Facts of the Case

The petitioner, Jain Cooperative Bank Limited, filed a writ petition challenging:

  • Order passed under Section 148A(d), and
  • Notice issued under Section 148 of the Income Tax Act for AY 2017–18.

The reassessment proceedings were initiated on the basis of large cash deposits amounting to ₹141.28 crores during the demonetization period (April 2016 to December 2016) flagged by the Financial Intelligence Unit (FIU).

The petitioner contended that:

  • The deposits were made by customers and were duly disclosed.
  • The bank merely complied with RBI directions during demonetization.
  • Assessment had already been completed earlier under Section 153A read with Section 143(3).

Issues Involved

  1. Whether reassessment proceedings under Section 148 can be initiated based on alleged suspicious transactions during demonetization.
  2. Whether such reopening amounts to a change of opinion.
  3. Whether non-consideration of petitioner’s reply violates principles of natural justice.
  4. Whether existence of prima facie material is sufficient to sustain reopening.

Petitioner’s Arguments

  • Reassessment was based on mere suspicion and surmise, not tangible material.
  • Cash deposits were already disclosed in financial statements and ITR.
  • Deposited money belonged to customers, not the bank.
  • No irregularity was found in earlier search and assessment proceedings (2018).
  • Reopening amounted to change of opinion on already examined facts.
  • Assessing Officer failed to consider detailed reply submitted by the petitioner.
  • Violation of Section 148A(d) and principles of natural justice. 

Respondent’s Arguments

  • Reassessment was triggered by FIU flagged suspicious transactions.
  • Huge cash deposits during demonetization raised concerns of escaped income.
  • Earlier assessment did not specifically examine the issue of cash deposits.
  • Existence of prima facie material justified reopening proceedings.

Court’s Findings / Order

  • The Court relied on Raymond Woollen Mills Ltd. vs ITO (1999) holding that:
    • At reopening stage, only prima facie material is required.
    • Sufficiency or correctness of material cannot be examined at this stage.
  • It further relied on ITO vs Techspan India Pvt. Ltd. (2018) stating:
    • If earlier assessment is non-speaking or silent, reopening is permissible.
  • The Court held:
    • There existed prima facie material of escapement of income due to huge deposits.
    • Even if reply was considered, reopening was justified.
    • Principles of natural justice are flexible and not rigid.

Final Order

  • Writ Petition Dismissed.
  • Reassessment proceedings allowed to continue.
  • Assessing Officer directed to decide matter independently on merits.

Important Clarifications by Court

  • Courts cannot interfere at reopening stage if prima facie material exists.
  • Change of opinion doctrine applies only when earlier assessment considered the issue explicitly.
  • Non-speaking assessment orders allow reopening.
  • Natural justice principles depend on facts and are not absolute.
  • Assessee retains right to raise all contentions before Assessing Officer.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3642-DB/MMH08092022CW130752022_183630.pdf

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