Income Tax Appellate Tribunal - Pune
Shaliwahan Nagari Sahkari Patsanstha ... vs Income Tax Officer, Aurangabad on 4 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES "SMC", PUNE
BEFORE DR.MANISH BORAD, ACCOUNTANT MEMBER
आयकर अपील सं. / ITA Nos.2245 and 2246/PUN/2025
Assessment Years : 2013-14 and 2014-15
Shaliwahan Nagari Sahkari Vs. Income Tax Officer,
Patsanstha Limited, Ward-1(1),
Ist Floor, Nath Plaza, Aurangabad
Opp Bus Stand, Paithan S.O.
Aurangabad 431 107
Maharashtra
PAN : AAAAS8819G
Appellant Respondent
Assessee by : Shri Nikhil Pathak
Revenue by : Shri Vishwajit Shinde
Date of hearing : 22.01.2026
Date of pronouncement : 04.03.2026
आदे श / ORDER
The captioned appeals at the instance of assessee pertaining to the Assessment Years 2013-14 and 2014-15 are directed against the separate orders dated 29.07.2025 of National Faceless Appeal Centre, Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called 'the Act') arising out of the respective Assessment Orders dated 15.05.2023 passed u/s.147 r.w.s.144B of the Act.
2. Though the assessee raised various legal grounds and ground on merit, we will first take up the legal issue challenging the validity of reassessment proceedings for which ld. Counsel for the assessee has submitted that the assessment has been completed by the Assessing Officer by making addition on the issues other than the one referred in the reasons recorded for issuance of notice u/s.148 of the Act.
2ITA Nos.2245 and 2246/PUN/2025 Shaliwahan Nagari Sahkari Patsanstha Ltd.
He submitted for A.Y. 2013-14 and 2014-15 in the order u/s.148A(d) of the Act, ld. Assessing Officer has observed that the income chargeable to tax at Rs.26,06,90,619/- and Rs.9,67,50,000/- has escaped the assessment. However, after the conclusion of the assessment proceedings no addition has been made on these issues but merely disallowance u/s.80P of the Act has been made for the interest income received from banks and the commission income received from Maharashtra State Electricity Distribution Company Limited (MSEDCL) which was already recorded in the books of account and details filed in the income tax return and placing reliance on the judgment of Hon'ble Bombay High Court in the case of CIT Vs Jet Airways (I) Ltd [2011) 331 ITR 236 (Bom.) prayer made to quash both the assessment orders for A.Y. 2013-14 and A.Y. 2014-15.
3. On the other hand, ld. Departmental Representative supported the orders of ld.CIT(A).
4. I have heard the rival contentions and perused the record placed before me. Validity of the reassessment proceedings for the impugned assessment years is in challenge before me on the ground that ld. Assessing Officer has not made the additions in the final assessment order on the issues which were appearing in the reasons recorded alleging escapement of income by the assessee. I note that in the order u/s.148A(d) ld. Assessing Officer has alleged that income of Rs.26,06,90,619/- and Rs.9,67,50,000/- has escaped the assessment for A.Y. 2013-14 and 2014-15. The assessee in the instant case is a Cooperative Society and has filed regular 3 ITA Nos.2245 and 2246/PUN/2025 Shaliwahan Nagari Sahkari Patsanstha Ltd.
return of income also. However, subsequent to the final notice u/s.148 of the Act assessee has again furnished the return. In the reassessment proceedings, various details were called for by the ld. Assessing Officer to explain the source of alleged cash collection made during the year to which specific reply was filed and ld. Assessing Officer has not made any addition towards unexplained cash deposit or unexplained cash collection. However, while concluding the proceedings, ld. Assessing Officer has merely made the addition denying deduction u/s.80P of the Act for the commission income received from MSEDCL and the interest received from banks treating it as income from other sources. I find that all these details were never mentioned in the orders u/s.148A(d) of the Act. Revenue has failed to bring to my notice that whether the Assessing Officer has issued any fresh show cause notice u/s.148 for the issue for which the additions have been made in the final assessment orders. Under these given facts and circumstances, it remains an admitted fact that ld. Assessing Officer has not made the additions for the issues referred in the reasons recorded in the orders u/s.148A(d) of the Act but has made the addition on some other issues/grounds for which no prior notice u/s.148 of the Act was issued.
5. I find that similar issue came up for adjudication before this Tribunal in the case of M/s. Lorgan Lifestyle Limited Vs. ITO - ITA No.215/PUN/2025 order dated 03.09.2025 and the finding of Tribunal reads as under :
"9. We have heard the rival contentions and perused the record placed before us. The main contention of ld. Counsel for the assessee is that ld. AO has not made addition for the reasons 4 ITA Nos.2245 and 2246/PUN/2025 Shaliwahan Nagari Sahkari Patsanstha Ltd.
mentioned in the reasons recorded for reopening the assessment proceedings. By way of legal issue raised in the additional ground, validity of re-assessment proceedings have been challenged. In light of the judgment of Hon'ble Apex Court in the case of National Thermal Power Company Ltd. Vs. CIT (supra), we admit this legal issue. From the record, we observe that the assessee is a Limited Company. Ld. AO based on the information about substantial cash deposit in the bank account of the assessee company, purchase of more than one vehicle and interest income as per Form No.26AS and there being no return of income filed by the assessee, notice u/s.148 of the Act dated 20.08.2018 duly served upon the assessee. Thereafter, re-assessment proceedings were carried out and various details as called for were furnished and also the submissions were made for the various reasons based on which the re-assessment proceedings were initiated. Ld. AO after carrying out the re- assessment proceedings firstly made no addition for the reasons referred in the show cause notice and the reasons recorded annexed thereto issued for the purpose of carrying out the re-assessment proceedings. However, ld. AO has made addition on some other issue which was never forming part of the reasons recorded for issuing notice u/s.148 of the Act. Ld. AO while concluding the assessment has only made one addition and that too disallowing bad debts written off in the profit and loss account. Before us, ld. DR failed to controvert the facts stated hereinabove.
10. Under the given facts and circumstances, we would first like to refer to the judgment of Hon'ble Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd. (supra) where ld. AO has not made any addition for the issues referred in the reasons recorded for carrying out the re-assessment proceedings but had made addition on some other ground for which fresh notice u/s.148 of the Act was not issued to the assessee. For better understanding, the relevant part of the above judgment is reproduced below :
"13. The effect of the amended provisions came to be considered in two distinct lines of precedent on the subject. The first line of authority, to which a reference has already been made earlier, adopted the principle that where the Assessing Officer has formed a reason to believe that income has escaped assessment and has issued a notice u/s 148 on certain specific issues, it was not open to him during the course of the proceedings for assessment or reassessment to assess or reassess any other income, which may have escaped assessment but which did not form the subject mater of me notice u/s 148. This view was adopted in the judgment of the Punjab & Haryana High Court in Vipan Khanna (Supra) and in the judgment of the Kerala High Court in Travancore Cements Limited (Supra) This line of authority, would now cease to reflect the correct position in law, by virtue of the amendment which has been brought in by the insertion of Explanation 3 to Section 147 by Finance (No. 2) Act of 2009 5 ITA Nos.2245 and 2246/PUN/2025 Shaliwahan Nagari Sahkari Patsanstha Ltd.
The effect of the Explanation is that once an Assessing Officer has formed a reason to believe that income chargeable to tax has escaped assessment and has proceeded to issue a notice u/s 148, it is open to him to assess or reassess income in respect of any other issue though the reasons for such issue had not been included in the reasons recorded u/s 148(2).
14. The second line of precedent is reflected in a judgment of the Rajasthan High Court in Commissioner of Income Tax v. Shri Ram Singh (2008) 306 ITR 343 (Raj). The Rajasthan High Court construed the words used by Parliament in Section 147 particularly the words that the Assessing Officer ''may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings'' u/s 147. The Rajasthan High Court held as follows.
.... it is only when, in proceedings u/s 147 the Assessing Officer, assesses or reassesses any income chargeable to tax which has escaped assessment for any assessment year, with respect to which he had "reason to believe" to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings u/s 147.
To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings u/s 147, the Assessing Officer were to come to the conclusion, that any income chargeable to tax, which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the Assessing Officer entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the Assessing Officer may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings u/s 147.
15. Parliament, when it enacted the Explanation (3) to Section 147 by the Finance (No. 2). Act, 2009 clearly had before it both the lines of precedent on the subject. The precedent dealt with two separate questions. When it effected the amendment by bringing in Explanation 3 to Section 147, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain courts that the Assessing Officer has to restrict the assessment or reassessment proceedings only to the issues in respect of which reasons were recorded for reopening the assessment. The corrective exercise embarked upon by Parliament in the form of 6 ITA Nos.2245 and 2246/PUN/2025 Shaliwahan Nagari Sahkari Patsanstha Ltd.
Explanation 3 consequently provides that the Assessing Officer may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice u/s 148(2). The decisions of the Kerala High Court in Travancore Cements Limited (Supra) and of the Punjab & Haryana High Court in Vipan Khanna (supra) would, therefore, no longer hold the field. However, insofar as the second line of authority is concerned, which is reflected in the judgment of the Rajasthan High Court in Shri Ram Singh (supra), Explanation 3 as inserted by Parliament would not take away the basis of that decision. The view which was taken by the Rajasthan High Court was also taken in another judgment of the Punjab & Haryana High Court in Commissioner of Income Tax Vs. Atlas Cycle Industries, .
The decision in Atlas Cycle Industries held that the Assessing Officer did not have jurisdiction to proceed with the reassessment, once he found that the two grounds mentioned in the notice u/s 148 were incorrect or non existent. The decisions of the Punjab & Haryana High Court in Atlas Cycle Industries (supra) and of the Rajasthan High Court in Shri Ram Singh (supra) would not be affected by the amendment brought in by the insertion of Explanation 3 to Section 147.-
16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment of reassessment on grounds other than those on the basis of Which a notice was issued u/s 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance Act (No 2) of 2009 However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of Section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assessee 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 u/s 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 7 ITA Nos.2245 and 2246/PUN/2025 Shaliwahan Nagari Sahkari Patsanstha Ltd.
some other income. If he intends to do so, a fresh notice u/s 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.
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 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 (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 April 1989 continue to hold the field.
18. In that view of the matter and for the reasons that we have 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 answered against the Revenue and in favour of the assessee. The appeal is accordingly dismissed. There shall be no order as to costs."
11. Similar issue has also been dealt recently by this Tribunal in the case of Rajya Rakhiv Police Karmachari Sahakari Patsanstha Maryaditand Vs. ITO in ITA No.171/Un/2025 order dated, 16.06.2025. Relevant finding of this Tribunal reads as under :
"8. We have heard the rival contentions and perused the record placed before us. So far as the legal issue raised vide Ground No.1 in the grounds of appeal is concerned, we find that the reason for carrying out the re-assessment proceedings was regarding explanation about the source of cash deposit of Rs.35,00,821/-. It is noticed that assessee neither had PAN nor has filed any return of income for the year under consideration. It was only during the course of re-assessment proceedings that ld. AO was able to examine the details in the form of Annual Report and Books of account. In the 8 ITA Nos.2245 and 2246/PUN/2025 Shaliwahan Nagari Sahkari Patsanstha Ltd.
assessment order, ld. AO has nowhere doubted the source of alleged cash deposit which was from the Members of the society and therefore no addition was made on this account. Ld. AO has disallowed the deduction u/s.80P of the Act by applying section 80A(5) of the Act. Under these given facts, judgment of Hon'ble Jurisdictional High court in the case of Jet Airways (I) Ltd. (supra) comes to the rescue of the assessee wherein it was held that "if after issuing a notice under section 148, he (AO) 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". Considering the judgment of Hon'ble Jurisdictional High Court, we find that in the instant case ld. AO has issued only one show cause notice u/s.148 along with the reasons to believe of the escapement of income with regard to unexplained cash deposit. During the course of assessment proceedings, ld. AO was satisfied with the source of cash deposit and therefore if he intended to make addition on some other ground he was required to issue a fresh show cause notice u/s.148. Since this exercise has not been carried out by the ld. AO the assessment order framed on 30.12.2019 is held to be bad in law and deserves to be quashed. Legal issue raised in Ground No.1 stands allowed."
12. In light of above settled judicial precedents and examining the facts of the instant case, we find that since ld. AO has not made the addition for the reasons recorded for carrying out the re-assessment proceedings and has made addition in the re-assessment proceedings on some other ground without issuing fresh notice u/s.148 of the Act. The facts and issue are squarely covered by the judgment referred supra. Therefore, such re-assessment proceedings are held to be invalid and hereby quashed. Finding of ld.CIT(A) is set aside and the legal issue raised in Additional Ground of appeal is hereby allowed."
6. The above referred decision is squarely applicable on the facts of the instant case narrated (supra) and accordingly legal ground raised by the assessee challenging the validity of assessment order is allowed and alleged assessment orders for A.Y. 2013-14 and A.Y. 2014-15 are hereby quashed.
9ITA Nos.2245 and 2246/PUN/2025 Shaliwahan Nagari Sahkari Patsanstha Ltd.
7. Since I have quashed the impugned reassessment proceedings but even otherwise on merits of the case also assessee being a credit cooperative society has earned interest from surplus funds deposited with the banks and it has been consistently held by this Tribunal in plethora of decisions that such surplus funds available with the assessee which are deposited in the banks for maintaining the liquidity ratio norms, then such investments fetching interest income is also eligible for deduction u/s.80P(2)(a)(i) of the Act.
8. Similarly the issue of earning commission income from MSEDCL has also come up before this Tribunal in the case of Kalyani Mahila Nagar Sahakari Patsanstha Maryadit Vs. ITO -
ITA No.241/PUN/2025 order dated 24.04.2025 wherein it isheld that even such commission income earned from MSEDCL is also eligible for deduction u/s.80P(2)(a)(i) of the Act as it akin to the banking activity. Finding of Tribunal reads as follows :
"5. We have heard the rival contentions and perused the record placed before us. We observe that the assessee has challenged the finding of ld.CIT(A) affirming the action of the AO in the assessment order framed for A.Y. 2012-13 u/s.143(3) of the Act on 13.02.2015 by not allowing deduction u/s.80P of the Act for the commission income earned from MSEDCL as well as interest earned from MSEDCL and Government Securities.
6. Revenue authorities failed to dispute this fact that the deposits with MSEDCL have been made by the assessee for carrying out the activity of earning commission and similarly the deposits made with the Government Securities are on account of the mandatory deposits for maintaining liquidity ratio to be maintained by the Credit Cooperative Societies in order to carry out its activity. We further observe that the Hon'ble Jurisdictional High Court in the case of CIT Vs. Ahmednagar Dist. Coop. Bank Ltd. (supra) has laid down that the activity of collecting bills, dues and charges for and on behalf of the Government, local authority, MTNL, BEST, MSEB etc., is akin to banking activity and is eligible for deduction u/s.80P(2)(a)(i) of the 10 ITA Nos.2245 and 2246/PUN/2025 Shaliwahan Nagari Sahkari Patsanstha Ltd.
Act. Ratio laid down by the Hon'ble Jurisdictional High Court has been subsequently followed by this Tribunal in the case of ITO Vs. Vijkamgar Coop. Credit Society Ltd. (supra) and in the case of Panvel Peoples Nagari Sahakari Patsanstha Maryadit Vs. ITO (supra).
7. On going through the said judgment of the Hon'ble Jurisdictional High Court and the decisions of this Tribunal, we find that the same are squarely applicable to the assessee on the facts of the instant case and respectfully following the same we are of the considered view that assessee is eligible for deduction u/s.80P of the Act for the commission income of Rs.6,11,030/- earned from MSEDCL. Similarly, the interest income earned from deposits with MSEDCL as well as mandatory deposits in Government Securities by the assessee society for carrying out the activity are akin to the main objects of the assessee society and therefore since the commission income is eligible for deduction u/s.80P(2)(a)(i) of the Act being incidental in nature and not having earned interest from deposit made from surplus funds with any Scheduled Banks, the same deserves to be allowable as deduction u/s.80P(2)(a)(i) of the Act. Accordingly, the finding of ld.CIT(A) is set aside and the grounds of appeal No. 1 to 3 raised by the assessee are allowed."
9. Following the same parity of reasoning, I hold that assessee is eligible for deduction u/s.80P(2)(a)(i) on the commission income at Rs.1,43,140/- and Rs.35,099/- for A.Yrs. 2013-14 & 2014-15 earned thereon.
10. Thus, Grounds of appeal raised by the assessee for both the assessment years under appeal are allowed.
11. In the result, both the appeals of the assessee are allowed.
Order pronounced on this 04th day of March, 2026.
Sd/-
(MANISH BORAD) ACCOUNTANT MEMBER पुणे / Pune; दिन ंक / Dated : 04th March, 2026.
Satish 11 ITA Nos.2245 and 2246/PUN/2025 Shaliwahan Nagari Sahkari Patsanstha Ltd.
आदे श की प्रतिलिपि अग्रेपिि / Copy of the Order forwarded to :
1. अपील र्थी / The Appellant.
2. प्रत्यर्थी / The Respondent.
3. The Pr. CIT concerned.
4. विभ गीय प्रतितनधि, आयकर अपीलीय अधिकरण, "SMC" बेंच, पण ु े / DR, ITAT, "SMC" Bench, Pune.
5. ग र्ड फ़ इल / Guard File.
आिे श नुस र / BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अधिकरण, पुणे / ITAT, Pune