Mahalaxmi Gramin Bigarsheti Sahakari Patsanstha Vs ITO (ITAT Pune)
Summary
The ITAT Pune allowed the appeal of the assessee and quashed the assessment order for AY 2018-19. The Tribunal held that when an AO reopens an assessment for specific reasons under Section 148 but later accepts the assessee’s explanation and then seeks to make additions on entirely different grounds, a fresh notice under Section 148 is mandatory. The case reinforces the principle that tax authorities cannot shift assessment grounds mid-stream without following proper legal procedures.
Facts of the Case
The assessee is a cooperative society. For Assessment Year 2018-19, the assessee did not file the return of income u/s 139(1). The Assessing Officer (AO) reopened the assessment based on the Risk Management System indicating that cash deposits of Rs. 2,44,25,000/- were made in the current account during Financial Year 2017-18. The AO accordingly issued a notice under Section 148(b) of the Income Tax Act, followed by a final notice under Section 148 on April 7, 2022, after obtaining prior approval from competent authority.
However, during the reassessment proceedings, it was discovered that the actual cash deposit was only Rs. 81,41,630/- instead of the initially reported Rs. 2,44,25,000/-. The assessee successfully explained the sources of this cash deposit of Rs. 81,41,630/- to the satisfaction of the AO, who consequently made no addition for unexplained cash deposits. Instead, the AO denied the assessee’s claim for deduction under Section 80P(2)(a)(i) amounting to Rs. 14,99,742/-, reasoning that the assessee had not furnished a return of income. This denial was made without issuing any fresh show cause notice under Section 148. The assessment order was passed on January 25, 2024, which was subsequently challenged before the CIT(A) and then before the ITAT.
