January 2023

Reassessment Powers of AO Power to assess other income not mentioned in notice of reassessment Power can be exercised only if notice is valid Notice found to be invalid on basis of reasons given in it Other income cannot be assessed on basis of invalid notice.

K. B. Bhujle, Advocate

69. CIT(Exemption) vs. B. P. Poddar Foundation for
Education
[2022] 448 ITR 695 (Cal.)
A.Y.: 2009-10
Date of order: 13th September, 2022
Sections: 147 and 148 of ITA, 1961

Reassessment Powers of AO Power to assess other income not mentioned in notice of reassessment Power can be exercised only if notice is valid Notice found to be invalid on basis of reasons given in it Other income cannot be assessed on basis of invalid notice.


For the A.Y. 2009-10, the scrutiny assessment order u/s 143(3) of the Income-tax Act, 1961 was passed on 1st March, 2011. Subsequently, pursuant to a survey u/s 133A, the assessment was reopened by issuing notice u/s 148 dated 13th March, 2016 for the reasons recorded that certain deposits of Rs. 59,42,709 represented income escaping assessment. In the reassessment order, the said amount was added as undisclosed income. Also, an amount of Rs. 3,65,97,000 was added as undisclosed income. Further, after taking into consideration the statements recorded from various persons who are said to have given donations for securing admission to professional colleges, the AO held that the assessee is not carrying out its activities as per the objects of the trust. Accordingly, the amount said to have been received as donation was added back to the income of the assessee u/s 69A.

The Commissioner (Appeals) deleted the addition of Rs. 59,42,709 but upheld the other additions. After taking note of the factual position, more particularly, that the addition of Rs. 59,42,709 which was made in the reassessment proceedings having been deleted by the Commissioner of Income-tax (Appeals), the Tribunal held that the reassessment on the heads which were not part of the reasons recorded for the reopening of the assessment is not sustainable. The Tribunal placed reliance on the decision of the Bombay High Court in CIT vs. Jet Airways (I.) Ltd. [2011] 331 ITR 236 (Bom) and the decision of the Delhi High Court in Ranbaxy Laboratories Ltd. vs. CIT [2011] 336 ITR 136 (Delhi). On the above grounds the appeal filed by the assessee was allowed.

Following questions were raised before the Calcutta High Court in the appeal filed by the Revenue:

(i) Whether on the facts and circumstances as well as in law the Income-tax Appellate Tribunal was correct in law in holding that the other additions made in the order under section 147/143(3) of the Income-tax Act, 1961, which were not part of the reasons recorded for reopening the assessment were not sustainable in the eyes of law even after insertion of Explanation 3 to section 147 of the Act by the Finance (No. 2) Act, 2009 when the addition was made by the Assessing Officer on the ground of reopening?

(ii) Whether on the facts and circumstances of the case the learned Income-tax Appellate Tribunal correctly interpreted the decision reported in the case of CIT v. Jet Airways (I.) Ltd. reporte

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