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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SHRI SAKTIJIT DEY
Date of hearing 02.06.2022 Date of pronouncement 07.07.2022 ORDER This is an appeal by the assessee against order dated 26.06.2019 of learned Commissioner of Income Tax (Appeals)-16, New Delhi, pertaining to assessment year 2011-12.
Ground nos. 1 & 2 are general grounds, hence, do not require specific adjudication.
In ground no. 3, the assessee has challenged the validity of reopening of assessment under section 147 of the Act.
Briefly the facts relating to this ground are, the assessee is a resident individual. For the assessment year under dispute the assessee has filed return of income declaring income of Rs.6,18,948/-. Subsequently, the Assessing Officer received information that in the year under consideration, the assessee has purchased some immovable property, based on such information, the Assessing Officer reopened the assessment under section 147 of the Act. In course of assessment proceeding, when the Assessing Officer called upon the assessee to explain the source of investments in the immovable property, the assessee stated that payments were made through banking channel. However, as per the allegation of the Assessing Officer, assessee did not explain the source of investment. Further, the Assessing Officer found that two sundry creditors have been shown by the assessee in her books of account. To verify the genuineness of the sundry creditors, the Assessing Officer issued notice under section 133(6) of the Act seeking necessary information. As observed by the Assessing Officer, such notices returned back unserved. Thus, in absence of any details relating to the sundry creditors, the Assessing Officer treated them as non-genuine and added back an amount of Rs.6,49,177/- to the income of the assessee. The assessee challenged the assessment order by filing an appeal before learned Commissioner (Appeals), inter alia, on the ground that the reopening of assessment under section 147 of the Act is invalid and the addition made in the assessment made thereunder is also invalid. While deciding assessee’s appeal, learned Commissioner (Appeals) did not find merit in the grounds raised by the assessee.
Accordingly, the appeal was dismissed.
I have considered the submission of learned Departmental Representative and perused the materials on record. On a reading of the assessment order, it becomes patent and obvious that the reason for reopening of assessment under section 147 of the Act is purchase of certain immovable property by the assessee. Whereas, while completing the assessment under section 143(3) read with section 147 of the Act, the Assessing Officer has remained completely silent on the issue, on which, the reopening of assessment was made. He has made addition of an amount of Rs.6,49,177/- representing outstanding sundry creditors.
Therefore, it is manifest, the Assessing Officer has completed the assessment by making an addition, which was not the subject matter of reopening of assessment, as per the reasons recorded. It is relevant to observe, before the first appellate authority, the assessee had specifically raised the issue of validity of the addition made on an item of income, which was not subject matter of reopening of assessment under section 147 of the Act.
From the submissions made by the assessee before the first appellate authority, it is noticed that in the year under consideration, the assessee had invested an amount of Rs.4,68,00,000/- in purchase of certain immovable properties.
This issue relating to purchase of immovable properties by the assessee, no doubt, was the subject matter of reopening of assessment under section 147 of the Act. On a reading of the assessment order, prima facie, it appears, the Assessing Officer was satisfied with assessee’s explanation regarding source of investment, hence, he did not make any addition with regard to purchase of immovable property by the assessee. Whereas, he made addition of a completely different item of income of unverified sundry creditors amounting to Rs.6,49,177/-. The question which arises for consideration is, whether without assessing the income for which the assessment was reopened, the Assessing Officer can make any other addition. The answer to the aforesaid question certainly has to be in the negative.
In case of CIT Vs. Jet Airways (I) Ltd., 331 ITR 236, the Hon’ble Bombay High Court, while dealing with an identical issue, has held that without assessing the income, for which the assessment was reopened, the Assessing Officer cannot assess any other item of income. The same view has been expressed in the following decisions as well:
Commissioner of Income Tax Vs. Mohmed Juned Dadani, (2013) 355 ITR 172 (Guj.) 2. Ranbaxy Laboratories Ltd Vs CIT, 336 ITR 136 (Del. HC)
Respectfully following the ratio laid down in the aforesaid decisions, I have no hesitation in holding that the addition made of Rs.6,49,177/- is unsustainable. Accordingly, I delete the addition.
Ground is allowed.
In the result, the appeal is allowed, as indicated above.
Order pronounced in the open court on 7th July, 2022