Reassessment limited to recorded reasons fails when no addition arises on reopening issue and a new disallowance is introduced.

Reassessment cannot be sustained on a new disallowance when the recorded reason for reopening, here cash deposits, does not result in any addition and no fresh notice is issued under section 148. The Assessing Officer accepted the assessee's explanation on the original cash-deposit issue, but then made a disallowance of deduction under section 80P(2)(a)(i) on a different ground not covered by the reopening reasons. Applying the principle that reassessment must remain linked to the income for which notice was issued, the new issue could not be introduced without a fresh notice. The reassessment was therefore invalid and the disallowance was quashed.

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Issues: Whether the reassessment could be sustained when the original reason for reopening, relating to cash deposits, did not result in any addition and the Assessing Officer made a disallowance of deduction on a different ground without issuing a fresh notice under section 148.

Analysis: The reassessment was initiated to examine alleged escapement of income arising from cash deposits in the assessee's bank account. The assessee furnished explanations to the satisfaction of the Assessing Officer, and no addition was made on that basis. The only addition ultimately made was disallowance of deduction under section 80P(2)(a)(i), which was a new issue not forming part of the recorded reasons for reopening. Applying the principle that reassessment must remain tied to the income for which notice was issued and that a fresh notice is required if the original issue does not survive but a different item is sought to be assessed, the reassessment on the new issue could not be sustained.

Conclusion: The reassessment proceedings were invalid and bad in law; the disallowance made on the new issue was quashed in favour of the assessee.

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