The Mumbai Bench of the Income Tax Appellate Tribunal examined the validity of reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, and the legality of an addition made on account of interest income, where the income forming the basis of reopening had already been voluntarily offered to tax by the assessee.

The assessee, an individual, had not filed a return of income for Assessment Year 2011-12. Information available in the Non-Filer Management System indicated that the assessee had sold an immovable property for a consideration of ₹55,00,000 during the relevant year. On this basis, the Assessing Officer reopened the assessment under Section 148 to examine the capital gains arising from the said transaction.

In response to the notice under Section 148, the assessee filed a return of income declaring total income of ₹18,70,760, which included short-term capital gains of ₹14,67,190 arising from the sale of the property. During the reassessment proceedings, the Assessing Officer noticed that interest income amounting to ₹13,15,618 reflected in Form 26AS had not been offered to tax and accordingly made an addition under the head “Income from Other Sources”.

The assessee’s appeal before the Commissioner of Income Tax (Appeals) was dismissed for non-prosecution. Before the Tribunal, the assessee contended that since no addition was made on the issue of capital gains, which formed the basis of reopening, the reassessment was invalid in view of the decision of the Bombay High Court in CIT v. Jet Airways (I) Ltd. It was further submitted that the interest income did not belong to the assessee but pertained to fixed deposits held in a fiduciary capacity on behalf of Hiraco Jewellery (India) Pvt. Ltd., which had already offered such income to tax.

The Tribunal held that the reliance placed on Jet Airways (I) Ltd. was misplaced on the facts of the case. It was observed that the assessee had suo motu offered the capital gains income in the return filed pursuant to the notice under Section 148. Such voluntary offering of income constituted assessment of the very issue forming the basis of the belief that income had escaped assessment. Consequently, the reassessment proceedings could not be held invalid merely because no separate addition was made by the Assessing Officer on that issue.

With regard to the addition of interest income, the Tribunal noted that the assessee had produced documents to contend that the interest income belonged to the company and had already been taxed in its hands. However, no verification or adjudication of these facts had been carried out by the Assessing Officer or the Commissioner (Appeals). The Tribunal therefore held that the matter required fresh examination.

Accordingly, the Tribunal set aside the issue relating to the addition of interest income to the file of the Assessing Officer for fresh verification and adjudication in accordance with law, after granting reasonable opportunity of being heard to the assessee. The appeal was allowed for statistical purposes.

Source Link - https://itat.gov.in/public/files/upload/1768289093-AQxMNh-1-TO.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.