Explanation 3 To Sec 147 Can't Be Resorted To Make Addition On Any Other Issue Which Is Not Included In Reasons For Reopening: New Delhi ITAT

The Bench of the ITAT comprising of Anubhav Sharma (Judicial Member) and Shamim Yahya (Accountant Member) observed while referring to the decision of Jurisdictional High Court in the case of Commissioner of Income Tax vs. Monarch Educational Society [2016] 387 ITR 416 that, “If no addition is made on the basis of the reasons to believe recorded by the Assessing Officer for reopening the assessment under section 148 of the Act, resort cannot be had to Explanation 3 to section 147 of the Act to make an addition on any other issue not included in the reasons to believe for reopening the assessment.” (Para 6)

As per the brief facts of the case, the assessee is corporate society and his case was reopened as Non-PAN AIR has been received that the assessee had purchased immovable property of Rs. 1,00,00,000/-. To ascertain the assessment particulars of the assessee and to verify the transaction, query letter and verification letter u/133(6) were issued to the assessee to explain the source of this high value transaction. However, no plausible explanation has been furnished by the assessee with respect to the aforesaid high value transaction. Even the assessee has not furnished its PAN. Thus, the source of this high value transaction entered into by the assessee remained unexplained. Hence, the AO has reason to believe that the income of Rs 1,00,00,000/-, chargeable to tax has escaped assessment within the meaning of section 147 on account of unexplained/undisclosed investment made by the assessee.

The Bench reiterated the AO's observation in respect of the addition that, “Further, during the course of assessment proceedings, the assessee was required to file a valid confirmation with the details of each Members such as complete Name & address, PAN, details of their business/profession, their relations with each other, their ITR and copy of bank account of the members evidencing such transactions. But the assessee was failed to prove their identity, creditworthiness and genuineness and the explanation offered was not satisfactory found. Hence, the receipts of Rs. 51,85,000/- shows as received from members of the society, are to be added to the income of the society as unexplained income.”

The Bench observed that no addition was made on the recorded reasons but addition was made on some other issue, which is not permissible.

Therefore, on finding that the issue is squarely covered in favour of the assessee, the ITAT allowed the assessee's appeal.

Counsel for Appellant/Taxpayer: Ved Jain

Counsel for Respondent/Department: Amit Katoch

Case Title: Vishram Sahakari Awas Samiti Limited verses ITO

Case Number: ITA No:- 1667/DEL/2021

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