Calcutta HC: AO Cannot Make Other Additions When Reopening Reason Fails

CIT (Exemption) Vs B.P. Poddar Foundation For Education (Calcutta High Court)

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 against the order of the Income Tax Appellate Tribunal for Assessment Year 2009-10. The substantial questions of law concerned whether additions made in reassessment proceedings on issues not forming part of the recorded reasons for reopening under Sections 147 and 148 were sustainable after insertion of Explanation 3 to Section 147 by the Finance Act, 2009, and whether the Tribunal had correctly applied the decisions in Jet Airways (I) Ltd. and Ranbaxy Laboratories Ltd.

The assessee had filed a return declaring nil income, which was processed under Section 143(1). Following a survey under Section 133A, the Assessing Officer found deposits with M/s. Nissan Developers and Properties Pvt. Ltd. and later also referred to deposits with Poddar Projects Ltd., treating both entities as specified persons of the assessee. The assessment was reopened under Section 147 by issuance of notice under Section 148. During reassessment, the Assessing Officer invoked Sections 13(1)(c)(ii), 13(1)(d), 11(5) and the proviso to Section 164(2), treated Rs.4,24,39,709 as income, and also added alleged donations under Section 69A after examining the genuineness of the assessee’s activities.