RAKESH KAMAL CHOUDHARY,ARARIA vs. THE INCOME TAX OFFICER, PURNEA

ITA 440/PAT/2026Status: DisposedITAT Patna29 September 2026AY 2017-189 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the assessee's appeal. The core of the decision rested on the interpretation of Section 147 of the Income Tax Act, 1961, particularly the phrase 'and also' in Section 147(1). The Tribunal, referencing judicial pronouncements including those from the Rajasthan High Court in CIT v. Shri Ram Singh, held that the Assessing Officer (AO) must assess or reassess the income that formed the basis of the 'reason to believe' that income had escaped assessment. If this primary income is not assessed or reassessed, the AO cannot independently assess other income that comes to his notice subsequently during the proceedings. The Tribunal noted that while Explanation 3 to Section 147, inserted by the Finance (No. 2) Act, 2009, lifts the embargo on making assessments on grounds other than those for which the notice was issued, it does not override the substantive part of Section 147. Since the AO accepted the assessee's contention that the initial cash deposit of ₹18,54,700/- belonged to a partnership firm and did not make any addition on that ground, he was not empowered to independently make an addition of ₹17,63,802/- based on other bank deposits. Therefore, grounds 1 to 4 were allowed, and the addition of ₹17,63,802/- was deleted.

What were the facts?

The assessee, Rakesh Kamal Choudhary, filed an appeal against the order of the Addl/JCIT(A)-6, Kolkata, for Assessment Year 2017-18. The Assessing Officer (AO) initiated reassessment proceedings under Section 147 of the Income Tax Act, 1961, based on information regarding cash deposits of ₹18,54,700/- during the demonetization period. The assessee filed a return declaring total income of ₹1,92,360/-. While the AO accepted that the initial deposit pertained to a partnership firm where the assessee was a partner, he discovered other bank accounts with total deposits of ₹17,63,802/-. As the declared gross receipts were ₹2,11,705/-, the AO treated the excess deposits of ₹15,52,097/- as unexplained money under Section 69A and made an addition. The CIT(A) confirmed the addition, noting the assessee's failure to respond to notices and provide evidence.

What were the issues?

1. Whether the initiation of reassessment proceedings under Section 147 of the Income Tax Act, 1961, was valid, considering the conditions precedent for issuing a notice under Section 148 were not met and the AO acted on surmises and conjecture. 2. Whether the AO could make an addition of ₹17,63,802/- on other grounds when the original reason for reopening, i.e., cash deposit of ₹18,54,700/- in a partnership firm's account, was dropped. Assessee's Contentions: - The reassessment proceedings under Section 147 are void-ab-initio and bad in law as the conditions for issuing a notice under Section 148 were absent. - The AO exercised powers under Section 147 on mere surmises and conjecture. - The initial cash deposit of ₹18,54,700/- pertained to a partnership firm, not the assessee individually, making the initiation of proceedings under Section 147/148 erroneous. - Since the AO dropped the addition on the ground on which reopening was initiated, he could not make another addition independently, relying on CIT vs Jet Airways (1) Ltd and Ranbaxy Laboratories Ltd vs CIT. Revenue's Contentions: - Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 69A,Section 144,Section 139,Section 272A(1)(d),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PATNA ‘SMC’ BENCH AT KOLKATA

Before: SHRI YOGESH KUMAR US & SHRI RAKESH MISHRA

For Appellant: CA. प्रत्यर्थी के ओर से/

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Addl/JCIT(A)- 6, Kolkata [Ld. ‘Addl/JCIT(A)'] passed u/s 250 of the Income Tax Act, 1961 [the 'Act'] for AY 2017-18 dated 13.04.2026. ITA No(s). 440/PAT/2026 Assessment Year(s) 2017-18 Rakesh Kamal Choudhary.

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