SHRI VARDHAMAN NAGRI SAHAKARI PATSANSTHA LTD.,PACHORA vs. ITO WARD 1(4), JALGAON, JALGAON

However, Assessing Officer disallowed Assessee’s claim for deduction u/s.80P(2)(a)(i) of the Act, of Rs.5,41,121/- in the assessment order. The Assessing Officer disallowed said claim on the ground that Return of Income was not filed u/s.139(1) of the Act.

Aggrieved by the Assessment Order, Assessee filed appeal before the ld.CIT(A). Ld.CIT(A) confirmed the disallowance. Assessee submitted before the Assessing Officer as well as ld.CIT(A) that provisions of section 80AC were applicable from A.Y.2018-19, therefore, Assessee submitted before ld.CIT(A) that prior to the Amendment which is w.e.f. A.Y.2018-19, it was not mandatory to file Return of Income u/s.139(1) for claiming 3 deduction u/s.80P of the Act.

Aggrieved by the order of ld.CIT(A), Assessee filed appeal before this Tribunal.

Before us, ld.AR submitted that since notice u/s.148 was issued on the ground of cash deposits and no addition has been made on the issue of cash deposits, Assessing Officer was precluded from making many other additions. Ld.AR relied on the decision of CIT Vs. Jet Airways Ltd. 331 ITR 236 (Bom). Ld.AR also relied on ITAT Pune’s Decision in Shree Mahalaxmi Gramin Bigarsheti Sahakari Patsanstha Vs. ITO in dated 20.06.2025.

Ld.AR also submitted that the Amendment to Section 80AC was w.e.f.A.Y.2018-19. Hence, it is not applicable in the case of Assessee. Therefore, ld.AR submitted that Assessee was eligible for deduction u/s.80P as assessee had filed Return of Income in response to notice u/s.148 of the Act.

In this case, admittedly, notice u/s.148 was issued on account of cash deposits. During the assessment proceedings, Assessee filed elaborate submission and produced cash book. The Assessing Officer after verifying the submission filed by assessee, arrived at a 4 conclusion that cash deposits are explained satisfactorily. However, Assessing Officer disallowed assessee’s claim for deduction u/s.80P(2)(a)(i) of the Act. In this context, it is important to refer to the decision of Hon’ble Bombay High Court. The Hon’ble Bombay High Court in the case of CIT Vs. Jet Airways Limited 331 ITR 236 (Bom) has held as under : “16………………….Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the 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 the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.

We have approached the issue of interpretation that has arisen for decision in these appeals, both as amatter 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 beensupported by the background which led 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.

In that view of the matter and for the reasons that we have 5 indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand [A] answered against the revenue and in favour of the assessee. The appeal is, accordingly, dismissed. There shall be no order as to costs.” 8.1 Thus, Hon’ble Bombay High Court has categorically held that Assessing Officer is precluded from making any addition under section 147, if no addition is made on the issue on which notice u/s.148 was issued. ITAT Pune Bench in the case of Shree Mahalaxmi Gramin BigarshetiSahakariPatsanstha Vs. ITO in for A.Y.2018-19 dated 20.06.2025 has held as under : “5. I have heard the rival contentions and the perused placed before me. I observe that the assessee is a Cooperative Society and did not furnish any return of income for A.Y. 2018-19. However, ld. Assessing Officer based on the information that cash of Rs.2,44,25,000/- has been deposited in the current account of the assessee society during F.Y. 2017-18, issued notice u/s.148(b) of the Act and thereafter final notice u/s.148 was issued on 07.04.2022 after taking prior approval from the competent authority……….. therefore since ld.AO has not made addition on the reasons recorded in the notice u/s.148 of the Act and has made addition/disallowance under some other head without issuing fresh show cause notice u/s.148 of the Act, assessment order dated 25.01.2024 is held to be bad in law and deserves to be quashed.” 8.2 Thus, respectfully following Hon’ble Jurisdictional High Court and ITAT Pune Bench(supra), we hold that Assessment Order is bad in law as Assessing Officer has not made any addition on the issue of cash deposits for which notice u/s.148 was issued, but made addition on the issue of 80P of the Act which is not permissible as held by Hon’ble Bombay High Court. Accordingly, Ground No.3 6 raised by the assessee is allowed.

Since we have decided the Ground No.3 in favour of the Assessee, all other grounds become academic in nature, hence, all other grounds are dismissed unadjudicated.

In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 16 December, 2025.