If additions in income are not made on the grounds for reassessment, no addition can be made elsewhere
The Hon’ble Agra ITAT has held recently in the case of Kumar Goyal vs. ITO (ITAT Agra), I.T.A. No.116/Agra/2012 that if no additions are made on the grounds for reassessment, then no addition can be made elsewhere.
It is a settled principle that in a reassessment proceeding, when no additions are made in the income which has escaped assessment as stated in the reasons behind re-opening the assessment, no other additions can be allowed. In such cases, the reassessment fails.
The underlying principle is that the object behind allowing the re-assessment proceedings is to incorporate the income that has escaped assessment as stated in the reasons that have been cited by an Assessing Officer. But when no additions have been made in the reasons which have been recorded, the purpose of reassessment proceedings becomes frustrated.
However, if additions are made in the income in the reasons cited for re-opening the assessment, the Assessing Officer has the liberty to make additions in the other items, as it appears justified to him.
The Hon’ble Tribunal relied upon the judgment of the Hon’ble jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. and rejected the reassessment order.
Decision of the Bombay High Court:
In another case of CIT vs. Jet Airways (331 ITR 236), the Hon’ble Bombay High Court has held that if after issuing a notice as per the provisions of section 148, the Assessing Officer does not add the income which he earlier had a reason to believe that had not been assessed, to the taxable income of the assessee, it is not allowed to the Assessing Officer to independently assess the other income of the assessee.
It has been further held that if the AO intends to do so, he should issue a fresh notice under section 148 of the Income Tax Act, which would be checked in the case of a challenge by the assessee, otherwise, it is not open to him to assess any other income of the assessee.
The Hon’ble Bombay High Court held that Section 147 implies that the AO has to reassess the income which escaped assessment and state the reasons for the same and thereafter he can also assess or reassess any other income which has escaped assessment and came to his notice at the time of such proceedings.
Other similar decisions of other High Courts:
The Hon’ble Chhattisgarh High Court in the case of ITA no.5441/Del./2011 on 8.11.2011 and in ACIT vs. Major Deepak Mehta (ITA no. 04 of 2006) also expressed similar views.
Recently, the Hon’ble Rajasthan High Court in the case of CIT versus Sri Ram Singh, (2008) 306 ITR 343 (Raj.) also held in similar terms.