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Facts
The assessee's case was reopened based on a Tax Evasion Petition alleging financial transactions, black money accumulation, and money laundering. The Assessing Officer (AO) issued a notice under section 148. While the original reasons for reopening were not pursued for addition, the AO made an addition on account of cash deposits.
Held
The Tribunal held that the reassessment must be confined to the reasons recorded for reopening. Since no addition was made on the original grounds, the AO was not justified in making an addition on a different issue (cash deposits) which was not part of the reasons for reopening. The reassessment order was deemed bad in law and quashed.
Key Issues
Whether the AO can make additions on issues not forming the basis of the original reasons recorded for reopening the assessment.
Sections Cited
147, 148, 250, 144B, 69A, 80HH, 80IG
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PER PAWAN SINGH , JUDICIAL MEMBER:
This appeal by assessee is directed against the order dated 19th August 2024 passed by National Faceless Appeal Centre, Delhi [herein referred as “Ld. CIT(A)”] under section 250 of the Income- tax Act, 1961 (herein referred as “the Act”). The assessee has raised the following grounds of appeal:-
(1) On the facts and in the circumstances of the case, the CIT(A) erred in confirming the reopening the assessment under section 147 of the Act made by the Assessing Officer is valid. The reassessment order issued by the Assessing Officer is bad in law and should be quashed. (2) On the facts and in the circumstances of the case, the CIT(A) erred in validating the reopening the assessment under section 147 of the Act without having documentary evidences for allegations and reasons for reopening. (3) On the facts and circumstances of the case and in law the CIT(A) erred confirming the addition of Rs 23,65,000 as unexplained income under section 69A of the Act.
Rival submissions of both the parties have been heard and perused the record. At the time of hearing, the learned authorised representative (ld AR) of the assessee submits that he has prepared summery of his submissions, and he may be allowed to placed such submissions or record. The Ground No. 1 & 2 relates to validity of reopening and passing of assessment order under section 147 read with section 144B. The Ld. AR of the assessee submitted that case of the assessee was reopened on the basis of information from the ‘insight portal’ which was based on tax evasion petition that assessee is engaged in financial transactions leading to the accumulation of black money and money laundering. The Assessing Officer (AO)after recording reasons of reopening under section 147, issued notice under section 148 of the Act. The assessee filed her return of income in response to notice under section 148. As per the contents of notice under section 148 the assessee entered into financial transactions thereby resulting into accumulation of black money and money laundering, but no such addition was made in the assessment order. The addition in the assessment can only be made if the issue forming the basis of reasons recorded is sustained.
Admittedly, the reassessment was initiated on one issue on which no addition is made, thus, the AO cannot make other addition on 2 unrelated issue. The reassessment must be confined on the reasons recorded and if no addition is made on such issue, the reassessment cannot expand the scope of addition for other issue. The reasons recorded must having clear communication with the addition made.
If the AO deviates from the reasons recorded, the reassessment order is bad in law. The Ld. AR of the assessee by reading the contents of assessment order submitted that admittedly no addition on the issue, on which the case of assessee was reopened, was made by the AO thereby the AO was precluded for making any other addition. The ld AR of the assessee submits that has a strong case against the validity of additions in the assessment order. To support his submission, the ld. AR relied a number of decisions in his written submissions, but mainly focused on the following decision:- PCIT Vs Jet Airways(I) Ltd, 331 ITR 236(Bombay HC) DIT Vs. Black & Veatch Prichard, Inc. (Bombay HC), Ranbaxy Laboratories Ltd. Vs. CIT,336 ITR 136 (Delhi HC), CIT vs. Monarch Educational Society (ITA No. 101 of 2016 – Delhi HC) and PCIT vs. Jaguar Buildcon (P) Ltd. (Delhi HC).
In support of ground No.3, the ld AR of the assessee submits that during the assessment, the AO picked up other issue of cash deposits in her bank account and asked the assessee to explain the source of cash deposit of Rs. 23,65,000/- and as to why it should not be treated as unexplained income under section 69A of the Act.
In response to the show cause, the assessee filed all details required by the AO and explained the source of cash deposit. It was 3 explained that she was having cash in hand from her own savings of Rs. 7.00 lacks. Rs. 3.00 lacks gift from her son and gift of Rs 3.00 lacks from her nephew and cash of Rs. 5.50 lacks was received on sale of gold Jewellery and Rs. 5.70 lacks was withdrawn form bank.
The AO discarded the submission of the assessee and made addition of Rs. 23,65,000/- under section 69A of the Act. Aggrieved by the assessment order, assessee filed the appeal before the Ld. CIT(A) and again the assessee submitted the details and explained about the source of cash deposit and also filed copy of gift deed about the gift from her son and nephew and sale bill/ receipt of gold jewelry.
The ld CIT(A) after considering the submission of assessee, confirmed the action of AO by taking viewthat there is no witness on the gift deed. In her personal law even oral gift is valid. The assessee has shown taxable income of more than Rs. 23 lakhs filed in the return of income. The assessee submitted that for the purpose of business and to meet the requirement had sold gold Jewellery which was deposited in bank. The assessee deposited cash of Rs. 15.00 lakhs on 31.05.2015, Rs. 5,70,000/- on 23.08.2016, Rs. 95,000/- on 30.09.2016 and Rs. 2 lakhs on 17.03.2017/-. The Ld. AR while explaining the source of such deposit submitted that assessee was having Rs.7.00 lakhs cash from her saving which is reflected in the balance sheet and the copy of which is placed at page no.4 of the paper book. He further submitted that copy of gift deed from her son Mr. Shayan Hasan Chariyari, is filed at page no. 21 to 31 of of sale bill is placed at page no. 51 of the paper book. And Rs. 5,15,000/- was withdrawn by the assessee which was not used and re-deposited again and the details of withdrawn are reflected at page no. 52-57 of the paper book. The assessee has discharged her onus. The assessee has clearly established all three ingredients i.e. identity, the assessee has furnished the name, address and PAN of donors. Copy of audited report and balance sheet of both the donor are also filed. Once the assessee is discharged her primary onus, the onus shifts on the AO to prove otherwise by bringing sufficient material on record. The AO has not brought any adverse material on record except doubting the source. To support the contention of assessee, Ld. AR relied on following case laws:- Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC), ITO vs. R. S. Sibal [2004]269ITR429(Delhi HC), CIT vs. Devi Prasad Vishwanath Prasad (1969) 72 ITR 194 (SC), CIT vs. Durga Prasad More (1969) 721 ITR 807 (SC), Lakshmi Rice Mills vs. CIT (1974) 97 ITR 258 (PAT.), Smt. Harshila Chordia vs. ITO (2008) 298 ITR 349 (Raj.), CIT vs. Vishal Exports Overseas Limited (Gujrat High Court) Tax Appeal No. 2471 of 2009, ITO vs. Surana Traders (2005) 93 TTJ 875: (2005) 92 ITD 212 Hon'ble Mumbai ITAT, Smt. Teena Bethala Vs ITO (ITA No. 1383/Bang/2019) dated 28.08.2019, DCIT vs. M/s Karthik Construction Co.
Kanpur Steel Co. Ltd. Vs CIT (1957) 32 ITR 56 (All), ITO vs. Vishan Lal (ITA No. 634/Lkw/2014) 5
On the other hand, Ld. Sr. DR for the revenue supported the order of lower authorities. On the issue of reopening, the Ld. Sr. DR for the revenue submits that the case of the assessee was reopened on the allegation of financial transactions leading to accumulation of black money. Once, the case of the assessee was reopened, the AO has jurisdiction to examine any other issue which came to his notice subsequently during assessment. Thus, the reopening is valid and the additions made in the assessment in as per law, the assessee cannot find fault on the addition made in the assessment order. The AO has followed the direction of decision of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal (Civil Appeal No. 3005/2022, dated 04.05.2022).
On merit of the addition made on account of unexplained income under section 69A of the Act, the Ld. Sr. DR for the revenue submits that during the assessment as well as before Ld. CIT(A), the assessee has failed to substantiate the source of cash deposit. The assessee has shown gift from relatives but failed to prove the same.
Further, the assessee failed to show evidence about the cash in hand. The ld Sr DR for the revenue prayed for dismissal of appeal.
We have considered the rival submissions of both the parties and perused the orders of lower authorities carefully. We have also deliberated on written submissions of ld AR of the assessee and on various case laws relied by him. Ground no. 1 & 2 relates to the validity of reopening under section 147 of the Act. We find that the case of assessee was reopened on the basis of Tax Evasion Petition (TEP) filed by some Munir Ahmad Ansari. On the basis of such tax evasion petition, the AO recorded the reasons. The AO has recorded such reasons on page no. 2 of the assessment order and for appreciation of the facts and reasons recorded are extracted below:-
"...... 4) On verification of the information, it is gathered that Ghazala Hassan Chariyari is entering into financial transactions thereby resulting into accumulation of black money and money laundering and also has undisclosed immovable properties. The assessee Ghazala Hassan Chariyari is the owner of Skyship International is residing at 401/402, Al-Makkah Housing Society, Millat Nagar, Andheri (W), Mumbai. The assessee has one nephew named Adnan Athar Abu Bakshi who is also a Director in Skyship International residing on rent at 802, 12th Floor, E-Heights, 356, Genera Arun Kumar VaidyaMarg, Jogeshwari (W), Mumbai. The assessee also has son and daughter by names Shayan Hasan Chariyari and Anna Hasan Chariyari respectively.
5) It is further gathered that the assessee have two agencies for Haj and Umrah, however, as per Haj Rules, one Agency can have only one file for Haj. The details of two agencies of assessee are as under. a) Skyship International, which is located at 124, Off. Memon Wada Road, Near Shalimar Restaurant, M.E. SarangMarg, Jhanda Galli, Masjid Bunder, Mumbai - 400003, and b) Millat Haj Tours and Travels which is in the name of Kamaluddin, who is working as a Manager in Skyship International which is located at the same address.
6) It is further gathered that the assessee in her both the above agencies, take around 200 people for Haj to Saudi Arabia every year by charging Rs. 3,50,000/- per Haji. The Hajis transfer only 25% to 30% amount through Union Bank and rest of the money is used to transfer by Hawala in illegal ways which is handled by Adnan Athar Abu Bakshi and the assesseeGazala Hassan Cheriyari.
As the assessee has not filed the return of the income for the year under consideration, hence, the income chargeable to tax has escaped assessment in the hands of the assessee amounting to Rs. 7,00,00,000/- (Rs. 3,50,000 x Rs. 200)/-.
7) It is also gathered that the assessee has purchased Flat No. 403, A/22 in Al-Makkah Building in the name of her daughter Ana Hasan Cheriyari amounting to Rs. 1,45,00,000/-and the same has been given on rent by the assessee. The daughter of the assessee Ana Hassan Cheriyari is studying in Pune and does not have any source of income.
As the assessee has not filed the return of the income for the year under consideration thereby not disclosing income from house property owned by her as mentioned above, hence, considering that the assessee is a 100% owner of the above property, 8% of the total costofRs. 1,45,00,000- is worked out as annual rent from the above property, which comes to Rs. 11,60,000/-.
8) The total escapement of income in the hands of the assessee works out as under:
Rs. 7,00,00,000/- - As discussed in paras no. 6 above Rs. 11,60,000/-- As discussed in para no. 7 above Rs. 7,11,60,000/-- Total Escapement of Income in the hands of assessee.”
On careful perusal of the reasons recorded, we find that the AO reopened the case of assessee that income of the assessee has escaped from assessee on account of receiving /retaining amount of Haj Pilgrims and income chargeable to tax of Rs. 7.00 crores, secondly, the assessee has purchased flat No 403 in Al-Makkah Building in the name of their daughter and thirdly income from such flat aggregate to Rs. 11,60,000/-. Thus, as per reasons recorded, there is total escapement of income of Rs. 7.11 crores.
We find that the AO on filing return of income and receipt of reply from assessee, dropped on both the items of escapement of income, which were made basis of escapement of income and reopening, thereby no addition was made by AO. However, the AO picked up some other issue which was not the subject matter of reasons recorded i.e. cash deposit in bank account of assessee. The AO made addition on cash deposit of Rs. 23,65,000/-. Though the assessee in her reply stated that she was having own saving and gifts from her family members and from sale of gold Jewellery items. The assessee before Ld. CIT(A) filed a detail written submission on the issue of validity of reopening and addition was made other than the subject matter of reopening. The assessee has also stated that her case for AY 2014-15, 2015-16, 2016-17 and 2017-18 was reopened and no addition on the reasons of reopening was made. The Ld. CIT(A) while considering such submission of the assessee, upheld the validity of reopening by simply holding that AO has rightly followed the procedure laid down as per Income Tax Act and decision made by Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agrawal (supra). Before us, the ld. AR of the assessee vehemently argued that reassessment must be confined to the reasons recorded and if no addition was made on the issue for which reassessment was initiated, the AO cannot expand to other matter. We find that Hon’ble Jurisdictional High Court in the case of CIT vs. Jet Airways (supra) andHon’ble Delhi High Court in Ranbaxy Laboratories Ltd. (supra) has held that when no addition was made on the basis of reasons recorded for reopening of the assessment, it was not open for the AO to bring some other income to tax in the course of assessment proceedings. The Hon’ble Delhi High Court in Ranbaxy Laboratories Ltd. (supra) also held that since the AO had not made any disallowance in respect of items which were the reasons for initiation of assessment proceedings. There was no justification in making the disallowance of other item in reducing the claim of deduction u/s 80HH or 80IG of the Act. Similar view was taken by Delhi High Court in CIT vs. Monarch Educational Society (supra) that if no addition is made on the basis of reason to believe recorded by AO for reopening of the assessment under section 148 of the Act, resort cannot be had to Explanation 3 to section 147 to make an addition on any other issue not included in the reasons to believe for reopening of the assessment.
In the case in hand, admittedly, no addition has been made by the AO on the items which were basis of reasons recorded, therefore, we are of the considered view that the AO was not justified in making the addition on cash deposit, which was not included in reasons recorded. Thus, the reassessment order passed under section 147 read with section 144B of the Act dated 23.05.2023 is we have treated the assessment order is bad in law, therefore adjudication of addition on merit have become academic.
In the result, the appeal is accordingly allowed.
Order pronounced in the open court on 16.05.2025.
Sd/- Sd/- (GIRISH AGRAWAL) (PAWAN SINGH) ACCOUNTATN MEMBER JUDICIAL MEMBER Mumbai, Dated 16/05/2025 DK, Sr PS आदेशक���त�ल�पअ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent. 3. संबं�धतआयकरआयु�त/ The CIT(A) 4. आयकरआयु�त(अपील) / Concerned CIT 5. �वभागीय��त�न�ध,आयकरअपील�यअ�धकरण,मु�बई/ DR,ITAT,Mumbai 6. गाड�फाईल / Guard file.