Scope of reassessment must follow recorded reasons; additions beyond that scope are unsustainable and deleted.

Reassessment must be confined to the matters for which reasons are recorded; the tribunal applied the reasons-recorded principle and held that additions that target unexplained investments in a recurring deposit cannot be sustained where reopening was predicated on undisclosed salary. The AO's belief about escaped salary was not translated into findings about the recurring deposit, and the Revenue cannot rely on external material to expand or amend recorded reasons to justify fresh additions. Outcome: additions for unexplained investment/recurring deposit were deleted and appeals allowed in favour of the assessee.

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Issues: Whether additions made in reassessment proceedings on grounds different from the specific item stated in the reasons for reopening (i.e., making additions for unexplained investment/recurring deposit when reassessment was reopened for undisclosed salary) are sustainable.

Analysis: The Tribunal examined the reasons recorded under Section 147 of the Income-tax Act, 1961 (including Explanation 2 and Explanation 3) and the assessment orders. The AO had recorded belief that salary income of Rs.6 lakhs had escaped assessment but did not make any addition on that item; instead, additions were made for unexplained investment in a recurring deposit. The Court applied precedent holding that reassessment must be confined to the matter for which reasons are recorded and that an AO cannot, in reassessment proceedings, make additions on matters not encompassed by the recorded reasons. The Tribunal found no formulation in the reasons that the escaped income related to the recurring deposit investment and held that the Revenue cannot rely on external material to improve or alter the recorded reasons to justify additions beyond the scope of reopening.

Conclusion: The additions made in the reassessment proceedings on account of unexplained investment/recurring deposit are not sustainable; the appeals are allowed and the additions are deleted in favour of the assessee.

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