Dr. Agarwal’s Health Care Limited Vs DCIT (ITAT Chennai)
Chennai ITAT Quashes Reassessment Where No Addition Was Made on the Recorded Reason for Reopening
The Chennai ITAT held that a reassessment under section 147 cannot survive where the Assessing Officer ultimately makes no addition on the very issue for which the assessment was reopened, but instead makes an addition on an altogether different issue. In the present case, the assessment was reopened on the allegation that the assessee had suppressed the variable component of professional fees payable to doctors. However, while completing the reassessment, the Assessing Officer did not make any addition on that issue and instead disallowed interest expenditure of Rs. 4.02 crore, which was wholly unrelated to the recorded reasons for reopening. The Tribunal observed that the Madras High Court, in Tractors & Farm Equipment Ltd., Anand Cine Services (P.) Ltd., PVP Ventures Ltd. and Martech Peripherals (P.) Ltd., following the decisions of the Bombay High Court in Jet Airways and the Delhi High Court in Ranbaxy Laboratories Ltd., has consistently held that the Assessing Officer can assess other escaped income only if an addition is first made on the issue forming the basis of reopening. Rejecting the Revenue’s reliance on the Karnataka High Court decision in N. Govindaraju, the Tribunal noted that the jurisdictional Madras High Court had expressly declined to follow that view. Since no addition was made on the recorded reason for reopening, the Assessing Officer lacked jurisdiction to sustain the reassessment by making a disallowance on another issue. Accordingly, the Tribunal quashed the reassessment order, leaving the merits of the interest disallowance open.
