No Addition with Explanation of 3 to Section 147: ITAT Delhi Deletes Order

The assessment order is been quashed by the Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) since no addition was incurred based on the reason to believe recorded by the Assessing Officer ( AO ) for reopening the assessment u/s 148 of the Income Tax Act, 1961.

CIT(A) based on the points and situations of the case has erred both the points and in statute in eliminating the taxpayer’s contention that the reopening of assessment proceedings and the re-assessment order passed via the AO is not legal and without jurisdiction and it has been passed without there being a true service of the notice issued u/s 148 of the income tax act.

The representative of the taxpayer Mr Ved Jain, contested the jurisdiction in the same matter. He said as for the cause to which the reopening was performed therefore no addition has been accomplished on that ground. He furnished that the addition is concerning an item which is not cited in the cause recorded for reopening.

Meanwhile the course of assessment proceedings, the taxpayer is directed to file a valid confirmation with the details of each Member such as complete Name & address, PAN, details of their business/profession, their relations with each other, their income tax return (ITR) and copy of bank account of the members proofing these transactions. Taxpayer though unable to prove their identity, credit worthiness, and genuineness, and the explanation offered was not sufficiently discovered.

The receipts of Rs. 51, 85, 000/- depicted as received from members of the society, need to be added to the income of the society as unexplained income.

The bench witnessed that the matter urged by the Revenue stands covered in favour of the taxpayer through the court’s decision in Ranbaxy Laboratories Ltd. v. CIT which has been followed in CIT v. Software Consultants, if no addition is made based on the reasons to believe recorded by the Assessing Officer for reopening the assessment u/s 148 of the Act, resort could not had to Explanation 3 to Section 147 of the Income Tax Act to make an addition on any other issue not included in the reasons to believe for reopening the assessment. No significant question of law appears. The appeal was dismissed.

The problem is squarely covered in taxpayers’ favour, and the assessment order was accountable to be quashed, the two-member bench of the tribunal including Anubhav Sharma (Judicial member) and Shamim Yahya (Accountant member) witnessed. Consequently, the same was quashed. The taxpayer’s appeal stands permitted.