2023 (7) TMI 607 - AT - Income Tax

Scope of Reopening of assessment u/s 147 - addition made by the AO in the income already assessed u/s 143(3) - stand of the assessee is that if an addition on the item for which assessment was reopened is not made, then no addition can be made - HELD THAT - As per case of CIT vs.- Jet Airways 2010 (4) TMI 431 - HIGH COURT OF BOMBAY Ranbuxy Laboratories 2011 (6) TMI 4 - DELHI HIGH COURT and Md. Juned 2013 (2) TMI 292 - GUJARAT HIGH COURT as unanimous in their approach that if an assessment is reopened on account of escapement of income of item A , then, discovery of any other escapement during reassessment proceedings would only be added if addition is being made on item A . In this case as per relevant part of the reason above but no addition is being made on that item, therefore, no other addition can be made. We, thus delete the addition and allow this appeal of the assessee.

Summary

Issues:
The issues involved in the judgment are related to the reopening of assessment, addition of income, and the interpretation of relevant legal provisions.

Reopening of Assessment:
The appeal was directed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2012-13. The application for permission to raise an additional ground of appeal was filed by the assessee's counsel, contending that no addition was made on the item for which the assessment order was reopened. The reasons for reopening the assessment were crucial in determining the validity of the reassessment. The discrepancy in dates raised questions regarding the timing of the recording of reasons and the subsequent assessment process.

Addition of Income:
The primary issue revolved around the addition of Rs. 5,35,262/- by the Assessing Officer. The discrepancy in the closing balance between the assessee's ledger and that of M/s. Angel Commodities Broking Pvt. Limited led to the addition. However, the assessee argued that if no addition was made on the item for which the assessment was reopened, then no further addition could be justified. The judgment cited various High Court decisions supporting this legal principle.

Legal Interpretation:
The Tribunal analyzed the reasons for reopening the assessment, focusing on the source of funds utilized by the assessee. Despite the reopening being based on the alleged escapement of income related to a specific amount, no addition was made on this particular item. The Tribunal referred to precedents set by the Bombay High Court, Delhi High Court, and Gujarat High Court, emphasizing that any additional income discovered during reassessment should be linked to the original item in question. As no addition was made on the identified item, the Tribunal allowed the appeal and deleted the addition of Rs. 5,35,262/-.

Conclusion:
The Tribunal allowed the appeal of the assessee, emphasizing the principle that if no addition is made on the item for which the assessment was reopened, no further addition can be justified. The Tribunal's decision to delete the additional income added by the Assessing Officer was based on this legal interpretation. The order was pronounced in open court on July 11, 2023.