High Court Quashes Reassessment Notice Based on Same Bank Deposits Already Examined Earlier

M/s. Sanjay Kumar Bijay Kumar, a partnership firm engaged in the wholesale and retail trade of cattle feed and building materials, challenged reassessment proceedings initiated for AY 2019-20. The firm held two PANs but had consistently filed its income tax returns using PAN-2 since AY 2003-04, although certain banking transactions with Canara Bank reflected PAN-1.

Based on information regarding cash deposits of Rs. 4,42,47,290 during FY 2018-19, reassessment proceedings were earlier initiated by the Income Tax Officer, Cuttack. After examining the firm’s books of accounts, bank statements and audited financials, the officer concluded that the deposits were already disclosed in the returns filed under PAN-2 and assessed the income at NIL.

Thereafter, the Deputy Commissioner of Income Tax, initiated fresh reassessment proceedings for the same assessment year by issuing a notice under Section 148 based on the same deposits appearing under PAN-1. The petitioner challenged the action before the High Court, contending that the issue had already been examined in earlier reassessment proceedings.

Issue Before Court; Whether reassessment proceedings under Section 147 can be initiated for the same transactions that had already been examined and concluded in earlier reassessment proceedings for the same assessment year.

HC’s Ruling: The  Court allowed the writ petition and quashed the reassessment proceedings. The Court noted that the earlier reassessment order passed in 2023 had already examined the same bank deposits and concluded that they were duly disclosed in the firm’s income tax returns, resulting in a NIL assessment.

The Court held that initiating fresh proceedings in 2025 on the identical transactions and for the same assessment year was impermissible. Such action would amount to reopening an issue already examined, effectively constituting a review based on a change of opinion, which is not permissible under Section 147. Relying on the principle that a person should not be vexed twice for the same cause, the Court quashed the order under Section 148A(3), the notice issued under Section 148, and the later reassessment proceedings.

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