DR. AGARWALS HEALTH CARE LIMITED,CHENNAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CHENNAI

The assessee has raised 3 grounds in its memorandum of appeal. The assessee has also raised an additional ground vide its petition dated 10.07.2026. At the time of hearing, the Ld.AR did not press Ground Nos.1 & 2 and its sub-grounds, hence the same are dismissed. The Ld.AR has only argued the Ground No.3 & its sub- grounds on merits and Ground 4 raised in the additional ground on legal issue.

The assessee has raised the following legal ground in its Additional Ground of Appeal vide Ground No.4: “Ground No.4 On the facts and circumstances of the case, the re- assessment order is bad in law, owing to the fact that no addition was in the reassessment order in relation to the original reason for reopening the assessment u/s.148.”

The Ld. AR submitted that the additional ground is purely legal in nature and goes to the root of the validity of the reassessment proceedings. It was further submitted that all the facts necessary for adjudication of the ground are already available on record and no fresh investigation into facts is required. The Ld. DR did not raise any serious objection to the admission of the additional ground.

We have considered the rival submissions. Since the additional ground raises a pure question of law arising from the facts already available on record and does not require any further investigation of facts, the same is admitted for adjudication in view of the decision of the Hon'ble Supreme Court in National Thermal Power Co. Ltd. v. CIT [(1998) 229 ITR 383 (SC)]. Accordingly, the additional ground is admitted for adjudication.

Brief facts of the case are as follows: The assessee is a company engaged in providing healthcare services. For the assessment year 2018-19, it filed its return of income on 30.11.2018 declaring total income of 'Nil' and a business loss of Rs.24,89,49,563/-. The assessment was completed under section 143(3) r.w.s. 143(3A) r.w.s 143(3B) of the Act vide order dated 16.04.2021, determining the total income at 'Nil' and the business loss at Rs.12,06,46,090/-.

Subsequently, the Department received information that the assessee had allegedly suppressed the variable component of professional fees payable to doctors, which was linked to the gross turnover. It was noticed that while the assessee had debited fixed

Aggrieved by the reassessment order, the assessee preferred an appeal before the First Appellate Authority. The FAA confirmed the assessment order of the AO.

Aggrieved, the assessee is in appeal before the Tribunal. The Ld. AR challenged the validity of the reassessment proceedings and submitted that the reassessment order is bad in law, as no addition has been made on the issue for which the assessment was reopened. It was submitted that the reassessment was initiated solely on the allegation of suppression of the variable component of professional fees payable to doctors. Although the notice issued under section

The Ld.DR was duly heard.

We have heard rival submissions and perused the material on record. The assessment was reopened on the basis of information that the assessee had allegedly suppressed the variable component of professional fees payable to doctors amounting to Rs.2,33,42,650/-. The notice issued under section 148A of the Act also called upon the assessee to explain why the said expenditure should not be disallowed. However, while completing the reassessment under section 147 read with sections 144 and 144B of the Act, the Assessing Officer did not make any addition on the said issue. Instead, the reassessment was concluded by disallowing interest expenditure of Rs.4,02,20,696/-, which did not form part of the reasons recorded for reopening. The issue as to whether the AO can sustain a reassessment by making additions on issues other than

The AO, in the impugned assessment order dated 24.03.2023 (page 9), relied upon the decision of the of the Hon’ble Karnataka High Court in the case of N. Govindaraju vs. ITO reported in [2015] 377 ITR 243 (Kar) to hold that once the notice for reopening is valid, the additions can be made on all issues (including any other income also) which may come to the notice of the AO during the course of reassessment proceedings though the reason for reopening itself does not survive. However, we find that the Hon'ble Jurisdictional Madras High Court in Anand Cine Services (P.) Ltd. vs. ACIT [(2024)

Since the Hon'ble Jurisdictional High Court has expressly considered and declined to follow the view taken by the Hon'ble Karnataka High Court in N. Govindaraju (supra), the decision of the Hon'ble Madras High Court is binding on us. Respectfully following the dictum laid down by the Hon'ble Jurisdictional High Court in Anand Cine Services (P.) Ltd. (supra), we hold that where no addition is ultimately made on the issue forming the basis of reopening, the reassessment cannot be sustained merely for making additions on other issues that came to the notice of the AO during the reassessment proceedings.

In the present case, admittedly no addition has been made in respect of the alleged suppression of professional fees, which constituted the sole reason for reopening the assessment. Therefore, the Assessing Officer lacked the jurisdiction to make a disallowance of interest expenditure, which was entirely unconnected with the recorded reasons for reopening. Respectfully following the binding decisions of the Hon'ble Jurisdictional High Court, we hold that the reassessment order passed u/s.147 of the Act is unsustainable in law. Accordingly, the reassessment order is quashed. Since we have quashed the reassessment proceedings in one of the legal grounds, the ground on merits (Ground No.3 and its sub-grounds) do not require adjudication and are left open.

In the result, the appeal filed by the assessee is partly-allowed.