2025 (7) TMI 1573 - AT - Income Tax

Reopening of assessment u/s 147 - absence of substantive addition on the basis of reason for reopening - allegations that the Assessee Company is one of the beneficiary companies to whom accommodation entries were provided by Shri Hasmukhlal Mehta who has admitted in his statement recorded on oath u/s 131 during the course of survey action u/s 133A HELD THAT - Though the AO has made the additions on account of interest income received and interest paid respectively to Simandhar Developer and Mukta Builder and other entity however admittedly has not made any addition on the basis reason/issue on which the case was reopened u/s 147/148 of the Act. Therefore the addition made in the absence of substantive addition on the basis of reason for reopening of the case is hit by the judgment of Jetair (P.) Ltd. 2023 (3) TMI 484 - BOMBAY HIGH COURT Thus on this count alone the assessment order passed in pursuance to the notice u/s 148 of the Act is liable to be quashed. Thus the assessment order is quashed. Assessee appeal allowed.

Summary

The Appellate Tribunal (ITAT Mumbai), per Judicial Member Shri Narender Kumar Choudhry, allowed the Assessee's appeal against the reopening of assessment for A.Y. 2014-15 under section 147 of the Income Tax Act, 1961. The case was reopened based on allegations of accommodation entries of Rs. 8,10,000/- linked to Shri Hasmukhlal Mehta's statement under section 131 during survey action under section 133A. However, the Assessing Officer (AO) made additions on unrelated interest income/payments without making any addition on the specific reason for reopening. Relying on the Bombay High Court's ruling in Jetair (P.) Ltd. vs. Dy. CIT (2023) 148 taxmann.com 185, the Tribunal emphasized that under section 147, the AO must assess the income which formed the basis for reopening; if that income is found not to have escaped assessment, the AO cannot assess other income without issuing a fresh notice under section 148. Since the AO did not add income on the original reason for reopening, the assessment order pursuant to the section 148 notice dated 27.03.2019 was held liable to be quashed. Consequently, the Tribunal quashed the assessment order and declined to examine other legal or merit issues raised by the Assessee, thereby allowing the appeal.