2024 (6) TMI 540 - AT - Income Tax

Assessment under section 147 quashed for making additions on grounds different from reopening reasons

Ganesh Steel & Alloys Ltd. Versus DCIT, Circle-1 (1), Kolkata

ITAT Kolkata allowed the assessee's appeal and quashed the assessment framed u/s 143(3) r/w 147. The AO reopened assessment u/s 147 based on reasons ... Reopening of assessment u/s 147 - addition u/s 69C in respect of bogus purchases - HELD THAT:- One such argument advanced in respect of non-making of addition in the assessment framed qua the issue which was the subject matter of the reasons recorded u/s 148(2) and the addition was made on different count altogether. The undisputed facts are that the case of the assessee was reopened u/s 147 r/w 148 of the Act after recording reasons u/s 148(2) that the assessee has taken accommodation entries from shell entities namely M/s Chakradhari Industries Ltd. during the year. No addition has been made for issue recorded in the reasons u/s 148(2) and therefore, no other addition can be made by the AO in the assessment so framed. On this score, we are inclined to hold that the assessment framed by the AO is invalid and cannot be sustained. Similarly we note that the AO has addition u/s 69C of the Act in respect of bogus purchases however the provisions of section 69C are applicable only to unexplained expenditure where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the AO, satisfactory, the amount covered by such expenditure or part thereof, may be deemed to be the income of the assessee for such financial year. But this is not the case before us, the assessee has duly disclosed the total purchases of books of account and the payments made to M/s Chakradhari Industries Ltd. were also out of books of account with explained sources. Therefore the source of expenditure was also fully explained and even on this count, the addition made by AO is wrong and cannot be sustained. In view of the above facts and circumstances, we are inclined to set aside the order of Ld. CIT(A) and quash the assessment framed by the AO u/s 143(3) read with Section 147 as without jurisdiction - Appeal of the assessee is allowed. Issues involved:The appeal against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi for the AY 2012-13, challenging the reopening of assessment u/s 147 and addition u/s 69C of the Act.Reopening of Assessment:The assessee contested the validity of the reopening of assessment u/s 147, arguing that the notice u/s 143(2) was issued by the wrong authority and the reasons recorded for reopening were based on incorrect information. The assessee cited precedents to support the argument that the assessment was bad in law due to jurisdictional issues and lack of proper grounds for reopening.Addition u/s 69C:The assessee challenged the addition made u/s 69C of the Act, contending that the provision applies to unexplained expenditure, whereas in this case, the purchases were duly recorded in the books of account with explained sources. The Tribunal found that the addition under section 69C was unjustified as the purchases were properly accounted for, and the source of expenditure was fully explained.Assessment Order Invalid:The Tribunal held that the assessment framed by the AO was invalid on multiple grounds, including the failure to make additions based on the reasons recorded for reopening and the incorrect application of section 69C. Citing legal precedents, the Tribunal concluded that the assessment was without jurisdiction and quashed the same.Decision and Outcome:The Tribunal allowed the appeal of the assessee on legal issues, leaving the grounds raised on merit open for future consideration if necessary. The assessment framed by the AO was deemed invalid and was quashed by the Tribunal.Separate Judgement:No separate judgment was delivered by the judges in this case.