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Issues Involved:
1. Taxability of Rs. 88 lakhs as income under the head "Salaries". 2. Validity of reopening assessment under section 147. 3. Inclusion of Rs. 35,008 and Rs. 14,000 as salary income. Issue-wise Detailed Analysis: 1. Taxability of Rs. 88 lakhs as income under the head "Salaries": The assessee challenged the finding that Rs. 88 lakhs received was taxable as income under the head "Salaries" under section 17(3)(i). The assessee argued that the amount was a non-compete fee, capital in nature, and not related to employment. The CIT(A) held that the agreement was a device to evade tax and that the payment was made to retain the assessee's services for the continuity of business, thus taxable as salary. The AO concluded that the payment coincided with the date the assessee became an employee of Bax and was therefore profit in lieu of salary under section 17(3)(i). The Tribunal noted that the non-compete agreement overlapped with the employment agreement, making it taxable as salary. The Tribunal distinguished this case from Saurabh Srivastava's case, where the non-compete agreement was independent. Thus, the Tribunal upheld the inclusion of Rs. 88 lakhs as salary income. 2. Validity of reopening assessment under section 147: The assessee argued that the reopening was based on a mere change of opinion without new material. The CIT(A) held that the AO had a reason to believe that income had escaped assessment, which was sufficient for reopening under section 147. The Tribunal referred to the decision in Mahanagar Telephone Nigam Ltd., which stated that non-issuance of notice under section 143(2) does not disempower the AO from initiating reassessment if there is reason to believe income escaped assessment. The Tribunal found that the AO had material on record that the assessee received Rs. 88 lakhs, paid advance tax, and later claimed it as a capital receipt. This provided a rational nexus for reopening. The Tribunal dismissed the assessee's plea of non-issuance of notice under section 143(2) in reassessment proceedings, finding no rebuttal to the AO's assertion of issuing notices. Thus, the reopening of assessment was held valid. 3. Inclusion of Rs. 35,008 and Rs. 14,000 as salary income: The assessee contended that these amounts were reimbursements of expenses and not taxable. The Tribunal noted that in reassessment proceedings, the AO can only assess income that escaped assessment or income found during reassessment, not make general enquiries. The Tribunal followed the decision in Vipan Khanna, which held that the AO cannot make fishing enquiries in reassessment. Thus, the Tribunal allowed the assessee's ground, holding that the AO did not have jurisdiction to add these amounts as salary income. Conclusion: The Tribunal upheld the inclusion of Rs. 88 lakhs as salary income and validated the reopening of assessment under section 147. However, it allowed the assessee's appeal regarding the inclusion of Rs. 35,008 and Rs. 14,000 as salary income, holding that the AO exceeded his jurisdiction in reassessment proceedings. The appeal was partly allowed.
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