Ekviradevi Gramin Bigarsheti Sahakari Patsanstha Maryadit Vs ITO (ITAT, Pune Bench)
Reassessment Opened for ₹1.47-Crore Bank Deposits, but Addition Made Only u/s 80P: Pune ITAT Quashes the Roving Detour u/s 147
Summary: The Pune Bench of the ITAT has quashed reassessment proceedings where the notice u/s 148 was issued to examine alleged unexplained cash deposits & time deposits aggregating to ₹1,47,36,100, but the AO ultimately made no addition concerning those transactions and instead disallowed deduction of ₹7,06,146 u/s 80P(2)(a)(i). Following the jurisdictional Bombay High Court decision in CIT v. Jet Airways (I) Ltd., the Tribunal held that the AO could not independently assess an altogether different item after abandoning the very issue for which reassessment jurisdiction had been assumed.
Reopening Triggered by Cash & Time Deposits
The assessee was a co-operative credit society. It had not filed its return of income for AY 2018-19, reportedly because its audit report was not received in time.
Information available on the Insight Portal indicated that the assessee had made cash deposits of ₹91,86,100 in The RDCC Urban Bank and had also invested ₹55,50,000 in time deposits. Since no return had been filed, the AO formed the view that these transactions aggregating to ₹1,47,36,100 represented income that had escaped assessment.
After issuing a show-cause notice u/s 148A(b), the AO passed an order u/s 148A(d) on 07.04.2022. The AO recorded that the cash deposits & time deposits remained undisclosed and constituted information suggesting escapement of income within the meaning of sections 147 & 148. Notice u/s 148 was accordingly issued on the same date.
Deposits Disappeared, but Deduction u/s 80P Was Disallowed
During reassessment, the AO apparently accepted the assessee’s explanation regarding the bank transactions. No addition was ultimately made either for the cash deposits of ₹91.86 lakh or for the time deposits of ₹55.50 lakh.
Instead, the AO examined the return filed by the assessee in response to the notice u/s 148 and disallowed its claim of deduction of ₹7,06,146 u/s 80P(2)(a)(i). The reassessment was completed u/s 147 r.w.s. 144B on 20.03.2024 solely on the basis of this disallowance.
The CIT(A)-NFAC confirmed the addition. The assessee, therefore, approached the Tribunal and challenged the validity of the entire reassessment.
Assessee Challenges AO’s Journey Beyond Recorded Reasons
Before the ITAT, the assessee contended that the very foundation of the reopening concerned alleged unexplained cash & time deposits. However, after examining those transactions, the AO did not make any addition on either issue.
The disallowance u/s 80P(2)(a)(i) was entirely unrelated to the information that had triggered the reassessment. It was neither part of the order u/s 148A(d) nor the basis for issuing the notice u/s 148.
The assessee argued that once the AO accepted that the income referred to in the recorded reasons had not escaped assessment, he could not continue the reassessment merely to make an addition on a different issue.
“Such Income” Must First Be Assessed
The Tribunal relied upon the jurisdictional Bombay High Court ruling in CIT v. Jet Airways (I) Ltd. [331 ITR 236 / 195 Taxman 117 (Bom.)].
The High Court had explained that the expression “and also” appearing in section 147 has an important consequence. The AO must first assess or reassess the income which formed the basis of his belief that income had escaped assessment. Once that condition is satisfied, he may also assess any other escaped income that comes to his notice during the reassessment proceedings.
However, where the AO accepts the assessee’s explanation and does not make any addition regarding the income for which the assessment was reopened, he cannot independently assess some unrelated income discovered during the proceedings. If the AO desires to assess that different item, he must initiate fresh proceedings by issuing a fresh notice u/s 148, the legality of which would remain open to challenge.
No Blanket Power to Conduct Roving Enquiry
The Tribunal also referred to CIT-II v. Mohmed Juned Dadani [30 taxmann.com 1 (Guj.)], wherein the Gujarat High Court approved the principles laid down in Ranbaxy Laboratories Ltd. v. CIT [336 ITR 136 (Delhi)] & Jet Airways.
These decisions hold that the reassessment provisions do not give the AO blanket authority to conduct a roving enquiry into every possible item of income once jurisdiction is assumed on a particular ground. The statutory requirements of recording reasons, issuing notice & establishing escapement in relation to the recorded issue cannot be reduced to an empty formality.
The Gujarat High Court had also approved the decision in ACIT v. Major Deepak Mehta [344 ITR 641 (Chhattisgarh)], reiterating that assessment of a new item cannot survive independently when the foundational reason for reopening does not result in any addition.
Reassessment Quashed as Invalid
Applying these principles, the ITAT found that the AO had travelled beyond the reasons recorded for reopening. The proceedings had been initiated exclusively to examine cash & time deposits of ₹1.47 crore, but not a rupee was added on that account.
The only addition of ₹7,06,146 arose from disallowance of deduction u/s 80P(2)(a)(i), which was not mentioned in the original notice or order u/s 148A(d). Since no fresh notice u/s 148 had been issued in respect of that new issue, the reassessment was declared invalid & bad in law.
The ITAT set aside the order of the CIT(A) & quashed the reassessment. Consequently, the remaining grounds, including the merits of deduction u/s 80P & limitation u/s 149, were left undecided as academic.
Author’s Comments
This decision reiterates a fundamental limitation on reassessment jurisdiction: the reason recorded cannot merely serve as an entry ticket for investigating some other issue. The AO must ultimately assess or reassess the income forming the basis of reopening before invoking the power to tax “any other income” noticed during the proceedings.
An interesting feature is that the notice was issued under the post-01.04.2021 reassessment regime, after an order u/s 148A(d). Nevertheless, the Tribunal applied the principle laid down in Jet Airways, thereby indicating that the introduction of section 148A does not permit the AO to abandon the original information & convert reassessment into an unrestricted scrutiny.
The Revenue cannot say: “The deposits were satisfactorily explained, but since the door is now open, let us disallow section 80P.” Once the original foundation disappears, an unrelated addition cannot keep the reassessment alive.
Cases Discussed
- CIT v. Jet Airways (I) Ltd. — Bombay High Court, 331 ITR 236; 195 Taxman 117.
- CIT-II v. Mohmed Juned Dadani — Gujarat High Court, 30 taxmann.com 1.
- Ranbaxy Laboratories Ltd. v. CIT — Delhi High Court, 336 ITR 136.
- ACIT v. Major Deepak Mehta — Chhattisgarh High Court, 344 ITR 641.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, PUNE BENCH
The captioned appeal at the instance of assessee pertaining to A.Y. 2018-19 is directed against the order dated 21.04.2026 of National Faceless Appeal Centre, Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of Assessment order 20.03.2024 passed u/s.147 r.w.s.144B of the Act.
2. Assessee has raised following grounds of appeal :
“The following grounds are taken without prejudice to each other –
On facts and in law,
1. The Ld. CIT(A) erred in confirming the addition of Rs.7,06,146/ made by the Ld. Assessing Officer:
2. The Ld. CIT(A)-NFAC erred in not admitting additional ground of appeal, regarding invalidity of notice issued u/s 148 on 07/04/2022 with approval obtained from incorrect authority as provided u/s 151 of the Act, by actually accepting the same on merits.
3. The Ld. CIT(A)-NFAC erred in not declaring the impugned assessment order as bad in law since Notice u/s 148 dated 07/04/2022 was issued for the reasons of cash deposited and Time Deposit purchase into the Bank, but addition of Rs.7,06,146/- was made by way of disallowance of deduction u/s 80P(2)(a)(i).
4. The alleged escaped income did not exceed Rs.50,00,000/-, as evident from the impugned Assessment Order and therefore Notice u/s 148 and subsequent proceedings are time barred in terms of section 149 of the Act.
5. The Ld. CIT(A)-NFAC erred in confirming addition of Rs.7,06,146/- by way of disallowance u/s 80P(2)(a)(i) which was claimed through Return filed in response to Notice u/s 148 dated 07/04/2022, i.e. during the reassessment proceedings.
The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.
3. At the time of hearing, ld. Counsel for the assessee did not press Ground No.2 and the same is therefore dismissed.
4. Referring to Ground No.3, ld. Counsel submitted that notice u/s.148 has been issued in the instant case to examine the Cash deposits in ‘The RDCC Urban Bank’ at Rs.91,86,100/- and Time deposits at Rs.55,50,000/-. However, the original assessment has been completed making no addition on both these issues but disallowance u/s.80P(2)(a)(i) of the Act is made and the said disallowance is not based on any reasons recorded in the notice issued u/s.148 of the Act and therefore the impugned assessment deserves to be declared as bad in law.
5. On the other hand, ld. DR supported the order of ld.CIT(A).
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:-
| Information | Amount |
|---|---|
| Cash deposits in The RDCC Urban Bank | Rs.91,86,100/- |
| Time deposits | Rs.55,50,000/- |
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 .
12. In the result, the appeal of the assessee is allowed.
Order pronounced on this 04th day of September, 2026.
