INCOME TAX ACT, 1961

Section 147

Reassessment - Scope - Assessment of item of income not forming part of reasons to believe -

AO framed reason to belive that taxable income pertaining to interest payment to bogus/jamakharchi companies had escaped assessment. Accordingly, AO reopened assessment by issuing section 148 notice. However, while framing reassessment AO also made addition on account of unexplained cash credit under section 68. Assessee approached CIT(A) who noticed that assessee had nowhere claimed impugned expenditure in its books which gave rise to alleged escapement and thus, re-opening reason had been assumed on an incorrect factual position. Question arose in such situation was whether addition under section 68 could be sustained.Held: Explanation 3 to section 147 has the effect that AO had to assess or reassess income which escaped assessment and which was the basis of 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 it was accepted as in the instant case that income forming the bsiss of reason to believe had not as a matter of fact, escaped assessment, it was not open to AO to independently assess some other income.

Relied:Ranbaxy Laboratories Limited v. CIT (2011) 336 ITR 136 (Del-HC) : 2011 TaxPub(DT) 1457 (Del-HC), CIT v. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom-HC) : 2011 TaxPub(DT) 218 (Bom-HC) and Maharashtra Academy of Engineering and Educational Research v. Dy. CIT, Central Circle-1 (1), Pune (2017) 55 ITR (Pune-Trib) 242 : 2017 TaxPub(DT) 812 (Pune-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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