Manjinder Singh Kang v. Commissioner Of Income-Tax Amritsar And Another

ITA No. 421 of 2010 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No. 421 of 2010 Date of Decision: 13.9.2010 Manjinder Singh Kang ...Appellant Versus Commissioner of Income-Tax Amritsar and another ...Respondents CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:Ms. Radhika Suri, Advocate for the appellant-assessee. AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act,1961 (for short “the Act’”) has been filed by the assessee against theorder dated 11.12.2009, passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar, (in short “the Tribunal”) in ITA No.343/ASR/2009 in respect of the assessment year 2001-02. The assessee has claimed the following substantialquestions of law for determination by this Court: 1.Whether in the facts and circumstances of the casethe order passed by the Hon’ble Income TaxAppellate Tribunal is contrary to the ratio of thisHon’ble Court in CIT Vs. Atlas Cycle Industries, 180ITR 319 and that of Rajasthan High Court in 306 ITR343?the order passed by the Hon’ble Income TaxAppellate Tribunal is contrary to the ratio of thisHon’ble Court in CIT Vs. Atlas Cycle Industries, 180ITR 319 and that of Rajasthan High Court in 306 ITR343? 2.Whether in the facts and circumstances of the casethe Tribunal failed to consider that the jurisdiction ofthe Assessing Officer ended when no additions weremade as per reasons recorded and thus, explanation3 to Section 147 was not applicable to the facts of thecase. 3.Whether in the facts and circumstances of the casethe Tribunal could take a view contrary to its owndecision in Pritpal Singh’s case, ITA No. 346 ASR2009 where a similar controversy was in issue?the Tribunal could take a view contrary to its owndecision in Pritpal Singh’s case, ITA No. 346 ASR2009 where a similar controversy was in issue? The facts in brief are that the appellant-assessee filed hisreturn on 29.8.2002 declaring income of Rs. 91,890/- plus agriculturalincome of Rs. 2,03,125/-. The income was subsequently revised to Rs.17,60,641/- plus agricultural income of Rs. 2,03,125/- on 13.2.2003.The case of the assessee was processed under Section 143(1) on18.3.2004 and, thereafter, reassessment proceedings were initiatedunder Section 147 read with Section 148. The assessing officer duringthe reassessment proceedings observed that the revision of return wasmade after filing of charge sheet by the Vigilance Department on24.12.2002; the assessee has understated his income and a totalamount of Rs. 5,29,86,224/- has been earned by the assessee bydubious means. It was further observed that during the accountingperiod relevant to the assessment year in question, the assessee wasChairman of the Punjab State Forest Development Corporation and hereceived payments of Rs. 1,23,429/- by transfer to his Bank AccountNo. 01190005761 which included regular transfer of Rs.2,500/- per month besides other amounts. According to the assessing officer, thesaid receipts in the sum of Rs. 1,23,429/- were assessable in the handsof the assessee under the head ‘salary’. Besides, the assessee in hiscapacity as Chairman of the aforesaid Corporation had enjoyed thefacility of residential accommodation for which the Corporation paidmonthly rent of Rs. 25,000/- and, thus, a total sum of Rs. 3,00,000/- wasto be treated as perquisite of the assessee. The assessing officer aftercritically investigating and examining the matter came to conclude thathe had the reason to believe that income chargeable to tax amountingto Rs. 1,41,27,702/- had escaped assessment within the meaning ofSection 147 of the Act. It was noticed by the assessing officer that theassessee was also partner in various firms. The salary received by himfrom those firms and the interest accruing thereon would be chargeableto tax. On these premises, the assessing officer further observed thatincome on these counts and the income on account of purchases ofassets acquired from income beyond the known sources of theassessee and chargeable to tax had escaped assessment underSection 147 of the Act. Certain cash deposits were detected duringinvestigation made by the Department. After visualizing the entirescenario which was supported by documents and otherwise, theassessing officer vide its order dated 28.12.2007 (Annexure A-1) madean addition of Rs.1,05,30,200/- to the taxable income returned by theassessee. Proceedings for imposition of penalty under Section 271(1)(c) were also initiated against the assessee separately. The assessee preferred appeal before the Commissioner ofIncome-tax (Appeals) {in short “CIT(A)”}. The primary submission that was made on behalf of the assessee was that the assessing officercould not make additions in respect of the income which had notescaped assessment for which no notice had been given to theassessee under Section 148 read with Section 147 of the Act. To fortifythis submission, reliance on behalf of the assessee was placed on thejudgment of this Court in Vipin Khanna vs. CIT 255 ITR 226 and CITvs. Atlas Industries, 180 ITR 319. The CIT(A) after conversing withthe assessing officer held as under: “It is correct that no addition has been made in theassessment order on the issues, on which the casewas reopened u/s 147. Hence, the judgment ofHon’ble Punjab and Haryana High Court in the caseof Sh. Vipin Khanna (255 ITR 220) is squarelyapplicable to the facts of the case. In the case ofSh.Vipin Khanna, supra, their Lordship hadadjudicated that the Assessing Officer was precludedfrom seeking general information on other issues,which could only be done by issuing a notice u/s 143(2) within the stipulated period. The AssessingOfficer is of the view that the facts of the case reliedupon by the learned counsel for the appellant aredifferent from the appellant’s case, but it is not so. Inview of the decision of the jurisdictional High Court inthe case of Vipin Khanna, cited supra and byrespectfully following the same, the reassessmentmade in the case of the appellant is cancelled.” Appeal of the assessee was consequently allowed videorder dated 27.5.2009 (Annexure A-2). Aggrieved by the order of theCIT(A), the Revenue preferred appeal before the Tribunal. Thesubmissions raised on behalf of the Revenue before the Tribunal weretwo-fold, one that the CIT(A) was not justified in ignoring the remandreport of the assessing officer which contained detailed facts andarguments in respect of all the issues involved. The second submissionraised was that at the time of initiating proceedings under Section 147read with Section 148 of the Act, only a prima facie satisfaction of theassessing officer was required and in support of this submission,reliance on behalf of the Revenue was placed on a decision of the apexCourt in Raymond’s Woolen Mills Ltd. Vs. ITO (1999) 236 ITR 34(SC). A specific reference was also made by the Revenue to theExplanation 3 inserted by Finance (No.2) Act, 2009 with effect from1.4.1989 in support of the second submission. The Tribunal made a marathon exercise and exhaustivelydelved upon issues with reference to judicial enunciations produced onrecord by both the sides. The Tribunal held that the issues of additionsqua the reasons were not adjudicated by the CIT(A) and theassessment was cancelled purely on legal grounds without adjudicatingthe case on merit and the case of Vipin Khanna (supra)did notadvance the case of the assessee. In order to appreciate the issuesraised herein, it is worthwhile to incorporate as what was held by theTribunal, in nut-shell: “Thus, it is evident from the above discussions thatthe present case had been decided by the CIT(A) only on legal grounds and not on merits. The remandreport of the A.O. has not been considered by theCIT(A) though officers of the Department werepresent at the time of proceedings before the CIT(A).Natural justice demands that the submissions madeby the parties, must be considered and appreciatedby the quasi judicial authority. Having regard to theabove legal and factual discussions as also toadvance the cause of justice, we are of theconsidered opinion that the case be restored to thefile of the CIT(A), for fresh adjudication. Accordingly,we restore the case to the file of the CIT(A), with thedirection to decide the case afresh, both on legalgrounds and on merit of the case, having regard tothe relevant provisions of the Act and the case lawsquoted and relied upon by the contending partiesincluding the remand report/submissions made bysuch parties. Further, it is incumbent on the CIT(A)to afford reasonable and proper opportunity to boththe parties before adjudicating the case afresh.Accordingly, the appeal of Revenue is allowed forstatistical purposes.” This is how the assessee is before us in present appeal. Learned counsel for the assessee submitted that theassessing officer had re-opened the assessment by issuing noticeunder Section 148 of the Act on the ground that the income from salary, ITA No. 421 of 2010 perquisites and unexplained cash deposits in various accounts alongwith interest thereon had escaped assessment. The counsel uged thatthe assessing officer, however, while passing re-assessment order hadsought to make addition of another amount without any addition havingbeen made on the ground on the basis of which reassessment hadbeen initiated. According to the learned counsel, no reassessmentorder could be passed by the assessing officer. Learned counsel forthe assessee relied upon following observations made by this Court in CIT v. Atlas Cycle Industries (1989) 180 ITR 319:- “We are of the view that the Tribunal was right incancelling the reassessment as both the grounds onwhich reassessment notice was issued were notfound to exist, and the moment such is the position,the Income-tax Officer does not get the jurisdiction tomake a reassessment.” CIT v. Atlas Cycle Industries (1989) 180 ITR 319:- “We are of the view that the Tribunal was right incancelling the reassessment as both the grounds onwhich reassessment notice was issued were notfound to exist, and the moment such is the position,the Income-tax Officer does not get the jurisdiction tomake a reassessment.” Support was also drawn from the decision of RajasthanHigh Court in Commissioner of Income-tax v. Shri Ram Singh,(2008) 306 ITR 343 (Raj.) wherein judgment of this Court in AtlasCycle Industries's case (supra) was followed. We have given our thoughtful consideration to thesubmission of the learned counsel for the assessee and do not find anymerit in the same. Explanation 3 to Section 147 has been inserted by Finance(No.2) Act, 2009 retrospectively with effect from 1.4.1989. It readsthus:- “Income escaping assessment. Explanation 3.—For the purpose of assessment orreassessment under this section, the AssessingOfficer may assess or reassess the income inrespect of any issue, which has escapedassessment, and such issue comes to his noticesubsequently in the course of the proceedings underthis section, notwithstanding that the reasons forsuch issue have not been included in the reasonsrecorded under sub-section (2) of section 148.” A plain reading of Explanation 3 to Section 147 clearlydepicts that the assessing officer has power to make additions even onthe ground on which re-assessment notice might not have been issuedin case during reassessment proceedings, he arrives at a conclusionthat some other income has escaped assessment which comes to hisnotice during the course of proceedings for re-assessment underSection 148 of the Act. The provision no where postulates orcontemplates that it is only when there is some addition on the groundon which re-assessment had been initiated, that the assessing officercan make additions on any other ground on the basis of which incomemay have escaped assessment. The reassessment proceedings, thus,in the present case cannot be held to be vitiated. Referring to the judgment of this Court inAtlas CycleIndustries’s case (supra) and Rajasthan High Court in Shri RamSingh's case (supra), it may be noticed that these were the judgmentsrendered by the Courts prior to the insertion of Explanation-3 to Section ITA No. 421 of 2010 147 of the Act. In view of insertion of Explanation 3 to Section 147 byFinance (No.2) Act, 2009 w.e.f. 1.4.1989, the aforesaid judgments donot advance the case of the assessee any longer. Accordingly, we find no merit in the appeal. Consequently, the same is dismissed. (AJAY KUMAR MITTAL) JUDGE September 13, 2010rkmalik/gbs (ADARSH KUMAR GOEL) JUDGE