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01-01-2020, Mir Feroz Ali Khan, Section 147, 148, 22(2), Tribunal Hyderabad

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1 month 2 weeks ago #11915 by amit
Section - 147, 148, 22(2)
Order Date - 01-01-2020
Favouring - Assessee Partly
Court - Tribunal Hyderabad
Appellant - Mir Feroz Ali Khan
Respondent - ITO
Justice - P. Madhavi Devi JM
Citation - 120Taxpundit35
Appeal No. - ITA No. 1896/Hyd./2017
Asstt. Year - 2008-09

Order

PER : P. Madhavi Devi

Both are assessee’s appeals for A.Y. 2005-06 and 2008-09 against the common and consolidated order of the Ld.CIT(A) - 9, Hyderabad dated 24th January, 2017.

2. Brief facts of the case are that the assessee an individual, admitted income from business declaring loss of Rs.1,19,752/- in the return filed by him for the A.Y. 2005-06 on 03.09.2006 and gross income of Rs.17,64,302/- in the return filed for the A.Y. 2008-09 on 10.09.2008. The returns were duly processed u/s 143(1) of the Income Tax Act, 1961 (the Act). Thereafter, the AO was of the opinion that the income of the assessee had escaped assessment. Accordingly, he reopened the assessment by issuance of notices u/s 148 of the Act. The reasons recorded by the AO are as under:

“A survey operation was conducted in the case of Mir Firoz Ali Khan, Hyderabad. It is found during the course of proceedings u/s 133A that the assessee had not admitted the investments in the income tax returns. Therefore, I have reason to believe that the income of the assessee chargeable to tax has escaped assessment by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts relevant to the assessment of his income in terms of s.147 of the I.T.Act, 1961. Please issue notice u/s 148.”

2.1. Thereafter, the AO completed the assessment u/s 143(3) r.w.s. 147 of the Act by bringing to tax the difference in sales in AYs 2005-06 and variation in purchases for A.Y. 2008-09. Aggrieved, the assessee preferred appeals before the CIT(A) challenging the validity of the assessment completed u/s 143(3) r.w.s. 147 of the Act on the ground that the AO having failed to make any addition on the grounds on which notice u/s 148 has been given, he could not have made any other additions in the re-assessment proceedings. The CIT(A), however upheld the validity of the assessment by relying upon the decision of Hon’ble Karnataka High Court in the case of N. Govindaraju reported in 377 ITR 243. Further he also upheld the additions made by the AO.

2.2. Aggrieved, the assessee is in second appeal before the Tribunal by raising the following grounds of appeal

“1. The CIT(Appeals) erred in upholding the validity of re-assessment order passed u/s 143(3) r.w.s. 148 of the I.T.Act, 1961.

2. The CIT(Appeals) is not justified in confirming the addition of Rs.13,47,402/-

3. Any other ground that may be urged at the time of hearing.”

2.3. As regards ground no.1 relating to the validity of re-assessment proceedings, the Ld.Counsel for the assessee submitted that notice u/s 148 of the Act has been issued on the ground that the assessee had not admitted the investments made by him in the income tax returns. However, without discussing anything on the issue, the AO had obtained information from Central Excise/Sales Tax department and on the basis of the information so obtained, he found that there are variations in sales/purchase and excise duty paid as per Central Excise and VAT records and thus made the additions. He thus submitted that the reasons for which the reopening has been made and additions have been made have no nexus what-so-ever, and, therefore, reassessment proceedings are not valid.

2.4. The Ld.DR however, supported the orders of the authorities below.

3. Having regard to rival contentions and material placed on record, I find that the reason on which the reopening has been made is different from the additions made by the AO. Therefore, there is no live link between the reasons for reopening and the additions made during the course of re-assessment proceedings.

3.1. I find that the Hon’ble Bombay High Court in the case of CIT vs. Jet Airways Ltd. Reported in 331 ITR 236 has considered the issue at length and at paras 13 to 22 held as under.

“13. The rival submissions which have been urged on behalf of the Revenue and the assessee can be dealt with both as a matter of first principle interpreting the section as it stands and on the basis of precedent on the subject. 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 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 otiose. Parliament having used the words “assess or reassess such income and also any otherincome 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 Parliamen 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.

14. The Shorter Oxford Dictionary defines the expression “also” to mean further, in addition besides, too. The word has been treated as being relative and conjunctive. 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 subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of

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