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2017 (12) TMI 1612 - AT - Income TaxValidity of re-assessment proceedings - unexplained deposits in bank - no addition on account of which the assessment was reopened - Held that - A perusal of the reasons recorded by the AO as reproduced by him in the assessment order shows that the reopening was made on account of cash deposit of ₹ 19 lakh in the bank account of the assessee. However, the AO in the assessment order has made addition of ₹ 36,26,500/- on account of capital gain and interest income. Thus, there is no addition on account of which the assessment was reopened by issue of notice u/s 148 of the I.T. Act. There was no addition made in the assessment order on account of which the assessment was reopened but some other additions have been made by the AO, therefore, the AO does not have jurisdiction to make such other additions in absence of any addition made for which the assessment was re-opened in the light of the decision of Hon ble Delhi High Court in the case of Ranbaxy Laboratory Ltd. 2013 (1) TMI 679 - DELHI HIGH COURT - Decided in favour of assessee
Issues Involved:
Validity of re-assessment proceedings and addition of ?36,26,500 made by the AO and sustained by Ld. CIT(A). Analysis: 1. Re-assessment Proceedings: The AO initiated re-assessment proceedings based on cash deposits of ?19 lakhs in the assessee's bank account, as per AIR information. The assessee challenged the validity of the re-assessment proceedings, arguing that the AO made additions unrelated to the reason for reopening. The Hon’ble Delhi High Court's decision in Ranbaxy Laboratories Ltd., vs CIT was cited, stating that additions beyond the reasons for initiation are impermissible. The Ld. CIT(A) upheld the reopening and additions. However, the Tribunal found no nexus between the reasons recorded and the information, quashing the re-assessment in a similar case. The Tribunal held that the AO lacked tangible material to believe the cash deposits constituted income, rendering the reopening invalid. Consequently, the Tribunal ruled in favor of the assessee, quashing the re-assessment proceedings. 2. Addition of Capital Gain: The AO added ?36,26,500 as capital gain, disallowing the deduction claimed under section 54B due to land purchase in the name of the assessee's mother. The assessee's argument that the land was jointly purchased with family members was rejected, leading to the disallowance. The Tribunal held that the AO lacked jurisdiction to make such additions as they were unrelated to the reason for re-assessment. The Tribunal cited the Ranbaxy case, emphasizing that the AO cannot add amounts beyond the scope of the reasons for reopening. As a result, the Tribunal allowed the assessee's appeal, emphasizing the invalidity of the re-assessment proceedings. 3. Undisclosed Interest Income: Additionally, the AO added ?38,362 as undisclosed interest income, completing the assessment at a total income of ?36,64,860. The Ld. CIT(A) upheld these additions. However, the Tribunal's decision to quash the re-assessment proceedings rendered these additions moot. The Tribunal focused on the lack of jurisdiction for such additions due to the absence of a direct link to the reason for re-assessment. Consequently, the Tribunal allowed the appeal, emphasizing the legal invalidity of the re-assessment process. In conclusion, the Tribunal ruled in favor of the assessee, quashing the re-assessment proceedings due to the lack of nexus between the reasons for reopening and the subsequent additions made by the AO. The Tribunal emphasized the legal principle that additions must directly relate to the reasons for initiating re-assessment, as established in relevant case law.
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