TARACHAND SHAMJI SAVLA,NAVI MUMBAI V. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 27(3), MUMBAI, NAVI MUMBAI

ITA 9255/MUM/2025

AI Insights

The case involves Tarachand Shamji Savla, the appellant, who contested the reopening of his income tax assessment for the year 2017-18 under Section 147 of the Income Tax Act. The reassessment was initially based on alleged unexplained cash deposits during the demonetization period. However, during the reassessment, the Assessing Officer accepted the explanation regarding these deposits but proceeded to disallow an interest expenditure of 11,88,050. The appellant challenged this decision, arguing that the reopening was invalid as no addition was made concerning the initial grounds for reopening. The Tribunal, referencing the judgment in Jet Airways (India) Ltd., ruled in favor of the appellant, stating that the Assessing Officer could not make additions on different issues without a valid reassessment on the original grounds.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 847101 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Mumbai
• Assessment Year: 2017-2018
• Appeal Filed On: 29-12-2025
• Other Referred Cases: Jet Airways (India) Ltd. v. CIT, CIT v. Sun Engg. Works (P.) Ltd., CIT v. Shri Ram Singh
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RITESH MISRA
• Assessee Lawyers: VASANTI PATEL
• Keywords: Set aside; Opportunity of being heard; Reassessment proceedings; Question of law; Unexplained cash credit; Principle of natural justice; Reason to believe
• Section: 147; 148

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) & SHRI SANDEEP KARHAIL (JUDICIAL MEMBER) ITA No. 9255/MUM/2025 Assessment Year: 2017-18 Tarachand Shamji Savla Airoli Service Centre, Plot No. 33, Sector -5, Airoli, Navi Mumbai – 400708 Vs. DCIT, Circle – 27(3) IT Officer, Vasi Rly Stn, Bldg, Navi Mumbai - 400703 PAN No. AAZPS7299A Appellant Respondent Assessee by : Ms. Vasanti Patel Revenue by : Shri Ritesh Misra, CIT-DR Date of Hearing : 24/03/2026 Date of pronouncement : 27/03/2026 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 04.11.2024 passed by the Ld. Commissioner of Income-tax (Appeals) / National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2017-18. The grounds raised by the assessee are reproduced as under: I. VALIDITY OF REOPENING OF THE ASSESSMENT: 1.1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) [CIT(Appeals)] Printed from counselvise.com erred in upholding the reopening of the assessment by the learned Assessing Officer for the above year under Section 147 of the Act. 1.2. It is submitted that the learned made any addition in respect of the ground for which the assessment has been reopened and hence the assumption of jurisdiction is bad in law and invalid. 1.3. It is submitted that when no addition is made in respect of the alleged belief on the basis of which the assessment is reopened, the AO cannot proceed to assess other income or make additions in respect of other items of income not included in reasons for reopening of the assessment. The Appellant prays that the reassessment quashed as illegal and bad in law. II. ADDITTION/DISALLOWANCE OF INTEREST EXPENSES OF RS.11,88,050/- 2.1 On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in upholding the denial of deduction for Interest expense Rs.11,88,050/ Assessing Officer. 2.2 The learned Assessing Officer and the CIT(A) failed to appreciate the submissions made and explanations offered to establish that the relevant conditions for deductibility of Interest Expenses have duly been complied with by the Appellant. 2.3 The learned Assessing Officer and the learned CIT(Appeals) failed to appreciate that there exists a direct nexus between the funds borrowed by the Appellant and the funds advanced for earning interest, and therefore, the deduction for corresponding interest expenditure cannot be denied. In view of the above, the appellant prays that the disallowance computed/ addition made by the learned Assessing Officer may kindly be deleted as the same is unrea III. DENIAL OF OPPORTUNITY OF BEING HEARD: Tarachand ITA Nos. 9255 erred in upholding the reopening of the assessment by the learned Assessing Officer for the above year under Section 147 of the Act. 1.2. It is submitted that the learned Assessing Officer has not made any addition in respect of the ground for which the assessment has been reopened and hence the assumption of jurisdiction is bad in law and invalid. 1.3. It is submitted that when no addition is made in respect of belief on the basis of which the assessment is reopened, the AO cannot proceed to assess other income or make additions in respect of other items of income not included in reasons for reopening of the assessment. The Appellant prays that the reassessment order may kindly be quashed as illegal and bad in law. II. ADDITTION/DISALLOWANCE OF INTEREST EXPENSES OF 2.1 On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in upholding the denial of or Interest expense Rs.11,88,050/- by the learned 2.2 The learned Assessing Officer and the CIT(A) failed to appreciate the submissions made and explanations offered to establish that the relevant conditions for deductibility of Interest Expenses have duly been complied with by the Appellant. 2.3 The learned Assessing Officer and the learned CIT(Appeals) failed to appreciate that there exists a direct nexus between the funds borrowed by the Appellant and the funds advanced for erest, and therefore, the deduction for corresponding interest expenditure cannot be denied. In view of the above, the appellant prays that the disallowance computed/ addition made by the learned Assessing Officer may kindly be deleted as the same is unreasonable, and unjustified. III. DENIAL OF OPPORTUNITY OF BEING HEARD: - Tarachand Shamji Savla, 2 ITA Nos. 9255/MUM/2025 erred in upholding the reopening of the assessment by the learned Assessing Officer for the above year under Section 147 of the Act. Assessing Officer has not made any addition in respect of the ground for which the assessment has been reopened and hence the assumption of 1.3. It is submitted that when no addition is made in respect of belief on the basis of which the assessment is reopened, the AO cannot proceed to assess other income or make additions in respect of other items of income not included in order may kindly be II. ADDITTION/DISALLOWANCE OF INTEREST EXPENSES OF 2.1 On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in upholding the denial of by the learned 2.2 The learned Assessing Officer and the CIT(A) failed to appreciate the submissions made and explanations offered to establish that the relevant conditions for deductibility of Interest Expenses have duly been complied with by the Appellant. 2.3 The learned Assessing Officer and the learned CIT(Appeals) failed to appreciate that there exists a direct nexus between the funds borrowed by the Appellant and the funds advanced for erest, and therefore, the deduction for corresponding In view of the above, the appellant prays that the disallowance computed/ addition made by the learned Assessing Officer may sonable, and unjustified. Printed from counselvise.com 3.1 On the facts and in the circumstances of the case and in law, the learned CTT(A) erred in passing the impugned order without granting the Appellant a reasonable and effective opport being heard, thereby violating the principles of natural justice. 3.2 The learned CTT(A) failed to consider the written submissions and explanation already filed by the Appellant, providing no sufficient opportunity of being heard to justify that borrowed is not a personal loan neither for personal purpose but used only for earning interest income. The Appellant craves leave to add to, alter or amend any of the aforementioned Ground or Grounds of Appeal, which are without prejudice to each other, as and when an occasion may arise at the time of hearing. 2. Briefly stated the facts of the case are that the assessee had filed his return of income for the year under consideration on 26.10.2017 declaring total income of Rs. 2,11,92,080/-, which was processed u/s 143(1) of the Act 1961 [in short ‘the Act’]. reopened under section 147 by issuance of notice under section 148 on the premise that substantial cash deposits made during the demonetisation period had r 2.1 During the course of reassessment proceedings, the Assessing Officer examined the explanation furnished by the assessee and accepted the source of the cash deposits. However, while no addition was made on the issue forming the basis of reopening, the Assessing Officer proceeded to disallow interest expenditure of ₹11,88,050/- claimed by the assessee. Tarachand ITA Nos. 9255 3.1 On the facts and in the circumstances of the case and in law, the learned CTT(A) erred in passing the impugned order without granting the Appellant a reasonable and effective opport being heard, thereby violating the principles of natural justice. 3.2 The learned CTT(A) failed to consider the written submissions and explanation already filed by the Appellant, providing no sufficient opportunity of being heard to justify that borrowed is not a personal loan neither for personal purpose but used only for earning interest income. The Appellant craves leave to add to, alter or amend any of the aforementioned Ground or Grounds of Appeal, which are without other, as and when an occasion may arise at the Briefly stated the facts of the case are that the assessee had filed his return of income for the year under consideration on 26.10.2017 declaring total income of Rs. ch was processed u/s 143(1) of the Act 1961 [in short ‘the Act’]. Subsequently, the assessment was reopened under section 147 by issuance of notice under section 148 on the premise that substantial cash deposits made during the demonetisation period had remained unexplained. During the course of reassessment proceedings, the Assessing Officer examined the explanation furnished by the assessee and accepted the source of the cash deposits. However, while no addition was made on the issue forming the basis of reopening, the sing Officer proceeded to disallow interest expenditure of claimed by the assessee. Tarachand Shamji Savla, 3 ITA Nos. 9255/MUM/2025 3.1 On the facts and in the circumstances of the case and in law, the learned CTT(A) erred in passing the impugned order without granting the Appellant a reasonable and effective opportunity of being heard, thereby violating the principles of natural justice. 3.2 The learned CTT(A) failed to consider the written submissions and explanation already filed by the Appellant, providing no sufficient opportunity of being heard to justify that the loan borrowed is not a personal loan neither for personal purpose but The Appellant craves leave to add to, alter or amend any of the aforementioned Ground or Grounds of Appeal, which are without other, as and when an occasion may arise at the Briefly stated the facts of the case are that the assessee had filed his return of income for the year under consideration on 26.10.2017 declaring total income of Rs. ch was processed u/s 143(1) of the Act Subsequently, the assessment was reopened under section 147 by issuance of notice under section 148 on the premise that substantial cash deposits made during the During the course of reassessment proceedings, the Assessing Officer examined the explanation furnished by the assessee and accepted the source of the cash deposits. However, while no addition was made on the issue forming the basis of reopening, the sing Officer proceeded to disallow interest expenditure of Printed from counselvise.com 3. On further appeal, the assessee challenged the validity of reassessment as well as addition on merit but could not succeed and the Ld. CIT(A) dismissed the assessee. 4. Before us Ld. Counsel for the assessee referred to Ground No.1 of the appeal assumption of jurisdiction under section 147 is vitiated inasmuch as no addition has been made on the basis of the reasons It was contended that, in such circumstances, the Assessing Officer cannot proceed to make additions on other issues, in view of the binding judgment of the Hon’ble jurisdictional High Court in Jet Airways (India) Ltd. Representative, on the other hand, relied upon the orders of the lower authorities. 4.1 Thus, the primary issue which arises for determination is whether, in a case where no addition is ultimately made in respect of the issue for which Officer retains jurisdiction to make additions on other issues. 5. We have heard the rival submissions of the parties and perused the relevant material placed on record. In the case the reasons recorded has been available on paper book at reasons recorded for reopening clearly reveals that the formation of Tarachand ITA Nos. 9255 On further appeal, the assessee challenged the validity of reassessment as well as addition on merit but could not succeed and the Ld. CIT(A) dismissed the appeal of the Before us Ld. Counsel for the assessee referred to Ground No.1 of the appeal and submitted that the very assumption of jurisdiction under section 147 is vitiated inasmuch as no addition has been made on the basis of the reasons It was contended that, in such circumstances, the Assessing Officer cannot proceed to make additions on other issues, in view of the binding judgment of the Hon’ble jurisdictional High Court in Jet Airways (India) Ltd. (331 ITR 236).The learned Departmental Representative, on the other hand, relied upon the orders of the Thus, the primary issue which arises for determination is whether, in a case where no addition is ultimately made in respect of the issue for which the assessment was reopened, the Assessing Officer retains jurisdiction to make additions on other issues. We have heard the rival submissions of the parties and perused the relevant material placed on record. In the case the reasons recorded has been filed by the assessee available on paper book at page 9 to 11. A perusal of the reasons recorded for reopening clearly reveals that the formation of Tarachand Shamji Savla, 4 ITA Nos. 9255/MUM/2025 On further appeal, the assessee challenged the validity of reassessment as well as addition on merit but could not appeal of the Before us Ld. Counsel for the assessee referred to submitted that the very assumption of jurisdiction under section 147 is vitiated inasmuch as no addition has been made on the basis of the reasons recorded. It was contended that, in such circumstances, the Assessing Officer cannot proceed to make additions on other issues, in view of the binding judgment of the Hon’ble jurisdictional High Court in CIT v. earned Departmental Representative, on the other hand, relied upon the orders of the Thus, the primary issue which arises for determination is whether, in a case where no addition is ultimately made in respect the assessment was reopened, the Assessing Officer retains jurisdiction to make additions on other issues. We have heard the rival submissions of the parties and perused the relevant material placed on record. In the case filed by the assessee, which is A perusal of the reasons recorded for reopening clearly reveals that the formation of Printed from counselvise.com belief by the Assessing Officer was solely predicated upon alleged unexplained cash deposits in during the demonetisation period. F reasons are reproduced as under: \"In this case there is information that the assessee has made following cash deposits during the period of 9.11.2016 to 30.12.2016. Bank and Branch CORPORATION BANK, Airoli Saraswat co-Op Bank Ltd, Airoli Union Bank, Kapurvadevi 2. In col. 13 of the return information was sought from the assessee about the bank details and also the details of the cash deposited during the period 9.11.2016 to 30.12.2016. In this regard, the source of cash deposit as mentioned by assessee in income for AY 2017 the ITBA AIMS module pertaining to Cash Transaction 2016 remain unexplained and unverified 3. In this regard query was made to the assessee to furnish the source of such cash deposits. However, no credible reply was furnished by the assessee in support of the same. Hence the assessee failed to substantiate the source of the cash deposit during the period of demonetization. Therefore I have reason to believe than an amo above) chargeable to tax has escaped assessment by reasons for Tarachand ITA Nos. 9255 belief by the Assessing Officer was solely predicated upon alleged unexplained cash deposits in the bank accounts of the assessee during the demonetisation period. For ready reference said reproduced as under: \"In this case there is information that the assessee has made following cash deposits during the period of 9.11.2016 to Bank and Branch Account No. Amount CORPORATION BANK, 4710020100026 250000/ Op Bank Ltd, 395100100000027 80298000/ Union Bank, Kapurvadevi 320102010002176 250000/ 2. In col. 13 of the return of income for AY 2017 information was sought from the assessee about the bank details and also the details of the cash deposited during the period 9.11.2016 to 30.12.2016. In this regard, the source of cash deposit as mentioned by assessee in the col. 13 of the return of income for AY 2017-18 alongwith the information as seen from the ITBA AIMS module pertaining to Cash Transaction 2016 remain unexplained and unverified 3. In this regard query was made to the assessee to furnish the uch cash deposits. However, no credible reply was furnished by the assessee in support of the same. Hence the assessee failed to substantiate the source of the cash deposit during the period of demonetization. Therefore I have reason to believe than an amount of Rs. 8,07,98,000/- (As discussed above) chargeable to tax has escaped assessment by reasons for Tarachand Shamji Savla, 5 ITA Nos. 9255/MUM/2025 belief by the Assessing Officer was solely predicated upon alleged the bank accounts of the assessee or ready reference said \"In this case there is information that the assessee has made following cash deposits during the period of 9.11.2016 to Amount 250000/- 80298000/- 250000/- of income for AY 2017-18, specific information was sought from the assessee about the bank details and also the details of the cash deposited during the period 9.11.2016 to 30.12.2016. In this regard, the source of cash the col. 13 of the return of 18 alongwith the information as seen from the ITBA AIMS module pertaining to Cash Transaction 2016 3. In this regard query was made to the assessee to furnish the uch cash deposits. However, no credible reply was furnished by the assessee in support of the same. Hence the assessee failed to substantiate the source of the cash deposit during the period of demonetization. Therefore I have reason to (As discussed above) chargeable to tax has escaped assessment by reasons for Printed from counselvise.com the failure on the part of the assessee to disclose fully and truly all material facts necessary within the meaning of section 147 of the Income-tax Act, 6. Thus, it is evident that reasons has been recorded on the basis of the cash deposits observed in the various bank accounts, But, in the course of reassessment proceedings, the Assessing Officer, upon examination, accepted the explanation of the assessee and did not make any addition on this count. Relevant finding of the Ld.AO is reproduced as under: “5. In this case, as per information available in the insight port and ITS details, it is seen that the assessee has made following cash deposits during the F.Y 2016 Bank and Branch Corporation Bank Airoli Saraswat Co-op Bank, Airoli Union Bank of India HDFC Bank Ltd Union Bank of India However, the assessee has admitted a total turnover of Rs.98,01,66,210/-. In this regard, vide notice dated 03.03.2022, the assessee was requested the cash deposits of the difference amount of Rs.23,64,66,090/ [1,21,66,32,300 98,01,66,210] and show cause why the amount of Rs.23,64,66,090/ unexplained cash credits. Tarachand ITA Nos. 9255 the failure on the part of the assessee to disclose fully and truly all material facts necessary within the meaning of section 147 of tax Act, 1961.\" it is evident that reasons has been recorded on the basis of the cash deposits observed in the various bank But, in the course of reassessment proceedings, the Assessing Officer, upon examination, accepted the explanation of ssessee and did not make any addition on this count. elevant finding of the Ld.AO is reproduced as under: In this case, as per information available in the insight port and ITS details, it is seen that the assessee has made following during the F.Y 2016-17 relevant to A.Y 2017 Bank and Branch Account No. Amount 4710020100026 39510010000027 1,17,66,12,300/ 558501010035049 3,33,00,000/ 068520000000484 320102010002176 Total 1,21,66,32,300/ However, the assessee has admitted a total turnover of . In this regard, vide notice dated 03.03.2022, the assessee was requested to explain the nature and sources of the cash deposits of the difference amount of Rs.23,64,66,090/ [1,21,66,32,300 98,01,66,210] and show cause why the amount of Rs.23,64,66,090/- should not be added to your total income as unexplained cash credits. Tarachand Shamji Savla, 6 ITA Nos. 9255/MUM/2025 the failure on the part of the assessee to disclose fully and truly all material facts necessary within the meaning of section 147 of it is evident that reasons has been recorded on the basis of the cash deposits observed in the various bank But, in the course of reassessment proceedings, the Assessing Officer, upon examination, accepted the explanation of ssessee and did not make any addition on this count. elevant finding of the Ld.AO is reproduced as under: In this case, as per information available in the insight port and ITS details, it is seen that the assessee has made following 17 relevant to A.Y 2017-18. Amount 2,50,000/- 1,17,66,12,300/- 3,33,00,000/- 60,90,000/- 3,80,000/- 1,21,66,32,300/- However, the assessee has admitted a total turnover of . In this regard, vide notice dated 03.03.2022, to explain the nature and sources of the cash deposits of the difference amount of Rs.23,64,66,090/- [1,21,66,32,300 98,01,66,210] and show cause why the amount should not be added to your total income as Printed from counselvise.com In response, the assessee vide reply dated 07.03.2021 submitted that the Assessee, is into business of petrol pump station. It sells, Petrol, Diesel, CNG and related petroleum products. The said pump station is under agency of Bharat Petroleum Corporation Limited (BPCL). Petrol pump station is in the heart of the city. Mostly the customers are retail customers/ citizens staying in the city limits. The turnover declared for such petrol pump station for AY 2017-18 is Rs. 96,02,30,547/ is Rs. 70,002/-. Thus, total turnover for such business is Rs. 96,03,00,549. It is further submitted by the assessee that the total cash deposits in his accounts is Rs. 84,47,81,758/ alleged that the cash deposit reported by t department is in-correct. This contention of the assessee is not acceptable because the information is uploaded by the respective banks in the insight portal of the department. Under these facts and circumstances, it is evident that the assessee has under It is also seen that the assessee has admitted net Profit @ 2.06% of turnover reported by him. Hence, by adopting the same ration 2.06% of Rs.23,64,66,090/ be added to the total income of the assessee. In this regard, final show cause notice along with the Draft assessment order was sent to the assessee on 21.03.2022. The assessee submitted response on 22.03.2022, 23.03.2022 and 25.03.2022. The response of the submitted by the assessee that the cash deposits reported by the Bankers are incorrect and double/ triple in cases. The assessee submitted necessary evidences in support of his claim. After going through the same, the submission is found acceptable and no addition is made on this ground. Tarachand ITA Nos. 9255 response, the assessee vide reply dated 07.03.2021 submitted that the Assessee, is into business of petrol pump station. It sells, Petrol, Diesel, CNG and related petroleum products. The said pump station is under agency of Bharat Petroleum Corporation ited (BPCL). Petrol pump station is in the heart of the city. Mostly the customers are retail customers/ citizens staying in the city limits. The turnover declared for such petrol pump station for 18 is Rs. 96,02,30,547/-. Further, other income dec . Thus, total turnover for such business is Rs. It is further submitted by the assessee that the total cash deposits in his accounts is Rs. 84,47,81,758/- only. The assessee has alleged that the cash deposit reported by the banks to the correct. This contention of the assessee is not acceptable because the information is uploaded by the respective banks in the insight portal of the department. Under these facts and circumstances, it is evident that the essee has under- reported his turnover by Rs.23,64,66,090/ It is also seen that the assessee has admitted net Profit @ 2.06% of turnover reported by him. Hence, by adopting the same ration 2.06% of Rs.23,64,66,090/-. i.e, Rs.48,71,201/- was proposed to e added to the total income of the assessee. In this regard, final show cause notice along with the Draft assessment order was sent to the assessee on 21.03.2022. The assessee submitted response on 22.03.2022, 23.03.2022 and 25.03.2022. The response of the assessee is perused. It is submitted by the assessee that the cash deposits reported by the Bankers are incorrect and double/ triple in cases. The assessee submitted necessary evidences in support of his claim. After going through the same, the submission of the assessee is found acceptable and no addition is made on this ground. Tarachand Shamji Savla, 7 ITA Nos. 9255/MUM/2025 response, the assessee vide reply dated 07.03.2021 submitted that the Assessee, is into business of petrol pump station. It sells, Petrol, Diesel, CNG and related petroleum products. The said pump station is under agency of Bharat Petroleum Corporation ited (BPCL). Petrol pump station is in the heart of the city. Mostly the customers are retail customers/ citizens staying in the city limits. The turnover declared for such petrol pump station for . Further, other income declared . Thus, total turnover for such business is Rs. It is further submitted by the assessee that the total cash deposits only. The assessee has he banks to the correct. This contention of the assessee is not acceptable because the information is uploaded by the respective Under these facts and circumstances, it is evident that the reported his turnover by Rs.23,64,66,090/-. It is also seen that the assessee has admitted net Profit @ 2.06% of turnover reported by him. Hence, by adopting the same ration was proposed to In this regard, final show cause notice along with the Draft assessment order was sent to the assessee on 21.03.2022. The assessee submitted response on 22.03.2022, 23.03.2022 and assessee is perused. It is submitted by the assessee that the cash deposits reported by the Bankers are incorrect and double/ triple in cases. The assessee submitted necessary evidences in support of his claim. After going is found acceptable and no addition is made on this ground.” Printed from counselvise.com 7. Thus, the ld AO has expressly mentioned that no addition has been made on the basis of the reasons recorded of cash deposit in bank account and according to him such cash deposits were found to be from question, therefore, is whether, having failed to make any addition on the issue which formed the very foundation of jurisdiction under section 147, the Assessing Officer could nonetheless proceed to make an addition on a different and unrelated issue. 7.1 This issue is no longer res integra. The Hon’ble jurisdictional High Court in CIT v. Jet Airways (India) Ltd. exhaustive analysis of section 147, has held in unequivocal terms that the words “and also” employed in the provision are conjunctive in nature. The Assessing Officer is, therefore, required to assess or reassess the income which formed the basis of the “reason to believe”, and only thereafter can he proceed to assess any other income which may come to his notice during the course of proceedings. 7.2 The Hon’ble High Court has categorically held that if the income, which formed the basis of reopening, is not assess reassessed, it is not open to the Assessing Officer to independently assess other income. Such action would amount to exercising jurisdiction in the absence of the foundational requirement Tarachand ITA Nos. 9255 Thus, the ld AO has expressly mentioned that no addition has been made on the basis of the reasons recorded of cash deposit in bank account and according to him such cash deposits were found to be from explained sources question, therefore, is whether, having failed to make any addition on the issue which formed the very foundation of jurisdiction under section 147, the Assessing Officer could nonetheless proceed to make an addition on a different and unrelated issue. This issue is no longer res integra. The Hon’ble jurisdictional CIT v. Jet Airways (India) Ltd. (supra), upon an ve analysis of section 147, has held in unequivocal terms that the words “and also” employed in the provision are conjunctive in nature. The Assessing Officer is, therefore, required to assess or reassess the income which formed the basis of the “reason to believe”, and only thereafter can he proceed to assess any other income which may come to his notice during the course of The Hon’ble High Court has categorically held that if the income, which formed the basis of reopening, is not assess reassessed, it is not open to the Assessing Officer to independently assess other income. Such action would amount to exercising jurisdiction in the absence of the foundational requirement Tarachand Shamji Savla, 8 ITA Nos. 9255/MUM/2025 Thus, the ld AO has expressly mentioned that no addition has been made on the basis of the reasons recorded of cash deposit in bank account and according to him such explained sources. The question, therefore, is whether, having failed to make any addition on the issue which formed the very foundation of jurisdiction under section 147, the Assessing Officer could nonetheless proceed to This issue is no longer res integra. The Hon’ble jurisdictional (supra), upon an ve analysis of section 147, has held in unequivocal terms that the words “and also” employed in the provision are conjunctive in nature. The Assessing Officer is, therefore, required to assess or reassess the income which formed the basis of the “reason to believe”, and only thereafter can he proceed to assess any other income which may come to his notice during the course of The Hon’ble High Court has categorically held that if the income, which formed the basis of reopening, is not assessed or reassessed, it is not open to the Assessing Officer to independently assess other income. Such action would amount to exercising jurisdiction in the absence of the foundational requirement Printed from counselvise.com contemplated under section 147. High Court is reproduced as under 12. The effect of section 147 as it now stands after the amendment of 2009 can, therefore, be summarised as The Assessing Officer must have reason to believe that any income chargeable to tax has assessment year; ( he proceeds to make an assessment, reassessment or recompilation, the Assessing Officer has to serve on the assessee a notice under sub Officer may assess or reassess such income, which he has reason to believe, has escaped assessment and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of th under the section; does not include a particular issue with respect to which income has escaped assessment, he may nonetheless, assess or reassess the income in respect of any and which comes to his notice subsequently in the course of the proceedings under 13. Now the submission of the learned counsel appearing on behalf of the assessee in the present case is also\" in section 14 assess or reassess the escaped assessment together with any other income chargeable to tax which has escaped assessment and which comes to his notice during the course of Assessing Officer assesses the income with reference to which he had formed a reason it would not be open to him to assess or reassess any other income chargeable which comes to his notice subsequently in the course proceedings. On the other hand, it has been urged on behalf of the revenue that even if, during the Tarachand ITA Nos. 9255 contemplated under section 147. The relevant finding of Hon’b High Court is reproduced as under: The effect of section 147 as it now stands after the amendment of 2009 can, therefore, be summarised as The Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year; (ii) Upon the formation of that belief and before he proceeds to make an assessment, reassessment or recompilation, the Assessing Officer has to serve on the assessee a notice under sub-section (1) of section 148; (iii) The Assessing Officer may assess or reassess such income, which he has reason to believe, has escaped assessment 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 and (iv) Though the notice under section 148(2) does not include a particular issue with respect to which income has escaped assessment, he may nonetheless, assess or reassess the income in respect of any issue which has escaped assessment and which comes to his notice subsequently in the course of the the section. Now the submission of the learned counsel appearing on behalf of the assessee in the present case is that the also\" in section 147 postulate that the Assessing Officer may assess or reassess the income which he has reason to believe has escaped assessment together with any other income chargeable to which has escaped assessment and which comes to his notice during the course of the proceedings. In other words, unless the Assessing Officer assesses the income with reference to which he had formed a reason to believe within the meaning of section 147, it would not be open to him to assess or reassess any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course proceedings. On the other hand, it has been urged on behalf of the revenue that even if, during the course of assessment or, as the Tarachand Shamji Savla, 9 ITA Nos. 9255/MUM/2025 The relevant finding of Hon’ble The effect of section 147 as it now stands after the amendment of 2009 can, therefore, be summarised as follows : (i) The Assessing Officer must have reason to believe that any escaped assessment for any ) Upon the formation of that belief and before he proceeds to make an assessment, reassessment or recompilation, the Assessing Officer has to serve on the assessee ) The Assessing Officer may assess or reassess such income, which he has reason to believe, has escaped assessment and also any other income chargeable to tax which has escaped assessment and which e proceedings ) Though the notice under section 148(2) does not include a particular issue with respect to which income has escaped assessment, he may nonetheless, assess or reassess caped assessment and which comes to his notice subsequently in the course of the Now the submission of the learned counsel appearing on that the words \"and 7 postulate that the Assessing Officer may he has reason to believe has escaped assessment together with any other income chargeable to which has escaped assessment and which comes to his notice words, unless the Assessing Officer assesses the income with reference to which he within the meaning of section 147, it would not be open to him to assess or reassess any other tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings. On the other hand, it has been urged on behalf of the assessment or, as the Printed from counselvise.com case may be reassessment, t or reassess the income escaped assessment and which formed the subject notice under section 148(2), it is nonetheless open to him to assess any other income which, during t proceedings is brought to his notice as having escaped assessment. 14. The rival submissions which have been urged on behalf of the revenue and the assessee can be dealt with, first principle, interpreting the section as it stands and on the basis of precedents on stands and without adding or deducting from the words used Parliament, it is clear that upon the f believe under section 147 and following under section 148, the Assessing Officer has the power to assess or reassess the income, which escaped assessment and also any other incom The words \"and also\" cannot be ignored. The interpretation which the Court places on the provision should effect of these words or rendering any part of the language used by Parliament otiose or reassess such income and also any other income chargeable tax which has escaped assessment\", the words \"and also\" cannot be read as being in the alternative. On interpretation would be to regard tho conjunctive and cumulative. It Parliament has not used the word \"or\". The Legislature did not rest content by merely using the word \"and\". The words \"and\", as well as \"also\" have been used together and in conj 15. The Shorter Oxford Dictionary mean 'further, in addition, besides, too'. The treated as being relative and conjunctive. Evidently, therefore, what Parliament intends by use the Assessing Officer, upon the formation of a reason to believe under section147 and the issuance of a notice under section 148(2) must assess or reassess: ( other income chargeable to tax which has escaped asses Tarachand ITA Nos. 9255 case may be reassessment, the Assessing Officer does not assess the income which he has reason to believe has escaped assessment and which formed the subject notice under section 148(2), it is nonetheless open to him to assess any other income which, during the course proceedings is brought to his notice as having escaped The rival submissions which have been urged on behalf of the revenue and the assessee can be dealt with, both as a matter of first principle, interpreting the section as it stands and on the basis of precedents on the subject. Interpreting the provision as it stands and without adding or deducting from the words used , it is clear that upon the formation of a reason to believe under section 147 and following the issuance under section 148, the Assessing Officer has the power to assess income, which he has reason to believe had escaped assessment and also any other income chargeable to tax. \"and also\" cannot be ignored. The interpretation which the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used otiose. Parliament having used the words \"assess or reassess such income and also any other income chargeable which has escaped assessment\", the words \"and also\" cannot be read as being in the alternative. On the contrary interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word \"or\". The Legislature did not merely using the word \"and\". The words \"and\", as well as \"also\" have been used together and in conjunction. Shorter Oxford Dictionary defines the expression \"also\" to mean 'further, in addition, besides, too'. The word has been treated as being relative and conjunctive. Evidently, therefore, what Parliament intends by use of the words \"and also\" the Assessing Officer, upon the formation of a reason to believe under section147 and the issuance of a notice under section 148(2) must assess or reassess: (i) 'such income'; and also ( other income chargeable to tax which has escaped asses Tarachand Shamji Savla, 10 ITA Nos. 9255/MUM/2025 he Assessing Officer does not assess which he has reason to believe has escaped assessment and which formed the subject-matter of a notice under section 148(2), it is nonetheless open to him to he course of the proceedings is brought to his notice as having escaped The rival submissions which have been urged on behalf of the both as a matter of first principle, interpreting the section as it stands and on the . Interpreting the provision as it stands and without adding or deducting from the words used by ormation of a reason to the issuance of a notice under section 148, the Assessing Officer has the power to assess he has reason to believe had e chargeable to tax. \"and also\" cannot be ignored. The interpretation which in diluting the effect of these words or rendering any part of the language used ng used the words \"assess or reassess such income and also any other income chargeable to which has escaped assessment\", the words \"and also\" cannot the contrary, the correct se words as being some significance that Parliament has not used the word \"or\". The Legislature did not merely using the word \"and\". The words \"and\", as unction. defines the expression \"also\" to word has been treated as being relative and conjunctive. Evidently, therefore, of the words \"and also\" is that the Assessing Officer, upon the formation of a reason to believe under section147 and the issuance of a notice under section ) 'such income'; and also (ii)any other income chargeable to tax which has escaped assessment Printed from counselvise.com and which comes to his notice proceedings under the section. The words 'such income' refer to the income chargeable to in respect of which the Assessing Officer has formed a reason believe that it has escaped assessment. Hence, the language which has been used by Parliament is that the assessment or reasses income in respect of which he it has escaped assessment and also in respect of any other income which comes of the proceedings as having escape the escapement of which was the basis of the formation of the season to believe is not assessed open to the Assessing Officer to independently assess only that income which comes the proceedings under the section as having escaped If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the not assess or reassess the income which notice, it would not other issue independently. Parliament when it enacted the provisions of section 147 with effect from 1 stipulated that the Assessing Officer has to assess o the income which he had reason to believe had escaped assessment and also any other income chargeable came to his notice during the proceedings. In the absence of the assessment or reassessment of the independently assess the latter. 16. In CIT v. Sun Engg. Works (P.) Ltd. Supreme Court dealt with the course of its judgment: \"Where an item unconnected with the escapement of income has been concluded finally reassessment on an escaped item of income is it open to the assessee to seek a review computation of the escaped income?\" Tarachand ITA Nos. 9255 and which comes to his notice subsequently in the course of the proceedings under the section. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of that the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the escapement of which was the basis of the formation of the season to believe is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that which comes to his notice subsequently in the course of the proceedings under the section as having escaped If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the section 147 with effect from 1-4-1989 clearly stipulated that the Assessing Officer has to assess o income which he had reason to believe had escaped assessment and also any other income chargeable to tax came to his notice during the proceedings. In the absence of the assessment or reassessment of the former, he cannot assess the latter. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 2971 , the Supreme Court dealt with the following question of law in the course of its judgment:— \"Where an item unconnected with the escapement of income has been concluded finally against the assessee, how far in reassessment on an escaped item of income is it open to the assessee to seek a review of the concluded item for the purpose of computation of the escaped income?\" Tarachand Shamji Savla, 11 ITA Nos. 9255/MUM/2025 the course of the proceedings under the section. The words 'such income' refer to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to that it has escaped assessment. Hence, the language indicative of the position sment must be in respect of the a reason to believe that it has escaped assessment and also in respect of any other to his notice subsequently during the course d assessment. If the income, the escapement of which was the basis of the formation of the , it would not be open to the Assessing Officer to independently assess only that sequently in the course of assessment. If upon the issuance of a notice under section 148(2), the the assessee and does was the basis of the to him to assess income under some other issue independently. Parliament when it enacted the 1989 clearly stipulated that the Assessing Officer has to assess or reassess income which he had reason to believe had escaped to tax which came to his notice during the proceedings. In the absence of the former, he cannot [1992] 198 ITR 2971 , the of law in the \"Where an item unconnected with the escapement of income has assessee, how far in reassessment on an escaped item of income is it open to the of the concluded item for the purpose of Printed from counselvise.com 17. The issue which arose before the Supreme Court was whether, in the course of a reassessment on an income could an assessee seek a review in respect of an item which stood concluded in the Supreme Court dealt with the provisions of section 147, as they stood prior to the amendment held that the expression \"escaped assessment\" includes both \"non-assessment\" as well as \"under assessment\". Inco to have escaped assessment within when it has not been charged in the hands of an assessee during the relevant assessment situation where the assessment of the assessee for year is, for the first time, made by resorting to the provisions of section 147. The expression “reassess an assessment has already been made but the Assessing Officer has reason to believe that there is under assessmen of the existence of any of the Explanation 1 to section 147. The Supreme Court adverted to the Judgment in V.Jaganmohan Rao held that once an assessment is validly reopened, under assessment is set aside and the Income jurisdiction and duty to levy tax on escaped assessment during the previous year. The Court held that the object of section it is not open to the assessee to convert the proceedings as an appeal or revision and thereby seek relief in respect of items which were rejected earlier or not claimed during the course of the original assessment proceedings. 18. The judgment in with the language of sections 22(2) and 34 of the while the judgment in interprets the provisions of section147 as they stood prior amendment on 1-4- 19. The effect of the amended provisions came to be considered in two distinct lines of precedent on authority, to which a reference has already been made earlier, Tarachand ITA Nos. 9255 The issue which arose before the Supreme Court was her, in the course of a reassessment on an escaped item income could an assessee seek a review in respect of an item which stood concluded in the original order of assessment. The Supreme Court dealt with the provisions of section 147, as they the amendment on 1-4-1989. The Supreme Court held that the expression \"escaped assessment\" includes both assessment\" as well as \"under assessment\". Inco to have escaped assessment within the meaning of the section when it has not been charged in the hands of an assessee during relevant assessment year. The expression \"assess\" refers to a situation where the assessment of the assessee for year is, for the first time, made by resorting to the provisions of expression “reassess\" refers to a situation where an assessment has already been made but the Assessing Officer to believe that there is under assessmen of the existence of any of the grounds contemplated to section 147. The Supreme Court adverted to the V.Jaganmohan Rao v. CIT [1970] 75 ITR 373 , which held that once an assessment is validly reopened, under assessment is set aside and the Income-tax Officer has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year. The Court held that of section 147 endures to the benefit of the reven it is not open to the assessee to convert the reassessment as an appeal or revision and thereby seek relief in respect of items which were rejected earlier or in respect of items not claimed during the course of the original assessment The judgment in V. Jaganmohan Rao's case ( with the language of sections 22(2) and 34 of the while the judgment in Sun Engg. Works (P.) Ltd.'s interprets the provisions of section147 as they stood prior -1989. 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, Tarachand Shamji Savla, 12 ITA Nos. 9255/MUM/2025 The issue which arose before the Supreme Court was escaped item of income could an assessee seek a review in respect of an item of assessment. The Supreme Court dealt with the provisions of section 147, as they 1989. The Supreme Court held that the expression \"escaped assessment\" includes both assessment\" as well as \"under assessment\". Income is said of the section when it has not been charged in the hands of an assessee during year. The expression \"assess\" refers to a situation where the assessment of the assessee for particular year is, for the first time, made by resorting to the provisions of \" refers to a situation where an assessment has already been made but the Assessing Officer to believe that there is under assessment on account grounds contemplated by to section 147. The Supreme Court adverted to the [1970] 75 ITR 373 , which held that once an assessment is validly reopened, the previous tax Officer has the the entire income that had escaped assessment during the previous year. The Court held that to the benefit of the revenue and reassessment as an appeal or revision and thereby seek relief in in respect of items not claimed during the course of the original assessment case (supra) dealt Act of 1922 Sun Engg. Works (P.) Ltd.'s case (supra) interprets the provisions of section147 as they stood prior to the The effect of the amended provisions came to be considered in . The first line of authority, to which a reference has already been made earlier, Printed from counselvise.com adopted the principle that a reason to believe that income has escaped assessment and issued a notice under section 148 on certain specific issues, it was not open to him during the course of assessment or reassessment income, which may have form the subject-matter of the notice under section 148. This view was adopted in the Judgment of the Punjab and Haryana High Court in Vipan Khanna's Kerala High Court in line of authority, would now cease law, by virtue of the amendment which has been brought in by the insertion of Explanation 2009. The effect of the Officer has formed a reason to believe that income chargeable to tax has escaped assessment under section 148, it is op in respect of any had not been included in the reasons recorded under section148(2). 20. The second line of precedent is reflected in a judgment of the Rajasthan High Cour . The Rajasthan High Court construed the words used by Parliament in section 147particularly the words that the Assessing Officer 'may assess or reassess such income and also any other income assessment and which comes to his notice subsequently in course of the proceedings' under section 147. The Rajasthan High Court held as follows : \". . . if is only when, in proceedings under section 147 the Assessing Officer, assesses to tax, which has escaped assessment for any assessment year, with respect to which only in addition, he can also put to tax, the other chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in under section 147. Tarachand ITA Nos. 9255 principle that where the Assessing Officer has formed a reason to believe that income has escaped assessment and a notice under section 148 on certain specific issues, it was not open to him during the course of the proceedings assessment or reassessment to assess or reassess any other income, which may have escaped assessment but which did not matter of the notice under section 148. This view the Judgment of the Punjab and Haryana High Vipan Khanna's case (supra) and in the judgment Kerala High Court in Travancore Cements Ltd.'s case ( 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 Explanation 3 to section 147 by Finance (No. 2) Act of 2009. 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 under section 148, it is open to him to assess or reassess income other issue though the reasons for such issue had not been included in the reasons recorded under The second line of precedent is reflected in a judgment of the Rajasthan High Court in CIT v. Shri RamSingh [2008] 306 ITR 343 . The Rajasthan High Court construed the words used by Parliament in section 147particularly the words that the Assessing Officer 'may assess or reassess such income and also other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in of the proceedings' under section 147. The Rajasthan High Court held as follows : \". . . if is only when, in proceedings under section 147 the Assessing Officer, assesses or reassesses any income 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 to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings Tarachand Shamji Savla, 13 ITA Nos. 9255/MUM/2025 where the Assessing Officer has formed a reason to believe that income has escaped assessment and has a notice under section 148 on certain specific issues, it the proceedings for to assess or reassess any other but which did not matter of the notice under section 148. This view the Judgment of the Punjab and Haryana High nd in the judgment of the case (supra). This the correct position in law, by virtue of the amendment which has been brought in by the section 147 by Finance (No. 2) Act of an Assessing Officer has formed a reason to believe that income chargeable to proceeded to issue a notice en to him to assess or reassess income other issue though the reasons for such issue had not been included in the reasons recorded under The second line of precedent is reflected in a judgment of the [2008] 306 ITR 343 . The Rajasthan High Court construed the words used by Parliament in section 147particularly the words that the Assessing Officer 'may assess or reassess such income and also hich has escaped assessment and which comes to his notice subsequently in the of the proceedings' under section 147. The Rajasthan High \". . . if is only when, in proceedings under section 147 the any income chargeable to tax, which has escaped assessment for any assessment year, he had \"reason to believe\" to be so, then, only in addition, he can also put to tax, the other income, to tax, which has escaped assessment, and which has of proceedings Printed from counselvise.com To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings were to come to the conclusion, that any income chargeable to which, according to his \"reason to believe\", had escaped assessment for any assessment year, did then, the mere fact that the Assessing Officer ent reason to believe, not continue to vest him with the jurisdiction, to subject to any other income, chargeable to tax, which the Assessing Officer may find to have escaped notice subsequently, in the course of proceedings under section 147.\" 21. Parliament, when it enacted the by the Finance (No. 2) Act, 2009 lines of precedent on the subject. The separate questions. When in Explanation 3 to section 147, Parliament stepped in to what it regarded as an interpretational error in the view which was taken by certain courts that the restrict the assessment or reassessment proceedings only to the issues in respect of the assessment. The corrective exercise embarked upon by \"Parliament in the form of that the Assessing Officer may assess or reassess respect of any issue which comes to his notice subsequently in the course of the proceedings not included in the notice under section 148( the Kerala High Court in and of the Punjab & Haryana High Court in (supra) would, therefore, no longer hold the field. However, insofar as the second line reflected in the judgment of the Rajasthan High Court in Singh’s case (supra would not take away the basis of that decision. was taken by the Rajasthan High Court was judgment of the Punjab &Haryana High Court in Industries [1989] 180 ITR 3191. The decision in Tarachand ITA Nos. 9255 To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the Assessing Officer were to come to the conclusion, that any income chargeable to , according to his \"reason to believe\", had escaped assessment for any assessment year, did not escape then, the mere fact that the Assessing Officer ent reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to 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 under section 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 questions. When it effected the amendment by bringing to section 147, Parliament stepped in to it regarded as an interpretational error in the view which was taken by certain courts that the Assessing Officer 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 the form of Explanation 3 consequently provides that the Assessing Officer may assess or reassess the income 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 under section 148(2). The decisions of Court in Travancore Cements Ltd.' s and of the Punjab & Haryana High Court in Vipan Khanna's ) 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 supra), Explanation 3 as inserted by Parliament would not take away the basis of that decision. The view was taken by the Rajasthan High Court was also taken in another judgment of the Punjab &Haryana High Court in CIT v. [1989] 180 ITR 3191. The decision in Tarachand Shamji Savla, 14 ITA Nos. 9255/MUM/2025 To clarify it further, or to put it in other words, in our opinion, if in Assessing Officer were to come to the conclusion, that any income chargeable to tax, , according to his \"reason to believe\", had escaped assessment, then, the mere fact that the Assessing Officer entertained a a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, other income, chargeable to tax, which the Assessing Officer may come to his notice subsequently, in the course of proceedings under section ) to section 147 before it both the precedent dealt with two it effected the amendment by bringing to section 147, Parliament stepped in to correct it regarded as an interpretational error in the view which ssessing Officer has to restrict the assessment or reassessment proceedings only to the were recorded for reopening the assessment. The corrective exercise embarked upon by ently provides the income in respect of any issue which comes to his notice subsequently in the reasons for such issue were 2). The decisions of s case (supra) Khanna's case ) would, therefore, no longer hold the field. However, is concerned, which is reflected in the judgment of the Rajasthan High Court in Shri Ram as inserted by Parliament The view which also taken in another v. Atlas Cycle [1989] 180 ITR 3191. The decision in Atlas Cycle Printed from counselvise.com Industries' case (supra have jurisdiction to proceed with that the two grounds mentioned in the notice under section 148 were incorrect or Haryana High Court in the Rajasthan High Court in not be affected by the Explanation 3 to section 147. 22.Explanation 3 judicial interpretation, on the making of reassessment on grounds other than those on the basis of which a notice was issued 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 certain issue, the Assessing Officer could not make an assessment or reassessment on notice during the proceedings. This interpretation will no longer hold the field after the Act (No. 2) of 2009. However, override the necessity of fulfilling the conditions set out in the substantive part of section 147. provision is intended to explain its contents and cannot be construed to override it nugatory. Section 147 has this effect that the Assessing Officer has to assessor reassess the income (\"such income\") which escaped assessment a belief and if he does so, he can also assess or reassess any other income which has escaped assessment notice during the course of the proceedings. However, if after issuing a notice under the assessee and holds that the income which he has formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is independently to assess some o a fresh notice under section148 would be necessary, the legality Tarachand ITA Nos. 9255 supra) 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 under section 148 non-existent. The decisions of the Punjab & Haryana High Court in Atlas Cycle Industries' case (supra the Rajasthan High Court in Shri Ram Singh's case (supra not be affected by the amendment brought in by the insertion of to section 147.- Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial held that when the assessment was sought to be reopened on the ground that income had escaped assessment 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 after the insertion of Explanation 3 by the Finance Act (No. 2) of 2009. However, Explanation 3 does not override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory sion 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 assessor reassess the income (\"such income\") which escaped assessment and which was the basis of the 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 under section 148, he accepted the contention of the assessee and holds that the income which he has a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open independently to assess some other income. If he intends to do so, a fresh notice under section148 would be necessary, the legality Tarachand Shamji Savla, 15 ITA Nos. 9255/MUM/2025 ) held that the Assessing Officer did not , once he found that the two grounds mentioned in the notice under section 148 existent. The decisions of the Punjab & supra) and of supra) would in by the insertion of lifts the embargo, which was inserted by an assessment or reassessment on grounds other than those on the basis of which a 148 setting out the reasons for the belief that income had escaped assessment. Those judicial held that when the assessment was sought to be escaped assessment on a certain issue, the Assessing Officer could not make an which came to his notice during the proceedings. This interpretation will no longer by the Finance does not and cannot override the necessity of fulfilling the conditions set out in the to a statutory sion is intended to explain its contents and cannot be or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assessor reassess the income (\"such income\") which nd which was the basis of the formation of belief and if he does so, he can also assess or reassess any other , comes to his notice during the course of the proceedings. However, if after 148, he accepted the contention of the assessee and holds that the income which he has initially a reason to believe had escaped assessment, has as a not open to him ther income. If he intends to do so, a fresh notice under section148 would be necessary, the legality Printed from counselvise.com of which would be tested in the event of a challenge by the assessee. 23. We have approached the issue of interpretation that has arisen for decision in t principle, based on the language used in section 147(1) and on the basis of the precedent on submission which has been urged on behalf of the assessee that section 147(1)as it stands po reason to believe that income chargeable to tax has assessment for any assessment year, the Assessing Officer may assess or reassess such income \"and also\" chargeable to tax which comes to his notice subsequently during the proceedings as also\" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite t language used by Parliament. Our view has been background which led to the insertion of 147. Parliament must be interpretation that was placed on the words \"and also\" by the Rajasthan High Court 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 section147(1) as they stood after the amendment of 1 24. In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the present case as being in error. The question of law shall, accordingly, stand answered the assessee. The appeal is, accordingly, dismissed. There shall be no order as to costs. 7.3 The ratio laid down by the Hon’ble High Court is clear and binding. The expression “and also” cannot be read disjunctively so as to confer unfettered jurisdiction upon the Assessing Officer. The jurisdiction under section 147 is conditional and is triggere Tarachand ITA Nos. 9255 of which would be tested in the event of a challenge by the 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 for any assessment year, the Assessing Officer may assess or reassess such income \"and also\" any other 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 as being in the alternative would be to rewrite t language used by Parliament. Our view has been supported by the background which led to the insertion of Explanation 3 147. Parliament must be regarded as being aware of the interpretation that was placed on the words \"and also\" by the High Court in Shri Ram Singh's case ( Parliament has not taken away the basis of that decision. While it to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section147(1) as they r the amendment of 1-4-1989 continue to hold the field. 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, stand answered against the revenue and in favour of the assessee. The appeal is, accordingly, dismissed. There shall costs. The ratio laid down by the Hon’ble High Court is clear and binding. The expression “and also” cannot be read disjunctively so as to confer unfettered jurisdiction upon the Assessing Officer. The jurisdiction under section 147 is conditional and is triggere Tarachand Shamji Savla, 16 ITA Nos. 9255/MUM/2025 of which would be tested in the event of a challenge by the We have approached the issue of interpretation that has matter of first principle, based on the language used in section 147(1) and on the the subject. We agree with the submission which has been urged on behalf of the assessee that stulates that upon the formation of a reason to believe that income chargeable to tax has escaped for any assessment year, the Assessing Officer may any other income chargeable to tax which comes to his notice subsequently during assessment. The words \"and also\" are used in a cumulative and conjunctive sense. To read as being in the alternative would be to rewrite the supported by the Explanation 3 to section regarded as being aware of the interpretation that was placed on the words \"and also\" by the case (supra). Parliament has not taken away the basis of that decision. While it to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section147(1) as they 1989 continue to hold the field. In that view of the matter and for the reasons that we have Tribunal in the present case as being in error. The question of law shall, revenue and in favour of the assessee. The appeal is, accordingly, dismissed. There shall The ratio laid down by the Hon’ble High Court is clear and binding. The expression “and also” cannot be read disjunctively so as to confer unfettered jurisdiction upon the Assessing Officer. The jurisdiction under section 147 is conditional and is triggered by the Printed from counselvise.com existence of escapement of income forming the basis of reopening. If such foundational escapement fails, the superstructure of reassessment cannot survive. 7.4 In the present case, it is an admitted position that no addition has been made in respe the sole basis for reopening. Consequently, the very jurisdiction assumed under section 147 stands vitiated, and the Assessing Officer could not have proceeded to make disallowance of interest expenditure on an altogether different footing. 7.5 In view of the aforesaid legal position, and respectfully following the binding precedent of the Hon’ble jurisdictional High Court in Jet Airways (India) Ltd. expenditure of ₹11,88,050/ Accordingly, the addition sustained by the Ld. CIT(A) is set aside and the ground No. 1 8. In the result the appeal filed by the assessee stands allowed. Order pronounced in the open Court on Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Tarachand ITA Nos. 9255 existence of escapement of income forming the basis of reopening. If such foundational escapement fails, the superstructure of reassessment cannot survive. In the present case, it is an admitted position that no addition has been made in respect of the cash deposits, which constituted the sole basis for reopening. Consequently, the very jurisdiction assumed under section 147 stands vitiated, and the Assessing Officer could not have proceeded to make disallowance of interest together different footing. In view of the aforesaid legal position, and respectfully following the binding precedent of the Hon’ble jurisdictional High Jet Airways (India) Ltd. (supra), the disallowance of interest 11,88,050/- is, therefore, liable to be deleted. Accordingly, the addition sustained by the Ld. CIT(A) is set aside he ground No. 1 raised by the assessee is allowed. In the result the appeal filed by the assessee stands ounced in the open Court on 27/03/2026. Sd/- SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Tarachand Shamji Savla, 17 ITA Nos. 9255/MUM/2025 existence of escapement of income forming the basis of reopening. If such foundational escapement fails, the superstructure of In the present case, it is an admitted position that no addition ct of the cash deposits, which constituted the sole basis for reopening. Consequently, the very jurisdiction assumed under section 147 stands vitiated, and the Assessing Officer could not have proceeded to make disallowance of interest In view of the aforesaid legal position, and respectfully following the binding precedent of the Hon’ble jurisdictional High (supra), the disallowance of interest is, therefore, liable to be deleted. Accordingly, the addition sustained by the Ld. CIT(A) is set aside allowed. In the result the appeal filed by the assessee stands /2026. OM PRAKASH KANT) ACCOUNTANT MEMBER Printed from counselvise.com Mumbai; Dated: 27/03/2026 KRK, SR. PS Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Tarachand ITA Nos. 9255 Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Tarachand Shamji Savla, 18 ITA Nos. 9255/MUM/2025 (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "