Reassessment based on mismatched accounting entries fails where disclosed land advance and work-in-progress are distinct items

Reassessment based on an alleged mismatch between advance paid for land and work-in-progress was not sustainable where the audited books separately disclosed both items and they reflected distinct accounting entries. The recorded reasons relied on a mistaken comparison of figures that were not inter-related, and the relevant facts had already been fully disclosed, leaving no valid basis to infer escapement of income. On that footing, the reassessment lacked jurisdictional support. Because the reassessment itself failed, the related addition under section 69 could not survive and was also unsustainable.

---

---

Issues: Whether reassessment under section 147 of the Income-tax Act, 1961 could be sustained on the basis of an alleged mismatch between advance paid for purchase of land and work-in-progress, and whether the addition under section 69 could stand.

Analysis: The recorded reasons showed that the assessee had disclosed advance for land and work-in-progress separately in its audited books. The advance represented only payment towards acquisition of land, while work-in-progress represented project expenditure; the two items were distinct and not inter-related. Since the relevant facts were already on record and fully disclosed, there was no material basis to infer escapement of income from the difference between the two figures. The reassessment was thus founded on a mistaken appreciation of accounting entries and lacked a valid jurisdictional basis. Once the reassessment itself failed, the addition made under section 69 could not survive.

Conclusion: The reassessment was invalid and the addition was not sustainable; the assessee succeeded.

---