2023 (9) TMI 1157 - AT - Income Tax

Tribunal favors assessee, quashes tax assessments. Key rulings on reopening assessments and AO jurisdiction.

The Tribunal allowed both appeals filed by the assessee, quashing the assessments framed by the AO under Section 143(3) r.w.s. 147 of the Income Tax Act ... Reopening of assessment u/s 147 - addition was not made in respect of undisclosed in the assets of the assessee and AO made the addition in respect of loans - Assessee challenged the legality of the assessment framed on the ground that the additions as envisaged in the reasons recorded u/s 148 were not made in the assessment framed and therefore the AO has no jurisdiction to make other additions in respect of loans from two parties - HELD THAT:- AO has no jurisdiction to make any other addition when the issues which were subject matter of the reasons recorded of Section 148(2) of the Act were not added in the assessment order. The case of the assessee is supported by the decision of Coordinate Bench in the case of Shree Prakash Chhawchharia (HUF) [2021 (6) TMI 234 - ITAT KOLKATA] wherein the Hon'ble Coordinate Bench has held that the AO has no jurisdiction to make the addition in respect of any other item which were not the subject matter of the reasons recorded when the issues which were the subject matter of the reasons recorded u/s 148(2) of the Act were not added to the income of the assessee. We note that the Coordinate Bench has followed the decision of Hon'ble Calcutta High Court in the case of CIT Vs. M/S Infinity Infotech Parks Ltd [2014 (9) TMI 1142 - CALCUTTA HIGH COURT] on the same issue. The Coordinate Bench has also followed the decision of Hon'ble Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd.[2010 (4) TMI 431 - HIGH COURT OF BOMBAY] and Ranbaxy Laboratories Ltd. [2011 (6) TMI 4 - DELHI HIGH COURT] Therefore, respectfully following the ratio laid down by the Hon'ble Courts we are hereby quash the assessment framed by the AO u/s 143(3) r.w.s. 147 of the Act and accordingly, the additional ground raised by the assessee is allowed. Issues Involved:1. Legality of reopening assessment under Section 148 of the Income Tax Act.2. Jurisdiction of the Assessing Officer (AO) to make additions not related to the reasons recorded for reopening.3. Applicability of the first proviso to Section 147 for reopening assessments after four years.Summary:Issue 1: Legality of Reopening Assessment under Section 148 of the Income Tax ActThe assessee challenged the reopening of assessment under Section 148 of the Income Tax Act, arguing it was 'bad in law.' The Tribunal admitted this additional ground for adjudication, citing precedents from the Hon'ble Supreme Court in *National Thermal Power Co. Ltd. Vs. CIT* and *Jute Corporation of India Ltd. Vs. CIT*. The Tribunal noted that the issue was purely legal and did not require further verification of facts.Issue 2: Jurisdiction of the Assessing Officer (AO) to Make Additions Not Related to the Reasons Recorded for ReopeningThe Tribunal found that the AO had no jurisdiction to make additions unrelated to the reasons recorded for reopening the assessment under Section 148. The AO had reopened the assessment on the grounds that Rs. 6 lakh had escaped assessment, but made additions totaling Rs. 17,99,521/- related to loans, which were not part of the original reasons for reopening. The Tribunal quashed the assessment framed under Section 143(3) r.w.s. 147 of the Act, following precedents from *CIT Vs. M/S Infinity Infotech Parks Ltd.*, *Ranbaxy Laboratory Ltd. Vs CIT*, and *CIT Vs. Jet Airways Ltd*.Issue 3: Applicability of the First Proviso to Section 147 for Reopening Assessments After Four YearsFor the Assessment Year 2013-14, the Tribunal addressed the reopening of assessment after four years. The AO had reopened the assessment on the grounds that Rs. 19,11,049/- had escaped assessment. However, the Tribunal found that the issue had already been examined during the original assessment proceedings under Section 143(3). The Tribunal noted that the assessee had disclosed all relevant facts, and the AO's reasons for reopening demonstrated 'blatant non-application of mind.' Citing the Hon'ble Supreme Court's decision in *ACIT Vs. CEAT Ltd.*, the Tribunal quashed the assessment, holding that there was no failure on the part of the assessee to disclose material facts.ConclusionThe Tribunal allowed both appeals filed by the assessee, quashing the assessments framed by the AO under Section 143(3) r.w.s. 147 of the Income Tax Act for both assessment years. The Tribunal did not adjudicate the grounds raised on merits due to the allowance of the legal issues in favor of the assessee.