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Facts
The assessee, a Cooperative Society, failed to file its return for AY 2018-19. The AO reopened the assessment based on information about a large cash deposit and later made an addition for disallowance of deduction u/s 80P. The assessee argued that the addition was made on an issue different from the reason for reopening.
Held
The Tribunal held that the reassessment proceedings were bad in law because the addition was made on an issue other than the one for which the case was reopened, and no fresh notice was issued. Consequently, the assessment order was quashed.
Key Issues
Whether reassessment proceedings are valid when the addition is made on a ground different from the initial reason for reopening, without issuing a fresh notice.
Sections Cited
250, 147, 144, 148A, 80P, 139(1), 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeal at the instance of assessee pertaining to A.Y. 2018-19 is directed against the order dated 23.01.2025 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 08.03.2024 passed u/s.147 r.w.s144 of the Act.
Assessee has raised five grounds of appeal
including the legal issue. I will first take up the legal issue raised in Ground No.2 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 which is other than the issue for which case was reopened and thus the entire re- Primary Teachers Co-Operative Bank Sevakanchi Sahakari Patsanstha assessment proceedings are bad in law and hence the addition made in the impugned order deserves to be deleted.
3. 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 deposit amounting to Rs.68,78,424/- and the alleged escapement of income, however, in the re-assessment proceedings concluded u/s.147 r.w.s.144 of the Act ld. AO has only made disallowance u/s.80P of the Act at Rs.14,59,898/- and has not made any addition for unexplained cash deposits.
4. 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.
5. 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 huge cash deposit of Rs.68,78,424/- in the bank account of the assessee maintained with Ahmednagar District Central Cooperative Bank Ltd. carried out the proceedings by issuing notice u/s.148A of the Act. During the course of re-assessment proceedings, assessee placed various details of the Cooperative Society based on which ld. AO was satisfied with the source of cash deposits which was actually received from the Members of the assessee society. However, ld. AO concluded the re- assessment proceedings denying the benefit of deduction u/s.80P of the Act on the ground that assessee has failed to file the return of income u/s.139(1) of the Act. 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 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 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.”
Primary Teachers Co-Operative Bank Sevakanchi Sahakari Patsanstha 6. I find that the decision in the aforesaid case is squarely applicable on the facts of the instant case before me. Respectfully following the above decision, I hold that the re- assessment proceedings carried u/s.147 r.w.s.144 of the Act vide order 08.03.2024 are illegal and bad in law and hereby quash the assessment order u/s 147 r.w.s 144 of the Act. Finding of ld.CIT(A) is set aside and the legal issue raised in Ground No.2 is allowed in favour of the assessee.
So far as merits of the case are concerned, since we 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 Order pronounced on this 26th day of August, 2025.