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Facts
The assessee, a cooperative society, did not file its return of income for AY 2018-19. The Assessing Officer (AO) initiated reassessment proceedings under section 147/148 based on information regarding cash withdrawals of Rs. 2,87,70,000/-. The AO later disallowed a deduction of Rs. 4,64,183/- claimed under section 80P(2)(d) on the grounds that the return was not filed within the due date as required by section 80AC.
Held
The Tribunal held that the reassessment proceedings were bad in law because the AO made an addition on a different footing (disallowance of deduction u/s 80P(2)(d)) than the grounds on which the reassessment was initiated (unexplained cash withdrawals). The AO failed to record separate reasons and obtain permission for the addition made on the deduction issue.
Key Issues
Whether the reassessment proceedings initiated on one ground can lead to an addition on a different, unrecorded ground, and whether the disallowance of deduction under section 80P(2)(d) was valid when the return was filed belatedly.
Sections Cited
147, 148, 148A, 144B, 80P(2)(d), 80AC, 139(1), 142(1), 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA
ORDER Per, Dr. A. L. Saini, AM:
Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2018-19 is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi[in short ‘Ld.CIT(A)/NFAC’], under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), dated 16.08.2024, which in turn arise out of an assessment order passed by the Assessing Officer u/s. 147read with section 144Bof the Act dated 21.03.2023.
2. The Grounds of appeal, raised by the assessee, are as follows:
“1.The order passed u/s 147 r.w.s. 144B of the Act and the notice u/s 148 of the Act is bad in law. 2.The Learned Commissioner (Appeals), NFAC, Delhi erred in sustaining the disallowance of claim of deduction of Rs. 4,64,183/-made by the Appellant u/s 80P(2)(d) in the return of income filed for the year, in view of Sec. 80AC of the Act. 3.The Learned Commissioner (Appeals), NFAC, Delhi erred in not adjudicating ground of disallowance of claim of deduction of Rs.4,64,183/- u/s 80P of the Act on merits. 4.The appellant craves leave to add, amend, alter or withdraw all or any ground of appeal, at any time, upto the date of hearing of the appeal.
The brief facts qua the issue are that assessee had not filed Return of Income for the assessment year (A.Y.) 2018-19, relevant to the financial year 2017-18. The assessee is a registered co-operative society and main activity of the society is to purchase milk from its member in village area at NagichanalalMangrol and sale this milk to milk district sangh, Junagarh.As per the information available with the department, a notice u/s 148 of the Act, was issued through ITBA portal of the department, on 31.03.2022, after completing the proceedings u/s 148A of the Act, and passing order under clause (d) of section 148A of the Income-tax Act,1961, as under- "The assessee is an assessing officer and has not filed return of income for the FY 2017-18 relevant to AY 2018-19. Thereafter, information was received from the INSIGHT Portal which suggested that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year. The information received by the assessing officer was within the Explanation 1(1) of proviso to section 148 and the information in the instantcaseis categorized under head 'any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time. 2. The information available with the assessing officer was analyzed and duly verified as per the data available with the assessing officer on various portals viz., ITBA, INSIGHT Portal and e-filing portal. 3. After due analysis of the relevant information and verification from different portals, it was observed that the income corresponding to the financial transactions available /on records has escaped assessment as the assessee had not filed return ofincome for year under consideration.
4. Thereafter, following due procedure as provided by Section 148A of the Act, a show-cause notice u/s 148A(b) was issued on 21.03.2022 and served upon the assessee after obtaining prior approval of the specified authority u/s.151 of the Act. The assessee was given opportunity of being heard by serving upon him a notice to show-cause within seven days, as to why a notice timber section 148 of the Act shall not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment, in its case for the relevant assessment year.
5. However, the assessee has not responded to the show-cause issued u/s. 148A(b) of the Act. Therefore, the assessing officer proceeded to decide on the material available on the record.
6. The information and material available on record has been analyzed and the following observations are made:- A. The assessee is an assessing officer and has not filed return of income for the assessment year under consideration as well. B. It is noted that the assessee has made cash withdrawals to the tune of Rs.2,87,70,000/- from the account of The Junagadh Jilla Sahakari Bank Limited during the year under consideration. The source of the amount out of which the cash transaction have been made remains unexplained as the assessee has not filed return of income for the year under consideration. The unexplained source of the amount out of which the cash transaction have been made and non-filing of return suggests within the meaning of section 147 r.w.s. 148 of the Act that income chargeable to tax has escaped assessment for the year under consideration 7. Therefore, based on the above observations which originate from the material/information available on record with the assessing officer, income to the tune of Rs.2,87,70,000/- has escaped assessment for the year under consideration. In view of the above facts, I am satisfied that the case of the assessee is fit case for issuance of Notice under section 148 of the Act for A.Y. 2018-19.
Accordingly, a notice u/s 148 of the I.T. Act 1961, was issued through ITBAportal of the department on 31.03.2022. In response, the assessee filed return of income, on 19.06.2022,showing total income of Rs. Nil, after claiming deduction of Rs.4,64,183/-, u/s.80P(2)(d) of the I.T.Act. As mentioned above, the issue involved in this case is cash withdrawals to the tune of Rs. 2,87,70,000/- from the account of the Junagadh Jilla Sahakari Bank Limited during the year under consideration and accordingly a notice us 148 of the I.T.Act was issued on 31.03.2022. Later on, during the course of assessment proceedings, a notices u/s 142(1) of the I.T.Act, was issued to the assessee, on 17.08.2022, requesting the assessee to furnish certain details, as mentioned therein such as, nature of activities/ business works of the entity and modus operandi of the same along with the computation of income for the period under consideration, a note on objectives of the entity along with documents/copy of deed/bye-laws details of all bank accounts and bank account statements, complete financial statements audit report along with thebalance Sheet, income and expenditure P&L account, etc. Anotice u/s.143(2) of the I.T. Act, was also issued to the assessee.
In response to the above notice, the assessee, on 19.11.2022 and on 12.12.2022, has furnished a written submission and uploaded the requisite details/ documents which has been examined. Further as per the financial statements and return of income filed in response to notice u/s 148, it has been found by the assessing officer that the assessee- society has shown total sale of Rs.3,48,56,990/- and total purchase of Rs.3,38,01,400/-, during the year under consideration. Gross total income of Rs.4,64,183/-, has been shown and after claiming deduction of Rs.4,64,183/-, under section 80P(2)(d) of the I.T.Act, total taxable income has been shown, as NIL.
The assessing officer also noticed that for claiming deduction u/s 80P of the I.T.Act, return of income is required to be filed on or before the due date for filing of return, as mentioned in section 80AC of the Act. As the assessee has filed return of income after issue of notice u/s 148 of the Act, the deduction claimed by the assessee-society is not allowable and therefore, a show cause notice was issued to the assessee, on 07.03.2023, explaining the proposed variations. The main contents of the show cause notice(SCN)is reproduced here: "Variation proposed: Please refer to the return of income filed in response to notice issued u/s 148 of the I. T.Act and replies submitted so far in this case.
It has been found that deduction ofRs.4,64,183/-, has been claimed u/s 80P(2)(d) of the Act, during the year under consideration. As per section 80AC of the I. T.Act, for claiming deduction u/s 80P of the I.T.Act, it is mandatory to file the return of income u/s 139(1) of the I.T.Act. But as per the record, the assessee, cooperative society has not filed its return of income u/s 139(1) of the I.T.Act. In view of this fact, claim of deduction ofRs.4,64,183/-, is proposed to be disallowed and added back to the total income."
In response to above show cause notice (SCN), the assesseehas submitted, it’s reply on 15.03.2023, statingthat the section 80AC was introduced w.e.f 1/4/2021. Accordingly, the above amendment would not apply to the impugned assessment year, the section was not in force during the period under consideration i.e. assessment year 2019-2020 for that assessee relied the Judgement of honorable I.T.A.T.RAJKOT in the case of Madi Seva SahkariMandali Ltd. Amreli V/S. Adit(CPC) Bengalureu, dated 31/10/2022.
8.However, the assessing officerrejected the contentions of the assessee and disallowed the deduction under section 80P(2)(d) of the Act of Rs.4,64,183/-.
9.Aggrieved by the order of the assessing officer, the assessee carried thematter in appeal, before the ld.CIT(A), who has dismissed the appeal of the assessee.The ld CIT(A) noted that statutory provisions of section 80AC of the Act, provides that no such deduction under section 80P of the Act, shall be allowed to an assessee, unless it furnishes a return of his income on or before the due date specified under section 139(1) of the Act, w.e.f. assessment year 2018-19 onwards. The section 80AC specifically mentions sub- section (1) of 139 of the Act. Therefore, even if the society files the return belatedly after the due date or in response to notice u/s 148, it cannot claim the benefit of deduction u/s 80P of the Act. It is noted that the legislature has categorically slated that only a return filed on or before the due dates u/s 139(1) shall be considered for claims u/s 80P of the Act. Thus, in view of this specific language used under the Act, it was concluded that the legislature envisages filing of return on time for allowability of deduction u/s 80P of the Act. Therefore, learned CIT( A) held thatthe disallowance of deduction u/s 80P, in theassessee`s case is correct.
Aggrieved by the order of the ld.CIT(A), the assessee is in further appeal before us.
Shri D.M. Rindani, Learned Counsel for the assessee, argued that the reasons were recorded on different footing to tax the cash credit transaction to the tune of Rs.2,87,70,000/-. However, the assessing officer has made addition on different issue u/s.80P(2)(d) of the Act andtheassessing officer has not made the addition inrespect of the amount, which is mentioned in the reasons recorded. Therefore, since the assessing officer has failed tomake addition in respect of the issue raised in reason recorded for reopening the assessment, andmade addition on different footing, without recording further reasons in writing to tax such items.Therefore, reassessment proceedings initiated by the assessing officer, is bad in law,and it should be quashed.
On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
13.We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. In our considered view, it was wholly erroneous on the part of the assessimg officer to make the addition on account of deduction claimed by the assessee under section 80P(2) (d) of the Act, as it was not the subject matter of reasons recorded by the assessing officer. The assessing officer recorded the reasons thatassessee has made cash withdrawals to the tune of Rs.2,87,70,000/- from the account of the Junagadh Jilla Sahakari Bank Limited during the year under consideration. The source of the amount out of which the cash transaction have been made remains unexplained, as the assessee has not filed return of income, for the year under consideration. The unexplained source of the amount out of which the cash transaction have been made and non-filing of return suggests within the meaning of section 147 r.w.s. 148 of the Act that income chargeable to tax has escaped assessment for the year under consideration. Therefore, we note that entire reasons were recorded to tax cash withdrawals to the tune of Rs.2,87,70,000/-, however, assessing officer disallowed the deduction under section 80P(2)(d) of the Act of Rs.4,64,183/-, which was not mentioned in the reasons recorded by the assessing officer. Hence, reasons were recorded on different footing and addition was made on different footing. If the assessing officer wanted to disallow the deduction, under section 80P(2)(d) of the Act, to the tune of Rs.4,64,183/-, then in that circumstances, he needs to record reasons in writing separately and also should take permission, from the appropriate authority, which has not been done by the assessing officer.
14.We note that during the assessment proceedings, the notice under clause (b) of section 148A of the Act dated 21.03.2022 was issued by the assessing officerby recording the following reasons:
“This office is in possession of information with regard to your cash/credit transactions as per following details during F.Y. 2017-18:
Bank Name Account Account Aggregate Aggregategrossamount Number Type grossamountc debited to reditedto the theaccountincash(Rs.) account incash(Rs.)
THE JUNAGADH 19600044488 Current 2,87,70,000 JILLA SAHAKARI 5 Account BANK LIMITED
On verification the database of Income Tax Department, it has also been found that you have not filed the return of income for the year under consideration i.e. A.Y. 2018-19.
3. In view of the above facts and figures, it is very much clear that the above transactions have never been offered for taxation under the provisions of Income Tax Act, 1961. Hence, the source and nature of these transaction are not proved. You are, therefore, requested to furnish reply in this regard on or before the date stipulated in this notice. If you failed to provide such details and clarification, it will be presumed that you have nothing to say in the matter and accordingly the transactions will be brought to tax-net by invoking section 148 of the Act.”
We alsofind that the assessing officerwhilemaking the order under clause (d),of section 148A of the Act observed as follows:
“7. Therefore, based on the above observations which originate from the material/information available on record with the assessing officer, income to the tune of Rs.2,87,70,000/- has escaped assessment for the year under consideration. In view of the above facts, I am satisfied that the case of the assessee is fit case for issuance of Notice under section 148 of the Act for A.Y. 2018-19.”
16.Therefore, we find the reasons were recorded to tax the cash withdrawal to the tune Rs.2,87,70,000/- from the account of the Junagadh Jilla Sahakari Bank Ltd, during the year under consideration. However, the assessing officer has not made any addition on this count,and he made addition on a different footing under section 80P(2)(d) of the Act to the tune of Rs.4,64,183/- . Therefore, the reassessment proceedings initiated by the assessing officer is bad in law. Therefore, we find that when the assessing officer had not made any addition, as regards the very basis on which the proceedings under section 147 of the Act were initiated in the case of the assessee, i.e. cash withdrawal to the tune of Rs.2,87,70,000/- and the assessing officer has expanded his jurisdiction, without taking permission from the higher authorities and has made a different addition, on account of disallowance of deduction under section 80P(2) (d) of the Act. We note that the assessing officer could not make addition on other grounds which did not form part of the reasons recorded by the assessing officer, for that, reliance is placed on the judgement of Hon’ble Gujarat High Court in the case of CIT Vs. Mohmed Juned Dadani, (2013) 30 taxmann.com 1 (Guj), where in it was held thatwhen on ground on which reopening of assessment was based, no addition wasmade by Assessing Officer, he could not make additions on some other grounds, which did not form part of reasons recorded by him. Based on these facts and circumstances, we delete the addition made by the assessing officer under section 80P(2)(d) of the Act, and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 02/06/2025.