Narendra Vinayak Palmure Vs ITO (ITAT Bangalore)
No Addition on Reopening Issue, No Addition on Any Other Issue: Bangalore ITAT Quashes Reassessment
Reassessment Fails When Recorded Reason Yields No Addition
The Bangalore ITAT held that where an assessment is reopened under section 147 for a specific reason, but no addition is ultimately made on that very issue, the Assessing Officer cannot sustain any addition on a different issue discovered during the reassessment proceedings. Accordingly, the Tribunal deleted the addition made by disallowing the assessee’s claim under section 54, since the reason recorded for reopening had failed.
In the present case, the reassessment was initiated on the allegation that the assessee had not adopted the stamp duty valuation for computing capital gains. However, while completing the reassessment, the Assessing Officer did not make any addition on account of the alleged difference between the stamp duty value and the declared sale consideration. Instead, the AO disallowed the deduction claimed under section 54 and made an addition on that basis.
The Tribunal relied on the landmark decision of the Bombay High Court in CIT v. Jet Airways (I) Ltd. (331 ITR 236), which held that the words “and also” in section 147 are conjunctive in nature. Therefore, before making any addition on other issues, the Assessing Officer must first assess or reassess the income for which the assessment was originally reopened. If no addition survives on the recorded reason, the reassessment cannot be used as a vehicle for making additions on unrelated matters.
Since the reassessment in this case was triggered by the alleged understatement of sale consideration but no addition was made on that issue, the very foundation of the reopening collapsed. Consequently, the addition made by denying the section 54 deduction was held to be unsustainable in law and was directed to be deleted. Having allowed the appeal on this preliminary legal issue, the Tribunal did not examine the merits of the section 54 claim.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeal has been filed by the assessee against the order of the learned CIT(A) passed under section 250 of the Income-tax Act, 1961 (“the Act”), dated 24.09.2025, relating to A.Y. 2015-16.
