2019 (11) TMI 1748 - AT - Income Tax

Reopening of assessment u/s 147 - reassessment proceedings initiated to reassess other income - different items of income not connected or related with the reasons to believe - appellant-trust deposited/ invested money with its specified person - Assessee argued that addition made in the assessment order u/s. 143(3)/l47 on the basis of the reasons recorded was deleted by Ld. CIT(A) therefore the other additions made in the said reassessment order which were not part of the reasons recorded for reopening the assessment are not sustainable in the eye of law - HELD THAT - We note that in the assessee s case under consideration the assessment for A.Y. 2009-10 was completed u/s. 143(3)/11 of the Act on 01/03/2011. A notice under section 148 of the Act was issued on 22.03.2016 to reopen the assessment u/s. 147 of the Act. The only reason for issuing the said 148 notice as per Reasons Recorded dated 17.08.2016 was that income has escaped assessment for having deposited money with the specified person M/s. Nissan Developers Properties Pvt. Ltd. We note that addition was deleted by ld CIT(A) and since AO has not issued a fresh notice under section 148 of the Act to reassess the other income therefore the reassessment proceedings initiated by the assessing officer to reassess other income ( as noted by us above) is null and void in the eye of law hence we quash the reassessment proceedings under section 147/148 of the Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the initiation of proceedings under Section 148 for reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Legitimacy of the reassessment proceedings initiated by the Assessing Officer (AO).
3. Validity of the additions made by the AO which were not part of the reasons recorded for reopening the assessment.

Detailed Analysis:

1. Validity of the initiation of proceedings under Section 148 for reopening the assessment under Section 147 of the Income Tax Act, 1961:
The assessee challenged the initiation of proceedings under Section 148, arguing that the notice was based on a wrong assumption that the appellant-trust deposited/invested Rs. 59,42,709/- with a specified person, M/s. NDPPL. The assessee contended that this amount was actually a repayment of an interest-free advance taken from NDPPL, as per the audited books of account and ledger copy of NDPPL. The CIT(A) upheld the reopening of the assessment, stating that the AO had a bona fide belief regarding the violation of Sections 11(5), 13(1)(d), and 13(1)(c) based on new information obtained from a survey under Section 133A.

2. Legitimacy of the reassessment proceedings initiated by the Assessing Officer (AO):
The reassessment proceedings were initiated under Section 147 based on the belief that the income of Rs. 59,42,709/- had escaped assessment due to its deposit with NDPPL, considered a specified person of the assessee. The CIT(A) deleted this addition, observing that the payment was a repayment of an outstanding loan and not an investment for earning income, thus not violating Sections 13(1)(d) or 11(5). The CIT(A) confirmed the validity of the reassessment proceedings, despite the deletion of the primary addition.

3. Validity of the additions made by the AO which were not part of the reasons recorded for reopening the assessment:
The AO made additional assessments of Rs. 3,64,97,000/- invested with Poddar Projects Ltd., Rs. 37,50,000/- received from students in cash, Rs. 9,95,000/- as Corpus Fund, and Rs. 1,07,74,500/- as Development Fund. These additions were not part of the original reasons recorded for reopening the assessment. The Tribunal noted that once the primary reason for reopening the assessment (Rs. 59,42,709/-) was deleted by the CIT(A), the other additions, which were not part of the reasons recorded, could not be sustained. The Tribunal relied on the judgments of the Bombay High Court in Jet Airways (I) Ltd. and the Delhi High Court in Ranbaxy Laboratories Ltd., which held that if the AO accepts that the income initially believed to have escaped assessment has not escaped, it is not open to him to independently assess other income without issuing a fresh notice under Section 148.

Conclusion:
The Tribunal quashed the reassessment proceedings under Section 147/148 of the Act, holding that the additional assessments made by the AO were not sustainable once the primary reason for reopening the assessment was deleted. The appeal of the assessee was allowed, and the reassessment proceedings were declared null and void.