Additions Based On Altogether Different Issue On Which No Reasons Were Recorded, Dents Proceedings U/s 147 / 148: Mumbai ITAT
Pankaj Bajpai
15 March 2024 9:00 AM IST
On finding that addition which is not based on the reasons for reopening is un-sustainable, the Mumbai ITAT deleted the addition made by AO u/s 69C of the Income Tax Act, 1961.The Bench of the ITAT comprising of Narender Kumar Choudhry (Judicial Member) and Padmavathy S. (Accountant Member) observed that, “the return of income was assessed under section 143(3) of the Act and the additions...
On finding that addition which is not based on the reasons for reopening is un-sustainable, the Mumbai ITAT deleted the addition made by AO u/s 69C of the Income Tax Act, 1961.
The Bench of the ITAT comprising of Narender Kumar Choudhry (Judicial Member) and Padmavathy S. (Accountant Member) observed that, “the return of income was assessed under section 143(3) of the Act and the additions made by the Assessing Officer and affirmed by the Ld. Commissioner, in fact, are based on the different issue on which no reasons were recorded and therefore dents the proceedings under section 147 / 148 of the Act as well as the assessment order itself. Hence, we do not find any hesitation to quash the assessment order itself being void-ab-initio.” (Para 11.5)
As per the brief facts of the case, the case of the assessee was reopened mainly on the reason / information received from DDIT(Inv), to the effects that the assessee has received bogus accommodation entries from two different companies. Against the said reasons for reopening, the assessee filed its reply / submission and admittedly, no addition on account of reasons recorded / alleged bogus accommodation entries has been made by the AO, which impliedly goes to show that the AO accepted the claim of the assessee qua ground for reopening the case. However, the AO proceeded further to make the disallowance on account of bogus and artificial loss booked by the assessee on BSE equity derivative segment by way of expiry trade and the disallowance u/s 69C @2% of the loss allegedly booked by the assessee.
The Bench noted that the question emerging in the present case is as to whether addition which is not based on the reasons for reopening is sustainable or not.
The Bench observed while referring the case of Commissioner of Income-tax-5, Mumbai vs. Jet Airways (I) Ltd 331 ITR 236 (Bom) that if after issuing a notice u/s 148, the AO accepted the contention of the assessee and holds that the income for which he had initially formed a reason to believe had escaped assessment, as a matter of fact not escaped assessment, it is not open to the AO independently to Assess some other income. If he intends to do so, a fresh notice u/s 148 would be necessary, the legality of which would be decided in the event of a challenge by the assessee.
The Bench further observed while referring to the decision of Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs CIT 336 ITR 136 (Del) that where a new issue comes before AO during the course of proceedings of assessment or re-assessment of escaped income and which intends to take into account, he would be required to issue a fresh notice u/s 148.
Therefore, on finding no reason for addition, the ITAT accepted the assessee's appeal.
Counsel for Appellant/Taxpayer: Akshay Jain
Counsel for Respondent/Department: Mahita Nair
Case Title: M/s Manu Stock Broking Private Limited verses ACIT
Case Number: I.T.A. No.3085/Mum/2023
