No Addition on Reopening Ground Makes Different Addition Invalid: ITAT Pune

Neha Hiranand Motwani Vs ITO (ITAT Pune)

Deposit Explained, Husband’s Rent Added: Reassessment Quashed

The controversy

An assessment was reopened to examine a bank deposit. The assessee explained its source, and the Assessing Officer made no addition on that issue. Instead, he added the husband’s share of rental income in the wife’s hands, observing that there was no time left to reopen the husband’s assessment.

The Pune Tribunal quashed the reassessment. Following the principle laid down by the Bombay High Court in CIT v. Jet Airways (I) Ltd., it held that when no addition was made on the issue forming the basis of reopening, the proceedings could not independently sustain an addition on an altogether different issue without a fresh notice.

The bank deposit that triggered reopening

The assessee was a salaried non-resident Indian employed with Oman Insurance Company. She had not originally filed a return for assessment year 2020-21.

Information available through the NMS module on the Insight portal showed a ₹10 lakh time deposit with Yes Bank during financial year 2019-20.

The Department initiated proceedings concerning the deposit and related interest income. The order refers to a communication under section 148A(d) dated 28 February 2024.

During the assessment proceedings, the assessee filed a return on 3 May 2024, declaring total income of ₹5,68,520, and furnished submissions explaining the source of the time deposit.

After considering those submissions, the Assessing Officer made no addition on the deposit or interest issue forming the basis of reopening.

The assessment shifted to the husband’s rent

Although the original issue did not result in an addition, the Assessing Officer proceeded to add the husband’s 50% share of rental income in the assessee’s hands.

The Tribunal recorded that this was done merely because there was no time left to reopen the spouse’s assessment for assessment year 2020-21.

The assessment was completed on 30 March 2025 under section 147 read with section 144C(3). The CIT(A), Pune-13, upheld the assessment through an order dated 31 January 2026.

Before the Tribunal, the assessee challenged both the merits and the legality of the reassessment. Her principal legal objection was that the proceedings had ended with an addition on a different issue, while no addition was made on the original ground.

The precedent applied by the Tribunal

The Tribunal relied upon its recent decision in Shri Ekviradevi Gramin Bigarsheti Sahakari Patsanstha Maryadit v. ITO, ITA No. 2212/PUN/2026, dated 4 September 2026.

In that case, reopening had been initiated to examine cash deposits and time deposits. The eventual assessment, however, made no addition on those matters and instead disallowed a deduction under section 80P(2)(a)(i).

The Pune Bench had quashed the proceedings after applying CIT v. Jet Airways (I) Ltd. [2011] 331 ITR 236 (Bombay).

The principle reproduced in the present order distinguishes between assessing additional escaped income during a valid reassessment and independently assessing another item after accepting the assessee’s explanation on the original reopening issue.

What Jet Airways requires

Under the reasoning adopted by the Tribunal, the Assessing Officer must assess or reassess the income that formed the basis of reopening. If that income is assessed, other escaped income coming to notice during the proceedings may also be examined.

However, where the Assessing Officer accepts that the income initially suspected of escaping assessment has not escaped assessment, he cannot independently assess some other income through those same proceedings. A fresh notice under section 148 would be necessary, subject to its own legal validity.

The reproduced precedent also discussed Ranbaxy Laboratories Ltd. v. CIT [2011] 336 ITR 136 (Delhi), CIT v. Mohmed Juned Dadani [2013] 30 taxmann.com 1 (Gujarat), and ACIT v. Major Deepak Mehta [2012] 344 ITR 641 (Chhattisgarh).

Reassessment and addition both fell

Applying the same reasoning, the Tribunal held that the notice under section 148 was illegal and bad in law.

The proceedings had commenced to examine the time deposit and interest income, but no addition had been made on those issues. The addition concerning the husband’s rental income arose from an altogether different matter, without a separate notice under section 148.

The Tribunal therefore quashed the reassessment proceedings, and the impugned addition stood deleted.

Since the assessee succeeded on the jurisdictional ground, the remaining grounds on merits were dismissed as infructuous. The appeal was allowed.

Author’s comments

The unusual feature is the attempt to bring the husband’s rental income into the wife’s assessment because reopening his case had become time-constrained. An approaching limitation deadline cannot substitute for a lawful basis to assess income in another person’s hands.

The actual relief, however, rested on the failure of the original reopening issue and the impermissible continuation on a different ground. The Tribunal did not separately decide the substantive attribution of rental income.

The decision is also significant because the Pune Bench applied the Jet Airways principle to proceedings initiated under the newer section 148A framework. That is the approach adopted in this order; it should be described precisely rather than converted into an unrestricted proposition about every reassessment.

Once the deposit was satisfactorily explained, the reopening could not be kept alive merely by replacing it with the husband’s rent.

Cases Discussed

• Shri Ekviradevi Gramin Bigarsheti Sahakari Patsanstha Maryadit Vs ITO, ITA No. 2212/PUN/2026, order dated 04.09.2026 (ITAT Pune) — Followed; reassessment was quashed where reopening concerned cash and time deposits but the eventual addition was an unrelated disallowance under section 80P(2)(a)(i).
• CIT Vs Jet Airways (I) Ltd., (2010) 195 Taxman 117 / [2011] 331 ITR 236 (Bombay High Court) — Relied upon; where the income forming the basis of reopening is ultimately not assessed, the Assessing Officer cannot independently assess another escaped item in the same proceedings without a fresh notice under section 148.
• CIT-II Vs Mohmed Juned Dadani, 30 taxmann.com 1 / [2014] 355 ITR 172 (Gujarat High Court) — Relied upon in the precedent followed; approved the principle that failure of the recorded reopening ground prevents an independent addition on another issue.
• Ranbaxy Laboratories Ltd. Vs CIT, [2011] 336 ITR 136 (Delhi High Court) — Approved and relied upon in the precedent followed; reassessment on another issue cannot independently survive where the original reason for initiating proceedings ceases to survive.
• ACIT Vs Major Deepak Mehta, [2012] 344 ITR 641 (Chhattisgarh High Court) — Approved in the precedent followed; adopted the principle concerning the limits on assessment of another item when the foundational reopening issue does not result in an addition.

FULL TEXT OF THE ORDER OF ITAT PUNE

1. The captioned appeal at the instance of assessee pertaining to A.Y. 2020-21 is directed against the order dated 31.01.2026 of ld.CIT(A), Pune-13 emanating out of Assessment Order dated 30.03.2025 passed u/s.147 r.w.s.144C(3) of the Income Tax Act, 1961 (in short ‘the Act’).

2. Assessee apart from raising the grounds on merit has also raised Legal issue in Ground No.2 challenging the re-assessment proceedings as bad in law because no addition was made on the issue forming the basis for reopening and the reassessment was concluded by making addition of an altogether different issue.

3. I have heard the rival submissions and perused the record placed before me. I note that the assessee is an individual and is a salaried non-resident Indian employed with Oman Insurance Company. No return of income has been filed for A.Y. 2020-21. However, as per the NMS module on Insight portal, information for F.Y. 2019-20 is available showing that the assessee has made Time Deposit amounting to Rs.10.00 lakh in Yes Bank and has not filed the return of income. Following show cause notice u/s.148A(d) of the Act has been issued on 28.02.2024:

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
INCOME TAX DEPARTMENT
OFFICE OF THE INCOME TAX OFFICER
WARD 1(1), NASHIK

To,
NEHA HIRANAND MOTWANI
18 JAIN BHAWAN, LAM ROAD DEOLALI CAMP
NASHIK 422401, Maharashtra
India

—

Order under clause (d) of section 148A of the Income-tax Act 1961

01. Brief facts

The assessee is an individual and has not filed return of income for A.Y 2020-21.

As per the Risk Management Strategy formulated by the Board, the information has been flagged on Insight Portal under “RMS- Non-filing of return” for the F.Y. 2019-20 relevant to A.Y. 2020-21. Details of the nature of the transactions, source and amount is as below:-

On verification, it is seen that the assessee has not filed return of income for the year under consideration and hence, the time deposits of Rs.1000000/- in Yes Bank Limited, TDS deducted on interest of Rs.2340/- and time deposits in Bank of Baroda remain unexplained. Therefore, amount of Rs.1002340/- has escaped assessment for the A.Y 2020-21.

02. Information and material shared with the assessee

Thus, as per the provisions of section 148A of the Income Tax Act, 1961 an opportunity of being heard was provided to the assessee. A show cause notice u/s 148A(b) of the Income Tax Act, 1961, dated 12.01.2024 was issued to the assessee along with the information. The assessee has given an opportunity for filing the response/reply upto24.01.2024.

03. Reply of the assessee

In response to the aforesaid notice u/s 148A(b) dated 12.01.2024, the assessee has not given any submission with regard to above mentioned transactions. Therefore, it is considered that the assessee has nothing to say in the matter.

04. Finding of the AO

On verification, it is seen that the assessee has not filed return of income for the year under consideration and hence, the time deposits of Rs.1000000/- in Yes Bank Limited, TDS deducted on interest of Rs.2340/- and time deposits in Bank of Baroda remain unexplained.

The assessee was provided an opportunity to explain the transaction, however, the assessee did not submit any details in this regard. In the absence of any explanation from the assessee in respect of the above transaction, the undersigned has no option but to treat the entire transaction as unexplained.

Considering the information flagged on Insight Portal, status of the return of income and non-response from the assessee, conclusively proves that there is escapement of income in this case.

The assessee did not furnish any reply in this regard. Assessee is a non-filer. Based on the information available with the department, case of the assessee is identified as a potential tax liability case. In view of the above facts and on the basis of material available on record, income amounting to Rs.1002340/- has escaped the assessment. Therefore, it is a fit case for issue of notice u/s148 of the Income Tax Act, 1961.

4. I further notice that during the course of assessment proceedings, assessee has furnished the return on 03.05.2024 declaring total income at Rs.5,68,520/- and also filed other submissions explaining the source of Time Deposit. Ld. Assessing Officer based on these submissions has finally concluded the assessment by not making the addition on the reasons recorded for reopening as mentioned in the notice u/s.148A(d) of the Act and has altogether made a new addition for the 50% rental income in the name of assessee’s husband merely on the ground that there is no time left for reopening the assessment of her spouse for A.Y.2020-21. The addition for the 50% share of rental income in the name of assessee’s husband has been made in the hands of assessee. I find that the facts indicate that the re-assessment proceedings have been initiated for examining Time deposits and interest income but no addition has been made by the Assessing Officer and altogether addition has been made on a new issue for undisclosed rental income received by assessee’s husband for which no separate notice issued u/s.148 of the Act. Under the similar set of circumstances, this Tribunal in the case of Shri Ekviradevi Gramin Bigarsheti Sahakari Patsanstha Maryadit Vs. ITO – ITA No.2212/PUN/2026 order dated 04.09.2026 held the notice issued u/s.148 of the Act as invalid and bad in law. Relevant finding of the Tribunal reads as follows :

“6. We have heard the rival contentions and perused the record placed before us. We will first take up this legal issue. We find in the notice issued u/s.148 of the Act dated 07.04.2022 Ld. Assessing Officer has recorded the following reasons for reopening the assessment :

“I have the following information in your case or in the case of the person in respect of which you are assessable under the Income tax Act, 1961(here in after referred to as “the Act”) for Assessment Year 2018-19.

Information flagged by the risk management strategy formulated in this regard suggesting that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. Order under sub-section (d) of section 148A of the Act has been passed in such case vide DIN ITBA/AST/F/148A/2022-23/1042620763(1) dated 07/04/2022 and annexed herewith for reference.”

7. In the order u/s.148A(d) of the Act, ld. Assessing Officer made following observations :

“The assessee, an individual has not filed his return of income for A.Y. 2018-19.

In this case 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 this office is within the Explanation 1(i) of proviso to section 148 and the information in the instant case is 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 this office is analyzed and duly verified as per data available with this office on various portals viz., ITBA, INSIGHT Portal and e-filing portal. The information in the instant case which has potential tax liabilities is tabulated as below:-

3. After due analysis of the relevant material available on record and verification of the same from various departmental different database portals, undersigned is possessing information which suggests that the income corresponding to the above tabulated financial transactions has escaped assessment as the assessee had not filed return of income for the year under consideration and therefore, cash deposits and time deposits in the bank accounts maintained in the Bank are remained undisclosed.

4. Thereafter, following due procedure as provided by Section 148A of the Act, a show-cause notice u/s 148A(b) was issued on 20.03.2022 after obtaining prior approval of the specified authority u/ 151 of the Act. The assessee was given opportunity of being heard by issuing a notice to show-cause on or before 27.03.2022, as to why a notice under 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 his case for the relevant assessment year.

5. In response to which assessee filed the submission and stated that they are cooperative society and income of their activity is mainlly from resident people and fishermen, it was further stated that they couldn’t received their audit report on 13.04.2019 when the return of income was barred. However, the contention of the assessee can’t be accepted as the filing or return of income and getting their account audited was responsibilty of the assessee. Therefore, the undersigned proceeded to decide on the material available on the record, whether or not it is a fit case to issue a notice u/s 148 of the Act by passing this order.

6. The information and material available on record has been analyzed and the following observations are made:-

1. The assessee has not filed his return of income for the year under consideration.

1. The assessee has made cash deposits of Rs.91,86,100/- in The RDCC Urban Bank and time deposits of Rs.55,50,000/-

The assessee has not filed his return of income for the relevant assessment year. Therefore the cash deposits & time deposits are remained undisclosed. Therefore, this suggests within the meaning of section 147 rws 148 of the Act that income chargeable to tax has escaped assessment for the year under consideration.

7. Therefore, based on the above cogent material available on record with this office, income to the tune of Rs. 1,47,36,100/- has escaped assessment for the year under consideration.

8. In this case return of income has not been filed for the year under consideration and, no regular assessment was made. Further, the requirements to initiate proceedings u/s. 147 of Income Tax Act, 1961 as provided by sections 148A rws 148 of the Act have been duly followed and the prior approval of specified authority as provided u/s 151 of the Act have been taken during the different steps of the procedure entailed by section 148A of the Act. In view of the above, provisions of section 147 are applicable to facts of this case and on the basis of information available with this office. In this case cash and time deposits remained undisclosed. Therefore, it is held to be a case where income chargeable to tax has escaped assessment and therefore it is a fit case for issuance of notice u/s. 148 of the I.T.Act, 1961 for Assessment Year under consideration.

9. Necessary approval of specified authority as per provisions of section 151 of the Income Tax Act, 1961 has been obtained before passing this order.”

8. In the assessment concluded u/s.147 r.w.s.144B of the Act Ld. Assessing Officer has eventually made disallowance u/s.80P(2)(a)(i) of the Act and the said finding reads as under :

“4.6 Conclusion drawn:

Considering above facts and circumstances and discussion made in the Show Cause Notice exemption claimed by the assessee u/s 80P(2)(a)(i) of the Income Tax Act, 1961 of Rs.7,06,146/- is withdrawn and added to the total income of the assessee.

Addition: Rs.7,06,146/-.”

9. From the above, it is vivid that ld. Assessing Officer has travelled beyond the reasons for reopening the assessment. In this regard, 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”.

10. In addition, the Hon’ble Gujarat High Court in the case of CIT-II vs. Mohmed Juned Dadani, 30 taxmann.com 1 (Gujarat) has approved the decisions in the case of Ranbaxy Laboratories Ltd. vs. CIT, 336 ITR 136 (Delhi) wherein the court besides approving the ratio of the decision of the Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. 331 ITR 236, held that sub-section (2) of section 148 mandated reasons for issuance of notice by the AO and s/s. (1) thereof mandated service of notice to the assessee before the AO proceeded to assess, reassess or recompute the escaped income and those conditions were required to be fulfilled to assess or reassess the escaped income chargeable to tax. Hon’ble Gujarat High court also approved the observations of the Hon’ble Delhi High Court to the effect that the Legislature could not be presumed to have intended to give blanket powers to the AO such that on assuming jurisdiction u/s. 147 regarding assessment or reassessment of the escaped income, he could keep on making roving inquiry, and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction, and also the finding of the Delhi High Court, that for every new issue coming before the AO during the course of proceedings of assessment or reassessment of escaped income, and which he intended to take into account, he would be required to issue a fresh notice u/s. 148. The ratio of the judgment of Hon’ble Chhattisgarh High Court decision in the case of Asstt. CIT vs. Major Deepak Mehta, 344 ITR 641 (Chhattisgarh) was also approved by the Hon’ble Gujarat High court.

11. In light of above referred judicial precedents, the 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 issued 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 finding of ld.CIT(A). Thus, assessee succeeds on the legal issue. Dealing with remaining grounds raised by the assessee on merit would be merely academic in nature.

5. Following the same parity of reasons, I hold that the notice u/s.148 of the Act issued in the instant case is illegal and bad in law and thus reassessment proceedings in question is hereby quashed and impugned addition stands deleted. Thus, assessee succeeds on this legal issue.

6. Dealing with remaining grounds raised on merits would be merely academic in nature and thus dismissed as Infructuous.

7. In the result, the appeal of the assessee is allowed as per terms indicated hereinabove.

Order pronounced on this Fifth day of October, 2026.