The order of the Bench was delivered by
Sunil Kumar Yadav (Judicial Member) .-This appeal is preferred on behalf of the assessee against the order of the Commissioner of Income-tax (Appeals) on various grounds, which are as under :
"1. Because the Commissioner of Income-tax (Appeals) has erred in law and on facts in deciding the appeal ex parte without adequate opportunity of being heard and without appreciating the facts of the case.
2. Because the Commissioner of Income-tax (Appeals) has erred in law and on facts in dismissing the assessee's appeal without considering the facts as enumerated in statement of facts filed at the time of filing the appeal.
3. Because the order of the Commissioner of Income-tax (Appeals) being a non-speaking order, without adjudication in facts and circumstances of the case is contrary to the facts and circumstances of the case is contrary to the principle of natural justice, bad in law and be quashed.
4. Because the Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the addition of Rs. 89,508 made by the Assessing Officer on account of alleged suppression of debtors without appreciating the facts and circumstances that merely because of error by ignorance in the name in the balance-sheet, i.e., Shanti Developers instead of correct being Srishti Developers.
5. Because the Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the addition of Rs. 3,00,000 on account of unexplained creditors ignoring the facts that the assessee had received Rs. 3,00,000 vide cheque No. 292024 duly credited in the bank account.
6. Because the Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the addition of Rs. 3,23,250 on account of suppression of debtors ignoring the clarification/explanation given in the statement of facts.
7. Because the Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the addition of Rs. 51,920 on account of unexplained investment alleged to have been made out of undisclosed sources ignoring the facts clarified in the statement of facts.
8. Because the order of the Commissioner of Income-tax (Appeals) is contrary to facts, bad in law and deserves to be vacated."
2. The assessee has also moved an application for admission of the additional ground of appeal vide application dated March 9, 2013 with a request to admit the following additional ground as it goes to the root of the case.
"1. Because the reassessment framed under section 148 is without jurisdiction, bad in law inasmuch as no addition has been made in respect of the alleged escapement of income for which action under section 147/148 was initiated, hence void ab initio, bad in law and be quashed.
2. Because the reassessment order is directly in conflict and contrary to the decision of Jet Airways (I) Ltd. reported in [2011] 331 ITR 236 (Bom)."
3. Through this additional ground, the assessee has challenged the validity of the assessment framed under section 143(3) read with section 147 of the Act. Since this is a legal ground and it can be raised at any stage, we admit the same and prefer to dispose of at the threshold.
4. Learned counsel for the assessee has invited our attention to the copy of the reasons recorded for reopening the assessment, according to which, during the course of survey conducted under section 133A of the Act in the case of Regency Hospital Ltd., Kanpur, on March 11, 2010, it was noticed from the details of the register that the Regency Hospital Ltd. has paid cash commission on different dates to Dr. Anil Kumar Jain in lieu of references made by the doctor without deducting tax at source on the said payment of commission. The Assessing Officer further noted that a sum of Rs. 22,450 has been paid by Regency Hospital Ltd. to the assessee, which has escaped assessment. Thus, he has reason to believe that the amount of commission receipt chargeable to tax has escaped assessment for the assessment year 2008-09 and accordingly assessment was reopened under section 147 of the Act by issuing a notice under section 148 of the Act. While framing the assessment, the Assessing Officer has not made any addition with regard to the commission receipt from Regency Hospital Ltd. Learned counsel for the assessee has strongly argued that since the Assessing Officer has not made any addition with respect to an issue on which assessment was reopened under section 147 of the Act, the assessment framed on other issues does not survive and deserves to be quashed. In support of his contention, he has invited our attention to the judgment of the hon'ble Delhi High Court in the cases of CIT v. Software Consultants in I. T. A. No. 914 of 2010 [2012] 341 ITR 240 (Delhi) and Ranbaxy Laboratories Ltd. v. CIT in I. T. A. No. 148 of 2008 [2011] 336 ITR 136 (Delhi). Reliance was also placed upon the judgment of the hon'ble Bombay High Court in the case of Jet Airways (I) Ltd [2011] 331 ITR 236 (Bom).
5. The learned Departmental representative, on the other hand, has submitted that once the Assessing Officer has reopened the assessment after recording valid reasons that a particular income chargeable to tax has escaped assessment, the Assessing Officer is at liberty to make additions on other issues, which came to his notice during the course of assessment proceedings irrespective of the fact that he may be satisfied with the issues on which the assessments are reopened.
6. Having given a thoughtful consideration to rival submissions and from a careful perusal of the record, we find that undisputedly the assessment was reopened on an issue of receipt of commission from Regency Hospital Ltd. on which tax deducted at source was not deducted but while framing the assessment, the Assessing Officer has not made any addition in this regard. The Assessing Officer has made additions on different issues. Now short question arises whether the additions made on different issues in a reassessment proceedings after having satisfied on an issue on which the assessment was reopened, are sustainable in the eyes of law. This aspect was examined at different point of time by different High Courts. The hon'ble Bombay High Court in the case of Jet Airways (I.) Ltd. [2011] 331 ITR 236 (Bom) has examined this issue in the light of various judicial pronouncements and has come to the conclusion that under section 147 the Assessing Officer has to assess or reassess the 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 proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income, which he has initially formed 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 under section 148 would be necessary, the legality of which will be tested in the event of challenge by the assessee. Relying upon this judgment, the hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. v. CIT reported in [2011] 336 ITR 136 (Delhi) has held that the Legislature could not be presumed to have intended to give blanket power to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. The relevant observations of the hon'ble Delhi High Court in paragraphs 18 to 20 are extracted hereunder (page 147) :
"18. We are in complete agreement with the reasoning of the Division Bench of the Bombay High Court in the case of CIT v. Jet Airways (I) Ltd. [2011] 331 ITR 236 (Bom). We may also note that the heading of section 147 is 'income escaping assessment' and that of section 148 'issue of notice where income escaped assessment'. Section 148 is supplementary and complimentary to section 147. Sub- section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute the escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Explanation 3 if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the Legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of the escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148.
19. In the present case, as is noted above, the Assessing Officer was satisfied with the justifications given by the assessee regarding the items viz., club fees, gifts and presents and provision for leave encashment, but, however, during the assessment proceedings, he found the deduction under sections 80HH and 80-I as claimed by the assessee to be not admissible. He consequently while not making additions on those items of club fees, gifts and presents, etc., proceeded to make deductions under sections 80HH and 80-I and accordingly reduced the claim on these accounts.
20. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under sections 80HH and 80-I which as per our discussion was not permissible. Had the Assessing Officer proceeded not to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-I as well."
7. Similar views were expressed by the hon'ble Delhi High Court in the case of CIT v. Software Consultants in I. T. A. No. 914 of 2010 [2012] 341 ITR 240 (Delhi), copies of which are placed on record. In this judgment also the hon'ble Delhi High Court has examined the impugned issue in the light of the judgments of the hon'ble Supreme Court in the cases of Jaganmohan Rao v. CIT/EPT [1970] 75 ITR 373 (SC) and CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297 (SC) and other judgments of different High Courts and their Lordships have held that the heading of section 147 is "income escaping assessment" and that of section 148 "issue of notice where income escaped assessment". Section 147 is supplementary and complimentary to section 148. Sub-section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub- section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute the escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Explanation 3, if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. Once he is satisfied on the issues on which the assessment was reopened after forming a belief that the income chargeable to tax has escaped assessment, the Assessing Officer cannot make addition on other issues. The relevant observations of the hon'ble Delhi High Court are extracted hereunder (page 245 of 341 ITR) :
"In the present case, as is noted above, the Assessing Officer was satisfied with the justifications given by the assessee regarding the items, viz., club fees, gifts and presents and provision for leave encashment, but, however, during the assessment proceedings, he found the deduction under sections 80HH and 80-I as claimed by the assessee to be not admissible. He consequently while not making additions on those items of club fees, gifts and presents, etc., proceeded to make deductions under sections 80HH and 80-I and accordingly reduced the claim on these accounts.
The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under sections 80HH and 80-I which as per our discussion was not permissible. Had the Assessing Officer proceeded to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would 'have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-I as well'."
8. Turning to the facts of the case, it is abundantly clear that the Assessing Officer has not made any addition with respect to receipt of commission from Regency Hospital Ltd. on which the assessment was reopened by the Assessing Officer. The Assessing Officer has made addition on other issues which were not part of the reasons recorded for reopening the assessment. Therefore, in the light of aforesaid judgments, the assessment framed by the Assessing Officer on other issues is not sustainable in the eyes of law. We accordingly set aside the assessment framed on other issues. Since the entire assessment is quashed, we find no justification to adjudicate the appeal on other grounds. Accordingly, the appeal of the assessee stands allowed.
9. In the result, the appeal of the assessee is allowed.
The order pronounced in the open court on April 25, 2013.