AMARINDER SINGH MATHARU,MUMBAI vs. ITO,WARD 3(1), KALYAN, RANI MANSION

In the grounds of appeal, the assessee has challenged the assessment order as bad in law.

Learned counsel for the assessee referring to page 13 of the paper book which is the order under clause (d) of section 148A of the Act, dated 23.03.2023, submitted that the reasons for reopening of the assessment were to assess income chargeable to tax of Rs. 1,35,36,478/- as escaped assessment with respect to the transactions relating to interest other than interest on securities under section 194A amounting to Rs. 35,36,478/-, and purchase of foreign currency amounting to Rs.1 crore, whereas in the reassessment order completed by the Assessing Officer, addition was made in respect of Rs. 2,25,55,884/- representing advance received from KP Pharmaceutical Technology (“KPPT”) towards commission. Learned counsel submitted that the Assessing Officer, while completing the reassessment did not make any addition in respect of the reasons recorded for reopening of the assessment, i.e., interest other than interest on securities and purchase of foreign currency as mentioned in the reasons.

Learned counsel for the assessee placing reliance on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Jet Airways (I) Limited, reported in (2011) 331 ITR 236 (Bombay), submitted that the Hon'ble Jurisdictional High Court has categorically held that if the addition is not made on the issues for which the assessment was reopened then no other addition on any other unaccounted issue is warranted.

Learned counsel submitted that a similar view has been taken by the Hon'ble Delhi High Court in the case of ATS Infrastructure Limited vs. ACIT reported in (2024) 166 taxmann.com 61 (Delhi). Learned counsel for the assessee submitted that the Hon'ble Delhi High Court held that notwithstanding the substitution of sections 147 to 151 and the introduction of section 148A, the jurisdiction of the Assessing Officer remains founded upon the information suggesting escapement of income, and therefore, if no addition is ultimately made on the issue forming the basis of reopening, the Assessing Officer cannot make reassessment by making additions on altogether different issues.

Learned counsel submitted that the ratio laid down in Jet Airways (I) Limited (supra) continues to hold the field even under the new assessment regime. Learned counsel submitted that the aforesaid principle is squarely applicable to the facts of the present case, as admittedly no addition has been made in respect of the issues forming the basis of the notice issued under section 148A(b) and the order passed under section 148A(d), namely, purchase of foreign currency, purchase of motor vehicle, rent payment, and interest receipts. Consequently, the impugned reassessment deserves to be quashed. Reliance is placed on the following judicial pronouncements.

On the other hand, learned DR placed reliance on the orders of the authorities below.

Heard rival contentions and perused the orders of the authorities below and the case laws relied upon. On perusal of the order passed under section 148A(d) of the Act, it is observed that the assessment was reopened for the following reasons.

However, the reassessment was completed by the Assessing Officer on 08.03.2024 under section 147 read with section 144B of the Act making an addition of Rs. 2,25,55,884/- in respect of advances received from KPPT by the assessee towards commission.

It is observed from the reassessment order that the Assessing Officer did not make any addition in respect of the alleged escapement of income as per the reasons recorded for reopening of the assessment. In other words, the Assessing Officer completed the reassessment by making an addition which did not form part of the reasons recorded for reopening of the assessment.

The Hon'ble Jurisdictional High Court, in the case of CIT vs. Jet Airways (I) Limited (supra) held that the Assessing Officer cannot make an addition which is not part of the reasons for reopening the assessment without making the addition specified in the reasons for reopening of the assessment. We observed that similar view has been taken by the Hon'ble Bombay High Court in the case of Yashoda Shivappa Nagangoudar vs. ITO reported in (2022) 138 taxmann.com 296 (Bom). The Hon'ble High Court held that, if on objection, the Assessing Officer accepts that the foundational assumption does not exist and thus does not assess that income, he cannot proceed to independently assess other income that came to notice during the proceedings without issuing a fresh valid notice under section 148 of the Act. Similar proposition is laid down in all other cases referred to above. Thus, the ratio laid down by the above decisions squarely applies to the facts of the assessee's case.

Thus, respectfully following the said decisions, we quash the reassessment order dated 08.03.2024 passed under section 147 read with section 144B of the Act for the assessment year 2019-20.

Since we have quashed the reassessment on the legal issue, the grounds raised by the assessee on the merits of the additions or the disallowance made by the Assessing Officer need not be adjudicated, as it would be of only academic in nature at this stage.

In the result, the appeal of the assessee is allowed as indicated above.