By K. B. Bhujle, Advocate
New Page 1
II. Reported :
41 Reassessment : Scope : S. 147 of
Income-tax Act, 1961 : Addition in respect of items other than one on which
notice is given : Permissible only when AO assesses any income with respect to
which he had ‘reason to believe’ to be so : Otherwise reassessment proceedings
become invalid.
[CIT v. Shri Ram Singh, 217 CTR 345 (Raj.)]
In the course of search of some business establishment, a
diary was found, which showed some entry regarding purchase of plot of land by
the assessee for a consideration of Rs.1,66,000, while in the agreement it was
shown to have been purchased for Rs.45,000. On this basis the Assessing Officer
issued notice u/s.148. In the course of the reassessment proceedings the
Assessing Officer was satisfied with the source of investment in land and no
addition was made on that count. However, in the course of reassessment
proceedings the Assessing Officer found that during the relevant year the
assessee had made deposits of Rs.1,65,000 cash, for which there was no
explanation. He therefore made an addition of Rs.1,65,000 and completed the
reassessment proceedings. The Tribunal found that the Assessing Officer has
accepted the investment in the plot of land which was the very basis of
reopening. The Tribunal held that when the very base of the reopening goes, the
reason for reopening also goes. The Tribunal, therefore, held that the action
taken by the Assessing Officer is illegal and accordingly quashed the
reassessment order.
On appeal by the Revenue, the Rajasthan High Court upheld the
decision of the Tribunal and held as under :
“Once the Assessing Officer came to the conclusion that the
income with respect to which he had entertained ‘reason to believe’ to have
escaped assessment, was found to have been explained, his jurisdiction came to
a stop at that. He did not continue to possess jurisdiction to put to tax any
other income, which subsequently came to his notice in the course of
reassessment proceedings, which was found by him to have escaped assessment.”
