ITAT Quashes Reassessment as Final Additions Differed from Recorded Reasons

Kavita Pahuja Vs ITO (ITAT Delhi)

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) allowed both appeals filed by the assessee, comprising a quantum appeal and a penalty appeal arising from proceedings under Sections 147 and 144B of the Income-tax Act, 1961.

The Tribunal first considered the quantum appeal and examined the assessee’s legal challenge to the validity of the reassessment proceedings. The assessee contended that the reopening of assessment was unsustainable because the reasons recorded by the Assessing Officer differed from the additions ultimately made in the assessment order. According to the Tribunal, the Assessing Officer had initially proposed to invoke Section 44AB and make additions under Section 69 by estimating profits at 8% of the entire turnover of Rs. 7,86,67,936, resulting in a proposed addition of Rs. 62,93,434. However, the assessment order dated 22.05.2023 ultimately treated the initial investment of Rs. 4,00,327 and share purchases amounting to Rs. 11,04,800, aggregating to Rs. 15,05,172, as the issues requiring addition.

The Tribunal observed that this factual position remained unrebutted by the Revenue. It noted that the Assessing Officer had deviated from the original reasons recorded for reopening while completing the reassessment. Relying on the decisions in Ranbaxy Laboratory v. CIT, CIT v. Jet Airways (I) Ltd., and ATS Infrastructure Ltd. v. ACIT, the Tribunal held that the reassessment proceedings could not be sustained in law when the final additions were unrelated to the basis on which the reopening had originally been initiated.