2023 (3) TMI 1105 - AT - Income Tax

Reopening of assessment u/s 147 - addition on all grounds or issues which may come to notice of AO subsequently during the course of proceedings u/s 147 even when the reason for the notice for such income which may have escaped assessment may not survive - HELD THAT - We are of the considered opinion that since the decision in Jet Airways India Ltd 2010 (4) TMI 431 - HIGH COURT OF BOMBAY has been rendered by the Hon ble jurisdictional High Court therefore the same is binding on us. In view of our aforesaid findings and respectfully following the decisions of the Hon ble jurisdictional High Court cited supra we are of the considered opinion that in the present case the Assessing Officer had no jurisdiction to make the addition under section 147 of the Act. As a result the petition filed by the assessee under Rule 27 of ITAT Rules is allowed. Reopening of assessment u/s 147 - undisclosed income in bank in bank account - information received under the DTAA from the French authorities regarding the foreign bank accounts under Article 28 of the Indo-French Fiscal Convention Treaty held with the HSBC Bank Geneva Switzerland - HELD THAT - As reassessment proceeding under section 147 of the Act was initiated to bring to tax the funds lying in various bank accounts however while passing the assessment order the Assessing Officer made the addition of the minimum balance required to open an account in HSBC Bank Geneva. Thus our aforesaid findings rendered shall apply mutatis mutandis. As a result the petition dated 17/01/2023 filed by the assessee under Rule 27 of ITAT Rules is allowed.

Summary

Issues Involved:
1. Assumption of jurisdiction under section 147 of the Income Tax Act.
2. Addition of unexplained money under section 69A of the Income Tax Act.
3. Validity of reassessment proceedings based on information received under DTAA.

Summary:

Assumption of Jurisdiction under Section 147:
The appeals involve the reassessment proceedings initiated under section 147 of the Income Tax Act based on information received from the French authorities under the India-France Double Taxation Avoidance Agreement (DTAA). The information pertained to undisclosed foreign bank accounts held with HSBC Bank, Geneva, Switzerland, by four individuals who are beneficial owners of accounts held in the names of four companies. The Assessing Officer (AO) issued notices under section 148 of the Act, and the assessees filed returns in compliance. The learned CIT(A) upheld the AO's assumption of jurisdiction under section 147, stating that the AO had valid reasons to initiate reassessment proceedings.

Addition of Unexplained Money under Section 69A:
The AO made additions under section 69A of the Act, treating the minimum balance required to open an account in HSBC Bank, Geneva, as unexplained money. For the assessment year 1997-98, the AO added CHF 100,000 (equivalent to Rs. 25,24,000) to the total income of the assessee, Shri Milan Kavinchandra Parikh. Similar additions were made for the assessment year 1999-2000 for the other assessees. The learned CIT(A) deleted these additions, relying on the decision of the coordinate bench of the Tribunal in the assessees' own cases for the assessment years 2006-07 and 2007-08.

Validity of Reassessment Proceedings Based on Information Received under DTAA:
The AO initiated reassessment proceedings based on the "Base Note" information received from the French authorities, which indicated that the assessees were beneficial owners of the undisclosed foreign bank accounts. The AO concluded that the funds lying in these accounts were the income of the assessees that had escaped assessment. However, the AO ultimately made additions based on the minimum balance required to open the accounts, rather than the funds lying in the accounts. The Hon'ble jurisdictional High Court in Jet Airways India Ltd. held that if the AO does not make any addition based on the reasons for reopening the assessment, he cannot independently assess other income without issuing a fresh notice under section 148.

Conclusion:
The Tribunal allowed the petitions filed by the assessees under Rule 27 of the ITAT Rules, holding that the AO had no jurisdiction to make the additions under section 147 of the Act, as the additions were not based on the reasons recorded for reopening the assessments. Consequently, the grounds raised by the Revenue on merits were rendered academic and dismissed. All the appeals by the Revenue were dismissed, and the petitions under Rule 27 of the ITAT Rules, as filed by the assessees, were allowed.