Reopening of Assessment u/s 147 Invalid Without Substantive Additions Related to Reopening Reasons

The ITAT Mumbai held that reopening of assessment u/s 147 was invalid as no substantive addition was made based on the reason for reopening. Although the AO made additions regarding interest income and payments, these were unrelated to the allegations involving accommodation entries referenced in the reopening notice. Following the precedent in Jetair (P.) Ltd., the assessment order passed under notice u/s 148 was quashed. The appeal by the assessee was allowed.

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The Appellate Tribunal (ITAT Mumbai), per Judicial Member Shri Narender Kumar Choudhry, allowed the Assessee's appeal against the reopening of assessment for A.Y. 2014-15 under section 147 of the Income Tax Act, 1961. The case was reopened based on allegations of accommodation entries of Rs. 8,10,000/- linked to Shri Hasmukhlal Mehta's statement under section 131 during survey action under section 133A. However, the Assessing Officer (AO) made additions on unrelated interest income/payments without making any addition on the specific reason for reopening. Relying on the Bombay High Court's ruling in Jetair (P.) Ltd. vs. Dy. CIT (2023) 148 taxmann.com 185, the Tribunal emphasized that under section 147, the AO must assess the income which formed the basis for reopening; if that income is found not to have escaped assessment, the AO cannot assess other income without issuing a fresh notice under section 148. Since the AO did not add income on the original reason for reopening, the assessment order pursuant to the section 148 notice dated 27.03.2019 was held liable to be quashed. Consequently, the Tribunal quashed the assessment order and declined to examine other legal or merit issues raised by the Assessee, thereby allowing the appeal.

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