Section 260A, 148, 147, HIGH COURT OF DELHI

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1 week 1 day ago #9144 by amit
Section - 260A, 148, 147, 139, 153
Order Date - 01-04-2019
Favouring - Assessee
Court - HIGH COURT OF DELHI
Appellant - TROPEX PROMOTION & TRADING LTD.
Respondent - CIT
Justice - S.MURALIDHAR & I.S.MEHTA
Citation - 419Taxpundit179
Appeal No. - ITA 30/2001
Asstt. Year - 1986-87

Order

PER : Dr. S. Muralidhar, J.:

1. This appeal under Section 260A of the Income Tax Act, 1961 is filed by the Assessee and is directed against an order dated 31st August 2000 passed by the Income Tax Appellate Tribunal („ITAT‟) in ITA 7484 of 1992 for the assessment year 1986-87. While admitting this appeal on 15th January 2002 the following questions were framed for consideration by this Court:

“1. Whether on the facts of the case borne on record, the Appellate Tribunal was right in law in upholding the legal validity of the action of the Assessing Officer in initiating reassessment proceedings against the assessee-appellant company for the assessment year 1986-87 u/s 147/148 of the Income Tax Act, 1961 for its alleged income of Rs. 76,61,408/- on the basis of the observations/ statements of the Assessing Officer in the note recorded by him under the provisions of sub-sec(2) of Section 148 of the Act, by way of the reasons for initiating the re-assessment proceedings?

2. Whether on the facts of the case borne on the record, the Appellate Tribunal was right in law in upholding the assessment of the assessee-appellant company u/s 68 of the Income Tax Act, 1961, in its re-assessment to income tax u/s 147/148 of the Act for the assessment year 1986-87 on an amount of Rs. 75 lakhs, being the amount received by it from the subscribers to its additional share capital raised in its Rights issue during the relevant previous year, duly accounted for in its audit books and shown as such in the audited balance sheet of the said year, on the reasoning that the assessee company had failed to prove the identity of the share subscribers and their credit worthiness?”

2. The background facts in brief are that for the AY in question i.e. 1986-87 the return filed by the Assessee was picked up for scrutiny. An assessment order was passed on 16th February 1989 by the Assessing Officer under Section 143 (3) of the Act. During the course of that assessment, the question of the sale and purchase of shares was examined. It appears also that the Assessee by a letter of the same date i.e. 16th February 1989 answered some specific queries raised by the AO as regards the increasing share capital by Rs.75 lacs.

3. While finalising the assessment again under Section 143(3) of the Act for the subsequent AY 1987-88 the AO appears to have found that (i) share capital had been introduced in the name of “Sikkim based parties”, (ii) that expenses had been claimed for maintaining an office at Bulandshahar and (iii) losses were claimed in the sale and purchase of shares. The AO decided to make a total addition of Rs.8348736 for the said three items for AY 1987-88.

4. A perusal of the reasons for reopening of the assessment for 1986-87 as noted in the notice dated 29th March 1990 issued to the Assessee under Section 148 of the Act reveals that “on the same lines” as pointed out by the AO for AY 1987-88, the assessment for AY 1986-87 was examined and the three identical items reflected in the return filed for AY 1986-87 was picked up for disallowance viz., share capital introduced to the extent of Rs. 75 lacs; loss in sale and purchase of shares and expenses for maintenance of an office at Bulandshahar. According to the AO, he had reasons to believe that income chargeable to tax amounting to Rs.76,61,408 on account of the aforementioned three items “had escaped assessment for assessment year 1986-87.”

5. On the basis of the above reopening, a re-assessment order dated 27th March 1992 was passed by the AO adding the aforementioned amount to the returned income of the Assessee for AY 1986-87. Aggrieved by the above reassessment order, the Assessee filed an appeal before the Commissioner of Income Tax (Appeals) [„CIT (A)]. By an order dated 5th August 1992 the CIT (A) dismissed the Assessee‟s appeal affirming the reassessment order. Thereafter, the Assessee filed ITA 7484 of 1992 before the ITAT. By the impugned order dated 31st August 2000, the ITAT dismissed the appeal.

6. Mr. Inder Paul Bansal, learned Counsel for the Assessee, first submitted that Section 147 as it stood prior to its amendment with effect from 1 st April 1989 was applicable in the present case. The said provision as it stood then reads as under:

“S.147.Income escaping assessment.-If-

(a) the (Assessing Officer) has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the (Assessing Officer) or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or

(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the (Assessing Officer) has in consequence of information in his possession reason to believe that 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 or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year).

Explanation 1. – For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:-

(a) where income chargeable to tax has been under-assessed; or

(b) where such income has been assessed at too low a rate; or

(c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922 (XI of 1922); or

(d) where excessive loss or depreciation allowance has been computed.

Explanation 2.- Production before the (Assessing Officer) of

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