Shree Maheshwari Industries, Mathura v. The ACIT, Mathura

CO 1/AGR/2010 | 2003-2004
Pronouncement Date: 25-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 120323 RSA 2010
Assessee PAN AAHFS7159R
Bench Agra
Appeal Number CO 1/AGR/2010
Duration Of Justice 1 year(s) 2 month(s) 19 day(s)
Appellant Shree Maheshwari Industries, Mathura
Respondent The ACIT, Mathura
Appeal Type Cross Objection
Pronouncement Date 25-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 25-03-2011
Date Of Final Hearing 14-03-2011
Next Hearing Date 14-03-2011
Assessment Year 2003-2004
Appeal Filed On 06-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI P.K. BANSAL ACCOUNTANT MEMBER AND SHRI H.S. SIDHU JUDICIAL MEMBER ITA NO. 315 & 316/AGRA/2009 ASSTT. YEAR : 2003-04 & 2004-05 A.C.I.T. - 3 VS. SHREE MAHESHWARI INDUSTRIE S MATHURA. 4 RAS BEHARI SADAN VRINDAVAN MATHURA. (PAN : AAHFS 7159R) C.O. NO. 01 & 02/AGRA/2010 (IN ITA NO. 315 & 316/AGRA/2009) ASSTT. YEAR : 2003-04 & 2004-05 SHREE MAHESHWARI INDUSTRIES VS. A.C.I.T. 3 4 RAS BEHARI SADAN MATHURA. VRINDAVAN MATHURA. (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI VINOD KUMAR JR. D.R. FOR RESPONDENT : SHRI M.M. AGARWAL FCA ORDER PER P.K. BANSAL A.M. : BOTH THE APPEALS BY REVENUE AND CROSS-OBJECTIONS BY THE ASSESSEE ARISING OUT OF THE ORDER OF CIT(A) DATED 14.05.2009 SINCE INVOLVE THE COMMON ISSUES THEREFORE FOR THE SAKE OF CONVENIENCE ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE EFFECTIVE GROUNDS TAKEN BY THE REVENUE IN BO TH THE APPEALS ARE COMMON EXCEPT THE CHANGE IN THE FIGURE. IN GROUND NO. 1(A) RELATING T O THE DELETION OF LUMP SUM ADDITION THE FIGURE IS RS.80 000/- IN THE ASSESSMENT YEAR 2003-04 WHILE IN THE ASSESSMENT YEAR 2004-05 THE FIGURE IS RS.25 000/-. THE NAME OF THE PARTIES IN THE ASSESSM ENT YEAR 2004-05 IS ONLY JAIN & JAIN OF 2 JODHPUR WHILE IN THE ASSESSMENT YEAR 2003-04 IN GRO UND NO. 1 THERE ARE FIVE PARTIES. BOTH THE LEANED AR AND DR AGREE THAT THE GROUND INVOLVED ARE COMMON AND THEREFORE THEY ARGUED THE CASE FOR THE ASSESSMENT YEAR 2003-04 ONLY. 3. GROUND NO.3 IN THE CROSS-OBJECTIONS SINCE NOT PR ESSED IN BOTH THE YEARS THEREFORE THE SAME STAND DISMISSED IN BOTH THE YEARS. 4. THE REST OF THE EFFECTIVE GROUNDS IN REVENUES A PPEAL AS WELL AS IN CROSS-OBJECTION FOR ASSESSMENT YEAR 2003-04 READ AS UNDER : GROUND IN ITA NO. 315/AGRA/2009 (A.Y. 2003-04): 1. THAT THE LD. CIT(APPEALS)-1 AGRA HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITIONS IN RESPECT OF LOAN CREDITS IN THE NAMES OF M/S. SHRI RAM GUM AND CHEMI CALS JODHPUR SMT. VIDHYA DEVI JAIN M/S. JAIN & JAIN M/S. ASHISH TRADING CO . M/S. DHOOT GUM & CHEMICALS OF JODHPUR ACCEPTING SOME FRESH EVIDENCES WHICH WERE NOT PRODUCED BEFORE THE AO IN VIOLATION OF RULE 46A AND IGNORIN G THE FACT THAT EVEN ON REMAND FOR VERIFICATION OF SUCH LOANS THE ASSESSEE HAS FAI LED TO PRODUCE THE BOOKS AND SUPPORTING EVIDENCES FOR VERIFICATION SUCH LOAN CRE DITS. 1.A). IN DOING SO THE CIT(A)-1 AGRA HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE LUMP SUM ADDITION IN RESPECT OF MISC. CLAIMS WITHOUT PROPER SUPPORTING DOCUMENTS TO THE EXTENT OF RS.80 000/-. 1. B). IN DOING SO THE LD. CIT(A) HAS ERRED IN LA W AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DIRECTING THE AO TO TR EAT THE IMPUGNED INCOME OF RENT FROM FACTOR BUILDING AND MACHINERY UNDER THE H EAD INCOME FROM HOUSE PROPERTY IN CONTRARY TO THE SAME HELD TO BE AS BUS INESS INCOME BY THE AO. GROUNDS IN C.O. NO. 01/AGRA/2010 (A.Y. 2003-04): 1. BECAUSE LEARNED CIT(APPEALS) HAS ERRED IN LAW I N NOT ADJUDICATING THE VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 148 OF THE ACT AND IN NOT 3 QUASHING THE INITIATION OF PROCEEDINGS ITSELF MORE PARTICULARLY IN VIEW OF THE FACT THAT :- (A). THE PROCEEDINGS WERE INITIATED ON THE BASIS OF FINDINGS RECORDED BY THE AO FOR ASSESSMENT YEAR 2005-06 THAT RENTAL INCO ME DECLARED BY THE ASSESSEE WAS REQUIRED TO BE ASSESSED AS PROFITS AN D GAINS OF BUSINESS AND PROFESSION. (B). THE SAID FINDINGS RECORDED BY THE AO FOR ASSES SMENT YEAR 2005-06 WERE WRONG IN THE FACTS AS WELL AS UNDER THE LAW. (C). THE SAID FINDINGS WERE REVERSED BY ORDER DATED 20.04.2009 PASSED BY HONBLE TRIBUNAL IN ITA NO. 153/JU/2009 WHO DIR ECTED THE INCOME TO BE ASSESSED UND3R THE HEAD INCOME FROM HOUSE PROPE RTY. (D). IN VIEW OF THE FINDINGS OF HONBLE TRIBUNAL FO R ASSESSMENT YEAR 2005-06 THE REASONS FOR INITIATING PROCEEDINGS U NDER SECTION 148 WERE VITIATED UNDER LAW AND THE SAID PROCEEDINGS COULD N OT BE ALLOWED BE CONTINUED. 2. BECAUSE ON A DUE CONSIDERATION OF LEGAL POSITION LEARNED CIT(APPEALS) HAS ERRED IN NOT APPRECIATING THAT ONCE THE ADDITIO N/DISALLOWANCE IN RESPECT OF AMOUNT FOR WHICH PROCEEDINGS FOR ASSESSMENT/RE-ASSE SSMENT WERE INITIATED IS DELETED NO OTHER INCOME COULD BE ASSESSED. 4. BECAUSE ON DUE CONSIDERATION OF UNDISPUTED FACTS TO THE EFFECT THAT :- (A). THERE WAS NO CHANGE IN THE CONSTITUTION OF THE ASSESSEE NECESSITATING IT TO FILE CERTIFIED COPY OF PARTNERS HIP DEED WHICH IS REQUIRED FOR THE YEAR WHEN THERE IS CHANGE IN THE TERMS OF PARTNERSHIP AS PER PROVISIONS CONTAINED UNDER SECTION 184(2) OF THE AC T. (B). CERTIFIED COPY OF PARTNERSHIP DEED WAS FILED B Y THE ASSESSEE ALONGWITH THE RETURN OF INCOME FOR ASSESSMENT YEAR 1999-2000. (C). COPY OF PARTNERSHIP DEED WAS FILED BEFORE LEAR NED CIT(APPEALS) AND THE ORIGINAL THEREOF WAS AVAILABLE WITH THE ASS ESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS. (D). THE REMUNERATION RECEIVED BY THE PARTNERS WAS ASSESSED IN THEIR HANDS AND SUCH MATERIAL WAS PRODUCED DURING THE COU RSE OF ASSESSMENT PROCEEDINGS ITSELF. LEARNED CIT(APPEALS) HAS ERRED ON FACTS AS WELL AS IN LAW IN SUSTAINING THE DISALLOWANCE OF RS.1 20 000/- TOWARDS REMUNERATION PAYABLE TO THE PARTNERS OF THE ASSESSEE. 4 5. SINCE IN THE CROSS OBJECTION THE ASSESSEE HAS T AKEN THE LEGAL GROUND ABOUT INITIATION OF PROCEEDINGS U/S. 148 WE THEREFORE ARE TAKING GRO UND NO. 1 & 2 OF THE CROSS-OBJECTION FIRST BEFORE TAKING THE REVENUES APPEAL. 6. THE LEARNED AR VEHEMENTLY CONTENDED THAT THE PRO CEEDINGS U/S. 148 WERE INITIATED BY THE ASSESSING OFFICER ON THE BASIS OF THE FINDING GIVEN IN THE ASSESSMENT YEAR 2005-06 THAT THE RENTAL INCOME DECLARED BY THE ASSESSEE WAS TO BE ASSESSED AS PROFITS AND GAINS OF THE BUSINESS OR PROFESSION. IT WAS POINTED OUT THAT IN THE ASSESSM ENT YEAR 2005-06 ULTIMATELY THE TRIBUNAL VIDE ORDER DATED 20.04.2009 DIRECTED THE ASSESSING OFFIC ER TO ASSESS THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS WAS RETURNED BY THE ASSESSEE. IT WAS CONTENDED THAT SINCE THE BASIS OF THE REASONS ITSELF DOES NOT REMAIN IN EXIS TENCE IN VIEW OF THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2005-06 THE INITIATION OF PROCEEDI NGS BECOMES BAD IN LAW AND THE PROCEEDINGS SO INITIATED MUST BE ANNULLED. 7. THE LEARNED DR ON THE OTHER HAND VEHEMENTLY CO NTENDED THAT THE INITIATION OF PROCEEDINGS WERE VALID. REFERRING TO THE REASONS TO BELIEVE AS RECORDED AT PAGE 85 OF THE PAPER BOOK IT WAS POINTED OUT THAT THE PROCEEDINGS WERE INITIATED BY RECORDING INDEPENDENT REASONS AND THE REASONS NOWHERE SPEAK THAT THE PROCEEDINGS WERE INITIATED ON THE BASIS OF THE FINDING IN THE ASSESSMENT YEAR 2005-06. AT THE TIME OF INITIAT ION OF PROCEEDINGS THE ASSESSING OFFICER MUST HAVE BONA FIDE BELIEF. THEREFORE WE HAVE TO SEE TH AT CIRCUMSTANCE AT THE TIME OF INITIATION OF THE PROCEEDINGS AND THE COURT CANNOT LOOK INTO THE SUFF ICIENCY OF THE REASONS. 5 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ALONGWITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT IN THIS CASE THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY RECORDING FOLLOWING REASONS ON 29.11.2006 :- THE ASSESSEE FILED ITS RETURN SHOWING NET INCOME O F RS.1 68 640/- AFTER SET OFF OF DEPRECIATION OF ASSTT. YEAR 2002-03 WHICH I NCLUDED BUSINESS INCOME OF RS.3 00 834/- AND RENTAL INCOME OF RS.5 12 400/-. I N COMPUTATION OF INCOME THE ASSESSEE HAS CLAIMED STANDARD DEDUCTION U/S. 24(A) @ 30% OF THE RENT RECEIVED SHOWN BY IT TO THE TUNE OF RS.2 19 600/- INTER ALIA PREVIOUSLY THE ASSESSEE WAS RUNNING ITS BUSINESS AS MANUFACTURER IN THE FACTOR PREMISES WHICH IS LET OUT TO ONE M/S. JODHPUR WOOD CRAFTS PVT. LTD. NEW DELHI/JODHP UR. AS PER AGREEMENT BETWEEN BOTH THE PARTIES THE DEED OF LEASE WAS EXE CUTED ONLY FOR 11 MONTHS AND THEREAFTER IT WAS RENEWED AGAIN FOR 11 MONTHS WHIC H SHOWS MENS REA OF THE ASSESSEE TO TAKE OVER THE FACTORY AS EARLY AS POSSI BLE AS PER CLAUSE (7) OF THE LEASE DEED. THE LESSEE UTILIZED THIS FACTORY PREMISES FOR COMMERCIAL PURPOSE ONLY NOT FOR RESIDENTIAL AFTER ANY ADDITION/ALTERATION. THU S THE PROP4RTY NEVER LOSE ITS NATURE OF BUSINESS. THE ASSESSEE HAD A PROFIT MOTIV E IN ITS MIND AND MADE TEMPORARY ARRANGEMENT TO EARN SOME PROFIT WHEN HE W AS UNABLE TO RUN THE FACTORY BUSINESS DUE TO FINANCIAL CRISIS. THEREFORE THE RENT RECEIPTS SHOWN BY THE ASSESSEE WAS NET PROFIT UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION FOR WHICH IT WAS NOT ENTITLED FOR ANY DEDUCTION WH ATSOEVER IT MAY BE. BUT THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 24(A) AS STATED SUPRA WHICH WAS NOT ALLOWABLE. ACCORDINGLY I HAVE REASON TO BELIEVE TH AT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 14 7 OF THE IT ACT. ISSUE NOTICE U/S. 148. 9. THE REASONS NOWHERE STATE THAT THE PROCEEDINGS U /S. 147 HAVE BEEN INITIATED ON THE BASIS OF THE FINDINGS GIVEN IN ASSESSMENT YEAR 2005-06. 10. THE RELEVANT PROVISIONS OF SECTION 147 OF THE I NCOME-TAX ACT READ AS UNDER : 147. IF THE AO HAS REASON TO BELIEVE THAT ANY INC OME 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 AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS UNDER THI S SECTION OR RECOMPUTE THE 6 LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALL OWANCE AS THE CASE MAY BE FOR THE A.Y. CONCERNED (HEREAFTER IN THIS SECTION AND I N SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR). PROVIDED THAT WHERE AN ASSESSMENT UNDER SUBSECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSM ENT YEAR NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON TH E PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YE AR. EXPLANATION 1.- PRODUCTION BEFORE THE ASSESSING OFF ICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DU E DILIGENCE HAVE BEEN DISCOVERED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2- FOR THE PURPOSES OF THIS SECTION TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT NAMELY:- (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF AN Y OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DU RING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARG EABLE TO INCOME TAX. (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE A SSESSING OFFICER THAT THE ASSESSSEE HAS UNDERSTATED THE INCOME OR HA S CLAIMED EXCESSIVE LOSS DEDUCTION ALLOWANCE OR RELIEF IN T HE RETURN. (C) WHERE AN ASSESSMENT HAS BEEN MADE BUT- (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE; OR 7 (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED. 11. FROM THE PLAIN READING OF THE AFORESAID SECTION IT IS CLEAR THAT FOR APPLICABILITY OF SECTION 147 THE AO MUST HAVE REASON TO BELIEVE. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSIN G OFFICER HAS A CAUSE OR JUSTIFICATION TO THINK OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT HE CAN BE SAID TO HAVE A REASON TO HAVE A REASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. T HE WORDS REASON TO BELIEVE CANNOT MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FAC TS BY LEGAL EVIDENCE. IT ONLY MEANS THAT THE AO FORMS A BELIEF FROM THE EXAMINATION HE MAKES AND INFORMATION THAT HE RECEIVES. IF HE DISCOVERS OR FINDS OR SATISFIES PRIMA-FACIE HIMSELF THAT THE TAXABLE INCOME HAS ESCAPED ASSESSMENT IT WOULD AMOUNT TO SAYING THAT HE HAS R EASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. THE JUSTIFICATION FOR HIS BELI EF IS NOT TO BE JUDGED FROM THE STANDARDS OF PROOF REQUIRED FOR COMING TO A FINAL DECISION. HIS FORMATION OF THE BELIEF IS NOT A JUDICIAL DECISION BUT AN ADMINISTRATIVE DECISION. THE DECIS ION TO INITIATE THE PROCEEDINGS IS NOT TO BE PRECEDED BY ANY JUDICIAL OR QUASI-JUDICIAL ENQUIRY. REASON TO BELIEVE HAS BEEN THE MATTER OF JUDICIAL SCRUTINY BY THE APEX COURT IN SEVERAL CASE S. IN THE CASE OF CALCUTTA DISCOUNT CO LTD V. ITO 41 ITR 191 (SC) IT WAS OBSERVED THAT IT IS THE DUTY OF THE ASSESSEE TO DISCLOSE ALL THE PRIMARY FACTS WHICH HAVE A BEARING ON THE LIABILITY OF INCOME EARNED BY THE ASSESSEE BEING SUBJECTED TO TAX. IT IS FOR THE AO TO DRAW INFEREN CES FROM THE FACTS AND APPLY THE LAW DETERMINING THE LIABILITY OF THE ASSESSEE. THE ASSESSEE CANNOT DRAW THE CONCLUSIONS DRAWN BY THE AO AND ONCE THE CONCLUSION IS DRAWN AND THE ASSESSMENT ORD ER FRAMED THE AO CANNOT AT A LATER POINT OF TIME FORM A DIFFERENT OPINION BY GIVING A SECOND TH OUGHT TO THE FACTS DISCLOSED BY THE ASSESSEE HOLDING THAT HE COMMITTED AN ERROR IN COMPUTING TAX ABLE INCOME AND REOPEN THE ASSESSMENT U/S 8 147. DISCOVERY OF NEW AND IMPORTANT MATTERS OR KNO WLEDGE OF FRESH FACTS WHICH WERE NOT PRESENT AT THE TIME OF ORIGINAL ASSESSMENT WOULD CO NSTITUTE A REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 1 47. OUR AFORESAID VIEW IS SUPPORTED BY THE FOLLOWING CASES DECIDED BY HONBLE APEX COURT : - I) PHOOL CHAND BAJRANG LAL V. ITO 203 ITR 456 477; II) ALA FIRM V. CIT 189 ITR 285 298; III) INDIAN AND EASTERN NEWSPAPER SOCIETY V. CIT 119 ITR 996 1004; AND IV) ITO V. LAKHMANI MEWAL DASS 103 ITR 437 445 12. THE WORDS REASON TO BELIEVE ARE STRONGER THAN THE WORDS IS SATISFIED. THE BELIEF ENTERTAINED BY THE ASSESSING OFFICER MUST NOT BE AR BITRARY OR IRRATIONAL. IT MUST BE REASONS OR IN OTHER WORDS IT MUST BASE ON THE REASONS WHICH ARE RELEVANT AND MATERIAL. THE COURT CANNOT GO INTO THE ADEQUACY OR SUFFICIENCY OF REASONS WHICH H AVE WEIGHED WITH THE ITO IN COMING TO THE BELIEF. BUT THE COURT CAN CERTAINLY EXAMINE WHETHER THE REASONS ARE RELEVANT OR HAVING BEARING ON THE MATTER IN REGARD TO WHICH HE IS REQUIRED TO EN TERTAIN A BELIEF BEFORE HE CAN ISSUE NOTICE U/S. 148. OUR THIS VIEW IS DULY SUPPORTED BY THE FOLLOWI NG DECISIONS : (I). GANGA SARAN & SONS PVT. LTD. VS. ITO 130 ITR 1 (SC) (II). ITO VS. NAWAB MIR BARKAT ALI KHAN BAHADUR 9 7 ITR 239 (SC) (III). RAJENDRA WOOLLEN MILLS LTD. VS. ITO 236 IT R 34 (SC). 13. THE BELIEF MUST BE IN GOOD FAITH AND CANNOT BE A PRETENCE. THE EXPRESSION REASON TO BELIEF DOES NOT MEAN A TEMPORARY SUBJECTIVE SATISFACTION O N THE PART OF THE ASSESSING OFFICER. THIS VIEW IS TAKEN BY HONBLE SUPREME COURT IN THE CASE OF S. NARAYANAPPA & OTHERS VS. CIT 63 ITR 219 (SC). THE BELIEF MUST BE THAT OF THE HONEST AND REA SONABLE PERSON BASED UPON REASONABLE GROUND 9 AND THE ASSESSING OFFICER MAY ACT ON DIRECT OR CIRC UMSTANTIAL EVIDENCE BUT NOT ON MERE SUSPICION GOSSIP OR RUMOR. THE ASSESSING OFFICER W OULD BE ACTING WITHOUT JURISDICTION IF THE REASONS FOR HIS BELIEF THAT THE CONDITIONS ARE SATI SFIED DOES NOT EXIST OR IS NOT MATERIAL OR RELEVANT TO THE BELIEF REQUIRED BY THE SECTION. THE USE OF E XTRANEOUS AND IRRELEVANT MATERIAL IN ARRIVING THAT CONCLUSION WOULD VITIATE THE CONCLUSION OF FACTS. T HERE MUST BE DIRECT NEXUS BETWEEN THE CONCLUSION OF FACT ARRIVED AT BY THE ASSESSING OFFI CER CONCERNED AND THE PRIMARY FACTS UPON WHICH THE CONCLUSION IS BASED. WHETHER THE REASONS RECORDED BY THE ASSESSING OFFICER ARE VALID BONA FIDE OR NOT THAT HAS TO BE LOOKED INTO AT THE TIME OF RECORDING OF THE REASONS I.E. THE VALIDIT Y OF THE REASONS HAVE TO BE LOOKED INTO AT THE TIME O F INITIATION OF THE PROCEEDINGS. IF THE ASSESSING OFFICER CAN LEGITIMATELY FORM AN OPINION THAT INCOM E CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON THE BASIS OF THE MATERIAL GATHERED WHILE RECORDI NG THE REASONS IN OUR OPINION THE INITIATION OF THE PROCEEDINGS U/S. 147 IS VALID. SUBSEQUENT DECIS ION OF THE COURT CANNOT AFFECT THE BONA FIDE OF THE REASONS RECORDED AT THE TIME OF INITIATION OF T HE PROCEEDINGS. 14. COMING TO THE FACTS OF THE PRESENT CASE ALTHOU GH THE LEARNED AR VEHEMENTLY ARGUED THAT THE ASSESSMENT HAS BEEN REOPENED BY THE ASSESSING O FFICER ON THE BASIS OF FINDINGS GIVEN IN ASSESSMENT YEAR 2005-06 BUT THE REASONS NOWHERE SP EAK SO. AS IS CLEAR FROM THE REASONS THE ASSESSING OFFICER HAS REFERRED TO THE LEASE AGREEME NT BETWEEN THE ASSESSEE AND ONE M/S. JODHPUR WOOD CRAFT PVT. LTD. NEW DELHI/JODHPUR WHICH WAS EXECUTED FOR 11 MONTHS AND THEREAFTER THE SAME WAS RENEWED FOR FURTHER 11 MONTHS. IT IS MENTI ONED THAT THE ASSESSEE WAS RUNNING ITS BUSINESS AS MANUFACTURER IN THE FACTORY PREMISES WH ICH WAS LET OUT BY THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE PROPE RTY IS USED FOR THE BUSINESS PRUPOSES AND IT DID NOT LOSE ITS NATURE OF BUSINESS AND THE ASSESSE E HAS MADE TEMPORARY ARRANGEMENT TO EARN 10 SOME PROFIT BY LETTING OUT THE FACTORY AND THEREFO RE HE WAS OF THE VIEW THAT THE INCOME WAS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AN D THE DEDUCTION U/S. 24(A) WAS NOT ALLOWABLE TO THE ASSESSEE. THEREFORE TO THAT EXTENT THERE I S ESCAPEMENT OF INCOME. IN OUR OPINION THERE EXISTS REASONABLE GROUND FOR THE ASSESSING OFFICER TO FORM THE SAID BELIEF AND THIS ITSELF IS SUFFICIENT TO CLOTH HIM WITH THE JURISDICTION TO IS SUE NOTICE U/S. 148. IT IS NOT A CASE WHERE THE ASSESSING OFFICER DOES NOT HAVE THE BELIEF THAT THE RE HAD BEEN ESCAPEMENT OF INCOME. WHAT THE LEARNED AR WANTS TO ARGUE IS THAT THERE ARE NO SUFF ICIENT REASONS FOR THE BELIEF. THIS IN OUR OPINION CANNOT BE LOOKED INTO BY THIS COURT. THE E XPRESSION REASON TO BELIEVE DOES NOT MEAN AN ARBITRARY SUBJECTIVE SATISFACTION ON THE PART OF TH E ASSESSING OFFICER. THE COURT CAN ONLY EXAMINE WHETHER REASONS FOR THE FORMATION OF BELIEF HAVE A RATIONAL CONNECTION OR NOT. THIS RATIONAL CONNECTION HAS TO BE EXAMINED ONLY AT THE TIME WHEN THE REASONS WERE RECORDED AND THE PROCEEDINGS U/S. 147 WERE INITIATED. IF IN ANOTHER YEAR SUBSEQUENTLY THE ADDITION MADE ON THE SAID BASIS GOT DELETED IN OUR OPINION WILL NOT A FFECT THE FORMATION OF THE BELIEF BY THE ASSESSING OFFICER AS ON THE DATE OF INITIATION OF THE PROCEED INGS TO BE NON-BONA FIDE. HONBLE SUPREME COURT IN ACIT VS. RAJESH JHAVERI STOCK BROKERS P LT D 291 ITR 500 HAS HELD THAT A THE STAGE OF ISSUE OF NOTICE UNDER SECTION 148 WHAT IS REQUIRED IS ONLY REASON TO BELIEVE BUT NO THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. THE RELEVANT HEAD NO TE ARE REPRODUCED HERE UNDER:- AT THE STAGE OF ISSUE OF NOTICE THE ONLY QUESTIO N IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE ;PERSON COU LD HAVE FORMED THE REQUISITE BELIEF. WHETHER MATERIAL WOULD CONCLUSIV ELY PROVE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT STAGE. THIS I S SO BECAUSE THE FORMATION OF THE BELIEF IS WITHIN THE REALM OF THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER. 11 15. WE ACCORDINGLY UPHOLD THE PROCEEDINGS INITIA TED U/S. 147 VALID. THUS THE GROUND NO. 1 TAKEN IN THE CROSS OBJECTION STANDS DISMISSED. 16. GROUND NO. 2 IN THE CROSS-OBJECTION ALSO RELATE TO THE LEGAL ISSUE. THE CONTENTION OF THE LEARNED AR IS THAT ONCE THE ADDITIONS MADE BY THE A SSESSING OFFICER ON THE BASIS OF WHICH THE ASSESSMENT HAS BEEN RE-OPENED GOT DELETED BY THE I TAT AND IF THE ASSESSING OFFICER HAD MADE THE ADDITION IN RESPECT OF ANY OTHER INCOME THE RE -ASSESSMENT NO MORE REMAINS INVALID. HE CONTENDED THAT DURING THE ASSESSMENT YEAR 2005-06 THE TRIBUNAL HAS HELD THAT THE INCOME FROM LETTING OUT OF THE FACTORY PREMISES HAS TO BE ASSES SED UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN VIEW OF THIS THE BASIS OF ESCAPED INCO ME FOR WHICH THE REASON TO BELIEVE WERE RECORDED NO MORE REMAINS IN EXISTENCE. IN THIS REG ARD HE RELIED ON THE RECENT DECISION OF HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT VS. JE T AIRWAYS INDIA LTD. 331 ITR 236 WHICH HAS CONFIRMED THE DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHRI RAM SINGH 217 CTR (RAJ.) 345. FOR THIS OUR ATTENTION WAS DRAWN T O PAGE 122 TO 139 OF THE PAPER BOOK. RELIANCE WAS ALSO PLACED ON THE DECISION OF AGRA BENCH IN TH E CASE OF ITO VS. SANJAY GOYAL ITA NO. 149/AGRA/2008 AND SANJAY GOYAL VS. ITO IN CROSS OBJ ECTION NO. 48/AGRA/2008 AND CONTENDED THAT IN THAT CASE THE ASSESSING OFFICER MADE THE A DDITION IN RESPECT OF REASONS RECORDED FOR THE ESCAPEMENT OF INCOME BUT THAT ADDITION WAS DELETED IN APPEAL AND THE TRIBUNAL DISMISSED THE APPEAL OF THE REVENUE. THE BENCH POINTED OUT THAT N OW WITH RETROSPECTIVE EFFECT EXPLANATION 3 HAS BEEN ADDED U/S. 147 TO NULLIFY THE DECISION OF RAJASTHAN HIGH COURT AND DUE TO THE EXPLANATION-III EVEN THE DECISION OF AGRA BENCH GET S OVER-RULED. BUT HE RELIED ON THE DECISION OF THE MUMBAI HIGH COURT IN THE CASE OF CIT VS. JET AI RWAYS INDIA LTD. (SUPRA). 12 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND HAVE PERUSED THE ORDERS OF THE TAX AUTHORITIES BELOW. AS HAS BEEN POINTED OUT BY US EARLIER WHILE DISPOSING OF THE GROUND NO. 1 OF THE CROSS-OBJECTION THE RE-ASSESSMENT PROCEEDIN GS HAVE BEEN INITIATED BY RECORDING THE REASONS THAT THE ASSESSEE WAS ALLOWED STATUTORY ALL OWANCE OUT OF INCOME @ 30% U/S. 34 OF THE IT ACT AND THE RENTAL INCOME WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. THE FIRST APPELLATE AUTHORITY HAS DECIDED THAT THE RENTAL INC OME HAS TO BE ASSESSED IN THE CASE OF ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE TR IBUNAL HAS ALSO DECIDED IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 THAT THE R ENTAL INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THUS THE INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AFTER THE ORDER OF THE APPELLATE A UTHORITY THE BASIS OF THE ESCAPED INCOME FOR WHICH THE REASONS TO BELIEVE WERE RECORDED NO MORE REMAINS IN EXISTENCE. SECTION 147 EMPOWERS THE ASSESSING OFFICER TO ASSESS OR RE-ASSE SS SUCH INCOME FOR WHICH THE REASONS WERE RECORDED AND OTHER INCOME CHARGEABLE TO TAX WHICH H AS ESCAPED ASSESSMENT. EXPLANATION-3 WHICH WAS INSERTED IN SECTION 147 BY THE FINANCE AC T 2009 W.E.F. 01.04.1989 READS AS UNDER : EXPLANATION 3. FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDER THIS SECTION THE ASSESSING OFFICER MAY ASSESS OR R EASSESS THE INCOME IN RESPECT OF ANY ISSUE WHICH HAS ESCAPED ASSESSMENT AND SUCH I SSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLU DED IN THE REASONS RECORDED UNDER SUB-SECTION (2) OF SECTION 148. 18. THE HONBLE MUMBAI HIGH COURT AS RELIED UPON B Y THE LEARNED AR WHILE INTERPRETING THIS EXPLANATION IN THE CASE OF CIT VS. JET AIRWAYS INDIA LTD. (SUPRA) UNDER PARA 6 TO 9 HAS HELD AS UNDER : 6. T H E EFFEC T OF E X PL A N A TION 3 W H I C H WAS I N SER T ED BY TH E F I NANC E ( N O.2 ) AC T O F 200 9 I S TH A T EVE N TH O U G H TH E N O TI CE TH A T H AS B EE N I SS U ED UNDER SEC TI O N 1 4 8 13 C O NTAININ G TH E R E A S ON S FOR R EO P E N ING TH E ASSESS M ENT DO E S NOT C O NTAIN A R E F E R E N CE T O A P A RTI C U L AR I SS U E W ITH R E F E R E N CE T O W HI C H INCO M E H AS ESCA P ED ASSESS M E NT TH E ASSESS IN G OFFI CE R M AY ASSESS OR REASSESS TH E INC O M E IN RES P EC T O F A N Y I SS U E W H IC H HA S ESCA P E D ASSESSME NT W H E N S U C H I SS U E C O M ES T O H IS N O TIC E S UB SE QU E NT LY IN TH E COURSE OF T H E PROC E EDINGS . TH E R E AS O N S FOR TH E IN SE RTI O N OF EXPLANATION 3 ARE T O B E FOU N D IN TH E M E MO RANDUM E X PLAININ G TH E PRO V I S ION S O F TH E F INAN CE (NO . 2) B ILL OF 2009 . THE ME M O RAN D UM TR E AT S TH E A M E NDM E NT T O B E C L A R IFICA T ORY AND CON T AI N S TH E FO LL OW IN G EX PLAN A TI O N ( [20 09 ] 3 14 I T R ( ST . ) 183 206) : ' S O M E CO URTS H AV E H E LD TH A T TH E AS SESSI N G O F F I CE R HAS T O RES T RIC T TH E R EASSESS M E NT PR OCEE DIN GS O NL Y T O I SS U ES IN R ESPEC T OF W H IC H TH E R E ASONS HAV E B E EN R E C O RD E D F O R R EO P E NIN G TH E A SSESS M E NT . HE I S N OT E M P OWE RED T O TOU C H UP O N A N Y O TH E R I SS U E F OR W H IC H N O R E ASON S HAV E BEEN R E C O RD E D . T H E A B OVE INT ER PR E TATI O N I S CON TR ARY T O T H E L EGISLATIV E I NT ENT . W ITH A V I EW T O FURTH E R C L AR IF Y IN G TH E L EG I S L A TI VE INT E NT I T I S P RO P OSED T O IN SE RT A N E X PLANATION IN SEC TI O N 1 4 7 T O PR OV ID E T HAT TH E ASSESSING O FFIC E R MA Y A SSESS O R R EASSESS IN CO M E IN RES P EC T OF A N Y IS S UE WH I CH C O M ES T O HI S N O TI CE S U BSEQ U E NTL Y IN TH E COURS E OF PROC E EDI N GS UN DER THI S SE CTI O N N O T W ITH S T A ND I N G TH A T TH E REASO N FOR SUC H I SS U E H AS NOT BEE N IN CL UD ED I N TH E R EASO N S R ECO R DED U NDER S U B - SEC T ION (2) O F SEC TI O N 148.' 7 IN O RD E R T O APP R ECIA T E T H E R EASO N S F O R TH E A M E N DM E NT IN SE R T I N G EXP L A NAT I O N 3 I T WO UL D B E N ECESS A R Y T O A D VE R T TO S O ME OF TH E JUDGMENTS OF T H E HIGH COURTS PRIOR TO THE AMENDMENT. 8. THE PUNJAB AND HARYANA HIGH COURT IN ITS DECISIO N IN VIPAN KHANNA V. CIT [2002] 255 ITR 220 DEALT WITH THE QUESTION AS T O WHETHER AFTER INITIATING PROCEEDINGS UNDER SECTION 147 ON THE GROUND THAT TH E PETITIONER HAD CLAIMED DE PR EC IATI O N A T A HI G H E R R A TE TH E ASSES SIN G OFFICE R WOU LD B E JUSTIFI E D IN LAUN C HING A N INQUI RY I NTO IS S U ES WHICH W E R E N O T C O NN EC T E D WITH TH E C L A IM O F D E PR E CIATI O N . TH IS QU ES TI O N WAS A N SWE R ED IN T HE N EGA TI VE . A DIV IS ION B E NCH O F THE KER A L A H IG H CO URT H E LD I N TRA V ANCOR E C E M E NT S LTD . V . A SS T . CIT [2 00 8] 305 ITR 1 70 TH A T U PON TH E I SS U A N CE OF A N O T ICE UND ER S E C TION 148(2 ) W HEN PR O C EE DIN GS W ER E INITI A T E D B Y TH E A SSESS IN G O FFI CE R O N IS S U ES IN R ES P E CT O F W HICH H E HAD F OR M E D A R EASO N T O RE LI EVE T HA T INC O M E HAD E SCAP E D A SSE SSM E NT I T WA S N O T O P E N T O TH E ASSE S S IN G O FF I CE R T O CAR RY O UT AN A SSESS M E NT O R R EASSESS M E NT IN R ESPECT O F O TH ER ISS U E S WHICH W E RE TOTALL Y UNC O NN E CT E D W ITH TH E PROC E EDING S THAT W E RE A LR E AD Y INITI A T E D AND W HICH C A M E T O HI S KN OW L E D GE DURING TH E CO U RSE OF TH E PR OCEE DIN G S . TH E DIVISION BENCH H E LD THAT IN R E SP E CT O F AN I S SU E W HICH I S T O TALL Y UNCONN E CT E D T O TH E BA S I S O N W HICH TH E ASS ESS IN G O FFIC E R F OR M E D A R E A S ON T O B E LIEVE THAT INCOM E E S CAPED A S S ES SM E NT A ND 14 IS S U E D A N O TI CE UNDER S ECTION 148 IT WAS OPEN T O HIM T O I S SU E A FR ES H N O TIC E B Y F O LL OW IN G S UB-S E CTION ( 2) OF SECTI O N 14 8 W ITH R E GARD T O TH E E SC A P E D INCOM E WHI C H CAME T O HIS KNOWL E D GE DURING TH E C O URSE OF TH E PROC E ED I NG S. TH E K E RALA H I GH C OURT H E LD A S F OLL O WS (PAG E 1 7 8) : ' TH E A SS ES S IN G OFFIC E R G ET S JURISDICT I ON UND E R SE CTI O N 148 T O A SS E SS OR R EA S S ES S TH E INCOM E WHICH HAS E SCAP E D A S S ES SMENT ONLY AFT E R S UB - SE CTI O N ( 2) OF S ECTION 1 48 IS C OMPLIED W ITH . TH E Q U E STI O N IS W H E TH E R S UB - S ECTI O N ( 2) O F S E CTION 148 HA S T O B E C O MPLI E D WITH IF AN Y O TH E R INCOME CHAR GE ABLE T O TA X HA S ES CAP E D AS SE S S M E NT O R W HI C H CO M ES T O HIS KN OW L E D GE S UB SE QU E NTL Y IN TH E CO UR SE O F TH E P R OCEE DING S . IN OTH E R WO RD S W H E N PR O CE E DING S AR E ALR E AD Y O N IN R ESPEC T O F O N E IT E M IN R ES P EC T O F TH E INCOM E FO R W HI C H H E HAD A LRE A D Y R ECO R DED R EASO N S I S I T N ECE S S AR Y THAT H E S H O ULD R E CO R D R E A SO N S F O R A SSESS IN G O R R E A SSESS IN G A N Y O F THE ITEM S W HICH AR E T O TALL Y UNC O NN E CTED WI TH TH E PR OCEED IN GS ALREAD Y INITIATED . SUPPO SE UND E R TW O HEADS IN C OME HA S ES CAP E D A SS E S SM E NT AND TH O S E T WO H E AD S AR E INT E R - L I NK E D A ND CO NN EC T E D TH E PROC E EDINGS INITIATED OR N O TIC E ALR E AD Y IS S U E D UND E R S UB -S ECTION ( 2 ) O F SEC TI O N 14 8 W O ULD B E S UFFICI E NT IF THE E S C AP E D INC O M E O N TH E SEC OND H E AD COM ES T O TH E KN O WL E D GE OF THE OFFICER IN TH E COUR SE O F TH E PR O- CEE D I N GS.' H E N CE TH E VI E W OF TH E PUNJ A B A ND HAR Y AN A HI G H C O URT AND TH E K E RALA 10 HI G H CO URT WAS TH A T O N CE TH E ASSESSI N G O F FI CE R HA S REASO N T O B E LI EVE TH A T I NCO M E C HAR GE ABL E T O TA X H AS ESCAPE D ASSESS M E NT A ND P ROCEE D S T O I SS U E A N O T ICE U N DE R SEC TI ON 148 I T I S NO T OP E N T O H I M T O ASSESS O R AS TH E CASE MA Y B E REASSESS TH E INC O M E U N D E R A N IND E P E ND E NT O R UN CO NN EC T E D I SS U E W HI C H W A S N O T TH E B AS I S OF THE NOTICE FOR REOPENING THE ASSESSMENT. 11. PAR L I A M E N T S T E PP E D IN T O CO RR E CT W H A T IT REGA RD E D A S A N IN CO RR EC T I NT E RPR E TA T I O N O F TH E PR OV I S I O N S OF SEC TI O N 147. T H E ME M O R AN DU M EXP L A IN I N G TH E PR OV I S I O N S O F TH E F IN A N CE (NO.2) B ILL O F 2009 STA T ES IN T H I S B ACKG R OUND TH A T SO M E CO URT S H A D H E LD TH A T TH E ASSESS IN G OFF I CE R H AS T O R ES TRI C T TH E R E A S S ESS MENT PROC EE DIN GS O NL Y T O IS SU ES IN R ES P EC T O F W HI C H R EASO N S H AVE: B EE N RECO RD ED F O R REO P E N I N G TH E ASSESSME NT A N D TH A T IT WAS N O T OPEN TO HIM T O T O U C H UP O N ANY O TH E R ISS U E FOR W H IC H NO R EASO N S H AVE BEE N R ECO RD ED. THI S INT E RPR E T A TION W A S R EG AR DE D B Y PARLI A M E NT AS BEI N G CON T RARY T O LEGISLATIV E IN T EN T . H E NC E EXP L ANATION 3 CAME T O B E IN SE RT E D T O P RO V ID E TH A T TH E A SSESS IN G OFFI CE R MA Y A SSES S OR R EASSESS IN COME IN RES P EC T O F ANY I SS UE WHI C H C O M ES TO HI S N O TI C E S UB SE QU E NTL Y IN TH E C O U RSE OF P ROCEE DI NGS UNDER S E C TI ON 147 THOU G H TH E R E A SO NS F O R SU C H I SS U E W ERE N O T IN C LUD E D IN TH E REA S ON S R E CORD E D IN T H E NOTIC E UND E R S E CTION 1 48(2) . 12. THE E FF E CT O F SEC T ION 14 7 A S IT N OW S T A ND S A FT ER TH E A M E ND ME NT OF 2009 CAN TH E R E FOR E B E S UMMARI SE D A S FO L LO WS : ( I ) TH E A S SESS IN G OFF I CER MU S T HAVE R E ASON T O B E L I EV E THA T AN Y INCOME CHARG E ABLE T O TA X HA S ESC A PE D A S SESSME NT FOR ANY ASS E SSM E NT YE AR ; (II) UPON T H E FORMATION O F TH A T B E LI E F AND B E FORE H E PROCEEDS TO MAK E AN A SSESS M E NT RE A SSESS M E NT O R RECO MPUTATI O N TH E A S SES SING OFFI CE R HA S TO SE RVE O N TH E A SSESSEE A N O TI CE UND E R SUB - S E C T IO N (1) OF SEC T IO N 148 ; (III) THE A S S E SSING OF F I C ER MAY A S S E S S O R R E ASS E SS SUCH INCOME WHICH HE HAS R E A S ON TO BELI E VE H AS ESC APED ASS ESS M E N T AN D AL S O AN Y OTHER IN C OM E CH A R G E A BL E T O TA X 15 WHICH H A S ESC A PE D A S SES S M E N T AND W H I CH C OM E S T O HI S NOTIC E SUB SE QUENTL Y IN T HE CO UR SE OF TH E PR OCEEDINGS UNDER THE S E CTION ; AND (IV) THOU G H TH E NOTI CE UND E R SEC - TI O N 148(2) DOES NOT INCLUD E A PARTI C ULAR I S SU E WITH R ES P EC T T O W H IC H IN CO M E H AS E SCAP E D ASSESS M E NT H E M AY N O N E TH E L ESS ASSESS O R R EASSESS TH E INCOME IN R ES PECT O F AN Y I SS UE W HICH HAS ES CAP E D A SSESS M E NT AN D WHIC H COM E S TO H IS N OTICE S U B SEQUENTL Y TO T H E C OURS E O F TH E PR OCEE DIN GS UNDER THE S E C TI ON . AFTER DEALING THE ARGUMENTS OF THE ASSESSEE AS WELL AS THE VARIOUS CASE LAWS CITED BEFORE THEM INCLUDING THE DECISION OF RAJASTHAN HIGH COURT IN T HE CASE OF CIT VS. SHRI RAM SINGH (SUPRA) HONBLE HIGH COURT HAS HELD AS UNDER IN PARA 22 : EX PLA NA T ION 3 L IFTS TH E EMBA R GO W H ICH WA S INSER T ED BY JUDICIA L I N TER P RE T A T IO N ON TH E MAKING OF AN ASSESSMENT OF REASSESS M E NT O N GROUND S O TH E R THAN TH OSE ON TH E B ASIS OF W H ICH A NOTICE WAS ISS U ED UN DER SEC T ION 1 48 . S E TT I N G O UT TH E REASO N S F O R TH E B E LI EF T HA T INCOME H A D ESCA P ED ASS E SSME NT . TH OSE JUD IC I AL DEC I SI ON S H A D H E LD TH A T W H E N TH E ASSESS M E N T WAS SO U G HT T O B E REOPE N ED ON TH E G R O UN D THA T INCOME H AD ESCA P ED ASSESSMENT ON A CER T A I N ISSU E T H E ASSESSI N G OFFIC E R COULD NOT MAK E AN ASSESSM E NT OR REASSESS M EN T ON ANO TH ER ISS U E W H IC H CAME T O HIS NOTICE DURING T HE PR O C E E DI NGS. THIS I NT E RPR E TA T IO N W I L L NO L ONGER HO L D T HE F I ELD AFTER THE INSER T ION OF E X P LANATION 3 BY T H E FINA N CE (NO . 2) AC T OF 2009 . HOWEVER EXPLANATION 3 DOES NO T AND CANNO T OVERRIDE TH E N ECESSITY OF FU L F ILL I N G T HE CONDITION S S ET OU T IN TH E SUBSTAN T IVE PAR T OF SEC T ION 147. AN EXP L ANA T ION TO A STATUTOR Y PROVISION IS I N TE N DED TO EX PL A IN I T S CONTEN T S A N D CA N NO T BE CONSTRU E D TO OVE R RIDE IT OR RENDER T HE SUBSTANCE A N D CORE NUGA T ORY . SEC T ION 147 H A S THI S EFFEC T TH A T TH E ASSE S SING OFF I CER HAS T O ASSESS OR REASSESS T H E I N COM E ( ' SUCH INCOME ' ) WHIC H ESCAPED ASSESSMENT AND WHIC H WAS THE B ASIS OF TH E FORMA TI O N OF B E L IEF AND IF H E DOES SO H E CAN ALSO ASSESS OR REASSES S ANY OT H ER INCOME WHIC H H AS E S CAPED ASSESS M EN T AND WHICH COMES TO HI S NO T IC E DURI N G T HE COURSE OF TH E P ROCEEDI N GS . HOWEVER IF AF T E R ISS U I N G A N OTIC E UNDER SEC TI O N 148 HE ACCEP T E D T HE CO NT E N T ION OF THE ASSESSEE A N D H OLDS TH A T TH E I N COME W H IC H H E H AS I N I T IA LL Y FOR M E D A REASO N T O BE L IEVE HAD ES CAP E D ASSESS M E NT H AS AS A MATT E R O F FAC T NOT ESCA P E D ASSESSMENT I T IS N O T O P E N T O HIM INDEPENDE NTL Y T O ASSESS SOME O T HER INCO M E . IF HE IN T END S T O D O SO A F RES H NO TI CE UND E R SEC T IO N 148 WOU LD B E N ECESSA R Y TH E L E GA L I T Y O F W HI C H WO U L D B E T ES T E D IN TH E EVE NT OF A C H A LL E N GE B Y TH E ASS E SSEE . 19. FROM THE SAID FINDING OF HONBLE MUMBAI HIGH CO URT IT IS APPARENT THAT IF THE ASSESSING OFFICER ACCEPTED THE CONTENTION OF THE ASSESSEE AND DID NOT MAKE ANY ADDITION IN RESPECT OF THE INCOME FOR ESCAPEMENT OF WHICH HE HAS RECORDED THE REASONS AND INITIATED THE PROCEEDINGS U/S. 16 147 HE CANNOT ASSESS ANY OTHER INCOME UNTIL AND UN LESS HE ISSUES THE FRESH NOTICE U/S. 148. THIS DECISION IN OUR OPINION WILL NOT BE APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE THE ASSESSING OFFICER DID NOT ACCE PT THE CONTENTION OF THE ASSESSEE BUT MADE THE ADDITION IN RESPECT OF ESCAPED INCOME FOR WHICH HE HAS RECORDED THE REASONS AND INITIATED THE PROCEEDINGS U/S. 147. THE ASSESSING OFFICER ASSESSE D THE INCOME FROM LETTING OUT THE FACTORY UNDER THE HEAD INCOME FROM BUSINESS. THE ADDITION S SO MADE BY THE ASSESSING OFFICER WERE ULTIMATELY DELETED BY THE FIRST APPELLATE AUTHORITY . UNDER THESE FACTS WE CANNOT SAY THAT THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION ON THE BASIS OF THE REASONS TO BELIEVE RECORDED BY HIM. THE DECISION OF HONBLE HIGH COURT IN JET AIRW AYS (SUPRA) WILL THEREFORE SUPPORT THE CASE OF THE REVENUE. RECENTLY THE SIMILAR ISSUE HAS ARI SEN BEFORE FULL BENCH OF KERALA HIGH COURT IN THE CASE OF CIT VS. BEST WOOD INDUSTRIES AND SAW MI LLS (2011) 331 ITR 63 (KER)(FB) IN WHICH IT WAS HELD: WHAT IS CLEAR FROM SECTION 147 OF THE INCOME-TAX A CT 1961 IS THAT ONCE ASSESSMENT IS REOPENED AFTER RECORDING REASONS FOR BRINGING TO TAX ANY INCOME THAT HAS ESCAPED ASSESSMENT IN TERMS OF SECTIONS 14 8 TO 153 THE ASSESSING OFFICER HAS TO COMPLETE THE ASSESSMENT BY FOLLOWING THE PRO VISIONS OF THE ACT AS IF THE RETURN FURNISHED AGAINST NOTICE UNDER SECTION 148 I S ONE FILED UNDER SECTION 139 OF THE ACT AND HAS TO ASSESS OR REASSESS SUCH INCOME A ND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT. THI S MEANS THAT SO FAR AS THE PROCEDURE TO BE FOLLOWED IS CONCERNED THERE IS NO DIFFERENCE BETWEEN INCOME ESCAPING ASSESSMENT AND REGULAR ASSESSMENT BECAUSE THE PROVISIONS GENERALLY PROVIDE FOR ISSUE OF NOTICE HEARING OF THE ASSESSE E AND TAKING OF EVIDENCE ETC. WHICH ARE THE SAME FOR REGULAR ASSESSMENT AND INCOM E ESCAPING ASSESSMENT. ORIGINAL ASSESSMENTS COMPLETED IN THE CASE OF THE A SSESSEE FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03 WERE REOPENED UNDER SECTI ON 147 OF THE ACT TO DISALLOW EXCESS DEPRECIATION GRANTED ON MOTOR VEHIC LES. HOWEVER IN THE COURSE OF REASSESSMENT UNDER SECTION 147 THE ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAD NOT EXPLAINED VARIOUS TRADE CREDITS AND BROUGHT TO TAX THE UNEXPLAINED TRADE CREDITS AS INCOME UNDER SECTION 68 OF THE ACT. THE ASSESSEE CHALLENGED THE VALIDITY OF THE REASSESSMENT ON THE GROUND THAT THE ASSESSIN G OFFICER HAD EXCEEDED HIS JURISDICTION UNDER SECTION 147 AND BOTH THE FIRST A PPELLATE AUTHORITY AS WELL AS THE TRIBUNAL ACCEPTED THE ASSESSEE'S CONTENTION HOLDING THAT SO FAR AS THE 17 REASSESSMENTS RELATED TO ASSESSMENT OF UNEXPLAINED TRADE CREDITS THEY WERE INVALID. ON APPEAL: HELD ALLOWING THE APPEALS THAT THE REASSESSMENTS WERE VALID AND THE ORDERS OF THE TRIBUNAL TO THE CONTRARY WERE NOT SUSTAINABLE. THEREFORE WE DO NOT AGREE BY THE LEARNED AR AND WE ARE OF THE VIEW THAT THE EXPLANATION 3 WILL EQUALLY BE APPLICABLE IN THE CASE OF THE ASSES SEE AS THE ASSESSING OFFICER MADE THE ADDITION FOR THE ESCAPED INCOME FOR WHICH HE HAS RECORDED TH E REASONS AND INITIATED THE PROCEEDINGS U/S. 147 OF THE ACT. THUS GROUND NO. 2 TAKEN BY ASSESSE E IN BOTH THE YEARS STAND REJECTED. 20. GROUND NO.3 IN CROSS-OBJECTIONS SINCE NOT PRES SED STANDS DISMISSED. 21. GROUND NO. 4 OF THE CROSS OBJECTION RELATES TO THE DISALLOWANCE OF THE REMUNERATION TO THE PARTNERS. THE FACTS RELATING TO THIS GROUND ARE THA T THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT DISALLOWED REMUNERATION PAID TO THE PAR TNERS AS THE ASSESSEE DID NOT FILE THE PARTNERSHIP DEED AND STATED THAT IT HAS BEEN MISPLA CED. WHEN THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) THE ASSESSEE FILED COPY OF PARTNERSHIP DEED BEFORE THE CIT(A) BUT THE CIT(A) DISALLOWED THE SAME IN THE ABSENCE OF ORIGINAL PART NERSHIP DEED BEING FILED BY THE ASSESSEE. 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDE RED THE SAME. IN OUR OPINION WHEN THE ASSESSEE CLAIMS DEDUCTION FOR ANY EXPENSE THE ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE EXPENDITURE. THE ASSESSEE HAS CLAIMED PARTNE RS REMUNERATION AT RS.1 20 000/-. THE ASSESSING OFFICER ASKED FOR THE PARTNERSHIP DEED WH ICH WAS NOT FILED AND IT WAS STATED THAT THE PARTNERSHIP DEED WAS MISPLACED. THE COPY OF THE PAR TNERSHIP DEED WAS FILED BEFORE THE CIT(A) 18 AS APPEARS FROM THE SUBMISSIONS REPRODUCED AT PAGE 24 OF THE CIT(A)S ORDER. WE MAY POINT OUT THAT THE REMUNERATION TO THE PARTNERS IS ALLOWABLE U/S. 37 OF THE INCOME-TAX ACT BEING THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. SECTION 40(B) PUTS AN EMBARGO AND RESTRICTS THE ALLOWANCE OF THE REMUNERA TION. SUB-CLAUSE (V) OF SECTION 40(B) CLEARLY STATES THAT REMUNERATION HAS TO BE ALLOWED TO A WOR KING PARTNER AUTHORIZED IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED. IT ALSO LAYS DOWN TH E AGGREGATE AMOUNT TO WHICH THE REMUNERATION WILL NOT EXCEED. WE THEREFORE IN THE INTEREST OF JUSTICE AND FAR PLAY TO BOTH THE PARTIES SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSING OFFICER SHALL ALLO W THE DEDUCTION TO THE ASSESSEE IN RESPECT OF THE REMUNERATION PAID TO THE PARTNERS TO THE EXTENT AS LAID DOWN U/S. 40(B)(V) PROVIDED THE ASSESSEE COMPLIES WITH THE CONDITIONS GIVEN U/S. 40(B)(V). T HUS THIS GROUND IS ALLOWED IN BOTH THE ASSESSMENT YEARS FOR STATISTICAL PURPOSES. ITA NO. 315 & 316/AGRA/2009 (A.Y. 2003-04 & 2004-0 5: 23. THE GROUND NO. 1 RELATE TO THE DELETION OF ADDI TION BY THE CIT(A) IN VIOLATION OFRULE 46A AND IGNORING THE FACT THAT EVEN ON REMAND FOR VERIF ICATION OF SUCH LOANS THE ASSESSEE HAS FAILED TO PRODUCE THE BOOKS AND SUPPORTING EVIDENCES FOR VERI FICATION SUCH LOAN CREDITS. THE FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSING OFFICER MADE ADDITION IN RESPECT OF FOLLOWING CASH CREDITS IN THE INCOME OF THE ASSESSEE ON THE BASIS OF ANNEXURE TO FORM 3CD AS THE ASSESSEE FAILED TO PRODUCE ANY PERSON FOR VERIFICATION. EVEN THOUGH IN SOME CASES THE ASSESSEE FILED THE COPY OF ACCOUNT OF THE RESPECTIVE PARTIES. THE DETAILS OF S UCH CREDITS ARE AS UNDER : FOR A.Y. 2003-04 : 19 NAME OF PARTIES AMOUNT COPY OF A/C PRODUCED SHRI RAM GUM & CHEMICALS JODHPUR 2 00 000 PRODUCE D SMT. VIDHYA DEVI JAIN JODHPUR. 1 00 000 COPY OF A/C FILED COPY OF BANK A/C FILED M/S. JAIN & JAIN JODHPUR 5 00 000 COPY OF CONFI RMATION FILED COPY OF BANK A/C NOT FILED M/S. ASHISH TRADING CO. 2 54 100 COPY OF A/C IN BOOKS FILED COPY OF BANK A/C NOT FILED. M/S. DHOOT GUM & CHEMICALS JODHPUR 2 36 156/- COP Y OF A/C IN BOOKS FILED COPY OF BANK A/C NOT FILED. FOR A.Y. 2004-05: M/S. JAIN & JAIN JODHPUR 1 00 000 COPY OF CONFI RMATION FILED COPY OF BANK A/C NOT FILED THE ASSESSEE WENT IN APPEAL IN BOTH THE YEARS AGAIN THE ADDITIONS OF THE SAID CASH CREDIT BEFORE THE CIT(A). BEFORE THE CIT(A) THE ASSESSEE SUBMITT ED FRESH EVIDENCES IN THE SHAPE OF CONFIRMATION OF THE PARTIES COPY OF BANK ACCOUNTS ETC. THE CIT(A) ASKED FOR THE REMAND REPORT VIDE LETTER DATED 04.03.2008 AND REMINDER WAS SENT ON 15.09.2008. THE ASSESSING OFFICER SUBMITTED THE REMAND REPORT VIDE LETTER DATED 20.10 .2008 AND 03.03.2009. THE ASSESSING OFFICER POINTED OUT THAT THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNT AND IN ABSENCE OF WHICH THE EVIDENCES OR EXPLANATION GIVEN BY THE ASSESSEE IS N OT VERIFIABLE. THE CIT(A) SUBSEQUENTLY DELETED THE ADDITION BY RELYING ON THE FRESH EVIDEN CE FILED BY THE ASSESSEE WITHOUT RECORDING THE REASONS FOR ADMITTING THE FRESH EVIDENCE. THE LEARN ED DR RELIED ON THE ORDER OF BENCH OF THIS TRIBUNAL IN ITA NO. 314/AGRA/2009 IN THE CASE OF TH E ASSESSEE DATED 18.02.2010 AND POINTED OUT THAT THIS ISSUE IS DULY COVERED BY THE DECISION OF THIS TRIBUNAL. THE FACTS AND CIRCUMSTANCES INVOLVED IN THIS CASE ARE SIMILAR TO THAT CASE. 20 24. THE LEARNED AR VEHEMENTLY CONTENDED THAT THIS I S NOT THE CASE OF FRESH EVIDENCE. THE ASSESSING OFFICER WAS GIVEN SUFFICIENT OPPORTUNITY BY THE CIT(A). HE CALLED FOR THE REMAND REPORT. IF THE ASSESSING OFFICER REMAINED INACTIVE THE ASSESSEE CANNOT BE PENALIZED. 25. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. WE HAVE ALSO GONE THROUGH THE DECISIONS OF THIS TRIBUNAL. WE NOTED THAT SIMILAR I SSUE IN THE ASSESSMENT YEAR 2002-03 HAS COME UP BEFORE THIS TRIBUNAL IN WHICH THE UNDERSIGNED W HILE SITTING IN SMC BENCH VIDE ORDER DATED 18.02.10 HELD AS UNDER : 6. I HAVE HEARD THE RIVAL SUBMISSION AND PERUSED T HE MATERIAL ALONGWITH THE ORDER OF THE CIT(A). I NOTED THAT TH E ASSESSEE MADE AN APPLICATION UNDER RULE 46A FOR ADMISSION OF THE FRESH EVIDENCE. THE CIT(A) THEREON CALLED FOR THE REPORT OF THE A.O. ESPECIALLY ON THE FOLLOW ING POINTS :- (I) ADMISSION OF ADDITIONAL EVIDENCE U/S.46A OF I.T . RULES 1962 WITH REGARD TO THE UNSECURED LOANS TREATED AS UNEXPLAINE D CASH CREDITS IN THE ASSESSMENT ORDERS FOR WHICH BANK STATEMENTS AND CONFIRMATIONS HAVE NOW BEEN FURNISHED BY THE APPELL ANT. (II) IN A.Y. 2003-04 AMOUNT OF RS.2 LAC ADDED TOWAR DS LOAN RECEIVED FROM SHREE RAM GUM & CHEMICALS JODHPUR IS STATED TO BE ADVANCE RECEIVED AGAINST SALE OF GOODS MADE ON 28.0 3.2003 TO THE SAME PARTY AND HENCE ACCOUNTED FOR IN SALES. THIS FACT SHOULD BE VERIFIED FROM THE BOOKS OF ACCOUNT. (III) IN THE CONTEXT OF CERTAIN ADDITIONS ON ACCOUN T OF UNSECURED LOANS THE AO HAS OBSERVED THAT THERE WAS CASH DEPOSIT IN THE BANK ACCOUNT OF THE CONCERNED CREDITORS. HENCE THE AVA ILABILITY OF CASH IN THE HANDS OF THE CREDITORS ON THE DATE OF DEPOSI T SHOULD BE VERIFIED. (IV) IN A.Y. 2003-04 ADDITION OF RS.1 LAC HAS BEEN MADE ON ACCOUNT OF CREDIT STANDING IN THE NAME OF SMT. VIDYA DEVI JAIN OF JODHPUR. THE SAME IS STATED TO HAVE BEEN ERRONEOUSLY MADE ON ACCOUNT OF WRONG NARRATION OF ENTRIES. THIS FACT SHOULD BE VE RIFIED. 21 (V) SUPPORTING EVIDENCE/MATERIAL/REASONS TO JUSTIFY THE ABOVE AND OTHER ADDITIONS VIS-A-VAIS THE ARGUMENTS MADE BY TH E APPELLANT IN DETAIL IN THE PAPER BOOK SHOULD BE FORWARDED TO THI S OFFICE. FOR THE ABOVE PURPOSE THE CASE RECORDS FOR A.Y. 20 02-03 TO 2005-06 ARE RETURNED HEREWITH TO BE RE-SENT ALON G WITH THE REQUISITE REPORT. THE PAPER BOOK IS ALSO ENCLOSED HEREWITH. THE CASE RECORDS SHOULD BE RE-SENT TO THIS OFFICE ALONG WITH THE REQUISITE REPORT BY 04.02.2009. 7. IN REPLY THERETO THE A.O. SUBMITTED A REPORT DA TED 03.03.2009. THE RELEVANT PARAGRAPH IS REPRODUCED BELOW :- THE ASSESSEE HAS FAILED AGAIN TO SUBSTANTIATE THE CLAIMS EVEN IN THE REMAND PROCEEDINGS AND TO PRODUCE THE B OOKS OF ACCOUNTS IN THE ABSENCE OF WHICH NO EVIDENCE OR EXP LANATION IS VERIFIABLE. HENCE ANY SORT OF FRESH EVIDENCE SHOU LD NOT BE ACCEPTED AND THE ORDERS OF THE ASSESSING OFFICER DE SERVE TO BE UPHELD. IT IS FOUND THAT THE AO HAD CORRECTLY APPR ECIATED THE FACTS OF THE CASE AND HAD APPLIED THE PROVISIONS OF THE A CT IN A RIGHT MANNER. HENCE THE GROUND AND OBJECTIONS RAISED BY THE ASSESSEE ARE MISPLACED AND LIABLE TO BE REJECTED. 8. THE CIT(A) SUBSEQUENTLY AFTER GIVING OPPORTUNITY TO THE ASSESSEE DELETED THE ADDITION IN EACH OF THE CASE MADE UNDER SECTION 68 OF THE ACT. I NOTED THAT RULE 46A(2) REQUIRES THE CIT(A) BEFORE ADMISSION O F THE FRESH EVIDENCE UNDER RULE 46A(1) TO RECORD HIS REASONS IN WRITING FOR T HE ADMISSION OF THE FRESH EVIDENCE. IN THIS CASE THE CIT(A) HAS NOT RECORDE D ANY REASONS FOR ADMITTING THE FRESH EVIDENCE. FURTHER I NOTED THAT IN THE REMAN D PROCEEDINGS THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS AS DESIRED BY THE A.O. AS THE CIT(A) IN THE REMAND PROCEEDINGS HAS ASKED THE A.O. TO VERIFY CER TAIN FACTS. THESE FACTS IN MY OPINION COULD HAVE BEEN VERIFIED ONLY AFTER VERIFY ING THE BOOKS OF ACCOUNTS. THUS I AM OF THE VIEW THAT IT IS A CASE WHERE THE CIT(A) HAS ACCEPTED THE FRESH EVIDENCE AND DECIDED THE APPEAL ON THE BASIS OF THE FRESH EVIDENCE WITHOUT GIVING PROPER OPPORTUNITY TO THE A.O. TO EXAMINE THESE EVI DENCES OR DOCUMENTS. RULE 46A(3) OF THE INCOME-TAX RULES 1962 MAKES IT OBLIG ATORY ON THE PART OF THE CIT(A) TO ALLOW REASONABLE AND PROPER OPPORTUNITY T O THE A.O. TO EXAMINE THE EVIDENCE OR DOCUMENTS OR TO CROSS-EXAMINE THE WITNE SS PRODUCED BY THE ASSESSEE OR TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNE SS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE. THE A.O. IN THE REMAND PROCEEDINGS HAS ASKED THE ASSESSEE TO PRODUCE THE B OOKS OF ACCOUNTS BUT THE ASSESSEE SINCE DID NOT PRODUCE THOSE BOOKS IN MY O PINION IN THE ABSENCE OF NON- PRODUCTION OF THE BOOKS OF ACCOUNTS BY THE ASSESSEE BEFORE THE A.O. WILL NOT BE 22 REGARDED THAT THE A.O. HAD THE PROPER OPPORTUNITY T O EXAMINE THE EVIDENCE OR DOCUMENT WHICH WERE PRODUCED BY THE ASSESSEE BEFORE THE CIIT(A). NATURAL JUSTICE DEMANDS THAT IF THE ASSESSEE PRODUCED ANY D OCUMENT OR EVIDENCE BEFORE THE CIT(A) THE A.O. SHOULD HAVE BEEN GIVEN PROPER OPPORTUNITY TO EXAMINE THOSE EVIDENCES. EVEN AN ASSESSMENT UNDER SECTION 143(3 ) HAS TO BE PASSED ON THE BASIS OF THE EVIDENCE OR THE BOOKS OF ACCOUNTS PROD UCED BY THE ASSESSEE. THE CIT(A) HAS ASKED THE A.O. TO REMAND ON THE SPECIFIC POINT AS HAS BEEN REPRODUCED HEREINABOVE. IN MY OPINION WITHOUT VERIFYING THE BOOKS OF ACCOUNTS THE REPORT COULD HAVE NOT BEEN GIVEN BY THE A.O. NO DOUBT TH E ACCOUNTS OF THE ASSESSEE HAS DULY BEEN AUDITED BUT NEITHER SECTION 142 NOR SECTI ON 145 NOWHERE PROVIDES THAT IN CASE THE ACCOUNTS ARE AUDITED BY A CHARTERED ACC OUNTANT UNDER SECTION 44AB THE A.O. WILL NOT HAVE THE POWER TO EXAMINE THE BOO KS OF ACCOUNTS UNDER SECTION 142 OR UNDER SECTION 145 OF THE ACT. NON PRODUCTIO N OF THE BOOKS OF ACCOUNTS BY THE ASSESSEE IN MY OPINION WILL TANTAMOUNT TO THA T THE ASSESSEE EITHER DOES NOT HAVE ANY BOOK OR THE BOOKS OF ACCOUNTS MAINTAINED B Y THE ASSESSEE ARE NOT CORRECT OR ARE NOT COMPLETE OR THE METHOD OF ACCOUN TING HAS NOT BEEN PROPERLY FOLLOWED. THE INFERENCE WILL BE DRAWN AGAINST THE ASSESSEE AS THE ASSESSEE FAILED TO DISCHARGE THE OBLIGATION CAST ON HIM IN VIEW OF THE PROVISIONS STATED UNDER SECTION 142(1)(II). THE AUDITOR IN MY OPINION CA RRIED OUT THE AUDIT UNDER SECTION 44AB OF THE ACT CANNOT ENTER INTO THE SHOE OF THE A .O. AND HIS SATISFACTION OF THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE IS NOT BINDING ON THE A.O. THE A.O. UNDER SECTION 145(3) READ WITH SECT ION 142(1)(II) IS EMPOWERED TO EXAMINE THE ACCOUNTS OF THE ASSESSEE INDEPENDENTLY AND HAS TO ARRIVE AT A FINDING ON HIS OWN SATISFACTION ABOUT THE ACCOUNTS OF THE A SSESSEE. BEFORE ME THERE IS NO ASSERTION ON BEHALF OF THE ASSESSEE THAT IT WAS NOT GIVEN FAIR AND ADEQUATE OPPORTUNITY TO PRODUCE THE BOOKS OF ACCOUNTS. PROC EEDINGS UNDER THE INCOME TAX ACT ARE DIFFERENT FROM THE CRIMINAL PROCEEDINGS. I N CRIMINAL PROCEEDINGS THE ORAL EVIDENCE IS RELEVANT TO DECIDE WHETHER THE ACCUSED HAS COMMITTED ANY OFFENCE OR NOT BUT THIS IS NOT THE CASE. IN INCOME TAX PROCEE DINGS THE INCOME CANNOT BE DETERMINED ON THE BASIS OF THE ORAL EVIDENCE AND ON SOME OF THE ASSESSEES THAT IT HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS WITHOUT PR ODUCING THE SAME BEFORE THE A.O. FOR HIS EXAMINATION/VERIFICATION. THE CIT(A) HAS ASKED FOR THE REPORT OF THE ASSESSEE WHY FACTUAL ASPECT RELATING TO THE ENTRIES IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN RESPECT OF CERTAIN CREDITORS. THE A.O. ASKED THE ASSESSEE TO PRODUCE THE BOOKS BUT THE ASSESSEE DID NOT PRODUCE THE BOOK S BUT THE CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE WITHOUT TAKING THE COGNIZANC E THAT IN FACT THE VERIFICATION WHICH WAS DESIRED BY HIM FROM THE A.O. REMAINS INCO MPLETE DUE TO THE NON- COOPERATION OF THE ASSESSEE. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE I NOTED THAT THE ASSESSEE HAS FILED DETAILED EVIDENCE BEFORE THE CIT(A) THE COPY OF WHICH IS AVAILABLE BEFORE ME TO PROVE THE IDENTITY OF THE CREDITOR GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF EACH OF THE CREDITOR BUT IN MY OPINION NO PREJUDICE WILL BE CAUSED TO THE ASSESSE E IF THESE EVIDENCES ARE VERIFIED BY THE A.O. AS IT WILL MEET THE END OF NATURAL JUST ICE. I ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) SO FAR GROUND NO.1 OF REVENUES APPEAL IS CONCERNED AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH THE DIRECTION THAT THE ASSESSEE WILL FILE ALL THE NECESSARY EVIDENCES WHICH HAS BEEN SUBMITTE D BEFORE THE CIT(A) TO PROVE 23 THE IDENTITY OF THE CREDITOR GENUINENESS OF THE TR ANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR. THE ASSESSEE IS ALSO FREE TO PRODUCE ANY EVIDENCE ON WHICH HE MAY RELY SO THAT HE CAN DISCHA RGE THE ONUS AS ENVISAGED UNDER SECTION 68 OF THE ACT TO PROVE THAT ALL THE 3 INGREDIENTS INBUILT UNDER SECTION 68 OF THE ACT. THUS THIS GROUND IS ALLOWED FOR ST ATISTICAL PURPOSES. 26. RESPECTFULLY FOLLOWING THE AFORESAID DECISION I N THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2002-03 WE SET ASIDE THE ORDER OF CIT(APPEALS) RELATING TO GROUND NO.1 OF REVENUES APPEAL AND RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSEE WILL FILE ALL NECESSARY EVIDENCE WHICH WER E SUBMITTED BEFORE THE CIT(A) TO PROVE THE IDENTITY CREDITWORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE IS ALSO FREE TO PRODUCE ANY EVIDENCE ON WHICH HE MAY R ELY SO THAT HE COULD DISCHARGE THE ONUS AS ENVISAGED U/S. 68 OF THE INCOME-TAX ACT TO PROVE TH AT ALL THE THREE INGREDIENTS INBUILT U/S. 68 OF THE ACT ARE SATISFIED. THUS THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 27. THE SECOND ISSUE RELATE TO THE DELETION OF LUMP SUM ADDITION IN RESPECT OF MISCELLANEOUS EXPENSES CLAIMED. BOTH THE LEANED AR AND DR AGREE T HAT THE SIMILAR ISSUE HAS BEEN TAKEN IN THE ASSESSMENT YEAR 2003-04 AND WHATEVER VIEW TAKEN IN ASSESSMENT YEAR 2003-04 THE SAME VIEW MAY BE TAKEN IN THE ASSESSMENT YEAR 2004-05. 28. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS O F BOTH THE PARTIES AND CONSIDERED THE SAME. WE NOTED THAT THE SIMILAR ISSUE HAS ARISEN IN ITA NO. 314/AGRA/2009 FOR THE ASSESSMENT YEAR 2002-03. WHILE DISPOSING OF THE APPEAL OF THE REVENUE THIS TRIBUNAL HAS IN WHICH THE UNDERSIGNED WAS THE AUTHOR WHILE SITTING IN SMC BEN CH VIDE ORDER DATED 18.02.2010 HELD AS UNDER : 24 11. I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. I AM OF THE OPINION THAT THE ASSESSEE HAS SU BMITTED THE DETAILS IN RESPECT OF EACH AND EVERY EXPENDITURE. THE A.O. WITHOUT SPEC IFICALLY POINTING OUT ANY EXPENDITURE TO WHICH THE ASSESSEE FAILED TO PROVE O R WHICH HAS NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS MADE A LUMPSUM DISALLO WANCE ON ADHOC BASIS FOR A SUM OF RS.3 00 000/-. ONCE THE ASSESSEE HAS SUBMIT TED THE DETAILS OF THE EXPENDITURE IN MY OPINION THE ONUS GETS SHIFTED T O THE REVENUE TO POINT OUT THE SPECIFIC EXPENDITURE WHICH HAS NOT BEEN WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. NO ADHOC DISALLOWANCE CAN BE MADE MERELY ON THE BASIS OF SUSPICION AND CONJECTURE. UNDER THESE FACTS I AM OF THE VIEW THAT THE CIT(A) WAS CORRECT IN LAW IN REDUCING THE DISALLOWANCE TO RS.5 0 000/- AND I ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A). THUS THIS GROUND OF APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE SAID ORDER WE DISMISS T HE GROUND TAKEN BY THE REVENUE. 29. THE THIRD ISSUE IN REVENUES APPEAL RELATES TO THE HEAD OF INCOME FROM HOUSE PROPERTY. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AS SHOWN RENT AMOUNTING TO RS.7 32 000/- FROM LETTING OUT PART OF THE FACTORY PREMISES UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND CLAIMED DEDUCTION U/S. 24(A) AMOUNTING TO RS.2 19 600/-. DU RING THE ASSESSMENT YEAR 2005-06 ALSO SUCH RENTAL INCOME WAS ASSESSED. WHEN THE MATTER WENT BE FORE THE CIT(A) THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ASSESS THE INCOME UNDER THE HE AD INCOME FROM HOUSE PROPERTY AND ALLOW DEDUCTION U/S. 24(A) OF THE ACT. 30. AT THE TIME OF HEARING THE LD. A.R. DRAWN OUR ATTENTION TOWARDS PAGE NOS.87 TO 91 OF THE ORDER OF I.T.A.T. JODHPUR BENCH IN THE CASE OF ASS ESSEE NAMELY SHREE MAHESHWARI INDUSTRIES IN ITA NO.153/JU/2009 DATED 20.04.2009 IN WHICH THE TR IBUNAL HAS TAKEN THE VIEW THAT THE RENTAL INCOME IN THE CASE OF THE ASSESSEE WILL BE UNDER TH E HEAD INCOME FROM HOUSE PROPERTY. THE RELEVANT FINDING OF THE HONBLE TRIBUNAL IN THE A.Y . 2005-06 ARE REPRODUCED AS UNDER:- I HAVE HEARD THE PARTIES AND HAVE CAREFULLY PERUSE D THE MATERIAL ON RECORD. THE ASSESSEES CLAIM BEFORE THE AUTHORITIE S BELOW WAS THAT THE FACTORY HAD PERMANENTLY BEEN CLOSED WITH NO SCOPE OF REVIVA L AND AS SUCH THE PROPERTY WAS LET OUT AND YIELDED INCOME FROM HOUSE PROPERTY. THE ASSESSING AUTHORITY THUS 25 HAS ERRED IN BRINGING TO TAX THE INCOME AS THE INCO ME FROM BUSINESS OF THE ASSESSEE WITHOUT CONSIDERING THE SUBSEQUENT EVENTS THAT ESTABLISH THE CORRECTNESS OF CLAIM OF THE ASSESSEE. IT IS BY NOW A WELL SETT LED LAW BY THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF RABINDRA KUMAR VS. STATE OF WEST BENGAL AIR 1975 SC 1409 THAT EVENTS OR CIRCUMSTANCES COMIN G INTO EXISTENCE AFTER COMMENCEMENT OF THE PROCEEDINGS WHICH HAVE IMPACT O N THE RIGHT TO RELIEF MUST BE CONSIDERED AND JUDGED. EVEN OTHERWISE THE JUDGM ENT RENDERED BY HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HOTEL R ATANADA INTERNATIONAL PVT. LTD. (2007) 293 ITR 557 SUPPORTS THE CLAIM OF THE A PPELLANT FOR BRINGING TO TAX THE INCOME FROM HOUSE PROPERTY. I THEREFORE ALLOW TH E GROUND IN APPEAL RAISED BY THE ASSESSEE. 31. RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT( A) IN DIRECTING THE A.O. TO ASSESS THE RENTAL INCOME BY LETTING OUT A PART OF THE PREMISES OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THUS THIS GROUND OF APPEAL IS ALSO DIS MISSED. 32. IN THE RESULT BOTH THE APPEALS AS WELL AS CROS S OBJECTIONS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25.3.11. SD/- SD/- (H.S. SIDHU) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 TH MARCH 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT CONCERNED 5. DR ITAT AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY