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The Dy. Cit Vs. Sri Alok Banerjee and Sri Subir - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Allahabad
Decided On
Judge
Reported in(2008)111ITD339(All.)
AppellantThe Dy. Cit
RespondentSri Alok Banerjee and Sri Subir
Excerpt:
1. these arc two group of cases., one is in the case of shri alok banerjee and the other is in the case of shri subir banerjee. both are based on identical set of facts and therefore, they are taken up together.2. we will first take up the case of shri alok banerjee in i.t.a. no.192/a/05 and co raised therein against the order of the ld. cit(a). the revenue has come up in appeal against the order of the cit(a) dated 24-2-05 raising the following grounds: 1. that the ld. cit(a) has erred in law and on fact in holding that reopening of the assessment under section 147/148 was bad in law and he has also erred in law in directing that the order passed under section 143(3)/148 is cancelled. 2. that the ld. cat (a) has erred in law in not appreciating the provisions of relevant section i.e......
Judgment:
1. These arc two group of cases., one is in the case of Shri Alok Banerjee and the other is in the case of Shri Subir Banerjee. Both are based on identical set of facts and therefore, they are taken up together.

2. We will first take up the case of Shri Alok Banerjee in I.T.A. NO.192/A/05 and CO raised therein against the order of the ld. CIT(A). The Revenue has come up in appeal against the order of the CIT(A) dated 24-2-05 raising the following grounds: 1. That the Ld. CIT(A) has erred in law and on fact in holding that reopening of the assessment Under Section 147/148 was bad in law and he has also erred in law in directing that the order passed Under Section 143(3)/148 is cancelled.

2. That the Ld. CAT (A) has erred in law in not appreciating the provisions of relevant Section i.e. 147 of the IT. Act, which speaks that the A.O. may 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 the proceedings under this section or etc 3. That the Ld. CIT(A) has also erred in law in directing the A.O. that cost of acquisition for land and building should be based as calculated in view of Dr. A.K. Mukherjee while Ld. CIT(A) has himself in his order very clearly observed that since the order has already been cancelled by him, the cost of acquisition is not discussed here. As such Ld. CIT(A) has himself gone beyond the direction given by himself in his order.

3. The assessee has raised the following gross objection in support of the order of the ld. CIT(A): 1. Because considering the facts and the circumstances of the case the proceedings Under Section 147 and 148 of the Income-tax Act, 1961 which have been initiated on the basis of erroneous assumption and facts, in absence of any genuine and definite information, without a valid and legal reason and formation of belief for escapement of a particular income, are illegal and bad in law.

Consequently the reassessment order dated: 23-01-2004 is illegal and bad in law.

2. Because the assessment order dated: 23-01-2004 passed Under Section 143(3)/147 is illegal and barred by the time limit prescribed for issuing the notice and passing order for reassessment under the Income-tax Act, 1961.

3. Because considering the facts and the circumstances of the case the initiation of reopening proceedings under Section 147 is illegal and bad in law.

(a) In the facts and circumstances of the case of acquisition as on 1-4-J981 as valued by the registered valuer and the indexed cost of acquisition claimed by the assessee ought to have been accepted while computing the taxable capital gains on sale of property.

(b) In view of the facts and. the circumstances of the case cost of acquisition adopted by the A.O. for computation of capital gains is erroneous and bad in law. the computation of long term capital gains at Rs. 14,12,923.00 is erroneous, bad in law. Calculation of capital gain shown by the assessee based on valuation report of the registered valuer should be accepted for the purpose of reassessment.

5. Because considering the facts and the circumstances of the learned CIT(Appeals) had decided the appeal on the point of validity of reopening of assessment Under Section 147 and had cancelled the reassessment order dated: 23-01-2004 on that ground without adjudicating other grounds of the appellant assessee before him.

Reference to the valuation of land in case of Dr. A.K. Mukharjee by learned CIT(Appeals) is general observation and are not effective.

4. The facts of the case are that the assessee had filed the return of income for the assessment year 9H-.99 on a total income .of Rs. 416200/-. Subsequently, the A.O. took action Undetr Section 147/148 on 27-9-2002 recording the following reasons: The assessee alongwith his brother Sri Subir Banerjee has deposited Rs. 11,73,679/- on 16-06-1997 as freehold charges to U.P..

Government. Assessee 's share is Rs. 5,86,835.

The above amount has not been disclosed by the assessee in his return of income for the A. Y. 1998-99 filed with the department.

On enquiry made by the AC IT Range-I the assessee vide his letter dated: 28-06-2002 has admitted the deposit and argued that Rs. 15,36,800 has been received as advance for sale of land through cheque and out of which Rs. 11,73,679 has been deposited. But the copy of bank account filed during the course of assessment proceedings does not reflect the above deposit and withdrawal Apart from the above the assessee has also taken an advance of Rs. 7,50,000. A.M. Wheller & Co. Pvt. where he is a Director. The above amount is a deemed dividend Under Section 2(22) (e) of the IT Act, 1961.

In view of the above I have reason to believe that income chargeable to tax amounting to Rs. 13,36,835 (Rs. 5\86,835 +Rs. 7,50,000) has escaped assessment. Issue notice Under Section 1477148.

5. Thus, the assessment was re-opened on two grounds, one is that the money paid by the assessee along with his brother Shri Subir Banerjee amounting to Rs. 11,73,679/- as freehold charges, the assessee's share being Rs.586,835/-, was unexplained. The second point taken by the A.O.for reopening the assessment was that the assessee has received a sum of Rs.7,50,000/- as advance from M/s. A.H. Wheeler & Co. P. Ltd., where lie was a Director and the same was taxable as deemed dividend Under Section 2(22)(e).

6. Thereafter, the A.O. is issued notice to the assessee on 2-9-2002 which was received by him on 4-9-2002. During the course of re-assessment proceedings he explained that a sum of Rs. 11 was not the subject matter of initiation of re-assessment proceedings was added into the total income. So far as the material available with the A.O.at the time of reopening of the assessment-is concerned, there is no dispute. There is no dispute to the fact that the bank accounts available with the A.O. at the time of reopening of the assessment did not reflect the deposit and withdrawals of the money for making free hold charges. Thus, at that point of time, the expenditure of Rs. 11,73,679/- was unexplained. The A.O. had given an opportunity to the assessee initially before issuing notice Undetr Section148 to explain the source of expenditure and the explanation " was that the money was paid out of deposit In the bank of the money received as advance on sale of land. Bank account given to the A.O. did not reflect such deposit and withdrawal. Thus the A.O. had a prima facie reason to believe that the sum of Rs. 11,73,679/-was unexplained. The question now is whether subsequent events or subsequent material furnished by the assessee during the reassessment proceeding whereby the said expenditure became explained could invalidate the reassessment proceedings. After careful consideration of the facts on record we do not agree with this view. The A.O. at the time of initiating reassessment proceedings is not required to establish escapement of income. An enquiry at the stage of examining the validity of reassessment notice is only to, see whether there are reasonable grounds with the A.O. to reopen (lie assessment and not whether the omission or failure and the escapement of income is established.

Support is derived from the decision of Hon'ble Supreme Court in Shri Krishan P. Ltd. V. ITO . Similarly, it is held in Central Province Manganese Ore Co. Ltd. v. ITO that final outcome of proceeding is not relevant. 73,679/- was paid out of money received as advance from the Government against the sale of land.

His reply was as under: In reply to your notice under reference we like to submit as under that we have deposited Rs. J173679/-(Rupees eleven lacs seventy three thousand six hundred seventy nine only) in the Government account towards freehold charges for our 3260.22 sq. mtrs of land situated at 9, Kanpur Road, Allahabad. The above mentioned amount of freehold charges has been paid by we out of the advance amounts received by we in cheques against sale of the said land on following dates.

Rs. 1173679/- deposited towards Freehold Charges for 3260.22 sq.

mtrs. of land vide Challan no. 6 dated 16/06/1997.

In this context we would like to state further that we are regular Income Tax Assessee and we mention here under our respective PAN No., for your reference. Hope this satisfy your quarries. Thanking you.

7. The A.O. thereafter did not make any addition in respect of Rs.5,86,835/- as according to him it was satisfactory explained; but worked out the capital gains on the sale of land by talking the cost of acquisition as under:Indexed Cost of Acquisition, 2648.00Add: Cost of improvementincluding freehold 12,95,179.00 -------------as shown by the assessee 12,97,827.00 ------------- During the year under consideration assessee sold total area of 1326.31 aq. mt for Rs. 15, 02,750. The chargeable capital gain was worked out as under:Total sale price, 19,53,350.00Less: Indexed cost including cost of improvement, (1326.21 x 407.49) 5,40,427.00 -------------Capital Gain chargeable to tax, 14,12,923.00 ------------- 8. While determining the cost of acquisition, the assessee's valuer had adapted a rate of land at Rs. 270/- per sq. metre. He adopted the rate fixed by the Collector for free hold land as on 1-4-1981 @ Rs. 13,750 to 165.00 per sq. metre. Originally the land of the assessee was lease-hold land and it was converted into free ' hold land by paying free-hold charges of Rs. 11,73,679/-. Stamp " duty of Rs. 1,15,000/- and other charges totally to Rs.12, 95,179/-. The A.O. rejected the Approved Valuer's report wherein the rate of land was taken at Rs. 270/- per sq. metre.

9. The assessee challenged the re-opening of the assessment before the ld. CIT(A) on the ground that the item on which the assessment wais reopened was not added at the time of reassessment therefore, the very basis of re-assessment/ reopening did not survive; It is because the A.O. accepted the explanation of lbs assessee that a sum of Rs.11,73,679/- is explained as coming from advanced of sale of land and- further thai deemed dividend is not taxable in the year concerned.

The A.O. has made the addition on account of long-term capital gains, which was not the subject matter of reopening of the assessment. The ld. CIT (A) also called for a remand report from the A.O. before canceling the assessment. However the. ld. CIT (A) cancelled the assessment by observing as under: Similar issue has arisen in the appellant's own case in earlier year and it has been held by me if the case is reopened on one ground and that ground exist no more, then the notice issued Under Section 148 is not in order and the assessment order is illegal order and should be treated as 'null and void. 'Following my earlier years order and in view of Assessing Officer's report in appellant own case, I am of the opinion that the reopening of the assessment is bad in law, therefore the order is cancelled.

10.The ld. CIT(A) also gave his comment on computation of long-term capital gains but finally did not give any finding on the ground that "Since the order has already been cancelled by me, the cost of acquisition is not discussed here.... "At one place, he has commented that taking the value of the land at Rs. 26,480/- is ridiculously low as it gives the rate of 75p. per sq. yd.. He set an example of one Dr.

A.K. Mukerjee, wherein the value of the land has been taken at Rs. 355.56 per sq. yd. as on 1-4-81.

11.Against this, the ld. D.R. submitted that the assessment has been validly reopened because at the time when original assessment was made Undetr Section143 (3), this aspect was not disclosed by the assessee.

The A.O. had carried out enquiries from the assessce about the source of sum of Rs.11,73,679/- paid as advance as free- hold charges, ft. was explained by the assessee vide his letter dated 28-6-02 that the same was paid out of Bank account but the bank account filed during the course of original assessment proceedings did not reflect above deposit or withdrawal. Once this is the position prima; facie the A.O. had reason to believe that the amount of Rs. 11,73,670/- has escaped the assessment. Therefore, reopening was valid. Further, as per Section 147, once an assessment is validly reopened then other item could be validly included while completing the assessment. For this proposition, he analyzed Section 147 which provides that not only such income which has escaped assessment but also any oilier income chargeable to tax, which has escaped the assessment and which comes to the notice of the A.O. subsequently could be assessed. He also relied on the decision of Hon'ble Allahabad High Court in Rama Shankeri Gupta v.CWT , for the proposition that the items discovered subsequently during the reassessment proceedings could be included in the re-assessment. The ld. D.R. also relied on the decision Hon'ble Calcutta High Court in CIT v. Assam Oil Co. Ltd. for the proposition that once re-assessment proceedings are initiated, then entire original assessment is set aside and entire assessment proceedings start afresh. In such a case, the A.O. has not only jurisdiction but also the duty to levy tax on entire income that has escaped assessment. Once an assessment is reopened notice is given for a fresh return of all the items.

12. Against this, the ld. A.R. for the assessee submitted that reassessment proceedings are bad in law, because no addition was made by the A.O. in respect of sum of Rs. 11,73,679/- being the sum paid as free hold charges, the assessors share being Rs. 5,86,835/-. Once no addition is made of this amount by the A.O, the very basis of reopening of the assessment goes away; therefore, the reassessment could not validly stand. The question of adding other items escaping income would arise only when the A.O. makes addition: in re-assessment proceedings in respect of the items on which assessment is reopened. Once items on which re-assessment is initiated is satisfactorily explained before the A.O, then the ground for reopening the assessment does not stand. He referred to Section 147 and the words mentioned therein i.e. "assessed" or "re-assessed" as income and also any other income chargeable to tax which has escaped assessment...." Thus, he has to make addition in respect of the items on which assessment is reopened so that he can validly make addition in respect of other items which have escaped assessment and which come to his notice subsequently in the course of proceedings. The word "and" used in this section means that both the additions must be made, one on which assessment was reopened and another which was discovered subsequently during the course of reassessment proceedings. Therefore, according to the ld. A.R,. if the A.O. does not make any addition of the item on which assessment was reopened then he loses jurisdiction to make addition in respect of oilier items, which were discovered subsequently during (he course of re-assessment proceedings. To support his proposition, lie has relied on the decision of Tribunal in Ashok Kumar Singh, Proprietor, Tilhar, the Gas Agency, Shahjahanpur v. ITO I, Shahjahapur in I.T.A. No.255(luckn/k)/03. for the asstt. Yr. 97-98 decided on Oct. 28,04 and reported in 2005(6) MTC-175 Tribunal and Dubey Land & Finance Ltd. 105, Friends Complex, Hazratganj, Lucknow v. ITO in I.T.A. No. 653, 654 & 655/L/03 for the A.Y. 91-92 to 93-94 decided by the Tribunal, Lucknow Bench and reported in 2005, 5 MTC-736, Trib: CIT V.M.P. Iron Traders(04) 189 CTR-154 for the proposition that if no material comes to the notice of the A.O. casting doubts or to the genuineness credits which were concluded during original assessment proceedings could not be reopened in the course of re-assessment proceedings initiated on the basis of information received on another ground; on the decision of Hon'ble Punjab & Haryana High Court in Vipin Khanna v. CIT and Ors.

again for the preposition that proceedings Under Section 147 are re-opened only regarding the item of under-assessment and finality of other issues are not effected.

13.In rejoinder, the ld. D.R. submitted that the decision of Hon'ble Lucknow Bench of the Tribunal would not be binding because it has not considered the decision of Hon'ble Alld. High Court in 275 ITR-628.

Further, the other decisions relied upon by the ld. A.R. relate to position of Statute prior to 1-4-89 thereafter substantial amendment in Section 147 has taken place.

14. We have considered the rival submissions and perused the material on record. The only question to be adjudicated upon is whether the A.O.could include capita! gains m the re-assessment proceedings, which was initiated on the question of unexplained investment in free hold charges but which was later found to be satisfactorily explained.

Investment in free hold charges was not added in the computation of income whereas capital gains which What is important for initiating reassessment proceedings is the satisfaction of the two requisite conditionsUnder Section 147 (a). Thus establishment of factum of escapement of income at the stage of initiation of reassessment proceeding is not essential. Further it has been held that the validity of jurisdiction-for initiation of reassessment proceedings has to be considered with reference to the material available at the time of initiation. The court is not required to look into the further material that came to light in the course of reassessment proceedings. Reliance is placed on the decision of Hon'ble Madras High Court in Asajohn Devinathan v. ACIT . In Chunnilal Surajmal v. CIT , it has been held that the material or events becoming available long after initiation are not relevant for sustaining the initiation of proceedings. The converse is equally true.

Subsequent explanation furnished by the assessee and accepted by the A.O. about an item of income on which assessment was reopened will not invalidate the reassessment proceedings when at time those material/ explanation were not available. Further, at that time, when the A.O.gets material in his possession which indicates escapement of income then he is not required to convene the assessee or to intimate to him the nature of alleged escapement. At the time of initiating reassessment proceedings, what is to be seen is whether there was enough material in the possession of the A.O. which would form the reasons for reopening the assessment. It is not necessary that the item of income which is alleged to have escaped the assessment is finally established to have escaped before initiating reassessment proceedings.; it is only after giving opportunity of being heard to the assessee and during the reassessment proceedings the A.O. may decide to, make the addition of the same amount, he may decide to increase the amount as originally thought by him to have escaped assessment, he may reduce the amount to be added into the total income depending upon the evidence furnished by tin assessee during the course of reassessment proceedings. Law doe: not require the A.O. to necessarily make addition of the amount income on which assessment was reopened. The law also does no require him to make the addition of the same amount which was mentioned in the reasons recorded by him. Thus, not only the quantum of income originally proposed by the A.O. in the reason so recorded may vary but even the subject matter of escapee income may altogether vanish. To judge the validity of reassessment in the basis of final outcome of reassessment proceedings on that item will not be proper as held by the courts as referred to above.

15. In our considered view, it is not legally proper to cancel the reassessment proceedings merely on the ground that addition in respect of the item on which reassessment was initiated was not done. The use of the word "May" in Section 147 as per amended - provision w.e.f.

1-4-1989 is very relevant. For convenience we reproduce the section as under: 147. Income escaping assessment.--If 1 he Assessing Officer, has reason to believe that any income 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 the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year): Here, the word "May" would not mean "Shall", because the use of the word "Shall" will take away the discretion from the A.O. to add or not to add an item on which assessment was reopened or discovered subsequently during the course of reassessment proceedings.. In; general the word "May" is an auxiliary verb clarifying the meaning of another verb by expressing an ability contingency, possibility or probability. When used in Statute in its ordinary sense the word is permissive and not mandatory. But where certain conditions are provided in the Statute and on the fulfillment thereof a duty is cast on the authority concerned to take an action then on the fulfillment of those conditions the word "May" take the character of "Shall" and then it becomes mandatory. Thus, whether the word is to be construed as mandatory equivalent to "Shall" or is merely permissive and conferring discretion has to be determined in each case from the apparent intention of the Statute as gathered from the context as well as the language of the particular provision. But primarily the word is used in a permissive sense unless it becomes necessary to give effect to the intent of Legislature where it becomes mandatory. Here in Section 147, after the A.O has recorded reasons to believe that any income chargeable to tax has escaped the assessment for the assessment year, "he may assess or re-assess such income or other income...." Thus, during the process of reassessment, the A.O. has to decide whether he has to make an addition or need not make the addition, if we kike the meaning of the word "May" used in this section as mandatory then on whatever basis the A.O. has recorded the reasons for reopening the assessment, he will have to make the addition of the amount and subsequent reassessment proceedings for examining the veracity of or truthfulness of the explanation furnished by the assessee would become an exercise in futility. Since the process of reassessment would include providing an opportunity to the assessee of being heard one cannot come-to the conclusion prior to assessment, i.e. at the initial stage of reopening the assessment, that particular item of escaped income has to be necessarily added.

16. That ld. A.R. for the assessee has sought to interpret the word "Assessed or "Re-assessed" in Section 147 as to mean "addition". But these two ;words do not really mean "addition" to the total income. It would only mean, an evaluation and coming to the final conclusion whether an item or items on which assessment was reopened is to he added to the total income or not and similarly other items which were discovered during the course of reassessment proceedings were to be added or not. The word "Assessed" means to ascertain or to fix the amount of tax to 'be paid, to make and evaluation or official estimate of property for the purposes of taxation. The Word "Assessed'" is a comprehensive word in taxing Statute. It often means the computation of income of the assessee, the determination of tax payable by him arid whole of the procedure for making the assessment and for collecting and recovering of tax. The word "Assessment" has been used in its widest connotation and includes the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof including a proceeding for imposition of penalty. In CIT v. Snnjay Kumar Gupta the The word "assessment" is used in the' Income-tax Act, 1961, in a number of provisions in a comprehensive sense and it includes all proceedings starting with the filing of the return or issue of notice and ending with the determination of the tax payable by the assessee. Proceedings for the assessment of a firm consist of computation of the income of the firm, determination of tax payable by the firm, apportionment of the income of the firm between its partners in the case of a registered firm, and in appropriate cases the imposition of take on the firm after including the share of the income of certain partners in the income of the firm, even though the firm is registered. The proceedings under Section 182 do not come to an end merely on computation of the income of the firm and the determination of tax payable by the firm on that income. When proceedings are taken under Section 155 of the Act to give effect to the order of the appellate authority and in pursuance thereof treat a firm as registered under the Act, which was earlier treated as unregistered by the Income-tax Officer, it is a proceeding for assessment. In the proceedings under Section 155, the income-tax Officer amends the order of completed assessment of a partner in a firm on the assessment or reassessment of the firm, on the ground that the share of the partner in the income of the firm has not been correctly included in the income of the partner. Such proceedings are amendment proceedings and, therefore, dearly form part of the proceedings for assessment.

17. Similarly, Hon'ble Gujarat High Court in Prabhawati B. Solanki v.CWT 243 ITR-827 (Guj) has held that the word "Assessment' is a comprehensive term. The Head Notes from the above decision are as under: The term "assessment" in the provision prescribing the period of limitation in the Wealth-tax Act, 1957, has been used in comprehensive sense which includes the integrated process of computation of net wealth as well as computation of tax liability thereon. The two actions need not be simultaneous they may be taken separately and at different times but the assessment is complete only when both the processes are over, namely, determination of net wealth and determination of tax payable on such net wealth. It is only when both the processes are complete that the assessment can be said to be completed. As a result, both the processes must take place prior to the expiry of the period of limitation.

18. The Honble Supreme Court in C. Abraham v. ITO has held that the word Assessment" is not used merely in the sense of compulation of income. The relevant part of Head Notes from the above decision is as under: The expression "assessment" used in the Sections of Chapter IV of the Income-tax Act is not used merely in the sense of computation of income and when Section 44 declares that the partners or members of the firm or association shall be jointly and severally liable to assessment, it refers to the liability to computation of income under Section 23 as well as the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Nor has the expression, "all the provisions of Chapter IV shall so far as may be applied to such assessment" a restricted content; in terms it says that all the provisions of Chapter IV shall apply, so far as may be appeal to such assessment of firms which have discontinued their business. By Section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. This liability arises only if the Income-tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case.

19. Thus, we rejected the contention of the ld. A.R. that the word "Assessed" or "Re-assessed" used" in Section 147 would only mean "addition" i.e. unless addition of the amount on which reassessment proceedings were initiated is added only then subsequent addition in respect of items discovered during re-, assessment proceedings can be sustained. Thus assessment is a much wider term. Any addition to the total income is an assessment but every act of assessment is not addition. Once assessment is validly reopened, one need not look back as the entire assessment is open to the A.O. He can look into oilier items of escapement: of income and make addition thereof if not satisfactorily explained. The word "And"' used in this section does not mean that The two items are tagged together and will survive conjointly and not independently. The word "May" provides a discretion to the A.O.to make the addition either of two or of the both or of none. Suppose m a case where certain item is discovered in the course of the reassessment proceedings which prima facie A.0. believes that it has escaped assessment, he cannot make the addition only on that prima facie satisfaction. Me has to afford an opportunity of being heard to the assessee. If he satisfied, addition has to be made otherwise not.

Mere discovery of an item during the reassessment proceedings does not empower the A.O. to make 'the addition thereof. He has to provide an opportunity to the assessee and consider his explanation before deciding to make addition in respect of that item. Therefore, we are of the considered view that at the end of the reassessment proceedings the A.O. may or may not, depending upon the material gathered by him and furnished by the assessee, make an addition of any other item of income discovered during the reassessment proceeding, or of the item on which assessment was reopened. Thus, the word "Assessed" and "Re-assessed" in this section only refers to the process of assessment and re-assessment i.e. evaluation and not final act of addition.

20. Now, w0 come to the case laws cited by the ld. A.R. In Ashok Kumari Sons Case, decided by the I.T.A.T., 'A' Bench Lucknow (supra), the inference in para 6 thereof was to the Effect that assessment or re-assessment means addition. In our considered view, this decision is silent on the use of the word "May" and also on the meaning of the word "Assessment" or "re-assessment", as discussed above. Further, this decision has not considered the ratio of the decision: of Mon'ble Allahabad High Court in Ram Shanker Gupta's case(supra)- 275 ITR-62'8, where it is held that once the assessment is re-opened the original order of assessment ceases to be operative. The effect of reopening-of the assessment is to vacate or set aside the original order of assessment and to substitute in its place the new assessment. The relevant part of head notes is as under: (i) that as a result of the retrospective amendment in Section 5(1)(viii) of the Act, the exemption on jewellery was not admissible and, therefore, the, net wealth chargeable to tax had escaped assessment f6r'that year. Thus, the Wealth-tax Officer was justified in initiating proceeding under Section 17.

(ii) That once the "assessment is reopened, the original order of assessment ceases to be operative and the effect of reopening of the assessment is to vacate or set aside the original order of assessment and to substitute in its place the order made on reassessment. Therefore, the assets could be revalued.

21. Similarly, the decision in Dubey Land & Finance Ltd. (Supra) I.T.A.T. Lucknow ench is silent on the meaning of the word "May" and "Assessment" and also the decision of Hon'ble Allahabad High Court in Rama Shanker Gupta's case was not before the Tribunal.CIT v. M.P. Iron & Traders (supra) is not applicable as it is different on facts. The assessment in that ease was re-opened on the basis of information regarding purchases out of the books. But the addition was made on cash credits also. It was held by the Hon'ble Punjab & Haryana High Court in that case that since the issue regarding the cash credit entries stood concluded when the original assessment was completed Undetr Section 143(1) and no material is shown to have conic to (he notice of the A.O. casting doubts us to genuine-ness of the cash credits it could not be re-opened in the: course of the reassessment proceedings initiated of the basis of information received on another ground. Not only this decision is differing on facts, as in the present case the (sic) of capital gains was not at all there in the original assessment proceedings and it was only discovered during the re-assessment proceedings but also in view of decision of Hon'ble Allahabad High Court being jurisdictional High Court which is binding on this Bench.

23. The decision of Hon'ble Punjab & Haryana High Court in Vipin Khanna's case is also on different facts and hence not applicable in view of the decision of Hon'ble Allahabad High Court in Rama Shanker Gupta's case.

(1) The validity of re-opening of assessment proceedings has to be evaluated only on the basis of material available at the time of reopening of the assessment. Subsequent material gathered during the re-assessment proceedings leading to enhancement, reduction or no addition will not affect the jurisdiction acquired by the A.O. to reopen the assessment.

(2) The word "May" used in Section 147 is only permissive and provides discretion to the A.O. to make addition either the item on which the assessment was reopened or of the item discovered during the course of re-assessment proceedings, or not.

(3) The word "Assessed or "Reassessed" used in Section 147 does not mean to add and hence "assessment" does not mean addition.

(4) The word "And" used in Section 147. does, not mean that the two items of escaped income i.e. the one on the basis of which the assessment was reopened and the oilier discovered dining the course of reassessment proceedings are conjoint or tagged together. It is only an enabling word empowering the A.O. to consider for computation of income items discovered during the course of re-assessment proceedings.

(5) After the A.O. has validly acquired the jurisdiction to re-open the assessment, he can make the addition either of the items on the basis of which assessment was re-opened or of the items discovered during the course of reassessment proceedings or of both depending upon the material finally available the A.O. during the course of reassessment proceedings.

25. As a result, we reverse the order of the ld. CIT(A) in canceling the assessment and restore that of the A.O. but since the ld. CIT(A) has not decided on the quantum of capital gains on the ground that he has cancelled the assessment, we restore the matter to his file to adjudicate, in the light of the material available on record and to be furnished by the assessee and A.O. on the quantum of capital gains in accordance with law.

26. As a result, we allow the appeal of the Revenue for statistical purposes. The CO. filed by the assessee is therefore, dismissed.

1. Since the facts and circumstances are identical with the facts and circumstances of the case in the case of Shri Alok Banerjee, we set aside the order of the ld. CIT(A) in canceling the assessment and restore the matter to the file of the C1T(A) to work out the quantum of capital gains in the light of evidence furnished or to be furnished by the assessee and the A.O.2. As a result, the appeal filed by the revenue His allowed for statistical purposes. The CO. filed by the assessee is rejected.


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