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:
- CIT Vs. Jet Airways (I) Ltd. (Bombay High Court), (2010) 195 Taxman 117 (Bombay)
FULL TEXT OF THE ORDER OF ITAT PANAJI
The captioned appeals at the instance of two different assessees pertaining to A.Y. 2018-19 are directed against the separate orders dated 23.12.2025 and 18.12.2025 framed by National Faceless Appeal Centre, Delhi arising out of respective Assessment Orders passed u/s.147 r.w.s.144 r.w.s.144B of the Income Tax Act, 1961 (in short ‘the Act’).
2. A common legal issue raised in the instant two appeals is that the reopening proceedings have been carried out to examine the cash deposits and in the reassessment proceedings no addition has been made for the reasons recorded for reopening of the assessment, i.e. cash deposits but a separate addition/disallowance has been made denying deduction u/s.80P of the Act for which no separate notice u/s.148 of the Act has been issued and that light of judgment of Hon’ble Jurisdictional High Court in the case CIT Vs. Jet Airways (I) Ltd. (2010) 195 Taxman 117 (Bombay) the impugned orders passed by ld.CIT(A) deserves to be quashed.
3. We have heard the rival submissions and perused the record placed before us. We observe in the case of assessee namely Karnataka Prathamik Krushi Pattin Sahakari Sangh Niyamit Handigund, the reasons for reopening was to examine the cash deposits of Rs.65,75,968/- but after the conclusion of the assessment proceedings no addition has been made for the cash deposits and only the deduction u/s.80P of the Act at Rs.83,632/- has been disallowed for which no separate notice u/s.148 of the Act has been issued.
4. Similarly in the case of another assessee namely Prathamik Krushi Pattin Sahakari Sangh Niyamit Godachi, the reasons for reopening was to examine the cash deposit of Rs.75,71,825/- but after the conclusion of the assessment ld. Assessing Officer disallowed Rs.3,73,928/- u/s.80P of the Act.
5. We take note of the ratio laid down by the Hon’ble Jurisdictional High Court in the case of CIT Vs. Jet Airways (I) Ltd. (2010) 195 Taxman 117 (Bombay) where the principle has been laid down “that section 147 of the section 147 has an effect that Assessing Officer has to assess or reassess income (‘such income’) which escaped assessment and which was basis of formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during course of proceedings. However, if after issuing a notice u/s.148, he accepts contention of assessee and holds that income, for which he had initially formed a reason to believe that it had escaped assessment, has, as a matter of fact, not escaped assessment, it is not open to him to independently assess some other income; if he intends to do so, a fresh notice u/s.148 would be necessary, legality of which would be tested in event of a challenge by assessee”. This principle laid down by the Hon’ble Jurisdictional High Court in the case of CIT Vs. Jet Airways (I) Ltd. (supra) squarely applies on the facts of the instant case and since ld. Assessing Officer has not made any addition for the reasons recorded for reopening and further failed to issue fresh notice u/s.148 of the Act for making disallowance on new issue which was not raised in the original notice u/s.148 of the Act, re-assessment proceedings deserves to be quashed as invalid and bad in law. We accordingly order so and set aside the findings of ld.CIT(A) in the instant appeals filed by the assessees. Thus, legal issue raised by the assessee in both the appeals are allowed.
6. Dealing with remaining grounds raised by the respective assessee(s) on merit would be merely academic in nature and therefore held to be infructuous.
7. In the result, both the appeals filed by the respective assessee’s are allowed as per terms indicated hereinabove.
Order pronounced on this 28th day of July, 2026.
