Income Tax Appellate Tribunal - Mumbai
Subhash Chandra,Uttar Pradesh vs Income Tax Department, Agra on 27 May, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
"SMC" BENCH MUMBAI
BEFORE HON'BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER
ITA No. 6449/Mum/2024
(Assessment Year: 2016-17)
Subhash Chandra Vs. ITO
G182A, Sourth Railway Agra, Uttar Pradesh
Colony, Agra Cantt, Agra -
282001.
PAN/GIR No. AFEPC7113H
(Applicant) (Respondent)
Assessee by Mr. Suchek Anchaliya
Revenue by Ms. Madhura M. Nayak Sr. DR
Date of Hearing 07.05.2025
Date of Pronouncement 27.05.2025
आदे श / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order 27.08.2024 passed u/s 250 of the Income Tax Act, 1961 ('the Act'), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2016-17.
2. Ground No. 1 & 2 of the revised grounds raised by the assessee are interrelated and interconnected and relates to challenging the order of Ld.CIT(A) in upholding the order of reopening of assessment. Therefore, I have 2 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai decided to adjudicate these grounds through the present consolidated order.
3. At the very outset, Ld. AR submitted that the reasons for reopening the case were other than the issue on which the actual addition was made by the AO and while relying upon the decision of Hon'ble Bombay High Court in the case of CIT Vs. Jet Airways Ltd 331 ITR 236 Bombay, requested to set aside the order of reassessment, Ld. AR also relied upon his written submissions and the same are reproduced here in below:
1. The case pertains to Mr. Subhash Chandra (PAN:
AFEPC7113H) (herein after 'assessee/ appellant'), an individual non resident of India, for the Assessment Year ('AY') 2016-17. The Income Tax Department initiated reassessment proceedings under section 147 of the Income Tax Act, 1961, based on information that the assessee purchased immovable property worth Rs. 53,82,256 during the Financial Year 2015- 16, but did not file a return of income for AY 2016-17.
2. The Reason reproduced under section 148A(b) of the Act dated 18.02.2023 is as under:
Information, in accordance with the Risk Management Strategy formulated by the Central Board of Direct Taxes (CBDT) has been received in your case for the Financial Year 2015-16 relevant to A.Y 2016-17 through Insight Portal. The details of the aforesaid information is as given below.
Transaction Inf ormation Inf ormation Source Amount
date /F.Y Code description
2015-16 Air - 006 Purchased Sub 53,82,256
immovable Registrar
property office Panvel-
valued at 4
Rs. (Filer TAN:
3 ITA No. 6449/Mum/2024
Subhash Chandra., Mumbai
30,00,000 PNEJ08610A)
or more
3. The reassessment was triggered based on information received through the Insight Portal, as part of the Risk Management Strategy of the Central Board of Direct Taxes (CBDT). The specific ground for reopening was the assessee's purchase of immovable property for Rs. 53,82,256, registered with Sub-Registrar, Panvel-4, without filing a return of income under section 139(1) for AY 2016-17. The Income Tax Officer (ITO), Ward-42(3)(4), Mumbai, issued a notice under section 148A(d) on 16.03.2023, followed by a notice under section 148, initiating reassessment to examine the sources of funds for the property purchase.
4. Thereafter, the faceless assessment unit issued various notices under section 142(1) of the Act and subsequently, the Show Casue Notice dated 20.11.2023 was issued. The Assessee vide letter dated 31.12.2023 submitted the reply along with the following documents:
Employment agreement with M/s Securewest International Ltd.
Purchase deed of the property.
Bank statements (HDFC, Punjab National Bank, State Bank of India).
HDFC housing loan details.
Computation of income.
5. The Assessing Officer concluded that the documents filed by the assessee is sufficient and no addition is warranted. The same is mentioned in para 7 of the assessment order.
"7. After verifying the details, it is concluded that the assessee has explained the sources for acquisition immovable property which is registered with Sub-Registrar, Panvel-4, Pin: 410206 and there is no variation between the valuation stamp duty authority and the apparent consideration. Therefore, the provisions of sec.56(2)(vii) (b) is not attracted" However, the 4 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai Ld. AO issued the second show cause notice dated 17.01.2024 and stated that "Now the issue under consideration is taxability of assessee's salary of Rs.25,20,000/- from his overseas employer, M/s Securewest International Ltd. The assessee has claimed that it is not taxable in India.
11. The assessee has not explained whether aforesaid salary from M/s Securewest International Ltd of Rs.25,20,000 was subjected to taxation in the country of origin. The assessee has not furnished the relevant foreign tax return evidencing taxation of the salary abroad. Thus, the assessee has not justif ied as to how it is not taxable in India. The assessee was required substantiate with reference to the reliefs granted under India's Double Taxation Avoidance Agreement (DTAA) with in the country of origin of his salary from his overseas employer. The assessee has not substantiated under what provisions he is claiming tax relief u/s 90 or 91 of the Income Tax Act, 1961.
12. Since the assessee has not come forward to substantiate his claim of tax relief on his salary income of Rs.25,20,000/- from his overseas employer, M/s Securewest International Ltd. in response to notice u/s 142(1) dated 22.12.2023, there is no alternative except to conclude the assessment by taxing the salary income of Rs.25,20,000. Accordingly, a sum of Rs.25,20,000/- is added to the total income admitted. Penalty proceedings under sec.271(1)(c) is being initiated separately for wrong claim of tax relief on his salary income from his overseas employer."
6. The assessment was completed under section 147 read with sections 144 and 144B, resulting in an addition of Rs. 25,20,000 to the assessee's income, representing salary income from an overseas employer, M/s Securewest International Ltd.
7. The reassessment was initiated to investigate the sources of funds for the property purchase, but the final addition was made on an entirely different ground-taxability of the overseas 5 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai salary income. This raises a legal concern, as per the Bombay High Court's ruling in Jet Airways (India) Ltd. v. CIT [2015] 235 Taxman 465 (Bom HC), which holds that an assessment reopened on one ground cannot be concluded by making additions on a different ground unless the new ground was part of the reasons recorded for reopening.
8. As per Jet Airways (Supra), the AO cannot make additions on issues not forming part of the recorded reasons for reopening, as it violates the jurisdictional requirement under section 147. The reasons for reopening must explicitly include the income suspected to have escaped assessment, and the assessment must be confined to those reasons unless new material emerges during the proceedings that was not available at the time of reopening.
9. The AO's addition of salary income was not linked to the property purchase in the recorded reasons for reopening. The investigation into the salary income arose during the reassessment proceedings, particularly through the notice under section 142(1) dated 22.12.2023. Since the salary income was not part of the original basis for reopening, the addition is arguably bad in law, as it exceeds the scope of the reassessment jurisdiction.
10. Therefore, it is requested to delete the arbitrary addition made by the Ld. AO and as confirmed by the CIT Appeal and allow the appeal of the assessee on additional ground.S
4. On the contrary Ld. DR relied upon the orders passed by the revenue authorities .
5. I have heard the counsel for both the parties, perused the material placed on record, judgement cited before me and also the orders passed by the revenue authorities.
From the records, I noticed that the Information, in accordance with the Risk Management Strategy formulated 6 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai by the Central Board of Direct Taxes (CBDT) has been received in the case of assessee for the Financial Year 2015-16 relevant to A.Y 2016-17 through Insight Portal. The details of the aforesaid information is as given below.
Transaction Inf ormation Inf ormation Source Amount
date /F.Y Code description
2015-16 Air - 006 Purchased Sub 53,82,256
immovable Registrar
property office Panvel-
valued at 4
Rs. (Filer TAN:
30,00,000 PNEJ08610A)
or more
6. The reopening was initiated on the ground that
assessee had purchased immovable property for Rs.
53,82,256/- without filing the return of income.
7. In response to the notice, assessee filed reply along with supporting documents. However, the AO after satisfying himself did not made additions on the ground of reopening of assessment but made additions on account of salary income of the assessee. The operative portion of the order of the assessing officer is reproduced here in below:
". Af ter verifying the details, it is concluded that the assessee has explained the sources for acquisition immovable property which is registered with Sub-Registrar, Panvel-4, Pin: 410206 and there is no variation between the valuation stamp duty authority and the apparent consideration. Therefore, the provisions of sec.56(2)(vii) (b) is not attracted" However, the Ld. AO issued the second show cause notice dated 17.01.2024 and stated that 7 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai "Now the issue under consideration is taxability of assessee's salary of Rs.25,20,000/- from his overseas employer, M/s Securewest International Ltd. The assessee has claimed that it is not taxable in India.
11. The assessee has not explained whether aforesaid salary from M/s Securewest International Ltd of Rs.25,20,000 was subjected to taxation in the country of origin. The assessee has not furnished the relevant foreign tax return evidencing taxation of the salary abroad. Thus, the assessee has not justif ied as to how it is not taxable in India. The assessee was required substantiate with reference to the reliefs granted under India's Double Taxation Avoidance Agreement (DTAA) with in the country of origin of his salary from his overseas employer. The assessee has not substantiated under what provisions he is claiming tax relief u/s 90 or 91 of the Income Tax Act, 1961.
12. Since the assessee has not come forward to substantiate his claim of tax relief on his salary income of Rs.25,20,000/- from his overseas employer, M/s Securewest International Ltd. in response to notice u/s 142(1) dated 22.12.2023, there is no alternative except to conclude the assessment by taxing the salary income of Rs.25,20,000. Accordingly, a sum of Rs.25,20,000/- is added to the total income admitted. Penalty proceedings under sec.271(1)(c) is being initiated separately for wrong claim of tax relief on his salary income from his overseas employer."
8. In this way, assessment was completed u/s 147 r.w.s 144 and 144B of the Act resulting in addition to the assessee's income. Admittedly, the reassessment was initiated to investigate the sources of funds for the property purchase, but the final addition was made on an entirely different ground-taxability of the overseas salary income. This raises a legal concern, as per the Bombay High Court's ruling in Jet Airways (India) Ltd. v. CIT 8 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai [2015] 235 Taxman 465 (Bom HC), which holds that an assessment reopened on one ground cannot be concluded by making additions on a different ground unless the new ground was part of the reasons recorded for reopening.
9. I noticed that as per Jet Airways (Supra), the AO cannot make additions on issues not forming part of the recorded reasons for reopening, as it violates the jurisdictional requirement under section 147. The reasons for reopening must explicitly include the income suspected to have escaped assessment, and the assessment must be confined to those reasons unless new material emerges during the proceedings that was not available at the time of reopening.
10. And in this way AO's addition of salary income was not linked to the property purchase in the recorded reasons for reopening. The investigation into the salary income arose during the reassessment proceedings, particularly through the notice under section 142(1) dated 22.12.2023. Since the salary income was not part of the original basis for reopening, the addition is arguably bad in law, as it exceeds the scope of the reassessment jurisdiction.
9 ITA No. 6449/Mum/2024Subhash Chandra., Mumbai
11. On this proposition, reliance has also been placed on the decision of the Coordinate Bench of ITAT in the case of Saloj Dudh Utpadak Sahakari Mandali Vs ITO, in ITA No. 1685/AHD/2024 and the operative portion of the order is contained in para number 7 to 15, and the same is reproduced here in below
7. Our attention in this regard was first drawn to the notice issued by the AO to the assessee under Section 148A(b) of the Act confronting the assessee with the information in his possession regarding escapement of income of the assessee placed at Paper Book page No. 1 and 2. Referring to the same ,it was pointed out that the information related to the assessee having made cash withdrawals of 1,13,20,000/- during the year and coupled with the fact that no return of income had been f iled by the assessee for the impugned year. The AO noted that the said information suggested that income of Rs. 1.13 crore had escaped assessment.
8. Thereafter, our attention was drawn to the order passed by the AO under Section 148A(d) of the Act af ter considering the assessee's explanation in response to the information confronted to the assessee in terms of the provisions of Section 148A(b) of the Act, placed at Paper Book page No. 3 to 7. Drawing our attention to Para 5 to 6 of the said order, Ld. Counsel for the assessee pointed out that the AO categorically noted therein that he had information and details in his possession that the assessee had made cash withdrawals of 1.13 crores from his bank account and was a non-filer of return and since the nature and source of fund to make such withdrawals remain unexplained, therefore, the source of fund of Rs. 1.13 crores to make cash withdrawals from the bank account of the assessee represented undisclosed/unexplained income of the assessee for A.Y. 2019-20 .Para 6 of the order was pointed out to us showing that the AO had categorically recorded therein that the information in his possession suggested income of Rs. 1.13 crores being the undisclosed 10 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai income of the assessee for the impugned year, and therefore it was a fit case to issue notice under Section 148 of the Act.
Saloj Dudh Utpadak Sahakari Mandali Ltd. vs. ITO Asst.Year - 2019-20
9. From the above notices it was pointed out that the satisf action of the AO with respect to escapement of income of the assessee for assuming jurisdiction to frame assessment under Section 147 of the Act was with respect to the source of cash withdrawals made from his bank account to the tune of Rs. 1.13 crores remaining unexplained.
10. Thereaf ter, Ld. Counsel for the assessee drew our attention to the order passed by the AO pointing out that the AO recorded his satisfaction with respect to the explanation of the assessee on the withdrawals made from the bank account as relating to the activity of milk cooperative activity being carried out by it and the funds deposited and withdrawals, relating to the funds of members. Our attention was drawn to Para 2.3 of the AO's order containing the above satisfaction of the AO. He, thereafter, pointed out that ultimately the AO disallowed the claim of deduction of income of the assessee amounting to Rs. 8,89,901/- on the premise that the return of income was not filed by the assessee within the due date prescribed as per the Section 139(1) of the Act in terms of section 80AC of the Act, which mandated the filing of returns of income within the due dates prescribed as per law for claiming deduction in terms of the provisions of Section 80P of the Act.
11. Thus, from the above documents Ld. Counsel for the assessee pointed out that the information with the AO for the escapement of the income of the assessee of Rs. 1.13 Crs of cash withdrawals from bank, did not ultimately culminate in addition being made in the hands of the assessee; that therefore, the jurisdiction of the AO to frame assessment under Section 147 of the Act was lost and no further addition on any other issue could be made by the AO. Support for Saloj Dudh Utpadak Sahakari Mandali Ltd. vs. ITO Asst.Year -2019- 11 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai 20 this proposition of law was drawn from various decision which are noted to above.
12. Ld. D.R. on the other hand, vehemently opposed the contention of the Ld. Counsel for the assessee, though he was unable to contradict the factual contention of the Ld. Counsel for the assessee before us that the basis of information in the possession of the AO regarding escapement of income did not result in any addition being made to the income of the assessee and that addition was made on some other issue. Nor was Ld. D.R. able to distinguish the case laws relied by the Ld. Counsel for the assessee before us in support of his contention that where no addition had made on the basis of information with the AO for escapement of income of the assessee, law does not permit any other addition to be made in such cases.
13. In light of the same since it is abundantly clear that the AO while framing order under Section 147 of the Act in the present case did not make any addition on the income which he believed had escaped assessment, which in the present case was the cash withdrawals of Rs. 1.13 crores from its bank account the source of which was found to be unexplained, the AO I hold , could not have made addition or disallowance on any other account, in the present case being disallowance of deduction claimed under Section 80P of the Act, since Courts have time and again reiterated that the moment the AO finds no escapement of income of the assessee on the basis of which he had assumed jurisdiction under Section 147 of the Act he loses jurisdiction to proceed further and make any other addition or disallowance to the income of the assessee.
14. In this regard we quote the relevant f indings of the Hon'ble Rajasthan High court in the case of CIT vs Shri Ram Singh 306 ITR 343:
Saloj Dudh Utpadak Sahakari Mandali Ltd. vs. ITO Asst.Year - 2019-20 "29. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the AO were to come to conclusion, that any income chargeable 12 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai to tax, Which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact, that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section
147.
30. xxx xxx
31. xxx xxx
32. The result of the aforesaid discussion is that the question framed, in the order dated 23rd May, 2006, is required to be, and is, answered the manner that the Tribunal was not justif ied in holding, that the proceedings for reassessment under section 148/147 were initiated by the 40, on non-
existing facts because ultimately the assessee has been able to explain the income, which was believed to have been escaped assessment, was explainable. It is further held, that the AO was justif ied in initiating the proceedings under section 147/148, but then, once he came to the concision, 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, and he did not continue to possess jurisdiction, to put to tax, any other income, which subsequently came to his notice, in the course of the proceedings, which were found by him, to have escaped assessment."
15. In light of the same I hold that the disallowance of deduction under Section 80P of the Act made in the present case by the AO is not sustainable being not in accordance with law, beyond the jurisdiction of the AO and accordingly, direct deletion of the same.
12. Since in the present case, the reassessment was initiated to investigate the source of funds for the property purchased, but the additions have been made qua that of salary income which is entirely different ground therefore 13 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai while following the decision of the jurisdictional High Court in the case of Jet Airways (supra), we are also of the view that AO cannot make additions on the issues not forming part of the recorded reasons for the opening, as it violates the jurisdictional requirement u/s 147 of the Act. Therefore ground No. 1 & 2 raised by the assessee stands allowed and the order of reopening and consequential order of reassessment stands quashed.
13 Since the order of reopening and consequential reassessment has already been quashed, therefore, other grounds raised by the assessee needs no specific adjudication.
14. In the result, the appeal filed by the assessee stands partly allowed.
Order pronounced in the open court on 27.05.2025.
Sd/-
(SANDEEP GOSAIN) JUDICIAL MEMBER Mumbai, Dated 27/05/2025 KRK, PS 14 ITA No. 6449/Mum/2024 Subhash Chandra., Mumbai आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent.
3. सं बंिधत आयकर आयु / The CIT(A)
4. आयकर आयु (अपील) / Concerned CIT
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मु बई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
/ आदे शानुसार BY ORDER, स ािपत ित //True Copy//
1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु बई / ITAT, Mumbai