The assessee preferred an appeal against the order passed by the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre for Assessment Year 2014-15. The assessee challenged both the validity of reassessment proceedings and the additions made on merits.

The assessee had originally filed the return of income declaring total income of ₹3,95,260. The case was selected for limited scrutiny under CASS, and assessment under section 143(3) was completed by making additions in respect of unsecured loans from seven persons amounting to ₹14,08,400 and commission income of ₹1,16,417. On appeal, the CIT(A) deleted the additions holding that the Assessing Officer had exceeded the scope of limited scrutiny, but simultaneously issued a direction under section 150(1) of the Income-tax Act, 1961, directing the Assessing Officer to reopen the assessment.

Pursuant to the said direction, the Assessing Officer issued notice under section 148 and completed reassessment by making the same additions. The CIT(A) upheld the reassessment as well as the additions, leading to the present appeal.

Before the Tribunal, the assessee contended that the reopening was bad in law as it was based on the direction of the CIT(A), that no new tangible material was brought on record, and that the notice under section 148 was issued merely to cure defects in the original assessment framed under limited scrutiny. It was further argued that the CIT(A) had exceeded his jurisdiction by directing reopening of assessment.

The Tribunal examined the statutory provisions of sections 251 and 150 of the Act and held that while the CIT(A) has powers to confirm, reduce, enhance, or annul an assessment, section 150 specifically empowers the Assessing Officer to issue notice under section 148 at any time in consequence of or to give effect to a finding or direction contained in an appellate order. Since the direction issued by the CIT(A) in the original appellate order was not challenged independently by the assessee, the Tribunal held that the Assessing Officer acted within jurisdiction in issuing notice under section 148. Accordingly, the legal grounds challenging the reopening were rejected.

On merits, with regard to the addition of ₹14,08,400 on account of unsecured loans, the Tribunal observed that the assessee had furnished confirmations, bank statements, and other supporting documents establishing the identity, creditworthiness, and genuineness of the loan creditors. The Revenue failed to bring any material on record to controvert the evidences filed. The Tribunal held that the assessee had duly discharged the onus under section 68, and therefore, the addition was unsustainable and was directed to be deleted.

As regards the disallowance of ₹1,16,417 relating to commission income, the Tribunal noted that the assessee failed to reconcile the discrepancy pointed out by the Assessing Officer and did not furnish any satisfactory explanation either before the lower authorities or before the Tribunal. In the absence of reconciliation, the disallowance was upheld.

Accordingly, the appeal of the assessee was partly allowed.

 Source Link- https://itat.gov.in/public/files/upload/1767928846-zyJzVs-1-TO.pdf

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