Sky Scraper Properties Private Limited Vs Ward 13(2)(1) (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT) Mumbai bench has quashed a reassessment order against Sky Scraper Properties Private Limited for the Assessment Year 2014-15, ruling that the Assessing Officer (AO) failed to make any addition based on the specific reason recorded for reopening the case. This decision underscores the crucial legal principle that an AO cannot sustain a reassessment by making additions on new grounds if the initial reason for reopening is not acted upon.
The case originated when Sky Scraper Properties’ assessment was reopened under Section 147 of the Income Tax Act, 1961. The primary reason recorded for reopening was an allegation that the company had received accommodation entries of Rs. 8,10,000 from Shri Hasmukhlal Mehta, who had admitted to providing such entries in a statement recorded under Section 131 during a survey action.
However, during the reassessment proceedings, the AO did not make any addition related to these alleged accommodation entries. Instead, the AO proceeded to make additions of Rs. 4,97,917 on account of interest income received and Rs. 10,23,658 related to interest paid to Simandhar Developer, Mukta Builder, and other entities. These additions were unrelated to the initial reason for which the assessment was reopened.
