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2017 (6) TMI 449

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..... nsequence of his deletion of the addition, not only the assessment order but all the proceedings flowing therefrom had the effect of becoming null and void. As such, he could not have gone ahead with any other issue and made enhancement of income. Making an enhancement in such circumstances would mean that though the jurisdiction of the Assessing Officer in initiating the reassessment was lacking, still, the assessment would be valid and ex consequenti, the addition would be sustainable. - Decided in favour of assessee. - ITA No. 6611/Del/2016 - - - Dated:- 7-6-2017 - Shri R. S. Syal, Vice President Assessee by : Shri C.S. Aggarwal, Sr. Advocate Deptt. By : Shri Amrit Lal, Sr.DR ORDER This appeal by the assessee is directed against the order passed by the CIT(A) on 03.11.2016 in relation to the Assessment Year 2006-07. 2. The only issue raised in this appeal is against the addition of ₹ 2,36,875 made by the ld. CIT(A) enhancing the income of the assessee. ITA No.6611/Del/2016 2 3. Succinctly, the factual matrix of the case is that the assessee filed its return declaring total income of ₹ 8,73,180/-. Scrutiny proceedings were completed and .....

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..... tribunal against such deletion. In other words, the deletion of the addition in the first appeal has attained finality. 5. Thus, the question which looms large on the canvass is whether the CIT(A) can make enhancement of income on account of discrepancy in the quantitative details. In making such an enhancement, the ld. CIT(A) has held that his power is coterminous with that of the Assessing Officer and, thus, he is competent to make a new addition. There is not and cannot be any doubt about the fact that the powers of CIT(A) are coterminous with that of the Assessing Officer. The Hon'ble Supreme Court in CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), has held that: the AAC has plenary powers in disposing of an appeal. The scope of his power is coterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has failed to do. This golden rule has been reiterated in several judgments including by the Hon'ble Supreme Court in Jute Corporation of India vs. CIT and Anr. (1991) 187 ITR 688 (SC). The principle which, therefore, emerges is that the power of CIT(A) is absolute and extends to all such things which the Assessing Officer ca .....

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..... acquiring the jurisdiction, the AO can make other additions as well. Thus the making of a `foundational addition is sine qua non for making `other addition . Reason behind this is not far to understand, being, prohibiting the Assessing Officer from needlessly exercising the power to reassess, by initiating the assessment proceedings on a fallacious ground and then making other additions as well. To put it simply, the Assessing Officer cannot proceed with the reassessment if the grounds mentioned in the re-assessment notice are non-existent. That is why, it has been held in several cases that no `other addition can be made unless the `foundational addition is made. The Hon ble jurisdictional High Court in Ranbaxy Laboratories Ltd. VS. CIT (2011) 336 ITR 136 (Del) has held that the AO has jurisdiction to reassess income other than the income in respect of which proceedings under s. 147 were initiated but he is not justified in doing so when the very reasons for initiation of those proceedings ceased to survive. The Hon ble Bombay High Court in CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom), has also reiterated the same proposition by holding that the Assessing Officer may a .....

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..... , but deleted the other addition. Both the assessee as well as the Revenue preferred appeals against the orders of CIT(A). Appeal of the assessee was allowed by the Tribunal thereby deleting the addition of ₹ 31 lac. Against this order, no appeal was preferred by the Revenue. Thus, the reasons which persuaded the AO to reopen the reassessment proceedings and on the basis of which additions were made were not found valid or justifiable as those additions were deleted by the Tribunal. Appeal of the Revenue was dismissed. In further appeal, the Hon ble High Court upheld the order of the tribunal by holding that : `Since the grounds for reopening the reassessment do not exist any longer and no additions were ultimately made on that account, the additions in respect of other items which were not part of reasons to believe cannot be made. On going through the ratio decidendi of the above judgment, it is vivid that if the `foundational addition is finally deleted in appeal, then `other addition also can t stand. 8. At this stage, it is pertinent to note the effect of insertion of Explanation 3 to Section 147 by the Finance (No.2) Act, 2009 w.r.e.f. 1.4.1989, which reads as u .....

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..... egal position about not continuing with the `other additions , if none of the `foundational additions is either made or finally sustained, has not been watered down by the insertion of Explanation 3. Ambit of the Explanation is confined only to making `other addition and not sustaining the `other addition , when the `foundational addition is not made or finally deleted. 11. Reverting to the facts of the instant case, it is found that the Assessing Officer made the `foundational addition of ₹ 22.57 lac which came to be finally deleted in the first appeal. In the absence of such an addition, neither the Assessing Officer nor for that purpose, the ld. CIT(A), exercising his coterminous power, could have made the `other addition . 12. The situation can be viewed from another angle as well. The Assessing Officer initiated reassessment proceedings and made addition of ₹ 22.57 lac. When the ld. CIT(A) held that the addition of ₹ 22.57 lac was not sustainable, it meant that the jurisdiction of the Assessing Officer was lacking in initiating the reassessment proceedings. As a consequence of his deletion of the addition, not only the assessment order but all the p .....

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