VEE GEE INDUSTRIAL ENTERPRISES PVT. LTD.,NEW DELHI V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, FARIDABAD, FARIDABAD

CO 69/DEL/2024

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the order of the Commissioner of Income Tax (Appeals) which quashed the reassessment order against Vee Gee Industrial Enterprises Pvt. Ltd. for the Assessment Year 2016-17. The reassessment was initially based on 'alleged bogus unsecured loans'. However, during the reassessment, additions were made on different issues not related to the original reason for reopening the assessment. The Ld. CIT(A) quashed the reassessment order, leading to the Revenue's appeal. The Tribunal's decision was influenced by precedents from the Delhi High Court, particularly the Ranbaxy Laboratories case, which established that additions cannot be made on issues not specified in the reassessment notice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23647 (ITAT-DELHI)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2016-2017
• Other Referred Cases: N. Govinda Raju Vs ITO, Ranbaxy Laboratories Ltd. vs CIT, Monarch Educational Society, Pr. CIT(Central)-3, New Delhi Vs. Jakhotia Plastics (P) Ltd., PCIT(Central)-1 vs M/s Mideast Integrated Steels Ltd, CIT vs Jet Airways (I) Ltd, CIT versus Shri Ram Singh, DIT (IT) v. Black & Veatch Prichard, Inc., Sheela Foam Ltd. Vs DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: PAVAN VED
• Keywords: Question of law; Principle of natural justice; Reason to believe; Bogus
• Section: 147; 148; 143(3); 250

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT and SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.2448/DEL/2024 (Assessment Year: 2016-17) DCIT, Central Circle 2, vs. Vee Gee Industrial Enterprises Pvt. Ltd., Faridabad. C-8, East of Kailash, New Delhi – 110 065. (PAN : AACCV6675P) CO No.69/Del/2024 (in ITA No.2448/DEL/2024) (Assessment Year: 2016-17) Vee Gee Industrial Enterprises Pvt. Ltd., vs. DCIT, Central Circle-2, C-8, East of Kailash, New Delhi – 110 065. (PAN : AACCV6675P) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Pavan Ved, Advocate Shri Mohit Gupta, CA Shri Mirza Baig, CA Shri Sarthak Agarwal, CA REVENUE BY : Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing : 24.02.2025 Date of Order : 19.03.2025 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : 2 ITA No.2448/DEL/2024 CO No.69/Del/2024 1. The Revenue has filed the appeal against the order of the ld. Commissioner of Income Tax (Appeals)-29, New Delhi [“ld. CIT(A)”, for short] dated 04.04.2024 for the AY 2016-17 and the assessee has also filed the cross objections for AY 2016-17. 2. The grounds of appeal raised by the Revenue in ITA no. 2448/DEL/2024 are as under: - 1. Whether Ld. CIT(A) is right in quashing the re-assessment order by holding that no addition was made on the issue which was the basis of reason recorded by the AO in view of decision of Hon'ble Karnataka High Court in the case of N. Govinda Raju Vs ITO [20l5] 377 ITR 243 (Karn.) (HC) wherein it was held that addition can be made on other issues during the course of proceedings under section 147, even though reason for notice for ‘such income’ which may have escaped assessment may not survive? 2. Whether Ld. CIT(A) is right in relying upon the decision of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs CIT [2011] 336 ITR 136 (Del.) and in the case of Monarch Educational Society [2016] 387 ITR 416 (DEL) in view of decision of Hon'ble High Court of Delhi itself in the case of Pr. CIT(Central)-3, New Delhi Vs. Jakhotia Plastics (P) Ltd. wherein the issue under consideration was referred to the larger bench for adjudication afresh? 3. Whether the decision of Ld. CIT(A) quashing the re-assessment proceedings in this case is sustainable in view of decision of Hon'ble High Court of Delhi in the case of Pr. CIT(Central)-3, New Delhi Vs. Jakhotia Plastics (P) Ltd.? 4. The appellant craves to add, amend, alter or modify any grounds of appeal at the time of hearing.” 3. The cross objections raised by the assessee in CO no. 69/DEL/2024 against the appeal preferred by the revenue are as under: - 3 ITA No.2448/DEL/2024 CO No.69/Del/2024 1. That on the facts and in the circumstances of the case, the order passed by the assessing officer was bad in law, violative of principles of natural justice and void-ab-initio. 2. That on the facts and in the circumstances of the case, the Ld. Assessing Officer (AO) has erred in law in determining the total income of the appellant at Rs.13,49,06,636/- as against the returned income of Rs.11,35,33,337/- u/s 143(3) of the Income Tax Act. 3. That on the facts and in the circumstances of the case, the Ld. AO has erred in law in framing a high-pitched assessment u/s 147 r.w.s. 143(3) of the Act by making erroneous, arbitrary and ad-hoc addition based on mere conjecture, suspicions and surmises. 4. That the Ld. AO has erroneously made arbitrary additions in the impugned assessment order framed u/s 147 of the Act on the issues which has no nexus with the “reason to believe” on the basis of which the re-opening assessment was initiated and thereby making a de-novo addition & consequent assessment, which has been rightly deleted by the Ld. CIT(A) vide order dated 04.04.2024. 5. That on the facts and in the circumstances of the case, the Ld. CIT(A) has rightly deleted the ad-hoc, arbitrary and de-novo addition made by the Ld. AO amounting to Rs. 1,31,07,957/- being baseless and without any merits. 6. That on the facts and in the circumstances of the case, the Ld. CIT(A) has deleted the ad-hoc, arbitrary and de-novo addition amounting to Rs. 1,31,07,957/- after duly considering the complete facts of the case and giving due opportunity both to the assessee as well as the Ld. AO and therefore, the appeal of the Ld. AO needs to be dismissed at inception being frivolous, erroneous and without any merits. 7. That the appellant craves to add, amend, alter or withdraw any Ground or Grounds of Appeal.” 4 ITA No.2448/DEL/2024 CO No.69/Del/2024 4. During the course of hearing, the Ld. Authorized Representative [AR] for the assessee placed following written submissions on record: - “I. Issue:- “When the no addition has been made by the Ld. AO on the issues/reasons based on which the notice u/s 148 was issued then the Ld. AO cannot make addition or assess any other income in lieu of some other issue for which reasons have not been recorded by the Ld. AO while issuing the notice u/s 148 for reopening the assessment within the meaning of section 147 r.w.s. 148 of the Act” II. Facts of the Matter: The captioned case for AY 2016-17 was re-opened on the basis of reasons for re-opening recorded vide notice/letter dated 08.12.2021 wherein the sole reason mentioned in the said reasons for re-opening was “alleged bogus unsecured loans”. Copy of the said reasons recorded u/s 148 for re-opening the proceedings u/s 147 are enclosed herewith at Pg nos. However, no addition was made on the issues on the basis of which assessment was re-opened while framing assessment u/s 147 of the Act dated 31.03.2022 rather additions were made on the other issues. III. Covered Matter in favour of the assessee:-  By the Hon’ble Delhi High Court in the case of PCIT(Central)-1 vs M/s Mideast Integrated Steels Ltd in ITA no. 1482/2018 order dated 10.09.2024 (in this decision, position of law as settled in Ranbaxy Laboratories has been affirmed and this case has been rendered after the judgement in case of Jakotia Plastics).  By the Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs CIT [2011] 336 ITR 136 (Del.) order dated 03.06.2011.  By the Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. [2010] 331 ITR 236 (Bom.). 5 ITA No.2448/DEL/2024 CO No.69/Del/2024  By the Hon’ble Delhi High Court in the case of Commissioner of Income-Tax (Exemption) vs Monarch Educational Society [2016] 387 ITR 416 (DEL) vide order dated 03.02.2016.  By the Hon’ble Rajasthan High Court in the case of CIT versus Shri Ram Singh, (2008) 306 ITR 343 (Raj.).  By the Hon’ble Bombay High Court in the case of DIT (IT) v. Black & Veatch Prichard, Inc. (2019) 107 taxmann.com 289 (Bom.)(HC))  By the Hon’ble ITAT Delhi in the case of Sheela Foam Ltd. Vs DCIT vide order dated 27.04.2020 Held: Vide the aforesaid judgements, the Hon’ble High Courts including Hon’ble Jurisdictional Delhi High Court in Ranbaxy Laboratories Ltd. vs CIT (supra) have held that where no addition has been made on account of the reasons recorded for re-opening the assessment under the provisions of section 147/148 of the Act, then no addition can be made in the hands of the assessee on any other account. Hence, the order passed u/s 147 r.w.s. 143(3) of the Act is invalid. IV. Prayer:- The ratio of the aforesaid judgements totally applies to the facts of the case following which the Ld. CIT(A) vide order u/s 250 of the Act dated 04.04.2024 has quashed the impugned assessment order dated 31.03.2022 for AY 2016-17 by observing as under: - “6.6 In view of the above judicial pronouncements including the decision of Jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. & Monarch Educational Society, it is held that the additions made by the AO on other issues are not sustainable in the absence of additions made on the issues on the basis of which case was reopened u/s 147. Since no additions were made by AO on the issue of unsecured loans, he could not have proceeded to make addition on other issues without the issuance of fresh 148 6 ITA No.2448/DEL/2024 CO No.69/Del/2024 notice. The ratio of the decisions of the Hon’ble Delhi High Court squarely apply to the facts of this case since the Assessing Officer did not make any addition for which the reopening was made. The Assessing Officer made various other additions other than the addition for which the assessment was reopened. In view of the above, respectfully following the above decisions of the jurisdictional High Court, 1 hold that the reassessment order passed by the Assessing Officer under Section 143(3) read with Section 147 of the Act is bad in law and the same is quashed on this ground.” In view of above stated facts and settled law, it is hereby prayed that the order of the Ld. CIT(A) may kindly be upheld wherein the impugned assessment order dated 31.03.2022 has been rightly quashed and thus the appeal of the revenue needs to be dismissed.” 5. Brief facts of the matter are that the case of the assessee company was re- opened vide notice u/s 148 of the Act dated 27.03.2021 on account of alleged information received during the course of a survey operation conducted on 20.08.2019 in case of the assessee company and case was centralized with the DCIT, CC-27, New Delhi. The reasons for re- opening were sought by the assessee by the assessee company and thereafter, the copy of reasons recorded were provided vide dated 08.12.2021 wherein it was mentioned that the case has been re-opened on account of issue of “alleged bogus unsecured loans”. 6. Thereafter, the assessment was framed by the Ld. AO vide order u/s 147 r.w.s. 143(3) of the Act dated 31.03.2022 whereby the income of the assessee company was determined at Rs. 13,49,06,636/- as against the 7 ITA No.2448/DEL/2024 CO No.69/Del/2024 returned income of Rs. 11,35,33,337/- by making additions to the tune of Rs. 2,13,73,299/- on different issues other than the alleged issue for re- opening, i.e., alleged bogus unsecured loans. 7. The assessee company filed an appeal before the Ld. CIT(A) against the aforesaid re-assessment order u/s 147 of the Act dated 31.03.2022. The Ld. CIT(A), Delhi-29 vide order u/s 250 of the Act dated 04.04.2024 allowed the appeal of the assessee company by quashing the reassessment order so framed u/s 147 of the Act dated 31.03.2022 by observing as under: - “6.6 In view of the above judicial pronouncements including the decision of Jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. & Monarch Educational Society, it is held that the additions made by the AO on other issues are not sustainable in the absence of additions made on the issues on the basis of which case was reopened u/s 147. Since no additions were made by AO on the issue of unsecured loans, he could not have proceeded to make addition on other issues without the issuance of fresh 148 notice. The ratio of the decisions of the Hon’ble Delhi High Court squarely apply to the facts of this case since the Assessing Officer did not make any addition for which the reopening was made. The Assessing Officer made various other additions other than the addition for which the assessment was reopened. In view of the above, respectfully following the above decisions of the jurisdictional High Court, 1 hold that the reassessment order passed by the Assessing Officer under Section 143(3) read with Section 147 of the Act is bad in law and the same is quashed on this ground.” 8 ITA No.2448/DEL/2024 CO No.69/Del/2024 8. The Revenue is under appeal before us against the aforesaid order dated 04.04.2024 u/s 250 of the Act against which the assessee company has filed Cross Objections. 9. During the course of hearing, the Ld. AR for the assessee most vehemently argued that the Ld. CIT(A) has rightly quashed the re- assessment order so framed u/s 147 of the Act dated 31.03.2022 by the Ld. AO by following the ratio laid down by the Hon’ble jurisdiction High Court of Delhi in case of Ranbaxy Laboratories Ltd. vs CIT [2011] 336 ITR 136 (Del.) whereby the Hon’ble High Court vide order dated 03.06.2011 observed & held at Para 15 as under: - “15. In Dr.Devendra Gupta's case (supra), learned Tribunal has relied upon the judgment of the Punjab & Haryana High Court, in Atlas Cycle Industries case (supra), and concluded that the basic condition is, that the AO has reason to believe, that any income chargeable to tax has escaped assessment, for any assessment year, and it was found, that the section puts no bar on the powers of the AO, to put to tax, any other income, chargeable to tax, which has escaped assessment, and which subsequently comes to his notice, in the course of the proceedings, but then, the prefixing words \"and also\", which succeeded \"any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income\". This expression was found to be making clear, that existence of the income, for which the AO formed belief, to have escaped assessment, is a precondition, for including any other income chargeable to tax, escaping assessment, and coming to the notice of the AO subsequently, in the course of the proceedings. Thus, unless and until such income, as giving rise to form belief, for escaping assessment, continues to exist, and constitutes a subject-matter of assessment, under s.147 \"no other income\" 9 ITA No.2448/DEL/2024 CO No.69/Del/2024 coming to the notice of the AO, during the course of the proceedings, can be roped in…….” 10. The Ld. AR further submitted that the decision of Hon’ble Delhi High Court in case of Pr. CIT(Central)-3, New Delhi Vs. Jakhotia Plastics (P) Ltd relied upon by the Revenue in their appeal cannot be followed as the Hon’ble Delhi High Court in as recent judgement in case of PCIT(Central)-1 vs M/s Mideast Integrated Steels Ltd in ITA no. 1482/2018 order dated 10.09.2024 has reiterated the position of law settled by the Hon’ble Delhi High Court itself in case of Ranbaxy Laboratories (supra) and therefore, the question of law has been settled in favour of the assessee company. 11. The Ld. AR further argued that not only the Hon’ble Jurisdictional High Court of Delhi but various other Hon’ble High Courts have unanimously settled the legal position that if the addition has not been made on the issues/reasons based on which the notice u/s 148 was issued then the AO cannot make addition or assess any other income in lieu of some other issue for which reasons have not been recorded by the Ld. AO while issuing the notice u/s 148 for reopening the assessment within the meaning of section 147 r.w.s. 148 of the Act, few of such cases relied upon by the Ld. AR for the assessee company are cited hereunder: - 10 ITA No.2448/DEL/2024 CO No.69/Del/2024 (i) Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. [2010] 331 ITR 236 (Bom.). (ii) Hon’ble Rajasthan High Court in the case of CIT versus Shri Ram Singh, (2008) 306 ITR 343 (Raj.). (iii) Hon’ble Bombay High Court in the case of DIT (IT) v. Black & Veatch Prichard, Inc. (2019) 107 taxmann.com 289 (Bom.)(HC)) 12. On the other hand, the Ld. DR supported the findings of lower authorities and objected to the submissions of the Ld AR and submitted that the jurisdiction may have changed on the basis of search or survey proceedings carried on. He, however, pressed upon the judgement of Hon’ble Delhi High Court in case of Pr. CIT(Central)-3, New Delhi Vs. Jakhotia Plastics (P) Ltd which, in our view, was rendered nugatory in view of the recent judgement of the Hon’ble Delhi High Court in case of PCIT(Central)-1 vs M/s Mideast Integrated Steels Ltd in ITA no. 1482/2018 order dated 10.09.2024. 13. Considered the rival submissions and perused the material placed on record. We find that the whole appeal revolves around the issue that no addition can be made to other issues for which reasons were not recorded while issuing notice u/s 148 of the Act if no addition has been made on the issues for which reasons were recorded for re-opening of the assessment. The Revenue relied upon the judgements of Hon'ble 11 ITA No.2448/DEL/2024 CO No.69/Del/2024 Karnataka High Court in the case of N. Govinda Raju Vs ITO [20l5] 377 ITR 243 (Karn.) (HC) and Hon’ble Delhi High Court in case of Pr. CIT(Central)-3, New Delhi Vs. Jakhotia Plastics (P) Ltd to support its contention that the Ld. CIT(A) was not right in quashing the assessment order dated 31.03.2022 in which order no additions were made on the issues for which reasons were recorded for the re-opening of the assessment. 14. On the other hand, the Ld. AR vehemently argued that the issue in appeal has already been settled by the Hon’ble Jurisdictional High Court of Delhi in case of Ranbaxy Laboratories Ltd. vs CIT [2011] 336 ITR 136 (Del.) and again reiterated the said position of law in its recent judgement in case of PCIT(Central)-1 vs M/s Mideast Integrated Steels Ltd in ITA no. 1482/2018 vide order dated 10.09.2024. Furthermore, several other High Courts have also pronounced judgements in conformity with the law laid down by the Hon’ble Jurisdictional High Court of Delhi in the case of Ranbaxy Laboratories (supra). 15. We have observed that the Ld. CIT(A) has also allowed the appeal of the assessee company by following the mandate of the Jurisdictional High Court of Delhi in the case of Ranbaxy Laboratories (supra) which is binding upon the authorities below. 12 ITA No.2448/DEL/2024 CO No.69/Del/2024 16. In the light of the afore-stated facts and following the judicial discipline as the decision of the Jurisdictional High Court of Delhi are binding upon the Tribunal, we hereby upheld the order of the Ld. CIT(A) and accordingly, the assessment order dated 31.03.2022 for AY 2016-17 is quashed. 17. In the result, the appeal of the revenue stands dismissed and the cross objections of the assessee company are allowed. Order pronounced in the open court on this 19th day of March, 2025. Sd/- sd/- (MAHAVIR SINGH) (S.RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 19.03.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "