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Facts
The assessee's appeals were against a common order of the CIT(A) concerning assessment years 2017-18 and 2018-19. The reopening was based on reasons related to unexplained sales and income, but additions were made on account of unexplained investment in a Recurring Deposit Scheme.
Held
The Tribunal held that if an assessment is reopened for a specific reason (e.g., unexplained sales), and no addition is made on that specific ground, then subsequent additions based on other grounds not originally cited are not sustainable. The Tribunal followed the precedents of the Bombay, Delhi, and Gujarat High Courts.
Key Issues
Whether additions can be made on grounds other than those for which assessment was originally reopened, especially when no addition is made on the original ground.
Sections Cited
147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
आयकर अपील�य अ�धकरण,च�डीगढ़ �यायपीठ, च�डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘A’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ & 442/CHD/2025 �नधा�रण वष� / Assessment Year: 2017-18 & 2018-19 Shri Bhupesh Gupta, Vs The ACIT, Aakash Hospital & Central Circle, Diagnostic, Nalagarh, Shimla. Solan. �थायी लेखा सं./PAN NO: AARPG5916A अपीलाथ�/Appellant ��यथ�/Respondent Assessee by : Shri Sudhir Sehgal, Advocate Revenue by : Shri Vivek Vardhan, JCIT Sr.DR Date of Hearing : 01.09.2025 Date of Pronouncement : 08.09.2025 VIRTUAL HEARING O R D E R PER RAJ PAL YADAV, VP
The present two appeals are directed at the instance of the assessee against the common order of the ld. Commissioner of Income Tax [in short ‘the CIT] dated 27.01.2025 passed for assessment year 2017-18 and 2018-19.
A perusal of the record would indicate that ld. CIT (Appeals) has decided four appeals for assessment year 2016- 17 to 2019-20 by the common order impugned herein.
& 442/CHD/2025 A.Y.2017-18 & 2018-19 2
The assessee has filed an application dated 26.07.2025 whereby permission to raise two additional grounds was sought. In the additional ground of appeal, assessee has pleaded that assessments are not sustainable because assessment was reopened for escapement of income ‘A’ but no addition of item ‘A’ was made and addition of item ‘B’ was made. Thus, these additions are not sustainable in view of the judgement of Hon'ble Bombay High Court in the case of Jet Airways reported in 331 ITR 236, Hon'ble Delhi High Court in Ranbaxy Laboratories Ltd. v. CIT, 336 ITR 136 and judgement of Hon'ble Gujrat High Court in the case of Md. Juned 353 ITR 172.
With the assistance of ld. Representative, we have gone through the record carefully. Since the issue agitated in the additional ground of appeal is a jurisdictional one, therefore, in view of the judgement of Hon'ble Supreme Court in the case of NTPC Ltd. Vs CIT reported in 229 ITR page 383, we permit the assessee to raise these additional grounds because issue will go to the roof of the dispute and will ultimately affect the taxability of the assessee.
& 442/CHD/2025 A.Y.2017-18 & 2018-19 3
5. While challenging the assessment orders, ld. counsel for the assessee took us through copy of the reasons available on page No. 12-14 and 19-21 of the Paper Book wherein reasons for re-opening in assessment year 2017-18 and 2018-19 are available. A perusal of the reasons would indicate that a survey was conducted on the hospital namely, Aakash Hospital & Diagnostic which is a proprietary concern of his wife Smt. Neelam Gupta. During the survey, it revealed that assessee was being paid salary of Rs.50,000/- per month and also a sum of Rs.3500/- was deposited in a Recurring Deposit Scheme with Parwanoo Urban Co-operative Bank. The AO harboured a belief that income of Rs.6 lacs has not been disclosed by the assessee. The conclusion of the AO in paragraph No. 5 of the reasons read as under : “5. In view of the facts narrated above, I hove reasons to believe that the amount of at least Rs, 6 lakh represent the income of the assessee which has escaped assessment for F.Y. 2016-17 relevant to A.Y. 2017- 18 within the meaning of clause (b) of Explanation 2 of section 147 of the l.T. Act in addition to any other undisclosed income on the basis of impounded material which may come to the notice subsequently during reassessment proceedings.” 5.1 However, while passing the assessment order, he did not make any addition of Rs.6 lacs, rather he made additions on account of unexplained investment in making recurring & 442/CHD/2025 A.Y.2017-18 & 2018-19 4 deposit in the bank. The ld. counsel for the assessee submitted that since AO did not make addition of Rs.6 lacs in each assessment year, therefore, he is denuded from his powers to make any other additions. For buttressing his contention, he relied upon the order of the ITAT in the case of Shri Rajesh Kumar Bansal V ITO & others. In this appeal, the Tribunal considered all the judgements including the submissions of ld. DR on the strength of judgement of Hon'ble Punjab & Haryana High Court in the case of PCIT Vs Lark Chemicals reported in 99 taxman.com 311.
6. The ld. DR on the other hand, relied upon the judgement of Hon'ble Punjab & Haryana High Court in the case of Lark Chemicals. He also emphasized that during the course of survey, wife of the assessee has disclosed payment of Rs.3500/- per month in the recurring deposit. Thus, AO has considered this aspect also while re-opening the assessment.
We have duly considered the rival contentions and gone through the record carefully. We find that identical situation has been considered by the Tribunal in the case of Shri Rajesh & 442/CHD/2025 A.Y.2017-18 & 2018-19 5 Kumar Bansal (supra). The relevant part of the discussion of the Tribunal read as under : “4. We find that identical reasons are recorded for assessment year 2014-15. The ld. Counsel for the assessee after taking us through these reasons took us to the finding recorded by the AO. He pointed out that assessments were reopened for assessing the unexplained sales of the assessee on sale of flats, whereas the additions have been made on the basis of unexplained sundry creditors. To buttress his contention, he took us through paragraph 5.2 of assessment order in assessment year 2012-13 and similar finding in the last para in assessment year 2013-14, 2014- 15. On the strength of judgement of Hon'ble Bombay High Court in the case of Jet Airways reported in 195 taxman 117, Ranbaxi Vs ITO, Hon'ble Delhi High Court, he submitted that decision of Jet Airways has been followed by the Hon'ble Bombay High Court in the case of PCIT Vs Lark Chemicals reported in 99 taxmann.com 311. Against this judgement, a SLP was filed before Hon'ble Supreme Court which has also been dismissed on 05.10.2018. The dismissal of SLP is being reported in 99 taxmann.com 312. On the strength of these judgements, assessee contended that if additions on the item for which assessment was reopened not made, then no other addition could be made.
On the other hand, ld. Sr.DR has relied upon the judgement of Hon'ble Punjab & Haryana High Court reported in Shri Majinder Singh Kang Vs CIT Amritsar dated 13.09.2010. She has placed on record copies of judgements.
We have duly considered the rival contentions and gone through the record carefully. There is no dispute with regard to the proposition propounded by the Hon'ble Bombay High Court, Delhi High Court and Gujrat High Court that if no addition is being made on an item for which assessment was reopened, then no other addition could be made. The Hon'ble High Courts are unanimous in their opinion on interpretation of Section 147 as well as Explanation 3 appended with this Section. The Hon'ble Court has held that if no addition is being made on an item for which assessment was reopened, then no other addition would be made. Though Hon'ble Punjab & Haryana High Court took a contrary view in the judgement cited by the ld. Sr.DR but since it is an appeal falling within the jurisdiction of Hon'ble Himachal Pradesh High Court, therefore, we would like to follow the view which is favourable to the assessee i.e. the decision of Hon'ble Bombay High Court, Delhi High Court and Gujrat High Court. The one more reason is that against the decision of & 442/CHD/2025 A.Y.2017-18 & 2018-19 6 Hon'ble Bombay High Court in the case of PCIT Vs Lark Chemicals, a SLP was filed before the Hon'ble Supreme Court against the decision of Hon'ble Bombay High Court which was also dismissed.
7. A perusal of the record would indicate that AO has not made the additions for which assessment was reopened. The perusal of the reasons would indicate that assessment was reopened on the ground that assessee has unexplained sales but no addition was made on account of unexplained sales, rather additions on account of sundry creditors have been made which is beyond the scope of re-assessment proceedings because on escapement of these sundry creditors, AO ought to have been recorded fresh reasons and reopen it again.
8. In view of the above discussion, we allow all the three appeals of the assessee and delete the additions made by the AO which has been confirmed by the ld. CIT(A).
In the result, the appeals are allowed.”
7.1 The issue is squarely covered by the above proposition of law. As far as the argument of ld. DR is concerned, we have perused the reasons. The AO has nowhere formulated his opinion that income in the shape of investment in the bank has escaped assessment. He might be having 100 of informations in his possession but which information persuaded him to believe that income has escaped assessment is the only relevant requirement to be taken into consideration. The ld. Sr.DR cannot improve the reasons by making reference to the original material/information possessed by the AO which can empower the AO to record reasons qua escapement of income on the basis of that & 442/CHD/2025 A.Y.2017-18 & 2018-19 7 information. Therefore, we are of the view that AO has no power to make additions of the alleged investment in Recurring Deposit Scheme, once he has not made any addition on the escaped salary income. In the light of the judgement of Hon'ble Bombay High Court, Hon'ble Delhi High Court and Hon'ble Gujrat High Court, we allow the appeal of the assessee and delete the additions.
In the result, appeals of the assessee are allowed.
Order pronounced on 08.09.2025.