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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
O R D E R Per Bench: These appeals by the assessee are against the separate orders of the Commissioner of Income Tax (Appeals)-50, Mumbai [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 31.12.2024 for AY 2018-19, 2019-20 & 2020-21. The common issue contended by the assessee in all 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. these appeals pertain to validity of reassessment under section 147 of the Act with regard to the surviving disallowance under 36(1)(va) towards delayed remittance of PF/ESI when the main reason for which the AO reopened i.e. disallowance under section 40(a)(ia) for non-deduction of TDS on payments for alternate accommodation, is deleted by the CIT(A).
ITA No. 1442/Mum/2025- AY-2018-19
2. The assessee is a company engaged in the business of development of commercial complexes and rehabilitation under Slum Rehabilitation Authority (SRA Scheme). The assessee filed the return of income for AY 2018-19 on 30.03.2019 declaring total income at Rs. 5,78,020/- and book profit of Rs. 60,41,205/-. The return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and assessment proceeding under section 143(3) of the Act was completed on 09.03.2021accepting return of income. A search and Survey action under section 133A of the Act was conducted on M/s DB Realty Group, Dynamix Group and other related entities on 07/10/2021. The assessee was also covered under Survey Action u/s 133A of the Act. On the basis of finding in survey action, a show cause notice under clause(b) of section 148A of the Act was issued to the assessee and an order u/s 148A(d) of the Act was passed on 31/01/2023. Subsequently a notice u/s 148 of the Act was issued. In response to the same, the assessee filed the return of income on 03/02/2023 declaring total income at Rs. 5,78,019/- and book profit of Rs. 60,41,205/-. The AO while completing the assessment under section 147 made the following disallowance: (i) Disallowance under section 40(a)(ia) of the Act. - Rs. 1,76,84,433/- (ii) Disallowance of delayed payment of PF/ESI - Rs. 80,41,155/- 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd.
3. Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) deleted the disallowance under section 40(a)(ia) made towards non-deduction of tax at source under section 194I on the payments made to slum dwellers towards alternate accommodation. The CIT(A) in this regard placed reliance on the decision of the Co-ordinate Bench in assessee's own case for AY 2012-13 (ITA No. 3429/M/2024 dated 19.09.2024). The CIT(A) confirmed the disallowance made by the AO under 36(1)(va) by placing reliance on the decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT ([2022] 143 taxmann.com 178 (SC)).
The ld AR submitted that the reasons for reopening in assessee's case is the disallowance on account of non-deduction of tax on compensation paid to slum dwellers and that the aforesaid disallowance is deleted by the CIT(A). The ld. AR drew our attention to the fact that the revenue did not prefer further appeal and therefore submitted that the impugned issue has reached finality. The ld AR further submitted that since the CIT(A) has deleted the addition, no other addition made during reassessment would survive since the AO does not have the jurisdiction to assess any other income. The ld AR in this regard drew our attention to the relevant provisions of section 147 of the Act which read as under – 147 - Income escaping assessment. If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).
Explanation.—For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. irrespective of the fact that the provisions of section 148A have not been complied with.]
5. The ld. AR argued that the explanation to section 147 cannot go beyond the main section. To buttress the said argument the ld AR submitted that the addition under the main provisions of section 147 could be made only in respect of those income which is subject matter of section 148A(b) notice and order under section 148A(d). The ld. AR further submitted that the disallowance made under section 36(1)(va) could have been made only by invoking explanation and not under the main provisions of section 147. Accordingly it is argued that when the addition made under main provisions are deleted then the disallowance under section 36(1)(va) which is done under explanation cannot be sustained since the explanation cannot go beyond the jurisdiction of main section. The ld AR in this regard drew our attention to the following observations of the Hon'ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd (331 ITR 236) – 16…….However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.
The ld. AR in this regard placed reliance on the following decisions – 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. “i. Decision of Hon'ble Delhi High Court in case of CIT vs. Adhunik Niryat Ispat (63 DTR 212) (PBP 40). ii. Decision of Hon'ble Delhi High Court in case of CIT vs. Living Media India Ltd (359 ITR 106) (PBP 42). iii. Order of the Mumbai Bench of the Hon'ble Tribunal in case of Travotel (India) (P) Ltd vs. ITO (158 ITD 878/69 taxman.com 445) (PBP 52). iv. Order of the Mumbai Bench of the Hon'ble Tribunal in case of Suraksha DB Realty vs. DCIT (ITA No. 482/Mum/2018 dated 08.09.2022) (PBP 60). v. Order of the Pune Bench of the Hon'ble Tribunal in case of Prabhakar Damodar Gawande vs. ITO (200 TTJ 1017) (PBP 88).”
7. The ld. DR heavily relied on his written submissions which is extracted below – “2. The appellant has primarily contested the validity of the reassessment notice issued u/s 148 of the Income-tax Act, 1961 ("the Act"), arguing that once the primary issue for reopening has been dropped by CIT(A), the reassessment proceedings automatically become invalid. The appellant relies heavily on the Hon'ble Bombay High Court's decision in CIT v. Jet Airways (India) Ltd. [2011] 331 ITR 236 (Bom). It is respectfully submitted that the misconceived. On the contrary, a careful examination of Jet Airways (India) Ltd. demonstrates robust support for the Revenue's position. 3. In CIT v. Jet Airways (India) Ltd. [2011] 331 ITR 236 (Bom), the Hon'ble Bombay High Court clearly established the principle that once reassessment proceedings are validly initiated based on new tangible information indicating escapement of income, the jurisdiction of the Assessing Officer (AO) extends beyond merely addressing the original reason for reopening. The Court held categorically that reassessment proceedings do not become invalid merely because the issue triggering the reopening did not culminate in an addition, either at the assessment or appellate stage. The essential jurisdictional test is whether the reassessment was initiated based on a valid reason to believe, supported by tangible material, which is not in dispute in this instant proceeding. 4. The judgment of Jet Airways (India) Ltd. does not stipulate the automatic invalidation of reassessment proceedings upon deletion or non-sustainability of the primary addition at any subsequent appellate stage. Instead, the Court emphasizes the AO's jurisdiction to assess any escaped income discovered during 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. the reassessment proceedings, irrespective of whether the initial reason for reopening is ultimately resulted in addition or whether such addition is sustained in appeal. Kind reference is invited to relevant part of the Judgment at Para 11, Page 6, which is being reproduced as under, "If the income, the escapement of which was the basis of the formation of reason to believe, is not assessed or re-assessed, it would not open to the assessing officer to independently assess only that income which comes to his notice subsequently in the course of proceeding under section as having escaped assessment. If upon the issuance of notice under section 148(2), the assessing officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issues independently."
Evidently the primary requirement is to assess or re-assess the income on the basis of which the case was re-opened. The wording of the judgment mentions only "assess" and NOT "addition". Hence what is required that issue on the basis of which the notice u/s, 148 was issued should be deliberated upon by the assessing officer in the course of re-assessment proceeding. Needless to say, that there no necessity that any assessment or re-assessment of certain issue may ultimately result in addition. Thus, even if no addition is made in respect of reason behind issue of notice u/s. 148, after due deliberation and examination of that issue, the assessing officer is fully empowered to examine and assess/re- assess other issues. Considering this fact, it would be far-fetched and illogical to resort to interpretation that since the addition of main issue got deleted by CIT (A), the additions on other issues would not survive.
6. In the instant case, the reassessment proceedings were initiated based upon tangible, credible, and previously undisclosed information resulting from the survey action u/s 133A conducted on 07.10.2021. This survey clearly revealed critical facts regarding the appellant's non-deduction of TDS under Section 194- 1 on compensation payments made to slum dwellers. Thus, the AO had substantial and valid reasons to believe that income had escaped assessment. The AO has also assessed the issue of non-deduction of TDS u/s. 194-I on payments made to slum dwellers (Para-4 of the asstt. Order) and ultimately made an addition of Rs. 176,84,433/- on this issue as disallowance u/s. 40(a)(ia) of the Income Tax Act. Hence the assessing officer has duly discharged his onus of assessing the income that was sought to be escaped and subject matter for reopening of assessment. The any subsequent factor such as sustenance of such addition before CIT(A) does not affect the validity of assessment of other income and consequent addition in the course of same re-assessment proceeding.
1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd.
The Hon'ble Supreme Court in CIT v. Sun Engineering Works Pvt. Ltd. [1992] 198 ITR 297 (SC) further fortifies this position, clarifying explicitly that once reassessment proceedings are validly initiated, the AO's jurisdiction extends to the entire assessment and is not constrained solely to the original reason for reopening.
8. Moreover, Hon'ble Supreme Court's judgment in ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [291 ITR 500 (SC)] reinforces the position that the validity of reassessment proceedings depends exclusively upon the legitimacy and sufficiency of the reason to believe at the time the reassessment notice is issued, and not on subsequent developments or the ultimate sustainability of additions made.
9. Consequently, the appellant's reliance on Jet Airways (India) Ltd. is critically misplaced, as the judgment, rather than invalidating the Revenue's case, squarely supports the AO's jurisdiction and the legal validity of the reassessment proceedings. The Revenue, therefore, humbly submits that the reassessment proceedings initiated under Section 147 and addition made by the assessing officer in respect to the issue of disallowance of PF, ESI etc. in the course of re- assessment proceeding remain entirely valid and sustainable in law.
10. It is therefore humbly prayed that the appeal of the appellant be dismissed on the issue of unpaid liability in respect of PF, ESI dues etc.”
We heard the parties and perused the material on record. The limited issue for adjudication before us is when the addition emanating from the reasons for reopening i.e. notice under section 148A(b) & order under section 148A(d), is subsequently deleted, then whether any other addition made during reassessment would survive or not. It is relevant here to consider the following observations of the Pune Bench of the Tribunal in the case of Prabhakar Damodar Gawande (supra) –
6. Section 147 of the Act provides that: “If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section…’. A bare perusal of the above provision manifests that the AO is fully empowered to bring to tax any other income which has escaped assessment and which comes to his notice subsequently in the course 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. of proceedings u/s 147, apart from the income escaping assessment on which the AO formed reason to believe about the escapement of income and issued notice u/s 148. The use of words ‘and’ between the income escaping assessment forming reasons to believe for issuing notice u/s 148 and other income chargeable to tax which escaped assessment and comes to the notice of the AO in the course of the proceeding, amply shows that the existence of the former is a pre-condition for taxing the latter. To put it simply, if the grounds set out in the re-assessment notice are nonexistent, i.e., either no addition is made on such grounds or the addition so made does not finally pass the scrutiny by the appellate forums, then, obviously, no further addition can be made for income which comes to his notice during the course of proceedings u/s 147. Without there being such a deterrent, the AO could have got unhindered powers to initiate re-assessment at the drop of a hat without any legally sustainable reasons and then made other additions resulting in multiplicity of proceedings, which the legislature has sought to curb. Any lawful jurisdiction to make addition on account of other incomes coming to the notice of the AO during the course of proceedings u/s 147 can be acquired only on the foundation of a validly acquired jurisdiction on legally sustainable items of income escaping assessment forming reasons for issuing notice u/s 148. In other words, if the AO fails to acquire a valid jurisdiction to make re- assessment on the basis of his reasons, then, he is also debarred for making additions for other incomes chargeable to tax which escaped assessment and come to his notice subsequently in the course of proceedings u/s 147. The Hon’ble Bombay High Court in CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom) has held to this extent. Similar view has been taken by the Hon’ble Delhi High Court in CIT vs. Chiel Communications India Pvt. Ltd. (2013) 354 ITR 549 (Del).
We further notice that the coordinate bench in the case of Suraksha DB Realty.(supra) has applied the ratio in the above decision of the Pune Bench while considering the similar issue. We also notice that the Hon'ble Delhi Court in the case of Adhunik Niryat Ispat Ltd (Supra) has considered the identical issue and held that –
“The return filed by the assessee for the asst. yr. 1999-2000 declaring income @ Rs. 1,22,460 was processed under s. 143(1) of the IT Act (hereinafter referred to as "the Act"). However, subsequently, on the information received from the Director of IT (Inv.), New Delhi, to the effect that the assessee had accepted the following accommodation entries from M/s 1.G. Properties (P) Ltd., M/s Parivartan Capital & Financial Services (P) Ltd. and from M/s Victoria (P) Ltd. in the garb of share capital, the notices were issued under s. 148 of the Act for 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. the assessment year. The assessee filed the return, pursuant to said notices, declaring the same income as was originally written. The AO passed the reassessment order dt. 23rd Dec., 2006 making additions of Rs. 31 lacs on account of unexplained share capital including the capital subscribed by the aforesaid three applicants on the basis of which the assessment was reopened by giving reasons to believe for opening reassessment. However, during the assessment proceedings, the AO also made certain additions of the credits received from M/s Adhunik Niryat, M/s Mahadev Metals, M/s Royal International and M/s Single Finshare India Ltd. though on that basis the assessment was not reopened. The assessee filed an appeal against these additions. CIT(A) confirmed the additions of Rs. 31 lac which was the basis for reopening reassessment. Insofar as other additions are concerned, CIT(A) deleted the same. In these circumstances, both the assessee as well as the Revenue preferred appeals against the orders of CIT(A). As far as appeal of the assessee is concerned, it was allowed by the Tribunal thereby deleting the additions of Rs. 31 lac as well. Against this order, no appeal was preferred by the Revenue. Thus, the reasons which persuaded the AO to reopen the reassessment proceedings and on the basis of which additions were made were not found valid or justifiable as those additions were deleted by the Tribunal.
Subsequently, an appeal preferred by the Revenue pertaining to the said additions made by the AO which were not part of "reasons to believe" and which were deleted by CIT(A) came to be heard by the Tribunal and has been dismissed by the Tribunal vide impugned order dt. 30th June, 2011. Against this order, the present appeal is preferred.
Since the grounds for reopening the reassessment do not exist any longer and no additions were ultimately made on that account, the additions in respect of other items which were not part of "reasons to believe" cannot be made. This issue has been decided by the High Court of judicature at Bombay in CIT vs. Jet Airways (1) Ltd. (2011) 239 CTR (Bom) 183: (2011) 52 DTR (Bom) 71 vide judgment dt. 12th April, 2010 in IT Appeal Nos. 1714 of 2009 and 1526 of 2008 [reported at]. Recently, this Bench has also delivered the judgment in case of Ranbaxy vs. CIT Ranbaxy Laboratories Ltd. vs. CIT (2011) 242 CTR (Del) 117: (2011) 57 DTR (Del) 281 decided on 3rd June, 2011 [reported at] agreeing with the aforesaid view taken by High Court of judicature at Bombay. We thus find that no substantial question of law arises in this appeal. Dismissed.”
We also notice that in Delhi Bench of the Tribunal, in the case of Mahesh Kumar vs ITO (ITA No.2650/Del/2024 dated 06.08.2025) the following question was framed for the third member – 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. “Whether, in the given facts and circumstances of the case, the reopening under Section 147 read with Section 148 of the Act is valid or not where the Assessing Officer made addition independently of other income which does not form the subject matter of reopening and where addition made by the Assessing Officer on the basis of reasons recorded for reopening were deleted by the CIT(A) and no addition of that income on the basis of reasons recorded survives which has reason to believe had escaped assessment and which formed the basis of reopening.”
The third member has answered the question as under – “18. In the result, Ground no. 3 as raised by the assessee deserves to be allowed and the impugned addition cannot be sustained. The question as referred to is answered accordingly, holding that the reopening u/s 147 r.w.s 148 of the Act, in this case, is not valid. The appeal, therefore, deserves to be allowed as proposed by the learned Vice President (Judicial Member).”
From the combined perusal of the above judicial precedence it is clear that if the addition made emanating from the reason to believe is deleted at any stage of the appellate proceedings then any other addition made in reassessment which is not part of the reason to believe would not survive. In assessee's case it is an undisputed fact that the reason for reopening pertain to the disallowance under section 40(a)(ia) since the assessee has not deducted TDS on the payment towards alternate accommodation to slum dewellers. The AO while completing the assessment under section 147 also made disallowance towards belated remittance of PF/ESI under section 36(1)(va) besides the disallowance under section 40(a)(ia). The CIT(A) during appellate proceedings deleted the disallowance under section 40(a)(ia) and confirmed the disallowance made under section 36(1)(va). Accordingly the surviving disallowance in the present case is not emanating from the reasons for reopening but is arising out of the explanation which enables the AO to make any other addition besides the addition made under the main provisions. Considering these facts, in our view, the impugned issue is squarely covered by the ratios laid down by the above stated judicial precedence. Therefore respectfully following the 1443 & 1444/Mum/2025 Shivalik Ventures Pvt. Ltd. decisions of the Hon'ble High Court and the Coordinate Bench, we direct the AO to delete the disallowance made under section 36(1)(va) of the Act.
Since we have allowed the appeal on the above ground the alternate proposition of the ld AR that since there was no survey other than survey u/s.133A(2A) the reopening is not justified, has become academic and left open accordingly.
& 1444/Mum/2025- AY-2019-20 & 2020-21
On perusal of records we notice that the facts and the issues arising for AY 2019-20 & 2020-21 are identical to AY 2018-19. Therefore our decision in AY 2018-19 is mutatis mutandis applicable to AY 2019-20 & AY 2020-21 also. Accordingly we direct the AO to delete the disallowance made under section 36(1)(va) of the Act for AY 2019-20 & 2020-21 also.
In result, the appeals of the assessee for AY 2018-19 to AY 2020-21 are allowed.