In a recent ruling, the Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) held that the reopening of the assessment was bad in law as the assessing officer ( AO ) made no addition in respect of the issue for which the assessment proceedings were initiated.
From the submissions made by the counsel on behalf of the assessee, it can be understood that the reassessment proceedings were begun due to the information received from the Investigation Wing that the assessee had availed accommodation entries in the form of bogus purchases.
According to the assessing officer ( AO ) the aggregate sum of purchase was Rs. 2,05,00,000.
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It was contended by the counsel on behalf of the assessee that the reason for opening the assessment was baseless as the assessee had not made any purchases from the 2 companies and only loans were availed from them.
It was vehemently argued by the assessee’s counsel that the addition made by AO was under Section 68 of the Income Tax Act, 1961 and not related to alleged bogus purchases. The counsel, by relying on the judgment of the Bombay High Court in the case of Hindustan Lever Ltd vs. R B Wadkar, ACIT (268 ITR 332) (Bom), strongly established that the AO cannot make additions other than what is mentioned as reasons for reopening the assessment.
The Departmental Representative, on the other hand, contended that the assessee had availed loans from the 2 companies providing accommodation entries.
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The bench noted that it is a well-established position of law that the additions can be made only on the reasons for which the assessments were made. The bench observed that the addition was made under Section 68 of the Income Tax Act, and no addition was made in respect of the issue for which the reopening was done.
The ITAT held that the reopening of the assessment was bad in law and upheld the decision of the Commissioner of Income Tax ( Appeals ) [CIT(A)], which deleted the additions made by the AO.
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The ITAT comprising Justice (Retd.) C.V. Bhadang ( President ) and B.R. Baskaran ( Accountant Member ) dismissed the appeal filed by the revenue.
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