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2015 (6) TMI 417 - AT - Income TaxReopening of assessment - non inclusion of sales consideration - Held that - The assessee has not included the sale consideration of ₹ 26,84,940/- to one Shri Manish Jhunjhunwala vide agreement dated 02.06.2006, is never the subject matter of addition by the AO and once this is not the subject matter of addition, the reassessment proceedings initiated by issuing of notice u/s. 148 of the Act cannot survive because the very base for issuance of notice u/s. 148 of the Act goes. In view of the above 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 in Shri Ram Singh 2008 (5) TMI 200 - RAJASTHAN HIGH COURT no contrary decision was pointed out by ld. Sr. DR, we respectfully following the decisions quash reassessment proceedings. The issue raised by assessee under Rule 27 of the Rules is allowed and initiation of reassessment proceeding is quashed. - Decided in favour of assessee.
Issues Involved:
1. Legality of reassessment proceedings under Section 147/148 of the Income-tax Act, 1961. 2. Admissibility of the assessee's Cross Objection under Rule 27 of the Appellate Tribunal Rules, 1963. 3. Validity of the reassessment notice and proceedings based on the reasons recorded by the Assessing Officer (AO). Detailed Analysis: 1. Legality of Reassessment Proceedings under Section 147/148 of the Income-tax Act, 1961: The core issue revolves around whether the reassessment proceedings initiated by the AO under Section 147/148 of the Income-tax Act, 1961, were valid. The reassessment was based on the AO's belief that the assessee had not disclosed the sale of a flat for Rs. 26,84,940. However, the AO did not include this amount in the total assessed income while completing the reassessment. The Tribunal referred to the decision of the Hon'ble Bombay High Court in CIT Vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom), which clarified that the AO must assess or reassess the specific income that led to the issuance of the notice under Section 148. If the AO does not assess this income, he cannot independently assess any other income that comes to his notice during the reassessment proceedings. The Tribunal also cited the Hon'ble Rajasthan High Court's decision in CIT Vs. Shri Ram Singh (2008) 306 ITR 343 (Raj), which supported the same interpretation. Consequently, the Tribunal quashed the reassessment proceedings as the AO did not assess the income that formed the basis for the notice under Section 148. 2. Admissibility of the Assessee's Cross Objection under Rule 27 of the Appellate Tribunal Rules, 1963: The assessee's Cross Objection was time-barred by 288 days, and no condonation petition was filed. The assessee's counsel stated that the issue raised in the Cross Objection pertained to the legality of the reassessment proceedings, which had already been adjudicated against the assessee by the CIT(A). The Tribunal noted that under Rule 27 of the Appellate Tribunal Rules, 1963, the respondent (assessee) could support the order appealed against on any grounds decided against him. Therefore, the Tribunal admitted the issue raised by the assessee under Rule 27 and proceeded to adjudicate it. 3. Validity of the Reassessment Notice and Proceedings Based on the Reasons Recorded by the AO: The Tribunal examined the reasons recorded by the AO for issuing the notice under Section 148. The AO's belief that the income had escaped assessment was based on the sale of a flat for Rs. 26,84,940, which was not separately detailed in the return of income. The Tribunal found that the sale consideration was included in the total sales disclosed in the Profit & Loss Account. The Tribunal emphasized that there must be a "live nexus" between the reasons recorded for the issuance of the notice and the income that allegedly escaped assessment. Since the AO did not include the specific sale consideration in the assessed income, the reassessment proceedings could not survive. The Tribunal quashed the reassessment proceedings, following the decisions of the Hon'ble Bombay High Court and Rajasthan High Court. Conclusion: The Tribunal quashed the reassessment proceedings initiated under Section 147/148 of the Income-tax Act, 1961, as the AO did not assess the income that formed the basis for the notice under Section 148. Consequently, the Cross Objections of the assessee and the appeal of the revenue were dismissed. The order was pronounced in the open court on 22.5.2015.
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