AO cannot proceed with re-assessment if the grounds mentioned in re-assessment are non-existent

1. This appeal by the assessee arises out of the order passed by the CIT(A)-5, Pune on 28-06-2019 in relation to the assessment year 2009-10.

2. The first legal issue raised by the assessee in this appeal is against the addition of Rs.2,18,000/- made by the Assessing Officer (AO) in the order u/s 143(3) (of Income Tax Act, 1961) read with sectin 147 of the Act, which got confirmed in the first appeal. The assessee has made out a case that this addition ought not to have been made as the same did not emanate from the reasons recorded by the AO and there was no addition on the basis of which the reassessment was initiated.

3. I have heard the rival submissions through Virtual Court and perused the relevant material on record. A copy of reasons recorded by the AO for the year under consideration has been placed at page 11 of the paper book, reading as under :

“On verification of the return of income declaring total of Rs.837500 on 31-03-2009 vide ACK No.0713003917.

2. On verification of the return it is observed that assessee has not reflected the income earned from M/s. Hyderabad Race Club to Race Hoarse Owners amounting to Rs.1172875/- for the F.Y. 2008-09 as per Information available with this office and letter received from Chief Commissioner of Income Tax-I(CCA), Hyderabad (A.P.) containing the following :

During a TDS survey conducted at M/s. Hyderabad Race Club, it was noticed by Survey Team that certain payments pertaining to the F.Y. 2008-09 to 2012-13 were made by Hyderabad Race Club to the Race Horse Owner who are being assessed outside A.P. Region. The payments are substantial and have come to notice on account of non-deduction TDS.

3. In view of the above, I have reason to believe that income chargeable to tax has escaped assessment by Rs.11,72,875/- for F.Y. 2009-10. I have reopened the said assessment u/s.147 (of Income Tax Act, 1961).

4. Issue notice u/s.148 (of Income Tax Act, 1961) for A.Y. 2009- 10 accordingly.”

4. It is seen from the order passed by the AO that the only addition made by him is of Rs.2,18,000/- representing unexplained cash deposits in the bank account. On a conjoint reading of the `reasons’ along with the order u/s 147 (of Income Tax Act, 1961), it is palpable no addition arising from the reasons for the reassessment was made. An altogether separate addition of Rs.2,18,000/- was made, which admittedly did not have any connection with the initiation of re-assessment.

5. It is further worthwhile to note that the Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom) has held that the AO cannot proceed with re-assessment if the grounds mentioned in re-assessment are non-existent i.e., if no addition is made on that score. When I examine the factual scenario obtaining in the instant case on the touchstone of the ratio laid down by the Hon’ble jurisdictional High Court in the above decision, the inescapable conclusion which can be drawn is that the only addition made in the re- assessment on a ground different from the one for which notice u/s 148 (of Income Tax Act, 1961) was issued, lacks legality. The same is, therefore, deleted.

6. In the result, the appeal is allowed in the above terms.

Order pronounced in the Open Court on 11th February, 2021.

Sd/-

(R.S.SYAL)

VICE PRESIDENT