2021 (12) TMI 816 - AT - Income Tax

Reopening of assessment - unexplained investment - Reopening on the basis of AIR information gathered from ITD System - addition being 12% of total sale turnover of assessee and income from other sources - HELD THAT - We find that there is no discussion about the addition of income from other sources in the assessment order. Assessee vehemently submitted before us that the ld. AO has not made addition on the basis of reasons of reopening. The Hon'ble Jurisdictional High Court in CIT vs Mohmed Juned Dadani 2013 (2) TMI 292 - GUJARAT HIGH COURT held that when on ground of which reopening of assessment was made by AO, he could not have made addition and some other grounds which did not form part of reasons recorded by him. Similar view that taken by the Hon'ble Bombay High Court in CIT vs Jet Airways 2010 (4) TMI 431 - HIGH COURT OF BOMBAY and Hon'ble Delhi High Court in Ranbaxy Laboratories Ltd. vs CIT 2011 (6) TMI 4 - DELHI HIGH COURT Therefore, in view of the aforesaid legal position, we find merit in the submission of ld. AR of the assessee that in absence of addition on the ground which did not form part of reasons recorded, the AO could not have make addition on some other ground, therefore, the plea of the ld. AR of the assessee is allowed and assessment order dated 11.08.2017 is set-aside. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening of assessment without proper discussion in the order.
2. Condonation of delay in filing the first appeal.
3. Estimation of profit at 12% under Sections 44AF/44AD.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2010-11. The case was reopened under section 147 of the Act due to cash deposits by the assessee. The AO estimated income based on turnover without proper documentation. The AO did not make any addition for cash deposits as per the reasons for reopening. The Tribunal set aside the assessment as additions were made on grounds not part of the reasons recorded, citing legal precedents.

2. The delay in filing the appeal was not condoned by the Commissioner of Income Tax (Appeals) despite considering the merits of the case. The Tribunal allowed the appeal based on legal grounds, rendering the discussion on merit and other submissions academic.

3. The AO estimated profit at 12% without proper basis, rejecting the assessee's books of accounts. The Tribunal found the estimation arbitrary and not in line with comparable instances. The assessee provided sales data from multiple years to show varying profit ratios, questioning the AO's estimation methodology. The Tribunal allowed the appeal, highlighting the lack of valid grounds for the estimation.

In conclusion, the Tribunal allowed the appeal based on legal grounds, setting aside the assessment due to additions made on grounds not part of the reasons for reopening. The Tribunal found the estimation of profit at 12% arbitrary and lacking a proper basis, supporting the assessee's contentions. The delay in filing the appeal was not condoned, but the Tribunal's decision rendered further discussion on merit unnecessary.