Once the A.O. accepts the objections of the assessee, it would not be open to him to assessee income on an issue other than the issue forming the basis of notice- Bombay High Court
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Case Details: |
Yashoda Shivappa Nagangoudar vs. ITO |
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Appeal No.: |
W.P. No. 3640 of 2019 |
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Date of Order: |
05-01-2022 |
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In Favour of: |
Assessee |
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Order pronounced by: |
Bombay High Court |
Brief Facts:
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The petitioner received notice u/s 148 of the Act on a reason to believe that the petitioner had deposited Rs. 13,40,000/- in cash in his bank accounts. The petitioner filed objections to the reopening of assessment that the bank made a factual mistake in reporting the above transactions and stated that the bank wrongly reported the figures of cash withdrawal as cash deposited in the AIR/CIB. The learned A.O. accepted the objections of the petitioner but proceeded for assessment proceedings on the basis of other non-cash deposits of Rs. 18,81,092/- in his bank account as the petitioner had not filed ITR even after huge credits in his bank account. Thus, the A.O. assumed jurisdiction on the other reasons which were not part of the original notice issued to the petitioner. |
Submission by the Petitioner
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Though, there cannot be any dispute that the notice which has been issued was a valid notice. As per explanation 3, it empowers the A.O. to assess or re-assess the income in respect of any issue that comes to his notice subsequently in the course of the proceeding’s u/s 147 of the Act but if the proceedings u/s 148 of the Act itself has been initiated wrongly, the question of any new issue that would come to his notice subsequently during the course of proceedings u/s 147 of the Act would not arise. The assessment or re-assessment 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 which comes to his notice subsequently during the course of any other income tax proceedings as having escaped assessment. |
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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 A.O. to independently assessee only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. |
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If upon the issuance of a notice u/s 148(2), the A.O. 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 assessee income under some other issue independently. The Ld. A/R on behalf of the petitioner also referred the judgment in the case of Commissioner of Income Tax cs. Jet Airways (I) Ltd. in his support. |
Observation & Ruling:
- 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 A.O. has to assess or reassess the income (“such income”) which has 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 u/s 148, he accepted 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 fresh notice u/s 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. In this circumstance, the petition is allowed.
Disclaimer: The above article is based on the ruling of Hon’ble Bombay High Court and is meant only for educational purposes. Readers are requested to act diligently and under consultation with any professional before applying the information contained in this article.
