Additions made on grounds other than on which re-assessment proceedings were initiated to be quashed: ITAT

The assessee during the F. Y. 2009-10 had made cash deposits of Rs. 6868705 in his bank account maintained with State Bank of India. As per office record, the assessee has not filed his return of income for the F.Y. 2009-10 relevant to A.Y. 2010-11. Therefore, the sources of cash deposits of Rs. 6868705 remained unexplained and had escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. The Assessing Officer reopened the assessment for escapement of the above income by the assessee and made various disallowances of expenses relating to 25% of purchases for want of bills and vouchers. The AO also disallowed opening capital shown by the assessee in his capital account as no explanation was offered by the assessee. There is one more addition that was made by the assessee in respect of the license fee paid by the assessee for want of supporting documents. Other than these three additions there is no other addition or disallowance made by the Assessing Officer relating to the cash deposits made by the assessee.

The Tribunal considering the decision of the Hon’ble Bombay High Court in the case of CIT Vs. M/s. Jet Airways (I) Limited (2011) held that if the Assessing Officer does not make any addition on the primary ground on the basis of which proceedings under Section 147 were initiated, he cannot make other additions.

The tribunal held that the ratio of the decision of the Hon’ble Delhi High Court squarely applies to the facts of the case since the Assessing Officer did not make any addition for which the reopening was made. The Assessing Officer made various other additions other than the addition for which the assessment was reopened.

Therefore, following the above decision of the jurisdictional High Court, the tribunal held that the reassessment order passed by the Assessing Officer under Section 143(3) read with Section 147 of the Act is bad in law and the same was quashed. The reassessment order was quashed on the preliminary ground; the other grounds raised by the assessee on merits are looked into as they become only academic at this stage. Therefore, the appeal was allowed.

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