2024 (9) TMI 1330 - AT - Income Tax

Reopening of assessment u/s 147 - capital gain on sale of land or profit on sale of land - as argued no addition made on account of income escaped as per reasons recorded - reopening of assessment based on different grounds than those included in the reason for reopening - HELD THAT - On perusal of Section 147 of the Act would show that, if, the Revenue makes an attempt to reopen the assessment, all that the AO has to show is that, AO has reason to believe that any income chargeable to tax has escaped assessment for the concerned assessment year and while doing so, AO is also empowered to assess any other income, which has escaped assessment and, which comes to AO's notice, subsequently, albeit, during course of the assessment proceedings. Careful reading of Section 147 of the Act would show that it empowers an Assessing Officer to reopen the assessment, if, AO has reason to believe, that any income chargeable to tax has escaped assessment for the relevant year, 'and also bring to tax' , any other income, which may attract assessment, though, it is brought to AO's notice, subsequently, albeit, in the course of the reassessment proceedings. To put it plainly, the purported income discovered subsequently during the course of reassessment proceedings, can be brought to tax, only, if the escaped income, which caused, in the first instance, the issuance of notice under Section 148 of the Act, is assessed to tax. In the present case before us admittedly the AO has reopened the assessment for assessing capital gain on sale of land or profit on sale of land, as noted in the reasons recorded above and while framing reassessment u/s. 143(3) r.w.s.147 of the Act, he has not touched upon this issue and added TP adjustments made for determination of ALP of the assessee. We quash the reassessment order and allow this appeal on jurisdictional issue. Appeal filed by the assessee is allowed.

Summary

Issues:
1. Jurisdiction for reopening of assessment based on different grounds than those included in the reason for reopening.

Analysis:

Issue 1: Jurisdiction for reopening of assessment
The appeal raised concerns regarding the assumption of jurisdiction for reopening the assessment when additions were made on grounds other than those mentioned in the reason for reopening. The appellant argued that the reopening was not valid as it only reflected a change in the assessing officer's opinion without any new evidence of concealed income. Reference was made to the Supreme Court decision in CIT vs. Kelvinator to support this argument. The appellant contended that the Commissioner of Income Tax (Appeals) erred in confirming the reopening of the assessment. The appellant highlighted that no addition was made for the reason recorded for reopening, and the reassessment order was deemed invalid. The appellant cited judgments from the Hon'ble Bombay High Court and Hon'ble High Court of Madras to emphasize that any additional income discovered during reassessment proceedings should be related to the initial reason for reopening the assessment.

Detailed Analysis:
The appellant initially filed its return of income for the assessment year 2010-11, which was later revised, and the assessment was completed under section 143(3) of the Income Tax Act. Subsequently, the assessment was reopened under section 147, and the reasons for reopening were related to the sale of properties at values below the fair market value. The appellant argued that the reassessment order did not address the reasons recorded for reopening but instead focused on transfer pricing adjustments. The appellant relied on legal precedents to assert that any additional income assessed during reassessment should be linked to the initial reason for reopening. The Tribunal noted that the assessing officer had not addressed the issue of capital gains on the sale of land, which was the primary reason for reopening. Consequently, the reassessment order was deemed invalid, and the appeal was allowed on the jurisdictional issue.

Conclusion:
The Tribunal quashed the reassessment order based on the jurisdictional issue, as the assessing officer did not assess the income related to the initial reason for reopening. The Tribunal did not delve into the merits of the case due to the favorable decision on the jurisdictional issue. The appeal was allowed, and the reassessment order was set aside.

This comprehensive analysis covers the jurisdictional issue raised in the appeal and provides a detailed breakdown of the arguments presented, legal precedents cited, and the Tribunal's decision based on the jurisdictional aspect of the case.