Reassessment proceeding is not valid when there is no connection between recorded reason and Addition of the Income: ITAT [Read Order]

The Amritsar Bench of the Income Tax Appellate Tribunal (ITAT) has held that a reassessment proceeding is not valid when there is no connection between recorded reason and addition of the income

Abdul Rashid Sofi, the assessee’s case was reopened u/s 148 of the Income Tax Act on the ground that the assessee is one of the settlers of M/s Mars Educational Trust, (M.E.T.). The assessee is a jointly and separate owner of land and building with the trust and the assessee took a loan from a bank after mortgaging their land and building.

During the assessment proceeding the AO did not illuminate any point related to the recorded reason which was formed based on reasons to believe. But the entire addition was made on basis of income from the petrol pump amount of Rs.6 lac and agricultural income Rs.1,75,000/-. The assessee filed a return related to said assessment year U/s 139 bearing acknowledgement No.546 dated 27.03.2009.

The notice u/s 148 was issued and the assessee made the reply to the said notice, but the entire addition was made without considering a single point of the recorded reason. On appeal, the CIT(A) granted relief in the amount of Rs.1,75,000/- and an additional Rs.6 lac was upheld.

It was viewed that the only addition sustained after the order of the CIT(A) that the income from the business amount of Rs. 6 lac related to the non-production of books of account for the business of petrol pump.

A Coram of Dr M L Meena, accountant member and Sh. Anikesh Banerjee, a judicial member observed that in the assessment proceeding there is no connection in between recorded reason and addition of the income.

It was held that if after issuing a notice under section 148, the AO accepts the contention of the assessee, it is not open to him to independently assess some other income. If the AO intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in event of a challenge by the assessee.

The order passed u/s 147/143(3) of the Income Tax Act was found to be not valid and the Tribunal quashed the addition made by the AO. 

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates