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Facts
The assessee claimed honorarium expenses, of which the AO disallowed 50% in the original assessment. After a survey, the AO reopened the assessment and made a further disallowance. The CIT(A) confirmed a revised disallowance of 75%.
Held
The Tribunal held that the AO cannot reassess income that was already subject to an appellate order. Since the honorarium issue was adjudicated in the original assessment and appeal, the reassessment was not permissible.
Key Issues
Whether the Assessing Officer can reassess income on an issue that was already subject to an appellate order under Section 147 of the Income Tax Act.
Sections Cited
147, 143(3), 133A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid two appeals filed by the assessee for Assessment Years (AYs) 2011-12 & 2012-13 arises out of the orders of Learned Commissioner of Income Tax (Appeal), Chennai-18 [hereinafter “CIT(A)”] dated 28.09.2024 in the matter of assessments framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s 147 of the Income-tax Act, 1961 (hereinafter “the Act”) dated 10.12.2018.
& 2991/Chny/2024 M/s. Golden Shelters Pvt. Ltd.` :- 2 -:
The facts in both the appeals of the assessee are identical and issues are common hence, we proceed to pass a common order. For brevity, we shall take up the appeal in for A.Y 2011-12 as lead case.
The assessee-company is engaged in the business of providing accommodation facilities, spiritual healing, and conducting meditation and yoga classes. The assessee-company filed its return of income for A.Y. 2011-12 electronically, declaring total income of Rs. 2,25,41,470/.
The A.O during course of scrutiny proceeding found that the assessee has paid Honorarium of Rs. 2,20,50,000/- to volunteers for various services, but no documentary evidence was produced to substantiate the claim. The A.O, therefore, made an ad-hoc disallowance of 50% of the claimed amount. Aggrieved by the addition, the assessee filed an appeal before the Ld. CIT(A), who confirmed the disallowance.
Subsequently, a survey u/s 133A of the Act was conducted on 08.02.2018 and statement of Sri Badri Narayanan, Director of the assessee-company was recorded where he stated that although the expenses were genuinely incurred, the company was unable to furnish documentary evidence and, therefore, the Honorarium amount is offered as income. Based on this statement, the AO reopened the & 2991/Chny/2024 M/s. Golden Shelters Pvt. Ltd.` :- 3 -: assessment and made a further disallowance of Rs. 1,10,25,000/-. On appeal, the Ld. CIT(A) revised the disallowance to 75% of the total Honorarium claim on an ad-hoc basis.
Before us, the Learned Authorized Representative (AR) raised legal ground, contending that the issue of Honorarium was already considered during the original assessment proceedings, where a disallowance of 50% was made, and the same was upheld by the Ld. CIT(A). Therefore, the assessment order had merged with the order of the Ld. CIT(A) in respect of this issue. The Ld. AR, referring to the third proviso to Section 147 of the Act, argued that the AO is not empowered to assess or reassess income which relates to matters already subject to an appellate order. Since the issue of Honorarium was a subject matter of the original assessment and appellate proceedings, the AO could not have made an addition on the same issue in the reassessment proceedings. In support, the Ld. AR relied on the judgment of the Hon’ble Bombay High Court in the case of CIT v. Reliance Energy Ltd. [255 CTR 357 (Bom.)] and the decision of the Hon’ble Madras High Court in the case of CIT v. Flothern Engineers (P.) Ltd. [225 Taxman 2230 (Mad.)].
& 2991/Chny/2024 M/s. Golden Shelters Pvt. Ltd.` :- 4 -:
On the other hand, the Learned Departmental Representative (Ld. DR) relied on the orders of the lower authorities and argued that A.O was competent to reassess the income as assessee has agreed for further disallowances of honorarium during survey .
We have heard the rival submissions and perused the materials available on record. The AO, in the original assessment order, had disallowed 50% of the honorarium claimed, as the assessee failed to produce supporting evidence. This disallowance was upheld by the Ld. CIT(A). However, the AO based on a survey statement , reopened the assessment and disallowed the entire honorarium amount in the reassessment order u/s 147 . On appeal, the Ld. CIT(A), restricted the disallowance to 75% on an ad-hoc basis. We are in agreement to Ld A.R that the third proviso to Section 147 of the Act clearly stipulates that the AO in the reassessment order u/s 147 of the Act, can assess or reassess , only income other than the income involving matters which were not the subject matter of appeal. Since the disallowance of honorarium was already the subject matter of an appeal and was adjudicated by the Ld. CIT(A) in 143(3) proceeding , the AO could not reassess the same matter in reopened 147 assessment order. We, therefore, hold that further disallowances of honorarium made by A.O, & 2991/Chny/2024 M/s. Golden Shelters Pvt. Ltd.` :- 5 -: is not according to law. Accordingly, the further disallowances of honorarium to the extent of 25% confirmed by the Ld CIT(A) is, therefore reversed. In view of the above, the appeal filed by the assessee for A.Y. 2011-12 is allowed.
We find that the identical issue is involved in assessee’s appeals for A.Y 2012-13 also and accordingly, our adjudication above in A.Y 2011-12 is mutatis mutandis applies therein also. Therefore, following our decision in the lead case, the disallowance made in this year is also deleted for the same reasons.
In the result, both the appeals filed by the assessee are allowed.
Order pronounced on 30th day of June, 2025 at Chennai.