ITAT Quashes Reassessment as No Addition Was Made on Original Ground of Reopening

The ITAT Ahmedabad has ruled that if no addition is made on the original issue that formed the basis of reopening of assessment, then the reassessment proceedings under Section 147 can not be validated. ITAT deleted the Rs 66.49 lakh addition by holding that the Assessing Officer can not independently assess unrelated income if the ground of jurisdiction has failed.

The assessee filed her return of income under Section 139(1) of the Income Tax Act and after a search and seizure operation, the Income Tax Officer (ITO) found out about a cash payment made by the assessee and her co-owner for purchasing a residential unit. On the basis of this information, the AO initiated reassessment proceedings under Section 147.

The Tribunal observed that the assessee had produced banking logs of her past sale of a residential property and linked it to the subsequent purchasing of the residential unit. The AO has failed to provide any concrete evidence or records to disprove the same. The tribunal further observed that the AO has not been able to make any addition on the very ground of opening of the case, which was the alleged cash ‘on-money‘ transaction.

Accordingly, the ITAT held that the reassessment proceedings were invalid and directed deletion of the addition of Rs. 66.49 lakh made under Section 69B read with Section 115BBE of the Act. The appeal of the assessee was allowed.