2024 (2) TMI 1170 - AT - Income Tax

Reopening of assessment u/s 147 - profit earned from the commodity transaction was not shown in the return of income - AO jurisdiction to make addition in respect of the item which does not form basis for forming opinion that income escaped assessment of tax especially, in view of the fact that no addition was made in respect of item for which the reasons were issued for by issuance notice u/s. 148 of the Act HELD THAT - This issue is no longer res integra by virtue of the judgment of Jet Airways (I) Ltd., 2010 (4) TMI 431 - HIGH COURT OF BOMBAY , Ranbaxy Laboratories Ltd. vs. CIT, 2011 (6) TMI 4 - DELHI HIGH COURT and Shri Ram Singh, 2008 (5) TMI 200 - RAJASTHAN HIGH COURT wherein it is held that it is not permissible for the Assessing Officer to make any other addition, if no addition is made in respect of items of which reasons were recorded for issuance of notice u/s. 148. Thus law is settled to the extent that it is not permissible for the AO to make any other addition, if the AO had chosen not to make addition in respect of items for which reasons were recorded by issuing notice u/s. 148 . As discussed, since the AO had chosen not to make addition in respect of the profit of Rs. 15,884/- earned from the commodity transaction made through Star Commodities, the AO had no jurisdiction to make addition u/s. 69. The very fact that the AO had sought make addition on the commodity transaction shows that the AO had no doubts about the genuineness of transaction. The addition of profit is separate and independent of addition made by the AO u/s. 69 of the Act. Thus, ratio of decision in the case of Jet Airways(I) Ltd. 2010 (4) TMI 431 - HIGH COURT OF BOMBAY is squarely applicable to the facts of present case. Therefore, the AO had no jurisdiction to make addition. We, therefore, direct the AO to delete the addition and the appeal filed by the assessee stands allowed.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) to make an addition not forming the basis for the belief that income escaped assessment.
2. Legality of the addition of Rs. 72,47,912/- under Section 69 of the Income Tax Act, 1961.

Summary:

Issue 1: Jurisdiction of the AO to Make Additional Assessments
The core issue in the appeal was whether the AO had the jurisdiction to make an addition of Rs. 72,47,912/- in the reassessment proceedings when the basis for reopening the assessment was the non-disclosure of a profit of Rs. 15,884/-. The appellant argued that the AO had no jurisdiction to make such an addition since the AO did not make an addition of Rs. 15,884/-, which was the basis for the belief that income had escaped assessment. The appellant relied on several judgments, including CIT Vs. Jet Airways(I) Ltd. (2011) 331 ITR 236 (Bombay), which held that if no addition is made in respect of the item for which reasons were recorded for issuance of notice under Section 148, then the AO cannot make any other addition.

Issue 2: Legality of the Addition of Rs. 72,47,912/- under Section 69
The AO made an addition of Rs. 72,47,912/- under Section 69 of the Act, holding that the commodity transactions through Star Commodities and J.K. Enterprises were dubious and fictitious, aimed at bringing unaccounted income into the books of account. The CIT(A) upheld the AO's findings. However, the appellant contended that since the AO did not add the profit of Rs. 15,884/- (the basis for reopening the assessment), the AO lacked jurisdiction to make the addition of Rs. 72,47,912/-.

Tribunal's Findings:
The Tribunal referenced the judgment in CIT Vs. Jet Airways(I) Ltd. and other similar cases, reiterating that it is not permissible for the AO to make any other addition if no addition is made concerning the item for which reasons were recorded for issuing notice under Section 148. The Tribunal noted that the AO sought to reopen the assessment to add the profit of Rs. 15,884/- and had no doubts about the genuineness of the transaction. Therefore, the addition of Rs. 72,47,912/- was not justified, and the AO had no jurisdiction to make such an addition.

Conclusion:
The Tribunal directed the AO to delete the addition of Rs. 72,47,912/-, allowing the appeal filed by the assessee. The order was pronounced on February 21, 2024.