2017 (11) TMI 1285 - AT - Income Tax

Reopening of assessment - income chargeable to tax which has come to notice subsequently in the course of proceedings - Held that - We find that the issue is squarely covered in the given facts of the case by the 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) on the proposition of that the AO could not assess the income chargeable to tax which has come to his notice subsequently, in the course of proceedings under section 147 of the Act, even though the same was not the basis for reopening under section 147 of the Act. As in the present case before us, the AO reopened the assessment on the issue of excess claim of depreciation and export earning received was not offered to tax but subsequently no addition was made on these two accounts and the additions were made on account of short term capital gain and disallowance of expenses for non-deduction of TDS by invoking the provisions of section 40(a)(ia) of the Act. It means that the issue is squarely covered by the decision of Hon ble Bombay High court in the case of Jet Airways (I) Ltd. (supra) and this being a jurisdictional high court decision, respectfully, following the same, we quash the reassessment proceedings and allow the appeal of the assessee.

Summary

Issues:
1. Reopening of assessment under section 147 read with section 148 of the Income Tax Act, 1961.
2. Validity of additions made by the Assessing Officer beyond the reasons recorded for reassessment.

Issue 1: Reopening of Assessment under Section 147:
The appeal arose from the Commissioner of Income Tax (Appeals) confirming the reopening of assessment by the Assessing Officer (AO) under section 147 read with section 148 of the Income Tax Act, 1961. The appellant contested the reopening, arguing that there was no escapement of income and no failure to disclose material facts for reassessment. The AO reopened the assessment based on discrepancies in export earnings and depreciation claimed by the assessee. The appellant objected to the reopening, citing reconciliation of figures and correct depreciation rates. The AO proceeded with reassessment, making additions unrelated to the reasons for reopening. The Commissioner upheld the AO's actions, leading the appellant to appeal before the Tribunal.

Issue 2: Validity of Additions Made by the AO:
The Tribunal analyzed the additions made by the AO beyond the reasons recorded for reassessment. The appellant contended that the additions were not in line with the grounds for reopening. However, the Tribunal found that the additions were linked to the issues mentioned in the reasons for reopening. Specifically, the disallowance under section 40(a)(ia) stemmed from discrepancies in export sales figures, justifying the AO's action. The Tribunal referenced the decision of the Hon'ble Bombay High Court in a similar case, emphasizing that the AO can assess any income that comes to notice during proceedings under section 147. As the reassessment was not based on the issues raised for reopening, the Tribunal quashed the reassessment proceedings, following the jurisdictional high court decision. Consequently, the Tribunal allowed the appellant's appeal, ruling in favor of the assessee.

In conclusion, the Tribunal's judgment focused on the legality of the reassessment under section 147 and the validity of the additions made by the AO. The Tribunal emphasized the need for additions to be connected to the grounds for reopening and cited relevant legal precedents to support its decision in favor of the appellant, ultimately quashing the reassessment proceedings.