When no addition is made on the basis of reasons recorded, reopening is bad in law

When AO do not make any addition on the basis of the reasons on which the reopening was done, the reopening is bad in law – ITAT

In a recent judgment, ITAT Cuttack has held that when the AO do not make any addition on the basis of the reasons on which the reopening was done, the reopening is bad in law.

ABCAUS Case Law Citation:
5036 (2026) (02) abcaus.in ITAT

Important Case Laws relied upon by Parties

The appellant assessee had purchased a property but had not filed its return for the impugned assessment year as the assessee did not have taxable income.

The AO issued a show cause notice u/s 148A(b) of the Income Tax Act, 1961 (the Act) on the ground that the assessee had sold the immovable property as return had not been filed.

The assessee replied that for the relevant Assessment Year she was not having income exceeding the exemption limit. The assessee further stated that notice issued u/s 148A(b) did not indicate that the AO had conducted any enquiry and the notice only specified the information available with the Department.

The assessee also contended that the scn did not allege any escapement of income. It was also stated that the assessee had purchased another property and therefore there was no taxable capital gain in the hands of the assessee.

However, the AO did not accept the response of the assessee and reopened and completed the assessment.

Before the Tribunal the assessee contended that in the assessment no addition had been made on account of the reasons recorded for the purpose of the reopening. It was submission that the addition had been made in respect of the source for the purchase of property. It was submission that the in view of the decision of the Hon’ble Supreme Court and the decision of the Hon’ble Madras High Court section 147 of the Act enables the Assessing Officer to travel beyond the reasons for initiating reassessment proceedings provided such reassessment is also carried out on the grounds or reasons on which reassessment was initiated. On the other hand, if the ground on which reassessment was initiated was no longer available to the Assessing Officer, reassessment cannot be continued on the basis of the original notice u/s.148 of the Act and that a fresh notice is necessary.

The Tribunal opined that AO having not made any addition on the basis of the reasons on which the reopening was done, the reopening was bad in law and quashed the consequential assessment order.

Download Full Judgment Click Here >>

• SC express concern over AI generated judgments/paragraphs escaping scrutiny by NCLT/NCLAT
• ICAI to take disciplinary action for quoting very low & incommensurate fee by Chartered Accountants
• NSDL latest e-TDS TCS RPU Version 6.00 and FVU 9.5 RPU V 1.0 from Tax Year 2026-27 – Download
• Requirement for filing Form 67 for claiming FTC only directory not mandatory – ITAT
• Limitation to invoke power u/s 263 for issues not covered in re-assessment start from original assessment – ITAT