THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), AHMEDABAD vs. NK PROTEINS PVT. LTD.

TAXAP/449/2025HC GujaratGJHC24039114202504 August 2026Author: HONOURABLE MR. JUSTICE BHARGAV D. KARIA,HONOURABLE MR. JUSTICE PRANAV TRIVEDI39 pages
AI SummaryDismissed

What were the facts?

The Principal Commissioner of Income Tax (Central), Ahmedabad (Revenue) filed an appeal against the order dated 12.11.2024 of the Income Tax Appellate Tribunal (ITAT) concerning Assessment Year 2009-10. The assessee, NK Proteins Pvt. Ltd., had its assessment order passed under section 143(3) on 29.12.2011. A notice under section 148 was issued on 09.03.2015, citing two reasons: a disallowance under section 14A and an amount received from National Stock Exchange Ltd. (NSEL). The Assessing Officer (AO) completed reassessment by making disallowances under sections 43(5), 73, 40A(2)(b), and section 14A. The assessee appealed to the CIT(Appeals), raising an additional ground regarding the validity of reopening. The CIT(Appeals) held the reassessment proceedings to be bad in law.

What did the High Court hold?

The High Court held that no substantial question of law arises from the impugned order of the Tribunal. Regarding issue 1, the court noted that the CIT(Appeals) had found that the additions made in the reassessment order were not based on the reasons recorded for reopening. The court agreed with the legal position that when no addition is made on the grounds for which reassessment was initiated, the AO cannot make additions on other grounds not forming part of the recorded reasons. Concerning issue 2, the court relied on the Supreme Court's decision in S. Sundaram Pillai v. V.R. Pattabiraman, stating that an explanation cannot expand the scope of the main statutory provision. The court found that Explanation 3 to Section 147, while clarifying the AO's power to assess issues that come to notice subsequently, does not override the necessity of fulfilling the conditions in the substantive part of Section 147, particularly when no income has escaped assessment as per the recorded reasons and no addition is made on those grounds. The court also noted that the ITAT had followed the jurisdictional High Court's decision. As for issue 3, the deletion of the disallowance under sections 43(5), 73, and 40A(2)(b) was upheld as part of the overall finding that the reassessment proceedings were vitiated.

What were the issues?

1. Whether, in law, the ITAT erred in concluding that the Assessing Officer cannot make additions on issues not forming part of the reasons recorded for reopening, especially when no addition was made on the issues included in the reasons recorded (turning on Section 147 of the Income Tax Act, 1961)? 2. Whether, in law, the ITAT erred in holding that Explanation 3 to Section 147, inserted retrospectively, cannot expand the scope and sweep of the main body of the statutory provision (turning on Section 147 and Explanation 3 thereto)? 3. Whether, in law, the ITAT erred in upholding the CIT(A)'s deletion of a disallowance of Rs. 13,89,08,810/- made under sections 43(5) read with sections 73 and 40A(2)(b) of the Income Tax Act, 1961? Assessee's Contentions: The assessee argued that the AO cannot make additions on grounds not mentioned in the reasons for reopening if no additions are made on the grounds stated in the reasons. The assessee also contended that Explanation 3 to Section 147 cannot expand the scope of the main provision and that the disallowance under section 43(5) read with sections 73 and 40A(2)(b) was wrongly made. Revenue's Contentions: The revenue argued that Explanation 3 to Section 147 allows the AO to make additions on issues that come to notice subsequently, even if not initially recorded, and that the ITAT erred in its findings.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3),Section 43(5),Section 73,Section 40A(2)(b),Section 14A,Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/449/2025 ORDER DATED: 04/08/2026 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 449 of 2025 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), AHMEDABAD Versus NK PROTEINS PVT. LTD. ========================================================== Appearance: MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1 MR DHINAL A SHAH(12077) for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA and HONOURABLE MR. JUSTICE PRANAV TRIVEDI Date : 04/08/2026

ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1.

Heard learned Senior Standing Counsel Mr. Varun Patel for the appellant and learned advocate Mr. Dhinal Shah for the respondent.

2.

This Appeal is filed under section 260A of the Income Tax Act, 1961 [for short ‘the Act’] arising out of order dated 12.11.2024 passed by the Income Tax Appellate Tribunal in ITA No. 339/Ahd/2022 C/TAXAP/449/2025

The order continues below.

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