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2014 (4) TMI 931 - AT - Income TaxReassessment u/s 147 of the Act reasons recorded for initiation of reassessment proceedings - Held that - When the reasons for reopening the assessment itself is incorrect, the AO accepts that position by not making related addition, no further additions can be made in the course of such reassessment proceedings - The very initiation of reassessment proceedings in such a case ceases to be of any effect Relying upon N.D. Bhatt, IAC v. I.B.M. World Trade Corpn. 1993 (7) TMI 7 - BOMBAY High Court - the AO has not challenged the CIT(A) s deletion of quantum addition made on the basis of reasons recorded for reopening the assessment - the reassessment proceedings were infructuous and no other additions could have been made by the AO either - CIT(A) has given categorical findings which run contrary to the reasons recorded while reopening the assessment and yet the revenue authorities have not raised, either in appeal or by any other mode, even a whisper against such findings which have thus reached finality - The very reassessment proceedings were also based on erroneous reading of facts which cannot lead to a legally sustainable addition Decided in favour of Assessee.
Issues Involved:
1. Validity of reassessment proceedings. 2. Legality of additions made during reassessment. 3. Impact of CIT(A)'s deletion of the primary addition on the reassessment. Issue-wise Detailed Analysis: 1. Validity of Reassessment Proceedings: The assessee appellant challenged the correctness of the CIT(A)-1's order dated 28th September 2012, which upheld the reassessment under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961, for the assessment year 2002-03. The primary grievance was the validity of the reassessment proceedings. The reassessment was initiated based on information received from the Addl. CIT, which indicated that the assessee was a beneficiary of bogus entries of Long Term/Short Term Capital Gain. A notice under Section 148 was issued on 27.03.2009, with specific reasons recorded for reopening the assessment. However, the CIT(A) deleted the primary addition of Rs.3,98,950/- on the grounds that the Assessing Officer did not provide evidence that the assessee received this amount in addition to the declared amounts. 2. Legality of Additions Made During Reassessment: During the reassessment, the Assessing Officer made additions of Rs.3,98,950/-, Rs.3,98,593/-, and Rs.3,97,955/-. However, the CIT(A) deleted the primary addition of Rs.3,98,950/-, and the revenue did not appeal against this deletion. The tribunal highlighted that once the primary addition, which was the basis for reopening the assessment, was deleted and not contested by the revenue, the reassessment proceedings lose their validity. The tribunal referenced the Hon'ble Bombay High Court's decision in CIT v. Jet Airways (I.) Ltd. 331 ITR 236, which stated that if the income that was the basis for reopening the assessment is not assessed, the Assessing Officer cannot independently assess other incomes that come to notice during the reassessment. 3. Impact of CIT(A)'s Deletion of the Primary Addition on the Reassessment: The tribunal emphasized that the deletion of the primary addition by the CIT(A) and the revenue's acceptance of this deletion render the reassessment proceedings infructuous. The tribunal explained that the reassessment proceedings are based on the reasons recorded for reopening the assessment, and if these reasons are found to be incorrect or unsustainable, the reassessment itself becomes invalid. The tribunal cited the legal principle that the reasons recorded for reopening the assessment must be clear, unambiguous, and based on evidence, and cannot be supplemented or altered later. Conclusion: The tribunal concluded that the reassessment proceedings were invalid because the primary addition, which was the basis for reopening the assessment, was deleted and not contested by the revenue. Consequently, no other additions made during the reassessment could survive legal scrutiny. The tribunal allowed the appeal, declaring the reassessment proceedings infructuous and invalid. Pronouncement: The judgment was pronounced in the open court on 29th November 2013.
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