PRAGATI FINSEC LTD.,NEW DELHI vs. ITO, WARD -20(1), NEW DELHI

This appeal by the assessee arises out of the order passed by the Ld.

The only grievance raised through various grounds is against the confirmation of addition of Rs. 25,06,400/-.

Briefly stated the facts of the case are that some information was received by the Assessing Officer from Directorate of Investigation that the assessee had received accommodation entry amounting to Rs.5,25,000/- from M/s. Suma Finance and Investment Limited. Notice u/s 148 was issued. During the course of assessment proceedings, the Assessing Officer further found that the assessee had deposited cash of Rs.25,06,400/- in Corporation Bank, Karol Bagh, New Delhi. Not convinced with the assessee’s explanation, the Assessing Officer made addition of Rs.25,06,400/-, apart from the addition of Rs.5,25,000/- for which reassessment proceedings were initiated. The Ld. CIT(A) got convinced with the assessee’s explanation about the genuineness of transaction of Rs.5,25,000/-. He, therefore, deleted such addition. The other addition of Rs.25,06,400/- was sustained against which the assessee has come up in appeal before the Tribunal.

I have heard the rival submissions and perused the relevant material on record. It can be seen from the discussion made supra that the AO resorted to the re-assessment on account of one reason. The addition so consequently made stood deleted in the first appeal. No material has been brought on record to demonstrate that the Revenue has preferred any appeal against the impugned order deleting the addition of Rs.5,25,000/-.

The use of words ‘and’ between the income escaping assessment forming reasons to believe for issuing notice u/s 148 and other income chargeable to tax which escaped assessment and comes to the notice of the AO in the course of the proceeding, amply shows that the existence of the former is a pre-condition for taxing the latter. To put it simply, if the grounds set out in the re-assessment notice are non- existent, i.e., either no addition is made on such grounds or the addition so made does not pass the scrutiny by the appellate forums, then, obviously, no further addition can be made for income which comes to the notice of the AO during the course of proceedings u/s 147. Without there being such a deterrent, the AO would acquire an unhindered power to initiate re- assessment at the drop of a hat without any legally sustainable reasons and then make other additions resulting in multiplicity of proceedings, which the legislature has sought to curb. Any lawful jurisdiction to make addition on account of other incomes coming to the notice of the AO during the course of proceedings u/s 147 can be acquired only on the foundation of a validly acquired jurisdiction on legally sustainable items of income escaping assessment forming reasons for issuing notice u/s 148.

In the result, the appeal of the assessee is allowed.