2020 (7) TMI 627 - AT - Income Tax

Reopening of assessment - Return filed beyond the time prescribed u/s 139(4) and therefore, was treated nonest by the AO - Belated return filed - HELD THAT - In the instant case, the AO had initiated proceedings u/s 147 for escapement of income which was the returned income filed prior to issue of notice u/s 148 in the belated return and as well as in the return filed in response to notice u/s 148 and since the AO has accepted the said returned income and proceeded to make various other additions without issuing fresh notice u/s 147/148, therefore, we are of the considered opinion that the AO has exceeded his jurisdiction in reassessing issues other than the issues in respect of which the proceedings are initiated and reasons for the initiation of those proceedings cease to survive. We, therefore, hold that the various other additions made by the AO are not in accordance with the law being without jurisdiction and, therefore, are to be deleted. Penalty levied u/s 271(1)(c) - HELD THAT - Since, in the quantum appeal we have deleted the various additions made by the AO and partly sustained by the CIT(A), therefore, the penalty does not survive. Accordingly the order of the CIT(A) partly sustaining the penalty levied by the AO u/s 271(1)(c) is set aside and the AO is directed to cancel the penalty. - Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment proceedings under Section 147/148 of the Income Tax Act.
2. Validity of additions made beyond the reasons recorded for reopening under Section 148.
3. Validity of penalty levied under Section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings Under Section 147/148:
The assessees challenged the reassessment proceedings initiated by the Assessing Officer (AO) under Section 147/148 on the grounds that the reasons for reopening were not communicated during the assessment proceedings and were based on mere AIR information. The Tribunal noted that the AO had issued notice under Section 148 after recording reasons that income to the tune of ?9,43,897/- had escaped assessment. However, the AO accepted the returned income of ?9,43,897/- in the reassessment proceedings and made various other additions without issuing a fresh notice under Section 148. The Tribunal referred to the decision of the Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT, which held that the AO cannot make other additions if the reasons for the initiation of reassessment proceedings cease to survive. The Tribunal concluded that the AO exceeded his jurisdiction by making additions beyond the reasons recorded for reopening, and hence, the reassessment proceedings were invalid.

2. Validity of Additions Made Beyond the Reasons Recorded for Reopening:
The assessees argued that the AO made various additions without issuing a fresh notice under Section 148, which were not part of the reasons recorded for reopening. The Tribunal observed that the AO had initiated proceedings for escapement of income of ?9,43,897/-, which was the returned income filed prior to the issue of notice under Section 148. Since the AO accepted the said returned income and made other additions without issuing a fresh notice, the Tribunal held that the AO had exceeded his jurisdiction. The Tribunal relied on the decision of the Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT, which held that the AO cannot independently assess other income if the reasons for the initiation of reassessment proceedings cease to survive. Consequently, the Tribunal deleted the various other additions made by the AO.

3. Validity of Penalty Levied Under Section 271(1)(c):
The assessees challenged the penalty levied by the AO under Section 271(1)(c) of the Act. Since the Tribunal deleted the various additions made by the AO in the quantum appeal, the penalty under Section 271(1)(c) did not survive. Accordingly, the Tribunal set aside the order of the CIT(A) partly sustaining the penalty and directed the AO to cancel the penalty.

Conclusion:
The Tribunal allowed all the four appeals filed by the respective assessees, holding that the reassessment proceedings were invalid, the additions made beyond the reasons recorded for reopening were without jurisdiction, and the penalty levied under Section 271(1)(c) did not survive. The Tribunal's decision was based on the principle that the AO cannot make other additions if the reasons for the initiation of reassessment proceedings cease to survive, as established in the case of Ranbaxy Laboratories Ltd. vs. CIT.

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