2022 (5) TMI 1157 - AT - Income Tax

Eligibility of Reopening of assessment u/s 147 - eligibility of addition on other issues which did not found part on the reasons recorded - no addition with respect to the ground on the basis of which the notice u/s 148 of the Act was issued - assessee had sold an immovable property at Village Jonawas which is situated within 5 K.M. from the municipality s limit of Rewari/Dharuhera Municipality and thus was covered in the definition of Capital Assets - HELD THAT - The perusal of the reasons recorded for re-opening the assessment as intimated to assessee vide reasons reveals that the reopening was initiated for the reason that assessee had sold an immovable property value in Village Jonawas which is situated within the 5 K.M. from the municipality s limit and thus was a Capital Asset and therefore the assessee should have offered the Capital gains to tax The assessment order reveals that the additions has been made on a different ground, being addition u/s 68 of the Act on account of unexplained deposits in the Bank. We find that Hon ble Bombay High Court in the case of Jet Airways (I) Ltd. . 2010 (4) TMI 431 - HIGH COURT OF BOMBAY has held that if upon the issuance of notice u/s 148 of the Act, the AO does not assess or reassess the income which was the basis of the notice, it would not be open to assess income under some other issue independently. It has further held that if AO intends to assess some other income, which did not initially formed part of the reason to believe that income has escaped assessment, then a fresh notice u/s 148 of the Act would be necessary. In the present case, it is Ld. A.R. s contention that no new notice u/s 148 of the Act was issued for the issues on which the additions that have been made in the assessment framed u/s 143(3) r.w.s. 147 of the Act. The aforesaid submissions of the Ld. A.R. has not been controverted by Revenue. Hon ble Gujarat High Court in the case of CIT vs. Mohmed Juned Dadani 2013 (2) TMI 292 - GUJARAT HIGH COURT after considering the effect of explanation 3 to Section 147 of the Act has held that if the assessing officer does not make any addition with respect to the ground on the basis of which the notice u/s 148 of the Act was issued, then he cannot make addition on other issues which did not found part on the reasons recorded. Thus in the present case, assessment framed by the AO is on other issues which is not part of the reasons recorded for reopening the assessment. In such a situation, the assessment order is not sustainable in the eye of law. We accordingly set aside the assessment. - Decided in favour of assessee.

Summary

Issues:
1. Validity of notice issued u/s 148 and assessment order passed on that basis.
2. Addition of Rs.63,00,000 as unexplained income from unexplained sources.
3. Legality of the addition made by the assessing officer.
4. Scope of provisions of section 147/148 of Income Tax Act, 1961.
5. Admissibility of additional ground challenging the validity of the assessment.
6. Jurisdiction of the Tribunal to examine legal issues raised by the assessee.
7. Reopening of assessment and framing of the order u/s 143(3) r.w.s. 147 of the Act.

Analysis:
1. The appeal challenged the validity of the notice issued u/s 148 and the subsequent assessment order. The AO initiated reassessment based on the sale of an immovable property by the assessee. However, the AO made an addition of Rs.63,00,000 under a different provision (section 68) than the one mentioned in the reasons for reopening the assessment. The Tribunal held that if the AO does not assess the income which was the basis of the notice, he cannot independently assess income under a different issue without issuing a fresh notice. Citing relevant case laws, the Tribunal set aside the assessment as unsustainable in law.

2. The assessee contested the addition of Rs.63,00,000 as unexplained income from unexplained sources. The Tribunal found that the addition was made under a provision different from the reason for reassessment, rendering it unsustainable. As per legal precedents, the AO cannot make additions on issues not part of the reasons recorded for reopening the assessment without issuing a fresh notice. Therefore, the Tribunal allowed this ground of appeal and quashed the assessment.

3. The Tribunal addressed the legality of the addition made by the assessing officer. It was observed that the AO added Rs.63,00,000 under section 68 of the Act, which was not in line with the reason for reopening the assessment. Relying on established legal principles, the Tribunal held that such additions without a fresh notice for new issues are not permissible. Consequently, the Tribunal set aside the assessment as not sustainable in law.

4. The issue regarding the scope of provisions of section 147/148 of the Income Tax Act, 1961 was examined. The Tribunal emphasized that the AO's authority to make additions is limited to the issues mentioned in the reasons for reassessment. Adding income under a different provision without issuing a fresh notice was deemed impermissible by legal precedents. The Tribunal, following established legal principles, set aside the assessment due to the inconsistency between the reason for reassessment and the actual additions made.

5. The Tribunal considered the admissibility of an additional ground challenging the validity of the assessment. The assessee sought to challenge the jurisdiction of the assessment framed under section 143(3) r.w.s 147 of the Act. The Tribunal admitted the additional ground, citing relevant legal decisions that support the Tribunal's authority to examine legal issues raised by the parties, even if not raised before lower authorities, as long as the essential facts are on record.

6. The Tribunal discussed the jurisdiction to examine legal issues raised by the assessee through additional grounds of appeal. It was argued that the legal issue challenging the validity of the assessment goes to the root of the matter and can be raised at any stage before the Tribunal. Citing relevant legal precedents, the Tribunal admitted the additional ground and proceeded to address the appeal in the interest of substantial justice.

7. The Tribunal analyzed the issue of reopening the assessment and framing the order under section 143(3) r.w.s. 147 of the Act. It was observed that the AO initiated reassessment based on the sale of an immovable property, but the additions were made under a different provision. Relying on legal judgments, the Tribunal held that additions made on issues not part of the reasons for reassessment require a fresh notice. Consequently, the Tribunal set aside the assessment as not sustainable in law, thereby allowing the appeal of the assessee.