Mellona Developers Pvt. Ltd. Vs ITO (ITAT Mumbai)
No Addition on a Different Issue if Reopened Issue Fails: ITAT Deletes ₹5.75 Crore Disallowance
In a significant ruling, the Mumbai ITAT held that when an assessment is reopened for a specific issue, the Assessing Officer cannot make an addition on an altogether different issue if no addition is ultimately made on the ground for which the reassessment was initiated. The Tribunal deleted a ₹5.75 crore disallowance of loan processing fees made in the case of a real estate developer.
The reassessment was initiated on the allegation that the assessee had earned interest income of ₹19.75 crore from inter-corporate deposits (ICDs) and had wrongly adjusted the same against project work-in-progress. According to the Assessing Officer, such interest income had escaped assessment and therefore proceedings under section 147/148 were initiated. However, after completing the reassessment, the Assessing Officer did not make any addition in respect of the alleged escaped interest income, which was the very basis for reopening. Instead, he disallowed ₹5.75 crore paid as loan processing fees on the ground that borrowed funds were not used for business purposes.
The Tribunal noted that the disallowance of processing fees was not the issue for which reasons were recorded while reopening the assessment. Relying on the Bombay High Court decision in Jet Airways (I) Ltd., it reiterated that where the Assessing Officer ultimately accepts that the income for which he formed the “reason to believe” has not escaped assessment, he cannot proceed to assess some other income independently without issuing a fresh notice under section 148.
Since no addition was made on the issue of ₹19.75 crore interest income, which formed the sole basis of reopening, the Tribunal held that the subsequent addition of ₹5.75 crore towards loan processing fees was without jurisdiction. Accordingly, the addition was deleted and the assessee’s appeal was allowed, without the Tribunal entering into the merits of the disallowance.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been preferred by the Assessee against the order dated 24.10.2025, impugned herein, passed by the National Faceless Appeal Centre (NFAC)/Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.
