Jambad Colliery Employees Cooperative Credit Society Limited Vs ITO (ITAT Kolkata)
No Addition on Reopening Issue: ITAT Deletes ₹51.94 Lakh Section 80P Disallowance
Introduction
The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT), in Jambad Colliery Employees Cooperative Credit Society Limited vs. ITO, deleted an addition of ₹51,94,684 arising from denial of deduction under Section 80P. The Tribunal found that the Assessing Officer had made no addition concerning the cash deposits that formed the basis of reopening, but instead disallowed an unrelated deduction.
The Tribunal held that the addition could not survive when the very basis of reopening was demolished by the absence of an addition on the identified issue. It accordingly set aside the Commissioner (Appeals)’s order and allowed the assessee’s appeal.
Facts of the Case
The assessee’s assessment was reopened following information concerning cash deposits in bank accounts maintained with The Burdwan Central Cooperative Bank Limited, Ukhra Branch, during financial year 2017-18.
The Assessing Officer issued a show-cause notice under Section 148A(b) on 8 March 2022. The information also referred to withdrawals of ₹2,30,54,773 from a savings bank account during the year.
Since the assessee had not filed a return of income, the Assessing Officer considered that bank deposits of ₹16,56,183 represented income chargeable to tax that had escaped assessment.
An order under Section 148A(d), dated 31 March 2022, again identified the cash deposits of ₹16,56,183 as the basis for proceeding with reassessment. A notice under Section 148 was subsequently issued, and the assessee furnished details and information during the proceedings.
Addition Made in Reassessment
Although the reopening concerned cash deposits, the Assessing Officer ultimately made an addition by rejecting the assessee’s Section 80P deduction of ₹51,94,684.
The assessment order questioned the eligibility of interest earned on deposits with a cooperative bank. The Assessing Officer also relied on the assessee’s failure to file a return under Section 139, holding that the deduction claimed in the return furnished in response to the Section 148 notice could not be allowed.
Crucially, however, no addition was made concerning the ₹16,56,183 cash deposits identified in the reopening proceedings. The reassessment addition thus arose from a different issue.
Additional Legal Ground Before ITAT
At the hearing, the assessee raised an additional ground challenging the sustainability of the Section 80P disallowance. It argued that the deduction issue did not form the basis of the information accompanying the Section 148A(b) notice or the order under Section 148A(d).
The Tribunal considered whether this objection could be examined despite being raised for the first time before it.
It found that the objection was a pure question of law, all relevant facts were already available in the appeal records, and no further factual verification was necessary. Accordingly, the additional ground was admitted for adjudication.
Legal Ground Can Be Raised for the First Time
For admitting the additional ground, the Tribunal relied on Jute Corporation of India Ltd. vs. CIT, 187 ITR 688 (SC), National Thermal Power Co. Ltd. vs. CIT [1998] 229 ITR 383 (SC), and PCIT vs. Britannia Industries Ltd. [2017] 396 ITR 677 (Cal).
The Bench observed that an assessee could raise a legal issue before an appellate authority for the first time where the necessary facts were already on record. The absence of an earlier challenge before the lower authorities did not prevent examination of such a ground in these circumstances.
Tribunal’s Findings on Reassessment
After examining the reopening documents and the assessment outcome, the Tribunal found a clear difference between the issue initiating reassessment and the addition ultimately made.
Both the Section 148A(b) notice and the Section 148A(d) order concerned alleged escapement of income represented by cash deposits. However, the Assessing Officer made no addition on that issue and instead rejected the Section 80P deduction.
The Tribunal held that the resulting addition was not sustainable in law, since the Assessing Officer’s failure to make an addition on the identified reopening issue demolished the very basis of reopening.
The relief was therefore granted on this legal ground. The Tribunal did not decide the substantive eligibility of the cooperative society’s interest income for deduction under Section 80P.
Conclusion
The ITAT allowed the assessee’s appeal and directed deletion of the ₹51,94,684 addition. The decision highlights the significance of comparing the reasons recorded in the reopening documents with the additions actually made in reassessment. It also demonstrates that a pure legal objection supported by existing records can be admitted at the appellate stage.
Cases Discussed
- Jute Corporation of India Ltd. Vs CIT (Supreme Court); 187 ITR 688: Relied upon for the principle that an appellate authority may entertain an additional ground where the circumstances justify its admission. Related TaxGuru discussion.
- National Thermal Power Co. Ltd. Vs CIT (Supreme Court); [1998] 229 ITR 383: Relied upon for the Tribunal’s power to examine a question of law arising from facts already on record, even if the question was not raised before the lower authorities. Related TaxGuru discussion.
- PCIT Vs Britannia Industries Ltd. (Calcutta High Court); [2017] 396 ITR 677: Relied upon in support of admission of the additional legal ground. Related TaxGuru discussion.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the Commissioner of Income Tax (Appeal)(hereinafter referred to as the “Ld. CIT(A)”] dated 01.12.2025 for the AY 2018-19.
2. At the time of hearing, the Learned Counsel for the Assessee raised additional Grounds of Appeal, which is extracted below:-
“i. That the addition of the sum of Rs.51,94,684 made, by disallowing the claim of deduction u/s 80P of the Act, in the reassessment order dated 20the March 2023 is liable to be deleted in as much as the said issue of addition was not the basis of reopening as contained in the information provide along with show cause notice issued u/s 148A(b) of the Act and as well as the Order passed u/s 148A(d) of the Act.”
3. After hearing the rival contentions and perusing the material on record, we find that the assessee has raised the above additional ground of appeal. In our opinion the issue raised in the additional ground is a purely a legal issue qua which all the facts are available in the appeal folder and no further verification of facts is required from any quarter whatsoever. In our considered view the assessee is at liberty to raise any legal issue before any appellate authority for the first time even when the same has not been raised before the lower authorities. The case of the assessee is squarely covered by the decisions of the Apex court in the case of (i) Jute Corporation of India Ltd. Vs CIT in 187 ITR 688, (ii) National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 and (iii) also by the decision of Hon’ble Calcutta High Court in PCIT vs. Britannia Industries Ltd. [2017] 396 ITR 677 (Cal). Therefore, we are inclined to admit the same for adjudication.
4. We have heard the rival submissions and perused the materials available on record. We find that, in this case, the show- cause notice u/s 148A(b) of the Act was issued on 08.03.2022, a copy of which is available at Page No. 1 of the Paper Book. We note from the perusal of the said show-cause notice that the case of the a ssessee was reopened for cash deposits in different bank accounts maintained with The Burdwan Central Cooperative Bank Limited, Ukhra Branch, during F.Y. 2017-18. Further, the a ssessee also withdrew Rs. 2,30,54,773/- from the savings bank account during the said year. We have noted that the Assessee had not filed any return of income. Therefore, the Assessing Officer concluded that the amount deposited in the bank account, to the tune of Rs. 16,56,183/-, was chargeable to tax and had escaped as sessment within the meaning of section 147 of the Act. Thereafter, an order u/s 148A(d) was passed on 31.03.2022, a copy of which is available at Page Nos. 4 to 7 of the Paper Book, which again discussed the same reason of cash deposits in the bank account aggregating to Rs. 16,56,183/- that had escaped assessment. Thereafter, the notice u/s 148 of the Act was issued to the Assessee, mentioning the same issue, and on 08.03.2022, there was no compliance within the stipulated time. Thereafter, some compliances were made before the Assessing Officer, submitting the details and information as called for. Finally, the Assessing Officer rejected the exemption claimed by the Assessee under Section 80P(2) (a)(iv) of the Act amounting to Rs.51,94,684/- on the ground that the Assessee was not eligible for the interest earned from deposits with the Co- operative Bank. The Assessing Officer noted that the Assessee had not filed any return of income u/s 139 of the Act and that the claim of deduction u/s 80P(2) (a)(iv) of the Act in the return filed in response to the notice u/s 148 of the Act could not be allowed and, accordingly, disallowed the same. We note that the Assessing Officer has not made any addition in respect of the income alleged to have escaped assessment in the show- cause notice as well as in the order passed u/s 148A(d) of the Act, but has made the addition by way of rejection of the claim u/s 80P(2) (a)(iv) of the Act. In our opinion, the addition made by the Assessing Officer is not sustainable in the eyes of law, as the very basis of reopening the assessment is demolished when the Assessing Officer has not made any addition in respect of the issues for which the show-cause notice was issued u/s the Act and the subsequent order was passed u/s 148A(d) of the Act. Consequently, we set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delete the addition.
5. In the result, Appeal of the Assessee is allowed.
Order pronounced on 26.10.2026.
