KAMLESH BABUBHAI PATEL,VALSAD vs. ITO, WARD 5, VAPI

When the matter was called for hearing, the learned Counsel for the assessee at the outset submitted that the appeal has been filed by the assessee belatedly before Tribunal. The learned Counsel adverted my attention to the affidavit filed in this

The effective grounds of appeal raised by the assessee are as follows: “1.On the facts and in the circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in re-opening the assessment u/s.147 of the Act and issuing notice u/s.148 of the Act. 2.On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.8,34,623/- (Rs.5,17,450 + Rs.3,17,173) on account of cash deposited in bank account of Rs.5,17,450/- and credit entries in bank account of Rs.3,17,173/- treated as alleged unexplained Income u/s.69A of the Income Tax Act, 1961”. 4. At the outset, Learned Counsel for the assessee, informs the Bench that assessee does not wish to press ground Nos. 3 to 7, therefore, I dismiss ground Nos. 3 to 7, as not pressed.

Succinctly, the factual panorama of the case is that assessee before me is an Individual. As per information available on record, it was noticed that the assessee had transacted in shares, total of which amounting to Rs.1,68,72,044/-, during the year under consideration. Further, on verification of the ITD system, it was noticed that the assessee had not filed his return of income. Therefore, it was evident that the assessee had invested in share from undisclosed source of income and even not paid tax on capital gain from transaction in shares. It was clear that the assessee had Page 2 of 7

Thereafter, during the assessment proceedings, the assessing officer noticed that as per details available on records and on verification of bank statement of bank account number 1771000052796, maintained with HDFC Bank, it was observed by the assessing officer that the assessee had deposited cash of ₹5,17,450/- and credit entries of ₹ 3,17,173/- total of both amounting to ₹ 8,34,623/- (₹5,17,450 +₹ 3,17,173), during the financial year (F.Y.) 2009-10 relevant to the assessment year (A.Y.) 2010-11. During the course of assessment proceedings, ample opportunities of being heard were afforded to the assessee to explain the sources of above- mentioned cash/credit entries in his bank account. But the assessee did not bother to explain the source of cash/credit entries in his bank account, with supporting evidence. Since, neither any reply/ nor any submission nor any explanation has been furnished by the assessee, about the sources of aforesaid cash deposit of ₹ 5,17,450/- and credit entries of ₹ 3,17,173/- total amounting to ₹ 8,34,623/-. Therefore, assessing officer held that the assessee had failed to explain the source of ₹

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has set-aside the matter to the file of the Assessing Officer for de novo assessment. Aggrieved by the order of the CIT(A), the assessee is in further appeal before this Tribunal.

Shri P M Jagasheth, Learned Counsel for the assessee, begins by pointing out that assessing officer has erred in re-opening the assessment u/s.147 of the Act and issuing notice u/s.148 of the Act. The learned Counsel pointed out that reopening of assessment was made by the assessing officer, and recorded the reasons for reopening stating that transaction in shares of Rs.1,68,72,044/-, has escaped from assessment, hence, reopening of assessment was made by the assessing officer. However, the assessing officer, did not make addition on account of transaction in shares of Rs.1,68,72,044/-, but made addition on different item, that is, cash deposit of Rs.5,17,450/- and credit entries of Rs.3,17,173/-, totalling of both Rs.8,34,623/-. Therefore, learned Counsel pointed out that this is the situation where reasons of reopening of assessment were made on, X item and ultimate addition was made by the assessing officer, on Y item, hence, the X item, on which the reopening was made, no addition was made by the assessing officer, on such X item, hence reassessment proceedings initiated by the assessing officer, bad in law. For this, learned Counsel relied on the decision, in the case of, Jet Airways 331 ITR 236.

I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. I note that it is abundantly clear that the addition of Rs. 8,34,623/- was made in the reassessment order u/s. 143(3)/l47 of the Act dated 23.10.2017. However, the assessing officer, recorded the reasons for reopening stating that transaction in shares of Rs.1,68,72,044/-, has escaped from assessment, hence, reopening of assessment was made by the assessing officer. However, the assessing officer, did not make addition on account of transaction in shares of Rs.1,68,72,044/- at all, but made addition on different item, that is, cash deposit of Rs.5,17,450/- and credit entries of Rs.3,17,173/-, totalling of both Rs.8,34,623/-. Based on this factual position, I find merit in the arguments advanced by the Learned Counsel for the assessee. It is settled position of law that if the assessing officer wants to make addition, on different item, then in that situation, the assessing officer has to record the reasons, separately and has to take permission from the higher authorities for reopening, which the assessing officer has failed to do so, in the assessee’s case under consideration. In that view of the matter, the other additions made in the said reassessment order which were not part of the reasons recorded for reopening the assessment are not sustainable in the eyes of law even after insertion of Explanation 3 to section 147 of the Act by Finance Act, 2009.

I note that assessing officer may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings

The view has also been ventilated by the Hon`ble Delhi High Court in the case of Ranbaxy Laboratories Ltd,336 ITR 136 (Del), therefore, I note that since assessing officer has not issued a fresh notice under section 148 of the Act to reassess the other income, that is, (credit entries of Rs.3,17,173/- and cash deposit Rs.5,17,450/-,totalling of both Rs.8,34,623/-), therefore, the reassessment

As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.

In the result, appeal of the assessee is allowed in above terms.