Krishna Traders Vs DCIT (ITAT Chennai)
Reassessment Held Invalid Where No Addition Made on Recorded Reasons – Fresh Addition u/s 40A(3) Not Sustainable
The ITAT, Chennai allowed the assessee’s appeal by holding that the reassessment proceedings were legally unsustainable. The assessment was reopened on the ground of unexplained cash deposits of Rs. 2,03,09,275/-, however, while concluding the reassessment, the Assessing Officer did not make any addition on this issue and instead made a fresh disallowance of Rs. 3,08,45,000/- under Section 40A(3) for alleged cash payments exceeding Rs. 20,000/-. The Tribunal held that once the Assessing Officer accepts the explanation on the issue for which reopening was initiated, he cannot make a new addition on a different issue without recording reasons and issuing a fresh notice under Section 148. Relying on binding judgments of the Madras High Court in Martech Peripherals (P.) Ltd., Anand Cine Services (P.) Ltd., and the settled ratio in Jet Airways (I) Ltd., the ITAT held that Explanation 3 to Section 147 cannot override the substantive provision. Accordingly, the addition made under Section 40A(3) was deleted. Since the appeal was allowed on this legal ground, the other grounds were rendered academic and the appeal was allowed in favour of the assessee.
