THE BANHATTI MINORITY URBAN CO-OPERATIVE CREDIT SOCIETY LIMITED,BAGALKOT vs. INCOME TAX OFFICER, WARD-1, BAGALKOT

PDF · subscribers
ITA 2917/BANG/2025Status: DisposedITAT Bangalore02 September 2026AY 2015-166 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that if the original basis for reopening the assessment under Section 147 does not result in any addition, the AO cannot make an addition on an entirely different issue. The power to assess 'any other income' is supplementary and cannot survive independently.

What were the facts?

The assessee, a cooperative society, did not file a return of income. Reassessment proceedings were initiated based on cash deposits. During reassessment, the AO accepted the explanation for cash deposits but disallowed a portion of the deduction claimed under Section 80P.

What were the issues?

Whether an addition can be made on an issue unrelated to the original reason for reopening under Section 147 when no addition is made on the original issue.

Which sections of the Income-tax Act were involved?

Section 80P,Section 147,Section 148A,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY

PER SHRI WASEEM AHMED, ACCOUNTANT MEMBER: This appeal is filed by the Assessee against the order of Ld. CIT(A)NFAC, Delhi vide DIN: ITBA/NFAC/S/250/2025-26/1081011530(1) dated 22-Sep-2025 for the Assessment Year 2015-16.

ITA 2917/BANG/2025 THE BANHATTI MINORITY URBAN CO- OPERATIVE CREDIT SOCIETY LIMITED 2. The first issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance of the deduction claimed under section 80P of the Act of Rs. 28,433/-which was not part of the reason for reopening the assessment under section 147 of the Act.

3.

The necessary facts are that the assessee, a cooperative society, did not file a regular return of income under section 139 of the Act for A.Y. 2015-16. A notice under section 148A(b) of the Act was issued on 19th March 2022 on the premise that, during the year relevant to A.Y. 2015-16, the assessee cooperative society made cash deposits of Rs. 76,43,000/-. Since the return of income was not filed for the said assessment year, the impugned cash deposit is proposed to be escaped income. As the assessee did not file any response. An order under section 148A(d) of the Act dated 1st April 2022 was passed, holding it a fit case for issuance of notice under section 148 of the Act to initiate the income-escaping assessment. Accordingly, notice u/s 148 of the Act was issued on 7th April 2022, to which the assessee filed return of income declaring total income at NIL after claiming deduction under section 80P of the Act for Rs. 6,20,855/-.

3.1 During the proceeding, several notices were issued, and the assessee filed the required details. After considering the materials, the AO finalized the assessment after making disallowances of deductions claimed under section 80P(2)(a)(i) of the Act for Rs. 28,433/- on account of profit attributable to interest income on fixed deposit. In other words, the AO accepted the nature & sources of the cash deposit for which the income escaping assessment proceeding was initiated, as no addition was made with respect to the cash deposit.

4.

The aggrieved assessee preferred an appeal before the learned CIT(A), who confirmed the addition or disallowances made by the AO for Rs. 28,433/- on account of disallowance of deduction claimed under section 80P of the Act.

5.

Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.

ITA 2917/BANG/2025 THE BANHATTI MINORITY URBAN CO- OPERATIVE CREDIT SOCIETY LIMITED 6. The learned AR before us has placed a paper book running from pages 1 to 85 comprising a copy of the written submission, notices issued under section 148A(b) and copies of case laws, etc. The learned AR before us argued that once the basis of reopening of the assessment under section 147 of the Act does not survive, the proceedings for the same (cash deposit in the present case) are to be dropped. The addition for any other item, i.e. addition on account of disallowances of 80P deduction, cannot be made in a proceeding under section 147 of the Act. The learned AR in contending so, placed reliance on several case laws including the ruling of the Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Pvt Ltd reported in 331 ITR 236, and in the case of PCIT vs Lark Chemicals Pvt Ltd reported in 368 ITR 655.

7.

On the contrary, the learned DR supported the order of the Ld. CIT(A) and submitted that the AO was justified in making the disallowance under section 80P of the Act during reassessment proceedings. It was contended that Explanation 3 to section 147 permits assessment of any other escaped income noticed during reassessment proceedings.

8.

We have heard the rival submissions of both the parties and perused the materials available on record. The short issue before us is whether, in proceedings- initiated u/s 147 of the Act on one specific issue, the AO can make an addition on an entirely different issue when no addition is ultimately made on the issue for which the assessment was reopened.

8.1 In the present case, the proceedings were initiated on the basis of cash deposits of Rs. 76,43,000/- made by the assessee during the relevant year. Since no return of income had been filed, the AO was of the view that the said cash deposits represented income which had escaped assessment. However, during the course of assessment, the assessee explained the nature and source of the cash deposits to the satisfaction of the AO. Consequently, no addition whatsoever was made in respect of the cash deposits. The AO instead made a disallowance of Rs. 28,433/- out of the deduction claimed u/s 80P(2)(a)(i) of the Act in respect of interest earned on fixed deposits.

ITA 2917/BANG/2025 THE BANHATTI MINORITY URBAN CO- OPERATIVE CREDIT SOCIETY LIMITED

8.2 Thus, it is not in dispute that the very issue on the basis of which jurisdiction u/s 147 of the Act was assumed did not result in any addition. The only addition which survives in the assessment relates to the claim of deduction u/s 80P of the Act. This issue did not form the basis for initiation of the reassessment proceedings.

8.3 At this stage, the decision of the Hon'ble Bombay High Court in CIT v. Jet Airways (I) Ltd. [2011] 331 ITR 236 (Bom.) assumes significance. The question before the Hon'ble High Court was whether, after issuing notice u/s 148 of the Act, the AO could independently assess some other income when no addition was made in respect of the income which had formed the basis for reopening the assessment.

8.4 In the case of Jet Airways (I) Ltd., before the Hon'ble High Court, the controversy was confined to the interpretation of section 147 of the Act and, in particular, whether the AO could assess an independent issue when the income for which the assessment was reopened was itself not assessed or reassessed.

8.5 The Hon'ble Bombay High Court examined the expression "such income and also any other income" appearing in section 147 of the Act. It held that the words "and also" have been used in a cumulative and conjunctive sense. Therefore, the AO must first assess or reassess the income which formed the basis of his belief that income had escaped assessment. Once such income is assessed or reassessed, the AO can also bring to tax any other escaped income which comes to his notice during the reassessment proceedings. However, where the income which formed the very basis of reopening is ultimately not assessed or reassessed, the AO cannot independently make an addition on some other issue. The relevant observation of the Hon’ble Bombay High Court for ready reference is extracted hereunder:

17.

We have approached the issue of interpretation that has arisen for decision in these appeals, both as a.matter of first principle, based on the language used in section 147(1) and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led

ITA 2917/BANG/2025 THE BANHATTI MINORITY URBAN CO- OPERATIVE CREDIT SOCIETY LIMITED

to the insertion of Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh's case (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field. 8.6 Applying the above ratio to the facts before us, we find that the position is clear. The sole foundation for initiation of proceedings u/s 147 of the Act was the cash deposit of Rs. 76,43,000/-. After examining the assessee's explanation and supporting materials, the AO did not make any addition in respect of such cash deposits. Thus, the very income which formed the basis for assumption of jurisdiction u/s 147 of the Act was ultimately found not to be assessable as escaped income.

8.7 Once that foundation did not survive, the AO could not use the reassessment proceedings only for making a disallowance of Rs. 28,433/- u/s 80P(2)(a)(i) of the Act. The power to assess "any other income" in reassessment proceedings is available in addition to the assessment or reassessment of the income for which the proceedings were initiated. It cannot survive independently when no addition is made on the very issue forming the basis of reopening. This is precisely the principle laid down by the Hon'ble Bombay High Court in Jet Airways (I) Ltd., wherein the question was answered against the Revenue and in favour of the assessee.

8.8 We therefore hold that, in the facts of the present case, the disallowance of Rs. 28,433/- made u/s 80P(2)(a)(i) of the Act cannot be sustained in the reassessment proceedings. The Ld. CIT(A) was not justified in confirming the same. Accordingly, we set aside the finding of the Ld. CIT(A) on this issue and direct the AO to delete the disallowance of Rs. 28,433/-. Accordingly, the ground of raised by the assessee is allowed.

8.9 Since, we have decided the substantive ground of appeal of the assessee and deleted the addition on technical grounds, we do not find it necessary to deal with the issues raised in the other grounds of appeal. As the issues raised therein have become redundant and infructuous. Hence, we hereby dismiss the other grounds of appeal of the assessee as infructuous.

ITA 2917/BANG/2025 THE BANHATTI MINORITY URBAN CO- OPERATIVE CREDIT SOCIETY LIMITED 9. In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 2nd Sept. 2026

Sd/- Sd/- KESHAV DUBEY WASEEM AHMED JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated: 2nd Sept. 2026 Vms

Copy to: THE BANHATTI MINORITY URBAN CO- OPERATIVE CREDIT SOCIETY LIMITED, NEAR MALLIKARJUN TALKIES GANDHI CHOWK, MANGALWAR PETH, TQ 1 JAMKHANDI, DT. BAGALKOT BANAHATTI, BAGALKOT-587311, KARNATAKA

INCOME TAX OFFICER, WARD-1, 2 SECTOR 24, SECTOR 63A, NAVA NAGAR, BAGALKOT-587103, KARNATAKA

3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE By Order

ASSISTANT REGISTRAR / I.T.A.T., BANGALORE

More judgments on Section 80P

All 5,069 judgments and leading authorities on Section 80P →

Recent GST High Court judgments

Search GST case law →