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Facts
The assessee filed an appeal against the CIT(A)'s order which confirmed the AO's action of reopening the assessment for AY 2012-13. The AO had reopened the case based on an opinion of escaped income due to undisclosed cash credits but ultimately made a disallowance under Section 40A(3) for Rs. 90.55 Lacs.
Held
The Tribunal held that if the AO accepts that the items for which reasons were recorded have not escaped assessment, it implies a lack of "reasons to believe that income has escaped assessment", rendering the notice invalid and without jurisdiction to assess any other income. Since no addition was made on the basis of the reopening's grounds, the reopening fails.
Key Issues
Whether the reassessment proceedings are valid if the additions made are not on the grounds for which the assessment was reopened?
Sections Cited
143(3), 147, 40A(3)
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Income Tax Appellate Tribunal, “DB” BENCH, AGRA
Before: HON’BLE SHRI SATBEER SINGH GODARA, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeal by assessee for Assessment Year (AY) 2012-13 arises out of the order of learned Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 25-09-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s. 147 of the Act on 24-12-2019. Upon perusal of assessment order, it could be seen that Ld. AO reopened the case of the assessee upon formation of an opinion of escapement of income on account of undisclosed / unexplained cash credits in the bank account of the assessee. However, ultimately, Ld. AO has landed up in making disallowance u/s 40A (3) for Rs.90.55 Lacs. In other words, no addition has been made for the issue which form the very basis of reopening the case of the assessee. Though the assessee preferred first appeal, Ld. CIT(A) confirmed the action of Ld. AO and rejected the legal grounds as well as grounds on merits. Aggrieved, the assessee is in further appeal before us.
In the above factual background, Ld. AR has cited the decision of Hon’ble Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd. (331 ITR 236) as well as the decision of Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. Vs. CIT (12 Taxmann.com 74) to plead that the law does not empower Ld. AO to make any addition if original ground of reopening fails. In this decision, it was held that though the Explanation 3 to Sec. 147 inserted by the Finance Act, 2009 w.e.f. 01.04.1989 permits the AO to assess or reassess income which has escaped assessment even if the recorded reasons have not been recorded with regard to such items, it is essential that the items in respect of which the reasons had been recorded are assessed. If the AO accepts that the items for which reasons are recorded have not escaped assessment, it means he had no “reasons to believe that income has escaped assessment” and the issue of the notice becomes invalid. If so, he has no jurisdiction to assess any other income. This fact could not be rebutted by revenue. No contrary decision has been shown to us. The final undisputed position that emerges is that no addition has been on issues which form the basis of reopening and therefore, reopening fails. This being the case, the reassessment proceedings are liable to be quashed. We order so. Consequently, the other issues would not survive in the appeal.
The appeal stand allowed in terms of our above order. Order pronounced on 18th February, 2025.