INCOME TAX OFFICER, KARNAL vs. OPINDER SINGH VIRK, KARNAL

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ITA 1095/DEL/2024Status: DisposedITAT Delhi21 March 2025Bench: MS. MADHUMITA ROY, JUDICIAL MEMBER, SHRI NAVEEN CHANDRA (Accountant Member)7 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, reiterating that if an assessment is reopened on specific grounds and those initial grounds do not lead to any additions, the Assessing Officer cannot then make additions on other items forming part of the original return that may come to notice during reassessment. Since the addition was made on grounds different from the initial reason for reopening and the initial grounds did not result in an addition, the Tribunal directed the Assessing Officer to delete the additions.

What were the facts?

The assessee's case for A.Y. 2011-12 was reopened under Section 148 based on information regarding cash deposits in HDFC and IDBI banks. However, the Assessing Officer made an addition of Rs. 1,72,49,370/- for profits from mutual fund transactions in an Indus Ind Bank account, which was not the original ground for reopening. The CIT(A) subsequently deleted this addition.

What were the issues?

Whether the Assessing Officer, after reopening an assessment on specific grounds, can make additions on entirely different grounds if the initial reasons for reopening do not result in any additions.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(4)Show list

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Income Tax Appellate Tribunal, DELHI ‘E’ BENCH,

Before: MS. MADHUMITA ROY, & SHRI NAVEEN CHANDRA

For Respondent: Shri Amit Katoch, Sr. DR
Hearing: 10.03.2025Pronounced: 21.03.2025

This appeal by the Revenue is preferred against the order of the NFAC, Delhi dated 14.02.2023 for A.Y 2011.

Page 1 of 7 [A.Y. 2011] ITO v Opinder Singh Virk 2. The grievances of the Revenue read as under:

“Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,72,49,370/- even when no explanation regarding nature and source of the credit entries in the bank account was furnished with supporting documents in view of the Judgement in the case of N. Govindaraju Vs. ITO (2015) 60 taxman.com 333/233 Taxman 376/377 ITR 243 wherein the Hon'ble Karnataka High Court held as under: "If notice under section 148(2) of the Act is found to be valid, then addition can be made on all grounds or issues which may come to notice of Assessing Officer subsequently during course of proceedings under section 147 of the Act even though reason for notice for 'such income which may have escaped assessment may not survive.”

3.

None appeared on behalf of the assessee nor any adjournment was sought. The ld. DR was heard at length. Case records carefully perused.

With the assistance of the ld. DR, it was decided to adjudicate upon the issues on the basis

4.

The ld. DR relied on the orders of the authorities below.

5.

Briefly stated, the facts of the case are that the case of the assessee was reopened u/s 148 of the Income-tax Act, 1961 [the Act, for short] on the basis of information that the assessee had deposited cash of Rs.

Page 2 of 7 [A.Y. 2011] ITO v Opinder Singh Virk 1,06,59,000/-, paid Rs. 2,22,85,943/- as per AIR for purchase of units of mutual fund, made time deposit of Rs. 85,00,000/- with the account maintained with HDFC Bank Ltd. as per CIB, expended Rs. 8,00,000/- as

per CIB for purchase of mutual fund units and Rs. 5,70,108/ interest received as per 26AS during the financial year 2010-11 relevant to assessment year 2011-12.

6.

The Assessing Officer, not satisfied with the reply of the assessee, made addition of Rs. 1,72,49,370/- on account of profit arising out of transaction in the mutual funds reflecting in the Indus Ind Bank account.

7.

Aggrieved, the assessee went in appeal before the ld. CIT(A) who decided the issue in favour of the assessee.

8.

Now the Revenue is aggrieved and is in appeal before us.

9.

We have heard the rival submissions and have perused the relevant material on record. The basic gist of the case in hand is that the case was reopened on account of deposit of cash in HDFC Bank and IDBI Bank. It was the finding of the ld. CIT(A) that addition was made on the basis of credit of Rs.1,72,49,370/- in the Indus Bank. The ld. CIT(A) has given a categorical finding which we reproduce as under for ready reference:

Page 3 of 7 [A.Y. 2011] ITO v Opinder Singh Virk

1.

“6. In the order u/s 143(3) 25.02.2014, the AO has admitted that Rs.7,74,13,335 (Rs.6,19,31,108 according to the appellant) was received by the appellant as enhanced compensation and interest thereon on account of compulsory acquisition of property. The appellant made various investment out of this compensation which was credited in the Indusind Bank. These investments became the subject of re- assessment proceedings. It is seen that the AO has not made any addition on account of any of the grounds for re-opening mentioned in Para 1 of the re- assessment order, accepting the submissions of the appellant filed during scrutiny proceedings. Instead, the AO made an addition of Rs. 1,72,49,370 being credits in the Indus-Ind bank. In the re-assessment order, the AO states that these are credits on account of 'returns from mutual funds'. According to the AO details related to these were filed by the assessee on the last but one day before the time barring date for assessment and hence could not be verified. The AO treated these credits as unexplained. If the nature of these credits is clear, treating such credits as unexplained is wrong. Hence the addition made by the AO cannot stand. The addition made by the AO is therefore deleted. However while giving effect to this order if there is any taxable component to the credits in bank on account of mutual funds, the same may be brought to tax.”

10.

After perusing the order of the ld. CIT(A) and material on record, we find no reason to interfere with the well reasoned order of the ld. CIT(A).

We further find that in the instant case, the AO reopened the assessment

1.

Page 4 of 7 [A.Y. 2011] ITO v Opinder Singh Virk on account of deposit of cash in HDFC Bank and IDBI Bank, however, the AO ultimately made addition on the basis of credits of Rs.1,72,49,370/- in the Indus Bank. We are of the considered view that it is not legally permissible for the AO to reopen the case based on one reason and make additions on reasons other than what was recorded for reopening the case.

In such a situation, we find that the hon’ble Delhi Court in the case of ATS Infrastructure Ltd reported in [2024] 166 taxmann.com 61 (Delhi), affirming its decision in Ranbaxy Laboratories Ltd. vs. CIT , 336 ITR 136 (Del) has held as follows:

25.

The position in law which emerges from the aforesaid discussion is that while it is true that the AO would have to establish that reassessment is warranted on account of information in its possession which appears to indicate that income chargeable to tax had escaped assessment, once the assessment itself is reopened it would not be confined to those subjects only. This would, however, be subject only to one additional rider and that being if, in the course of reassessment, the AO ultimately comes to conclude that no additions or modifications are warranted under those heads, it would not be entitled to make any additions in respect of other items forming part of the original return.

Following the above decision accordingly, the grounds taken by the Revenue stand dismissed and we direct the Assessing Officer to delete the additions.

Page 5 of 7 [A.Y. 2011] ITO v Opinder Singh Virk

11.

In the result, the appeal of the Revenue in is dismissed.

The order is pronounced in the open court on 21.03.2025.

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