OASIS SECURITIES LIMITED,MUMBAI vs. DCIT, CENTRAL CIRCLE-3(2), MUMBAI

In the instant case, the reason for reopening of the assessment u/s 147 of the Act was recorded with the following allegations:

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:

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.