Karnataka Prathamik Krushi Pattin Sahakari Sangh Niyamit Handigund Vs ITO (ITAT Panaji)
Reassessment Cannot Survive When No Addition Is Made on the Issue for Which It Was Reopened: Panaji ITAT Quashes Section 147 Proceedings
The two co-operative societies were subjected to reassessment under Section 147 based on alleged cash deposits. In the first case, reopening was for examining cash deposits of ₹65.76 lakh, while in the second case it concerned deposits of ₹75.72 lakh. However, the AO ultimately made no addition whatsoever in respect of the cash deposits. Instead, he proceeded to disallow deductions under Section 80P of ₹83,632 and ₹3,73,928 respectively.
The assessees contended that once the AO accepted the explanation concerning the very income for which the assessment was reopened, he could not independently make an addition on an altogether different issue without issuing a fresh notice under Section 148.
The Panaji ITAT accepted the contention, following the jurisdictional Bombay High Court decision in CIT v. Jet Airways (I) Ltd. (2010) 195 Taxman 117. It reiterated that the AO may assess “such income” forming the basis of reopening and, while doing so, may also assess other escaped income coming to his notice. But where no addition is ultimately made in respect of the income forming the very basis of reopening, the AO cannot independently assess another item of income in those proceedings; a fresh notice under Section 148 would be necessary.
Since no addition was made for the cash deposits forming the recorded reasons, and the AO instead disallowed Section 80P deduction on a new issue without issuing a fresh Section 148 notice, the Tribunal held the entire reassessment proceedings invalid and bad in law and quashed them. The CIT(A)’s orders were set aside and both assessees’ appeals were allowed.
Cases Discussed:
FULL TEXT OF THE ORDER OF ITAT PANAJI
