RAJESH KUMAR BANSAL TGHAROCH HOUSE, CLIFFEND ESTATE SHIMLA-171001,HIMACHAL PRADESH vs. THE INCOME TAX OFFICER WARD-2, SHIMLA, HIMACHAL PRADESH

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ITA 86/CHANDI/2024Status: DisposedITAT Chandigarh04 February 2025AY 2014-2015Bench: SHRI RAJPAL YADAV (Vice President), SHRI KRINWANT SAHAY (Accountant Member)1 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO made additions on grounds other than those for which the assessment was reopened. Relying on judgments from the Bombay High Court, Delhi High Court, and Gujarat High Court, the Tribunal found that if no addition is made on the item for which reassessment was initiated, no other additions can be made.

What were the facts?

The assessee filed appeals against the orders of the CIT(A) for assessment years 2012-13, 2013-14, and 2014-15. The reassessment proceedings were initiated on the grounds of unexplained sales from flats. However, the Assessing Officer (AO) made additions based on unexplained sundry creditors.

What were the issues?

Whether additions made by the AO on grounds different from the reasons for reopening the assessment are valid.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 2(40),Section 143(1),Section 148,Section 151

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH

Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY

For Appellant: Shri Sudhir Sehgal, Advocate
For Respondent: Dr. Ranjit Kaur, Addl.CIT, Sr.DR
Hearing: 29.01.2025Pronounced: 04.02.2025
1.

The present three appeals are directed at the instance of the assessee against the separate orders of ld. CIT(A) dated 17.01.2024, 05.12.2023 and 05.12.2023 passed in assessment year 2012-13, 2013-14 and 2014-15 respectively.

, 85 & 86/CHD/2024 A.Y.2012-13, 2013-14 & 2014-15 2

2.

In assessment year 2012-13, the assessee has taken 8 grounds of appeal whereas in assessment year 2013-14, he has taken 5 grounds of appeal. However, ground No. 1 is common in all the years. This ground is a legal and jurisdictional ground. In brief, this ground provides that though AO has not made the additions on the item for which assessment was reopened, he has made the addition on other issues qua them he found the income to be escaped during the assessment proceedings. The ld. Counsel for the assessee, at the very outset submitted that assessment of the assessee was reopened for all the three years. The reasons for re-opening are almost identical. The reasons for assessment year 2012-13 are available on page 5 of the Paper Book. The relevant part of these reasons is in para 4 which read as under :

“4. Reasons forming belief and details of escapement of Income:- In view of the above, I have reason to believe that income arising out on sale of Flats during the year at Rs. 22,00,000/- each i.e. is Rs. 44,00,000/- has not been declared in the ITR and the fact is admitted by the assessee before ITO Ward-1, Shimla. Keeping in view the fact that ITR, filed by assessee is silent of the investment made in the construction of these flats at Mehli as well as, income on sale of flats, it is estimated that atleast an income (Profit) on account of sale of Flats at Mehli estimated at Rs. 15,00,000/- or any other income which may come to notice during assessment proceeding has escaped assessment.”

, 85 & 86/CHD/2024 A.Y.2012-13, 2013-14 & 2014-15 3

3.

Similar reasons for assessment year 2013-14 are available at page Nos. 4 to 6 of the Paper Book filed in this appeal. The reasons are again contained in para 4 which are identical to assessment year 2012-13. We take note of the reasons for assessment year 2013-14 also which read as under :

“4. Reasons forming belief and details of escapement of Income:- In view of the above, I have reason to believe that income arising out on sale of Flats during the year at Rs. 30,01,000/- has not been declared in his ITR and the fact is admitted by the assessee before ITO Ward-1, Shimla. Keeping in view the fact that JTR, filed by assessee is silent of the investment made in the construction of these flats at Mehli as well as, income on sale of flats, it is estimated that at least an Income (Profit) on account of sale of Flats at Mehli estimated at Rs. 15,00,000/- or any other income which may come to notice during assessment proceeding has escaped assessment.

In this case a return of income was filed for the year under consideration but no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceedings u/s 147 is reason to believe which has been recorded above. It is also pertinent to mention that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated u/s 2(40) of the Act was made and return of income was only processed u/s 143(1) of the Act. In view of the above, provision of clause (b) of explanation 2 to section 147 are applicable to the facts of the case and the assessment year under consideration is deemed to be the case where income chargeable to tax has escaped assessment In this case more than 04 years have lapsed from the end of the assessment year under consideration. Hence, necessary sanction to issue notice u/s 148 has been obtained separately from Principal Commissioner of Income tax as per the provisions of section 151 of the Act.”

4.

We find that identical reasons are recorded for assessment year 2014-15. The ld. Counsel for the assessee , 85 & 86/CHD/2024 A.Y.2012-13, 2013-14 & 2014-15 4 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.

, 85 & 86/CHD/2024 A.Y.2012-13, 2013-14 & 2014-15 5

5.

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.

6.

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, , 85 & 86/CHD/2024 A.Y.2012-13, 2013-14 & 2014-15 6 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 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.

, 85 & 86/CHD/2024 A.Y.2012-13, 2013-14 & 2014-15 7

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).

9.

In the result, the appeals are allowed.

Order pronounced on 04.02.2025.

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