2007 (2) TMI 659 - HC - Income Tax

Invalid reassessment under Income Tax Act's section 147(a) must align with reason for reopening assessment.

Commissioner of Income-tax, Jalandhar Versus Gardhara Singh

The High Court considered a case involving reassessment proceedings under section 147(a) of the Income Tax Act. The Court found discrepancies between the ... - Issues involved: The legality of reassessment proceedings under section 147(a) of the Income Tax Act due to no addition being made in the consequential assessment for the income stated to have escaped assessment.Summary:Issue 1: Legality of reassessment proceedings under section 147(a) of the ActThe High Court considered a case where the original assessment was completed in 1971, and a reassessment was done in 1980 under section 147(a) of the Act, resulting in an addition of unaccounted money deposited by the assessee with another individual. However, the Appellate Assistant Commissioner found discrepancies in the reasons recorded for reopening the assessment and the actual basis for the reassessment. The Tribunal also noted that the original reason for reopening the assessment did not align with the addition made in the reassessment. The Court emphasized that the reasons for framing reassessment cannot differ from those that initiated proceedings under section 147(a) of the Act. Citing the Supreme Court's decision in CIT v. Sun Engg. Works (P.) Ltd., it was clarified that reassessment should only focus on the income that escaped assessment and not revisit the entire assessment. The Court also referred to a similar stance taken in the case of Vipan Khanna v. CIT. Consequently, the Court ruled in favor of the assessee, stating that the reassessment proceedings were not valid in the eyes of the law, and the addition made was unsustainable. The reference was disposed of accordingly.