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2023 (4) TMI 634 - AT - Income TaxReopening of assessment u/s 147 - addition u/s 68 - Addition made on amounts which did not form part of the reasons recorded for reopening - CIT(A) deleting the addition u/s 68 on concluding that when on the ground on which the reopening of assessment is based, no additions are made by the AO in the order of assessment, he cannot make additions on some other grounds which did not form part of the reasons recorded by him - .HELD THAT - Assessee s case was reopened on the basis of information relating to accommodation entry received from TVH Trading Company Pvt. Ltd. No addition was made in the assessment order on this account since the amount had already been added in the order u/s 153A. The addition was made u/s 68 in respect of the amount received from 5 persons which did not form part of the reasons recorded for reopening of the case Case laws in the case of Ranbaxy Laboratories Ltd. 2011 (6) TMI 4 - DELHI HIGH COURT and case of Jet Airways (I) Ltd. 2010 (4) TMI 431 - HIGH COURT OF BOMBAY are fully applicable and there is no infirmity in the well-reasoned order of ld. CIT (A). DR tried to submit that there are some other High Courts who have taken a contrary view. But, in our considered view, this is not an acceptable proposition in view of the decision of the Hon ble jurisdictional High Court which is a binding. Hence, we uphold the order of ld. CIT (A). Decided against revenue.
Issues Involved:
1. Deletion of addition under Section 68 of the Income Tax Act. 2. Interpretation of Explanation 3 to Section 147 of the Income Tax Act. 3. Validity of reassessment proceedings when no addition is made on the original grounds for reopening. Summary: Issue 1: Deletion of Addition under Section 68 of the Income Tax Act The Revenue's appeal challenged the deletion of an addition of Rs. 58,18,50,000/- made under Section 68 of the Income Tax Act by the CIT(A). The CIT(A) concluded that since no addition was made on the grounds for which the reopening was initiated, the Assessing Officer (AO) could not make additions on other grounds that did not form part of the reasons recorded for reopening. This conclusion was based on precedents from the Hon'ble Delhi High Court in Ranbaxy Laboratories Ltd. vs. CIT and the Hon'ble Bombay High Court in CIT vs. Jet Airways (I) Ltd. Issue 2: Interpretation of Explanation 3 to Section 147 of the Income Tax Act The CIT(A) elaborated on Explanation 3 to Section 147, which allows the AO to assess or reassess income in respect of any issue that comes to his notice during the proceedings, even if it was not included in the reasons recorded for reopening. However, the CIT(A) referenced judicial decisions that clarified the AO must first assess or reassess the income that formed the basis for reopening before making any other additions. This interpretation was supported by the Hon'ble Bombay High Court's judgment in Jet Airways (I) Ltd., which held that the AO cannot independently assess other income if the original reason for reopening does not result in an addition. Issue 3: Validity of Reassessment Proceedings The CIT(A) observed that the notice under Section 148 was issued based on unexplained capital receipts from TVH Trading Company Pvt. Ltd. amounting to Rs. 26,40,00,000/-. Since no addition was made on this account in the assessment order, the addition of Rs. 58,18,50,000/- from other sources was not sustainable. This view was supported by various judgments, including those from the Delhi High Court in Ranbaxy Laboratories Ltd. and the Bombay High Court in Jet Airways (I) Ltd., which held that if no addition is made on the grounds for reopening, the AO cannot make additions on other issues. Conclusion: The Tribunal upheld the CIT(A)'s order, agreeing that the AO could not make additions on issues not forming part of the reasons for reopening if no addition was made on the initial grounds. The Tribunal dismissed the Revenue's appeal, affirming that the CIT(A)'s decision was well-reasoned and consistent with binding judicial precedents. The appeal filed by the Revenue was dismissed.
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