Loading judgment…
Facts
The assessee is an individual who did not file a return of income for AY 2011-12. Information revealed that the assessee sold an immovable property, leading to a reassessment under Section 148. The AO made additions for interest income not offered by the assessee.
Held
The Tribunal noted that the assessee had suo motu offered capital gains, which was the basis for reopening. The addition of interest income was also questioned as it was allegedly received in a fiduciary capacity for another company that had already offered the interest income. The Tribunal found substance in the submission to restore the matter to the AO.
Key Issues
Whether the addition of interest income was justified when the primary basis for reassessment (capital gains) was already declared by the assessee, and the interest income was allegedly offered by another entity?
Sections Cited
Section 148, Section 151, Section 143(3), Section 147, Section 271(1)(c), Section 234A, Section 234B, Section 234C, Section 194I
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI PAWAN SINGH, JM & SHRI ARUN KHODPIA, AM
O R D E R
Per Arun Khodpia, AM:
This appeal is filed by the assessee, challenging the order of Addl/JCIT(A), Faridabad [for short “ld. CIT(A)”] dated 24.08.2025 for the AY 2011-12, arises from the assessment order passed under section 143(3) r.w.s.147 of the Income Tax Act, 1961 (the Act) dated 19.12.2018 by the ITO, W-19(2)(2), Mumbai. The grounds of appeal raised by the assessee are as under:
Kalpana Nitin Shah “1. That on the facts and in the circumstances of the case and in law, the entire reassessment proceedings initiated by issuance of notice under Section 148 dated 28/03/2018 are void ab initio as the said notice was issued without obtaining the mandatory prior satisfaction and approval from the Principal Chief Commissioner of Income Tax/Chief Commissioner of Income Tax, as required by Section 151 of the Income-tax Act, 1961.
2. That on the facts and circumstances of the case and in law, the Ld. AO acted without jurisdiction and erred in making an addition on an issue (Interest Income of ₹13,52,618) other than the ground based on which the reassessment was opened (Capital Gains), especially since the original ground was offered for assessment in the return filed in response to the Section 148 notice.
That on the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) erred in dismissing the appeal for non- prosecution/non-compliance, thereby denying the Appellant a proper opportunity to be heard and violating the principles of natural justice.
That on the facts and circumstances of the case and in law, Ld. AO has grossly erred in determining the taxable income of the Appellant for the subject assessment year at Rs 32,23,380/- as against the returned income of Rs 18,70,760/- and, accordingly, the assessment order passed by Ld. AO is bad in law and void ab initio,
5. That on the facts and circumstances of the case and in law, the Ld. AO has erred in making the addition of Rs 13,52,618/- based on mere conjectures and surmises, ignoring the factual matrix of the case as well as the nature of the transaction undertaken by the Appellant.
That the addition of 26,30,218/- on account of interest income is legally untenable as the Fixed Deposit was held by the Appellant in a fiduciary capacity for and on behalf of Hiraco Jewellery (1) Pvt. Ltd, the true owner of the funds, and was created solely as collateral security for the company's loan from the bank.
7. That the lower authorities erred in law by making an addition which leads to double taxation of the same income, as the interest earned on the said Fixed Deposit has been offered to tax by Hiraco Jewellery (I) Pvt. Ltd in its return of income for the relevant Assessment Year.
8. That on the facts and circumstances of the case and in law, the Ld. AO grossly erred in the addition of ₹7,22,400/- under the interest head, which is actually Rental Income, as evident from Form 26AS (u/s 1941) and was already Kalpana Nitin Shah considered in the computation of total income, thereby taxing the same income twice, which is impermissible.
9. That on the facts and circumstances of the case and in law, the Ld. AO has erred in charging interest under sections 234A, 234B, and 234C and initiating penalty proceedings u/s 271(1)(c), which are consequential and should be deleted once the core additions are deleted.”
Brief facts of the case are that, the assessee is an individual, who had not filed his return of income for the relevant year. Information was available in the NMS Module (Non filer Management System) ofi-taxnet that the assessee has sold an immovable property for consideration of Rs. 55,00,000/- during AY 2011-12. Since no ITR was furnished by the assessee within the time limit mandated under the Income Tax Act, whereas there was a transaction of sale of property, so to examine the capital gain income earned on account of sale of property, the case of assessee was re-opened under section 148 of the Act. Assessee furnished response to notice under section 148 and had declared a total income of Rs. 18,70,760/-, which includes Short Term Capital Gain (STCG) of Rs. 14,67,190/- on account of the said sale of property. Further it is noticed by the AO that the interest income reflecting in 26AS was also not offered by the assessee as Income from Other Sources amounting to Rs. 13,15,618/-, therefore, an addition for the said amount was made.
Kalpana Nitin Shah 3. Being aggrieved with the aforesaid addition assessee preferred an appeal before the ld. CIT(A), however the assessee remained non-complaint before the ld. CIT(A) on various occasions, therefore the appeal of assessee was dismissed on account of non-prosecution following the findings of AO.
4. To challenge the aforesaid order by CIT(A), assessee preferred an appeal before us, which is under consideration in the present matter.
At the outset, the ld. AR of the assessee submitted that since there was no addition on account of the prime issue of capital gain which was the basis for reopening assessment. Whereas the addition was made only on account of interest income reflecting in 26AS, without any addition on main issue of capital gain, the matter is covered by the decision of Hon’ble Mumbai High Court in case of Jet Airways, 331 ITR 236 (Bom.), according to which “the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment. it is not open to him independently to assess some other income.”
Kalpana Nitin Shah 6. Based on aforesaid submissions,it is argued that the assessee has a good case on the legal aspect, therefore the addition made by Ld. AO cannot sustain, relief may be granted to the assessee by deleting the addition made.
It is further submitted that on merits also this income of interest does not belong to assessee, it was received on account of FDs placed in capacity as a Director ofHiraco Jewellery (India) Pvt. Ltd. Hiraco had already offered the subject interest income in their ROI for the relevant period.
Per contra ld. Sr. DR submitted that the issue regarding interest which is not offered by the assessee as income was to be examined, however the assessee has not furnished submission before the AO as well as the CIT(A), therefore even if the assessee has a good case on merits, the facts need verification.For such reasons, at the most, it can be restored back to the file of AO for fresh adjudication.
We have considered the rival submissions and perused the material available on record. Admittedly since the assessee itself has suo-motu added and offered the income under the head capital gains which was thebasis for formation of belief for re-opening assessment, such suo-motu addition by assessee debarred the Ld. AO to take any further action to add it again, the addition thus was made impliedly, this takesthe case of assessee, out of the 5 Kalpana Nitin Shah ambit of the ratio of decision in Jet Airways (supra). The assessee’s legal count relying on the decision in the case of Jet Airways (supra), thus, fails. Further regarding interest added as income from other sources, it is submitted by ld. AR that this income is received by the assessee on account of FD placed in capacity as Director ofHiraco Jewellery (India) Pvt. Ltd. and such interest is already offered by the said company in their ROI. Relevant documents are also furnished before us, however no adjudication or verification of such documents is reflecting in the findings of AO as well as ld. CIT(A). We, thus, in terms of aforesaid facts and observations, find substance in the submissions of ld. Sr. DR that the matter should be restored back to the file of AO for fresh verification / adjudication, which fairly conceded by the Ld. AR. Accordingly, we set-aside the issue to the file of AO for fresh adjudication.
Needless to say, that the assessee may be allowed with reasonable opportunities of being heard in the set-aside proceedings. The assessee is also directed to complywith the notices issued in set-aside proceedings, failing which the Ld. AO would be at liberty to decide the issue in accordance with the mandate of law.
In result, the appeal of assessee is allowed for statistical purposes, in terms of our aforesaid observations.
Order pronounced in the open court on 09 -01-2026.