Facts of the Case

The Revenue filed an appeal under Section 260A of the Income Tax Act, 1961, challenging the order dated 22.01.2024 passed by the Income Tax Appellate Tribunal for Assessment Year 2012-13. The Tribunal had dismissed the Revenue’s appeal and upheld the order of the Commissioner of Income Tax (Appeals), which had deleted additions made pursuant to reassessment proceedings initiated under Section 147 of the Act.

 

Issues Involved

  1. Whether additions can be sustained in reassessment proceedings when no addition is made on the grounds recorded for reopening under Section 147.
  2. Whether Explanation 3 to Section 147 permits the Assessing Officer to make additions on issues not forming part of the recorded reasons, even when the original reason for reopening fails.
  3. Whether the ITAT erred in following the principles laid down in Ranbaxy Laboratories Ltd. v. CIT and CIT v. Jet Airways (I) Ltd..
  4. Whether any substantial question of law arose for consideration under Section 260A.

 

Petitioner’s (Revenue’s) Arguments

  • The Assessing Officer was empowered under Explanation 3 to Section 147 to assess or reassess income on any issue that came to notice during reassessment proceedings, even if it was not part of the reasons recorded under Section 148.
  • The CIT(A) and ITAT erred in deleting the addition of ₹65.40 crore made under Section 68 of the Act.
  • The judicial precedents relied upon by the ITAT required reconsideration in light of pending proceedings before the Supreme Court.

 

Respondent’s (Assessee’s) Arguments

  • The reassessment notice was issued solely on the ground of alleged mismatch between turnover and bank credits.
  • No addition was ultimately made on that ground in the reassessment order.
  • In absence of any addition on the recorded reasons for reopening, no other addition could be sustained, notwithstanding Explanation 3 to Section 147.
  • The issue was squarely covered by binding precedents of the Delhi High Court.

 

Court Order / Findings

  • The High Court observed that the controversy was no longer res integra and stood conclusively covered by the decision in Ranbaxy Laboratories Ltd. v. CIT.
  • The Court reiterated that if the Assessing Officer does not make any addition on the ground for which the assessment was reopened, he cannot proceed to make additions on other issues.
  • The Court also noted its consistent application of the said principle, including in ATS Infrastructure v. ACIT.
  • The Tribunal had correctly applied settled law and committed no error.

 

Important Clarification

The Court clarified that Explanation 3 to Section 147 does not override the foundational requirement that the reassessment must survive on the very reasons recorded for reopening. Failure of the primary reason for reopening vitiates the entire reassessment proceedings.

 

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court held that no substantial question of law arose for consideration and upheld the deletion of additions made in reassessment proceedings under Section 147 of the Income Tax Act, 1961.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770115253_THEPR.COMMISSIONEROFINCOMETAXCENTRAL1VsNAVEENINFRADEVELOPERSENGINEERSPVT.LTD..pdf 

 

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