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Facts
The assessee, a cooperative society, failed to file its return for AY 2018-19. The AO reopened assessment proceedings based on information regarding cash deposits, withdrawals, and time deposits. However, the addition made was for disallowance of deduction u/s.80P, which was not part of the reasons for reopening.
Held
The Tribunal held that the reassessment proceedings were bad in law as the addition was made on an issue not covered by the reasons recorded for reopening, and no fresh notice was issued. Consequently, the assessment order was quashed.
Key Issues
Whether reassessment proceedings are vitiated if the addition is made on an issue not forming the basis of the original reopening notice and reasons.
Sections Cited
147, 144, 144B, 148, 148A, 250, 151, 80P, 139(1), 80A(5)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
आदेश / ORDER
The captioned appeal at the instance of assessee pertaining to A.Y. 2018-19 is directed against the order dated 14.11.2024 of National Faceless Appeal Centre (NFAC), Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of Assessment Order dated 23.03.2024 passed u/s.147 r.w.s144 r.w.s144B of the Act.
Registry has informed that there is delay of 84 days in preferring the instant appeal before this Tribunal. Assessee has filed an affidavit explaining the reasons which led to delay in filing of the appeal.
After hearing both the sides and perusing the averments made in the affidavit, we are satisfied that due to ‘reasonable cause’ assessee failed to file the appeal within the stipulated time. I therefore in light of judgments of Hon’ble Apex Court Court in the case of Collector, Land Acquisition, Anantnag & Anr. Vs. Mst. Katiji & Ors. reported in (1987) 2 SCC 107 and in the case of Inder Singh Vs. State of Madhya Pradesh judgment dated 21.03.2025 (2025 INSC 382) condone the delay of 84 days in filing the appeal before this Tribunal.
Assessee has raised following grounds of appeal :
“1. Without prejudice to the other grounds and on the facts and in the prevailing circumstances of the case and in Law, the learned CIT(A) erred in confirming the addition so made by the Ld. Assessing Officer without appreciating the fact the impugned addition is invalid as the Ld. Assessing Officer made the addition on the issue which was not the part of reasons recorded at the time of issue notice under section 148A/148. Hence, the addition of Rs.12,61,164 on account of disallowance of deduction under section 80P being bad in law may please be deleted.
2. Without prejudice to the other grounds and on the facts and in the prevailing circumstances of the case and in Law, the learned CIT(A) erred in confirming the addition so made by the Ld. Assessing Officer without appreciating the fact that the notice issued under section 148 was issued without the proper approval as specified under section 151, thereby making the entire assessment null and void. Hence, the addition of Rs.12,61,164 on account of disallowance of deduction under section 80P being bad in law may please be deleted.
3. Without prejudice to the other grounds and on the facts and in the prevailing circumstances of the case and in Law, the learned CIT(A) erred in confirming the addition so made by the Ld. Assessing Officer without appreciating the fact the impugned addition is invalid as the Ld. Assessing Officer made the addition on the issue which was not the part of reasons recorded at the time of issue notice under section 148A/148. Hence, the addition of Rs 12,61,164 on account of disallowance of deduction under section 80P being bad in law may please be deleted.
3. Without prejudice to the other grounds and on the facts and in the prevailing circumstances of the case and in Law, the learned CIT(A) erred in confirming the addition so made by the Ld. Assessing Officer without appreciating the submissions made by the assessee before the Ld. Assessing Officer and without discussing the merits of case. Thus failure to consider the reply. Hence, the addition of Rs.12,61,164 on account of disallowance of deduction under section 80P being bad in law may please be deleted.
Saraswati Mahila Nagari Sahakari Patsanstha Maryadit 5. The Appellate craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal.
I will first take up the legal issue raised in Ground No.1 to 3 through which it is submitted that ld.CIT(A) erred in confirming the addition made by the Assessing Officer without considering the fact that the addition made is other than the issue for which case was reopened and thus the entire re- assessment proceedings are bad in law and hence the addition made in the impugned order deserves to be deleted.
At the outset, ld. Counsel for the assessee placing reliance on the decision of this Tribunal in the case of Rajya Rakhiv Police Karmachari Sahakari Patsanstha Maryaditand Vs. ITO in order dated, 16.06.2025 submitted that the case of the assessee was reopened on account of reason for source of cash deposits, cash withdrawals and time deposits and interest other than interest on securities and the alleged escapement of income, however, in the re-assessment proceedings concluded u/s.147 r.w.s.144 r.w.s.144B of the Act ld. AO has only made disallowance u/s.80P of the Act at Rs.12,61,164/- and has not made any addition for unexplained cash deposits/withdrawals/interest.
On the other hand, ld. DR supported the order of ld.CIT(A) but failed to controvert the contentions raised by ld. Counsel for the assessee.
I have heard the rival contentions and perused the record placed before me. I note that the assessee is a Cooperative Society but failed to file the return for A.Y. 2018-19. Ld. Assessing Officer based on the information about cash Saraswati Mahila Nagari Sahakari Patsanstha Maryadit deposits and time deposit and giving reference to various transactions appearing in para 1 and 2 of the assessment order has issued notice u/s.148 of the Act and carried out the re-assessment proceedings u/s.147 of the Act. During the course of re-assessment proceedings, assessee filed various details giving reply to each and every query raised by the ld. AO about the source of cash deposits, cash withdrawals and time deposits, commission/brokerage etc. Ld. AO has dealt with these issues at length in the assessment order running into 22 pages and was finally satisfied with the replies filed by the assessee. However, while concluding the proceedings, ld. AO observed that the assessee has claimed deduction u/s.80P of the Act at Rs.12,61,164/- but since the assessee failed to file the return of income u/s.139(1) of the Act he has disallowed the said claim made u/s.80P of the Act. Now before dealing with merits of the case about the assessee’s eligibility of getting benefit of deduction u/s.80P, first the legal issue needs to be adjudicated as to whether the said disallowance made by the ld. AO in the re-assessment proceedings find place in the reasons recorded for reopening the proceedings. Admittedly, no addition has been made for the issues mentioned in the recorded for reopening of the assessment proceedings but disallowance on some other issue has been made which is neither been mentioned in the reasons recorded for reopening nor any fresh notice u/s.148 of the Act has been issued prior to making such disallowance.
Now under these given facts where the addition has been made on the issue other than the issue on the basis of which reopening proceedings have been carried out, I find that Coordinate Bench in the case of Rajya Rakhiv Police Karmachari Sahakari Patsanstha Maryaditand Vs. ITO (supra) has dealt with a similar issue and has decided in favour of the assessee placing reliance on the judgment of Hon’ble Jurisdictional High Court in the case of Jet Airways (I) Ltd. (supra) (2011) 331 ITR 236. Finding of Tribunal reads as under :
“8. We have heard the rival contentions and perused the record placed before us. So far as the legal issue raised vide Ground No.1 in the grounds of appeal is concerned, we find that the reason for carrying out the re-assessment proceedings was regarding explanation about the source of cash deposit of Rs.35,00,821/-. It is noticed that assessee neither had PAN nor has filed any return of income for the year under consideration. It was only during the course of re-assessment proceedings that ld. AO was able to examine the details in the form of Annual Report and Books of account. In the assessment order, ld. AO has nowhere doubted the source of alleged cash deposit which was from the Members of the society and therefore no addition was made on this account. Ld. AO has disallowed the deduction u/s.80P of the Act by applying section 80A(5) of the Act. Under these given facts, judgment of Hon’ble Jurisdictional High court in the case of Jet Airways (I) Ltd. (supra) comes to the rescue of the assessee wherein it was held that “if after issuing a notice under section 148, he (AO) accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee”. Considering the judgment of Hon’ble Jurisdictional High Court, we find that in the instant case ld. AO has issued only one show cause notice u/s.148 along with the reasons to believe of the escapement of income with regard to unexplained cash deposit. During the course of assessment proceedings, ld. AO was satisfied with the source of cash deposit and therefore if he intended to make addition on some other ground he was required to issue a fresh show cause notice u/s.148. Since this exercise has not been carried out by the ld. AO the assessment order framed on 30.12.2019 is held to be bad in law and deserves to be quashed. Legal issue raised in Ground No.1 stands allowed.”
10. I find that the facts of the aforesaid case are squarely applicable on the facts of the instant case before me. Respectfully following the above decision, hold that the re- assessment proceedings carried u/s.147 r.w.s.144 of the Act Saraswati Mahila Nagari Sahakari Patsanstha Maryadit vide order 23.03.2024 are illegal and bad in law and I hereby quash the assessment order. Finding of ld.CIT(A) is set aside and the legal issue raised in Ground No.1 to 3 are allowed in favour of the assessee.
11. So far as merits of the case are concerned, since I have quashed the re-assessment proceedings, dealing with the grounds on merits would be merely academic. Therefore, the grounds raised on merits are dismissed as academic.
In the result, appeal of the assessee is allowed as per terms indicated above.
Order pronounced on this 26th day of August, 2025.