USHA ABHAYA,CHENNAI vs. ACIT, NCC-7(1), CHENNAI

ITA 2243/CHNY/2024Status: DisposedITAT Chennai29 September 2026AY 2017-1822 pages
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What did the Tribunal hold?

The Tribunal held that the Assessing Officer (AO) lacked jurisdiction to make additions on an issue different from the one that formed the basis for initiating the reassessment proceedings. The Tribunal relied on the binding decision of the Hon'ble Madras High Court in Tractors & Farm Equipment Ltd. vs ACIT, which, after considering Explanation 3 to Section 147, held that while Explanation 3 lifts the embargo on making assessments on grounds other than those for which notice was issued, it does not override the necessity of fulfilling the conditions in the substantive part of Section 147. The Court stated that the AO has to assess or reassess the income which escaped assessment and was the basis for the belief, and if he does so, he can also assess other escaped income. However, if the AO accepts the assessee's contention that the initially believed escaped income did not escape assessment, he cannot independently assess some other income without issuing a fresh notice. The Tribunal found that the revenue failed to show that the AO made additions on the issues for which he reopened the assessment. Therefore, the reassessment order was held to be passed without jurisdiction and non-est in the eyes of law. The addition on merits was considered academic and not adjudicated. Other legal grounds were left open.

What were the facts?

The assessee, Usha Abhaya, an individual engaged in business, filed her return for AY 2017-18 declaring Rs. 1,83,12,720. Her case was selected for scrutiny, and the assessment was completed on 18.12.2019 at Rs. 1,90,24,085, with an addition of Rs. 6,000 on account of rental income. Subsequently, the Assessing Officer (AO) reopened the assessment under Section 147 by issuing a notice under Section 148 on 26.03.2021. The reasons for reopening were based on information from the Investigation Wing, Chennai, suggesting that the assessee had transferred shares in M/s. Abusha Aryav Ventures Pvt Ltd at a lower rate than other equity shareholders, leading to an alleged escapement of income of Rs. 8,41,00,000. The assessee objected to the reopening, but her objections were overruled. During the reassessment proceedings, the AO made an addition of Rs. 46,98,99,816 under Section 68 concerning the sale of shares of M/s. Strides Shashun Ltd, an issue different from the one cited for reopening.

What were the issues?

1. Whether the Assessing Officer (AO) had jurisdiction to reopen the assessment under Section 147 of the Income Tax Act, 1961, when the addition made pertained to an issue different from the one forming the basis for initiating the reassessment proceedings? Assessee's Contention: The assessee argued that the AO erroneously assumed jurisdiction to make additions on issues that came to his notice during reassessment, particularly when no addition was made on the issue that formed the basis for initiating the reassessment. The assessee relied on the judgments of the Hon'ble Bombay High Court in CIT vs Jet Airways Ltd and the Hon'ble Madras High Court in Tractors & Farm Equipment Ltd. vs ACIT and Martech Peripherals P Ltd vs DCIT, which held that if the AO does not make an addition on the reasons recorded for reopening, the reassessment is bad in law, even with Explanation 3 to Section 147. The assessee also contended that there was no fresh tangible material to justify reopening and that the action was a change of opinion. Revenue's Contention: The revenue justified the AO's action of making an addition on a different issue, arguing that with the insertion of Explanation 3 to Section 147, the assessment order would survive even if no addition was made in respect of the reasons recorded for reopening. The revenue relied on the judgments in N. Govindaraju v. ITO, Majinder Singh Kang, and Mehak Finvest (P.) Ltd.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3),Section 68,Section 10(38)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI S.R. RAGHUNATHA

Hearing: 05.08.2026Pronounced: 29.09.2026

PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, (hereinafter referred to as ‘Ld. CIT(A)’), Delhi, dated 26.06.2024 for AY 2017-18 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

Usha Abhaya 2. At the outset, the Ld. AR of the assessee drew our attention to ground No.3 and submitted that the assessee

The order continues below.

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