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Facts
The assessee's case was reopened under Section 147 for AY 2016-17 based on information of a property transaction of Rs. 2,87,04,714. The Assessing Officer (AO) initially believed this amount represented undisclosed income. However, during assessment, the AO accepted the explanation for the source of this property investment. Subsequently, the AO made an addition of Rs. 35,43,224 on the issue of the assessee's residential status, which was not part of the original reasons for reopening.
Held
The Tribunal held that the AO could not make an addition on an issue that was not part of the original reasons for reopening, especially when the primary ground for reopening was accepted. Relying on the Delhi High Court's decision in ATS Infrastructure Ltd., the Tribunal stated that once the foundation of reassessment fails, the AO ceases to have jurisdiction to frame any addition on other grounds.
Key Issues
Whether the Assessing Officer can make an addition on an issue not forming the basis of the original reassessment notice, after accepting the explanation for the primary reason for reopening.
Sections Cited
147, 148, 151, 148A(b), 148A(d), 260A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, D: NEW DELHI
Before: SHRI SUDHIR PAREEK & SHRI BRAJESH KUMAR SINGH
ORDER PER BRAJESH KUMAR SINGH, AM:
This appeal by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeal), Noida-2 [hereinafter referred to as the ‘Ld. CIT(A)’] , dated 29.11.2024 arising out of the assessment order dated 27.05.2022 passed under Section 147 r.w.s. 144C(3) of the Income Tax Act, 1961
ITA No.-414/Del/2025 Abhishek Dixit (hereinafter referred to as ‘the Act’) by the DDIT / ADIT, International Taxation, Noida (hereinafter referred to as the ‘Ld. AO’) pertaining to Assessment Year (A.Y.) -2016-17.
This case was reopened u/s 147 of the Act vide notice dated 30.03.2021. The reasons recorded for reopening of the assessment, as appearing on page no. 3 of the Paper Book, are reproduced as under:
“ Reason for reopening of the Assessment in case of Shri Abhishek Dixit for A.Y. 2016-17 u/s 147 of the Act.
Assessee is an individual. The return of income for the relevant assessment year was not filed by the assessee.
As per information available on the record which has been provided by the office of the DDIT/ADIT (Inv.)-1, Agra, it is found that the assessee has made transaction of total amount of Rs. 2,87,04,714/- in the property during the FY. 2015-16 relevant to A.Y. 2016-17.
On perusal of material/information available on records, it has been noticed that the assessee has made transaction of Rs. 2,87,04,714/- in property during the F.Y. 2015-16. The amount involved in this transaction of the assessee does not commensurate with the income declared in the ITR by the assessee and assessee has not declared the abovementioned investment in property in ITR. Therefore, the source of abovementioned amount remained unexplained & unverified.
In view of facts, I am of the opinion that these transaction amount of Rs. 2,87,04,714/- made in property, were the income of the assessee from the undisclosed sources and it is sufficient to believe that the assessee has not disclosed true and full details of its income and amount of Rs. 2,87,04,714/- has escaped the assessment and which is required to be assessed u/s 147 of the Income- tax Act, 1961.
In view of aforementioned facts, I have reason to believe that an income chargeable to tax amounting to Rs. 2,87,04,714/- has escaped assessment in the hands of the assessee for the year under consideration within the meaning of section 147 of the Income Tax Act, 1961. Therefore, to assess this income and any other income which comes to the notice during the assessment, this case needs to be reopened u/s 147 of the Income Tax Act, 1961.
ITA No.-414/Del/2025 Abhishek Dixit 6. In this case no return of income was filed for the year under consideration and no assessment was made. Accordingly, in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above.
It is pertinent to mention here that in this case the assessee has chosen not to file return of income for the year under consideration although the total income of the assessee had exceeded the maximum amount which is not chargeable to tax as discussed in above paragraph and the assessee was assessable under the Act. In view of the above, provisions of clause (a) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment.
This case is within four years from the end of the assessment year under consideration, Hence, necessary sanction to issue the notice u/s 148 has been obtained separately from Addl./Joint commissioner of Income Tax as per the provisions of section 151 of the Act.” (emphasis by us)
2.1 In response to the said notice, the assessee had filed return of Income on 05/05/2021 stating that his residential status was that of a non-resident status and declared a gross total income of Nil which includes interest income of Rs. 1,66,493/- declared under the head income from other sources and loss of Rs. 2,00,000/- from house property. The assessee had claimed exempt income of Rs. 35,43,224/-.
At the outset, the Ld. AR submitted that the AO had reasons to believe that an income chargeable to tax amounting to Rs. 2,87,04,714/- had escaped assessment in the hands of the assessee for the year under consideration within the meaning of section 147 of the Income Tax Act, 1961 on account of investment
ITA No.-414/Del/2025 Abhishek Dixit in property in Financial Year (F.Y.) 2015-16, the source(s) of which was not disclosed as the assessee had not filed his return of income for A.Y. 2016-17.
3.1 The Ld. AR further submitted that during the course assessment proceedings, the AO had accepted the explanation regarding the source of Rs. 2,87,04,714/- towards investment in the property but the AO further inquired into the residential status of the assessee and held that the assessee’ income amounting to Rs. 35,43,224/- would be taxable in India on account of his residential status being treated as a resident.
3.2 The Ld. AR submitted that aggrieved with the said order the assessee filed an appeal before the Ld. CIT(A), which was dismissed by the Ld. CIT(A) and thus, the assessee was in appeal before us.
3.3 During the hearing before us, the Ld. AR filed a written submission wherein, relying upon the decision of the jurisdictional Hon’ble Delhi High Court in the case of ATS Infrastructure Ltd. vs. ACIT [(2024) 166 taxmann.com 61(Delhi)], it was submitted that it is a settled proposition that no addition can be sustained in the reassessment proceedings u/s 147 where the very ground forming the basis of reopening is ultimately dropped. The relevant extract of the AR’s submission in para no. 3 is reproduced as under:
“ 3. No addition can be made during re-assessment proceedings under section 147 of the Act, where the principal ground(s) on which re-assessment was proposed, is 4
ITA No.-414/Del/2025 Abhishek Dixit dropped. It is not open to the assessing officer to make any further addition on any other ground(s). It is a settled proposition that no addition can be sustained in reassessment proceedings under section 147 where the very ground forming the basis of reopening is ultimately dropped. The jurisdiction of the Assessing Officer is confined to the issue(s) for which the reassessment was initiated, and it is impermissible to travel beyond such grounds. In the present case, the reassessment was initiated under section 148 on the allegation that the Appellant had entered into a property transaction of INR 2,87,04,714/- during FY 2015-16. However, upon being satisfied with the explanation furnished, no addition was made on that issue. Instead, the Assessing Officer proceeded to make an addition of INR 35,43,224/- towards salary income-an issue not forming part of the "reason to believe." Such an approach is contrary to the settled law that once the foundation of reassessment fails, the Assessing Officer ceases to have jurisdiction to frame any addition. Accordingly, the impugned reassessment order dated 27.05.2022, as also the addition of INR 35,43,224/-, is without authority and ex facie bad in law Reliance is placed on the judgment rendered by Hon'ble Delhi High Court in the case of ATS Infrastructure Ltd Vs ACIT [(2024) 166 taxmann.com 61 (Delhi)].” (emphasis supplied by us) 3.4 In view of the above facts, the Ld. AR submitted that the impugned assessment order dated 27.05.2022, whereby an addition of Rs. 35,43,224/- was made, is without authority of law and expressly bad in law.
The Ld. Sr. DR relied upon the orders of the authorities below.
We have heard both the parties and perused the material available on record. In this case, we agree with the submission of the assessee that in view of the Hon’ble Delhi High Court in the case of ATS Infrastructure Ltd. vs. ACIT (supra) assessment proceedings initiated vide notice u/s 148 of the Act dated 30.03.2021 in this case was not sustainable in the eyes of law when the AO had accepted the explanation regarding the source of investment in property amounting to Rs. 2,87,04,714/- for which the assessment was reopened in the 5
ITA No.-414/Del/2025 Abhishek Dixit case of the assessee for the present AYs as per the reasons recorded as referred above in para no. 2 of this order.
5.1 In this regard, the relevant head-note of the decision of the Hon’ble Delhi High Court in the case of ATS Infrastructure Ltd. vs. ACIT (supra) are reproduced as under:
Section 148, read with section 147, of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for (Recording of reasons) - Assessment years 2014-15 to 2016 17 - Whether Assessing Officer 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 but once 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 if, in course of reassessment, Assessing Officer 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 original return - Held, yes - On basis of information that assessee had received loan from its 100 per cent subsidiary and said issue was not examined during assessment proceedings, notice under section 148A(b) was issued to assessee - In response to notice under section 148A(b), assessee submitted that during year relevant to assessment year, it had received no loans rather repayment had been made of advance received earlier - Assessing Officer in order passed under section 148A(d) considered reply of assessee and had found it tenable and observed that assessee had not provided any evidences with regard to source of funds utilized for making payment of loan and he, thus, treated loan repayment amount as income and made addition to income of assessee - Whether Assessing Officer after receiving reply from assessee had merely sought to ascertain source of funds on basis of which repayments were made and those loans was clearly not edifice on which section 148A(b) notice was based - Held, yes Whether Assessing Officer could not supplement or improve upon reason which formed basis for initiating action under section 148A - Held, yes - Whether since foundational material alone would be relevant for purposes of evaluating whether reassessment powers were justifiably invoked, impugned reassessment proceedings were to be quashed and set aside - Held, yes [Paras 24, 25, 30 & 32] [In favour of assessee.” (emphasis supplied by us) 5.1 Further, the Hon’ble Bombay High Court in the case of Commissioner of Income-tax-5, Mumbai v. Jet Airways (I) Ltd. [2010] 195 Taxman 117 (Bombay)
ITA No.-414/Del/2025 Abhishek Dixit had answered the question of revenue in negative and had held that in case of re- opening of the assessment u/s 148 of the Act, if the Assessing Officer does not assess or, as the case may be reassess the income which he has reason to believe had escaped assessment and which formed the basis of a notice under section 148 then the Assessing Officer could not assess or reassess independently any other income, which does not form the subject-matter of the notice. The relevant question of the revenue before the Hon’ble Court and the relevant extract of the decision of the Hon’ble Court in para nos. 17 and 18 are reproduced as under:
" Admit. During the course of the hearing of these appeals by the revenue under section 260A of the Income-tax Act, 1961, submissions have been urged before the Court confined to the following substantial question of law : Where upon the issuance of a notice under section 148 of the Income-tax Act, 1961 read with section 147, the Assessing Officer does not assess or, as the case may be reassess the income which he has reason to believe had escaped assessment and which formed the basis of a notice under section 148, is it open to the Assessing Officer to assess or reassess independently any other income, which does not form the subject-matter of the notice?"
We have approached the issue of interpretation that has arisen for decision in these appeals, both as a.matter of first principle, based on the language used in section 147(1) and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh's case (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its ITA No.-414/Del/2025 Abhishek Dixit legislative powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field.
In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand answered against the revenue and in favour of the assessee. The appeal is, accordingly, dismissed. There shall be no order as to costs.”
5.2 The facts in the present case are similar to the above question before the Hon’ble Court. Respectfully following the same, we hold that when the AO had accepted the explanation regarding the source of investment in property amounting to Rs. 2,87,04,714/- for which the assessment was reopened in the case of the assessee for the present assessment year, the AO could not have made the addition of Rs. 35,43,224/- as made in the assessment order. Accordingly, we delete the addition of Rs. 35,43,224/-. Thus, ground no. 10 of the appeal is allowed. In view of the ground no. 10 being allowed, the other grounds of appeal become academic and are left open in this case.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 21st January, 2026
Sd/- Sd/- [SUDHIR PAREEK] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated- 21.01.2026. Pooja. 8
ITA No.-414/Del/2025 Abhishek Dixit