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Facts
The assessee's case was reopened based on allegations of a loan given as accommodation entries, but the addition made was for disallowance under Section 14A r.w. rule 8D. The original reason for reopening was not addressed in the assessment order.
Held
The Tribunal held that no addition or disallowance could be made on a fresh issue when the original ground for reopening was not sustained. The addition made under Section 14A was therefore unsustainable and deleted.
Key Issues
Whether an addition/disallowance on a fresh issue is permissible if the original ground for reopening the assessment is not sustained.
Sections Cited
147, 148, 143(3), 14A, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SMT RENU JAUHRI
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 10.02.2025, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2011-12.
In the instant case, the reason for reopening of the assessment u/s 147 of the Act was recorded with the following allegations:
“That the loan amount of Rs.1,00,000/- was given to the Assessee company as accommodation entries and the Assessee was not able to quantify the details of loan and also not produced any evidence which clearly indicates that the income above Rs.1,00,000/- has escaped assessment”.
Consequently, on the basis of aforesaid reason, case of the Assessee was reopened by issuing notice dated 31.03.2017 u/s 148 of the Act, which resulted into making the addition of Rs.1,70,970/- on account of disallowance u/s 14A r.w. rule 8D of the Rules (in short ‘the Rules’) but not on the issue for which case was reopened.
Therefore the Assessee has claimed that as the case of the Assessee was reopened with the allegations that income above Rs.1,00,000/- on account of loan amount as accommodation entries has escaped assessment for the A.Y. 2011-12 for the reason of the failure on the part of the Assessee to furnish the correct particulars of facts necessary for the assessment, however, the Assessing Officer (AO) made no addition on such reason/issue for reopening but ultimately vide order dated 31.10.2017 u/s 143(3) r.w.s. 147 of the Act, made the addition of Rs.1,70,970/- on account of disallowance u/s 14A r.w. rule 8D of the Income Tax Rules 1962 (in short ‘the Rules’), which is not permissible in view of the judgment passed by the Hon’ble Bombay High Court in the case of Jet Airways Ltd. 331 ITR 236, wherein it has been held as under:
“That where no addition was made on the ground for which the assessment was reopened, then no further addition/disallowance on a fresh issue could have been made”.
The Ld. D.R. on the contrary has submitted that in fact the AO has given effect to the order passed by the then Ld. CIT(A) order dated 16.03.2016 and therefore the disallowance of Rs.1,70,970/- made u/s 14A r.w. rule 8D of the Rules, cannot be considered as a new addition/disallowance.
Having heard the parties and given thoughtful consideration to the peculiar facts and circumstances of the case and rival submission of the parties. As we have observed above that in view of the judgment of the Hon’ble Bombay High Court in the case of Jet Airways Ltd. (supra) “that when no addition has been made on the ground/issue for which the assessment was reopened then no addition/disallowance on a fresh issue can be made”, thus the addition in any case by way of assessment order dated 31.10.2017 u/s 143(3) r.w.s. 147 of the Act which is under consideration, is un- sustainable. Thus the same is deleted.
Considering the claim of the Ld. DR and order dated 16.03.2016 passed by CIT(A) for substantial justice, we clarify that the AO would be at liberty to pass fresh appeal effect giving order as per the facts and circumstances of the case and by following the directions of the higher authority, if any, in accordance with law.
Thus, the appeal filed by the Assessee stands allowed with the liberty mentioned above.
Order pronounced in the open court on 30.05.2025.