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Facts
The assessee, a co-operative housing society, had its income declared in the return processed under section 143(1) and later assessed under section 143(3). Subsequently, a reassessment notice under section 148 was issued, alleging escaped assessment. The AO initiated reassessment proceedings based on the same grounds as the original assessment, which had been examined and decided.
Held
The Tribunal held that reopening an assessment based on the same material and without any fresh tangible evidence, merely on a change of opinion, is unsustainable in law. The reassessment proceedings were found to be invalid, and the reassessment order was quashed.
Key Issues
Whether reopening of assessment under Section 147 based on change of opinion without fresh tangible material is valid? Whether interest income earned from cooperative banks is eligible for deduction under Section 80P(2)(d)?
Sections Cited
139, 143(1), 143(3), 147, 148, 148A, 144B, 250, 80P, 80P(2)(d), 80P(4), 142(1), 151, 144, 251(1)(a), 2(40), 194C, 1941, 151
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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI ANIKESH BANERJEE
Per Shri Anikesh Banerjee (JM): The instant appeal of the assessee filed against the order of the National Faceless Appeal Centre (NFAC), Delhi [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for assessment year 2013-14, date of order 10/12/2024. The impugned order was emanated from the order of the Assessment Unit, Income-tax Department (in short, the “Ld. AO”), order passed u/s. 147 r.w.s 144B of the Act, date of order 18/05/2023.
The Panchratna Co-operative Housing Society Ltd 2. The brief facts of the case is that the assessee is a co-operative housing society and filed the return u/s 139 of the Act. The total income was declared at Rs. 61,97,289/-. The returned was processed u/s 143(1) and subsequently the case was taken has scrutiny and the order was passed u/s 143(3) date of order 19.03.2016. In the assessment order the Ld.AO added back transfer fee, collection from others car and scooter parking at garden plot, additional maintenance, executive pass, advertisement and interest on delayed payment. The total addition was made amount to Rs. 1,11,89,292/-. The aggrieved assessee filed the appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the addition amounting to Rs. 66,12,901/- relied on the order of coordinate bench of ITAT, Mumbai by proposition taken relation to the doctrine of mutuality. Finally the ground was uphold by Ld. CIT(A) by the order dated 28.04.2023. 2.1 Subsequently the Ld.AO issue notice u/s 148 of the Act on dated 05.05.2021, APB page No.
The reasons recorded by Ld.AO related to notice u/s 148 which is reproduced as below. (APB page 48 and 49) “1. The assessee has filed the return of income for A.Y. 2013-14 on 29.09.2013 declaring total income at Rs. 61,97,289/-, The case was assessed u/s 143(3) of the 1. T. Act, 1961 on 19.03.2016 determining total income at Rs. 1,15,50,620/-,
It was observed from the records that during the assessment year under consideration, the assessee had earned interest income of Rs. 55,19,664/- from the investments made in fixed deposits in co-operative Banks. The assessee had also received interest income of Rs. 4,27,268/- from Bank of India. The deduction of the amount was claimed by the assessee and allowed by the AO u/s 80P of Rs 58,35,966/- of the I. T. Act. As per section 80P(2)(d), the interest income derived from its investments with any other co-operative societies is eligible for deduction. In the Instant case, the interest income has been derived from investments made in Co-operative Banks which does not fall under purview of Co- operative Society. Further, Interest income received from Nationalised Bank was also not eligible u/s 80P(2)(d). As per Balance Sheet, the investments were made The Panchratna Co-operative Housing Society Ltd in Saraswat Co-op. Bank, Bharat Co-op. Bank and Maharashtra Co-op. Bank. The assessee in its computation of total income claimed deduction of Rs. 58,35,966/- u/s 80P on account of investments and the same was allowed.
3. Further, it was also noticed that from the assessee's computation claimed TDS of Rs. 710,950/- on account of income of Rs. 72,41,011/- received from Loop that the assessee had Mobile (1) Ltd., Tata Teleservices Ltd., "Gem Plaza Jewellery Mfg. Co. Pvt. Ltd., Goenka Diamond and Jewels Ltd. etc. The TDS was deducted by the deductors u/s 194C, 194I. Thus, it appears the income received from these companies does not fall within the ambit of principle of mutuality which needs further examination. Also in the absence of exact details, it could not be ascertained whether this income has been credited in the income and Expenditure Account or not. Moreover, the service tax of Rs. 15,13,260/- credited to Income and Expenditure Account also does not appears to be fall under the principle of mutuality considering the various disallowance made in the Assessment Order.
4. In view of the above facts and circumstances of the case and after application of my mind, I have reason to believe that income of the assessee, chargeable to tax for the Assessment Year 2013-14 amounting to Rs. 59,46,932/- or any other income chargeable to tax which comes to my notice subsequently in the course of proceedings for re-assessment has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts in this case in terms of provisions of section 147 of the I.T. Act, 1961.
4. In this case, return of income was filed for the year under consideration and assessment u/s 143(3) was completed on 20.12.2016. Accordingly, in this case, the only requirement to initiate proceedings u/s 147 is reason to believe which has been recorded as above. It is pertinent to mention here that in this case the assessee had filed return of income for the year under consideration but no assessment as stipulated u/s 2(40) of the Act was made. In view of the above, provisions of clause (c) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment.
In this case more than four years have lapsed from the end of assessment year under consideration. Hence, necessary sanction from the Pr. CIT-19, Mumbai to
The assessee complied the said notice by a letter dated 08.06.2022 the copy said latter is Annexed in APB page 51. The relevant paragraphs of alleged letter are reproduced as below: “To: The Income tax officer 19(3)(1), 202, 2nd Floor, Matru Mandir, Tardeo Road, Mumbai 400 007 Dear Sir/Madam: 01 We refer to the show-cause notice dated May 25, 2022 u/s 148A(b) of the Income Tax Act, 1961 bearing ref no ITBA/COM/F/17/2022-23/1043176485(1) requiring us to submit explanations/clarifications within two weeks from the date thereof ie., June 08,2022.
02 In our case, return was filed declaring income of Rs 61,97,289/-and assessment was completed u/s 143(3) of the Act on March 19,2016 assessing the income at Rs 1,15,50,620/- after considering details and explanation submitted in response to notice u/s 142(1) of the Act dated June 20,2016 vide our Authorized Representative's letters dated September 29,2014, July 16,2015 and March 12, 2016--adding, among other items, Rs 66,12,901/-; and - allowing deduction of Rs. 58,35,966/- u/s 80P of the Act.
Based on the above and in the absence of or due to lack of any change in facts or circumstances of the case on record during the original assessment proceedings, it is imperative to provide us- i) Specific issues, short-comings and/or deficiencies in information/details called for by the Assessing Officer alleged to be not examined during the original assessment as referred in para 4.2 of Annexure to the show cause notice with specific reference to notices issued during the original assessment proceedings and information/ explanations submitted by us instead of vague or general finding mentioned in the Annexure purporting to be reasons for re-opening as ii) Precise new/additional information or material leading to application of mind and reason to believe that income chargeable to tax has escaped assessment; iii) Why reason to believe as per Annexure to the show cause notice issued in our case cannot be considered as change of opinion to disallow deduction u/s 80P of the Act under the given facts; and iv) how quantum of alleged escaped Income of Rs. 59,46,932/- is arrived at to justify reopening beyond 3 years in view of - Addition of Rs 66,12,901/- already done in the course of original assessment proceedings; and - Deduction u/s 80P of the Act being allowed after due inquiry and consideration of material on record in the course of original assessment proceedings.
We request that the same may be provided to us in the interest of natural justice to meet the case. before proceeding further in the matter. 03 In this context, we reproduce the provisions of s 148A of the Act below –” (Emphasis supplied)
The Ld.AO rebutted the said reply of the assessee in order u/s 148A(d) of the Act by letter dated 30.07.2022, APB Page-53 to 56. The relevant part of the rebuttal of the Ld.AO in paragraphs 5 and 6 are reproduces as below: “ In response to the said notice, the assessee has submitted his reply on ITBA portal on 15.06.2022. The gist of the assessee's reply is as under: “ ………. The assessee has stated that the assessment was completed u/s. 143(3) of the Act on March, 2016 assessing the income at Rs. 1,15,50,620/- after considering details and explanation. The assessee in its computation of total income claimed deduction of Rs. 58,35,966/- u/s 80P(2)(d) on account of investments and the same was allowed.".
The submission of the assessee is considered and after verifying material available on record; it is found that the contention of the assessee is not The Panchratna Co-operative Housing Society Ltd acceptable as the assessee has earned interest income of Rs. 55,19,664/- from the investments made in fixed deposits in co-operative Banks. As per Balance Sheet, the investments were also made in Saraswat Co-op. Bank, Bharat Co-op. Bank and Maharashtra Co-op. Bank where assessee has earned interest income at Rs. 55,19,664/- and claimed it has exemption u/s 80P(2)(d). As per section 80P(2)(d), the interest income derived from its investments with any other co- operative societies is eligible for deduction, In the instant case, the interest income has been derived from Investments made in Co-operative Banks which does not fall under purview of Co-operative Society since cooperative banks are not cooperative society. The assessee in its computation of total income claimed deduction of Rs. 59,46,932/- u/s 80P(2)(d) on account of interest income earned on investment made in cooperative bank the same is not allowable, hence income chargeable to tax at Rs 59,46,932/- has escaped assessment within the meaning of section 147 of the Act. Therefore it is suggested that this is a fit case for issuing notice u/s 148 of the I.T. Act, 1961.”
5. Finally the Ld.AO completed the assessment u/s 147 r.w.s 144B of the Act dated 18.05.2023 and with a addition of interest earned from Investment of cooperative bank amount to Rs. 59,46,932/- and the other income amount to Rs. 72,41,011/- receipt from Loop Mobile (I) Ltd., Tata Teleservices Ltd., Geme Plaza Jewellery Mfg. Co. Pvt. Ltd., Goenka Diamond and Jewels Ltd Etc and the service tax of Rs. 15,13,260/- non-attributable to members credited to I&E A/c which comes total amount of Rs. 87,54,271/-. The aggrieved assessee filed the appeal before the Ld. CIT(A). The Ld. CIT(A) considered the assessment order as ex-parte u/s 144 of the Act and Ld. CIT(A) without considering the legal grounds of the assessee set aside the impugned assessment order as per u/s 251(1)(a) of the Act. And accordingly the appeal was partly allowed for statistical purpose. The aggrieved assessee challenged the order of the Ld. CIT(A) before the bench primary on the legal grounds.
The Panchratna Co-operative Housing Society Ltd 6. The Ld.AR argued and file paper book which is containing page 1-77 which is kept in record. The Ld.AR argued that the assessing officer completed u/s 143(3) of the Act and Ld.AO considered both the interest of income from Cooperative Bank and other income. The other income was added back with the total income of the assessee and finally the Ld. CIT(A) considered the merit of the case and respectfully relied on the order of Hon’ble ITAT the addition was deleted. The relevant to interest earned from the investment in Cooperative Bank that is Bharat Co-Operative Bank and Bombay Mercantile Mumbai District Co- operative are all the legal issues are settled by the higher judicial wisdom. The Hon’ble Gujarat High Court in PCIT v. Ashwinkumar Urban Co-operative Society Ltd. [2024] 168 taxmann.com 314 (Guj.), after considering the judgment of the Hon’ble Supreme Court in Kerala State Co-operative Agricultural & Rural Development Bank Ltd. [2023] 154 taxmann.com 305 (SC), held that interest earned from investments made with a co-operative bank is eligible for deduction under section 80P(2)(d). Similar views have been expressed in PCIT v. Shree Madhi Vighag Khand Udyog Sahakari Mandli Ltd. [2025] 171 taxmann.com 22 (Guj.). The Hon’ble Supreme Court in PCIT v. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd., reported in (2023) 150 taxmann.com 173 (SC) further clarified that a co-operative bank is a co-operative society for the purposes of section 80P, and section 80P(4) is attracted only when the assessee itself is a co- operative bank. Thus, interest earned from a co-operative bank by a co-operative society continues to qualify for deduction under section 80P(2)(d). The Ld.AR challenged that validity of notice u/s 147 for not found the any tangible material for issuances of notice u/s 148 of the Act. The Ld.AR prayed for quashing the notice u/s 148.
The Panchratna Co-operative Housing Society Ltd 7. The Ld. DR argued and submitted that the assessment order was passed ex- parte, and therefore, the Ld. CIT(A) was justified in setting aside the matter to the file of the Ld. AO for fresh adjudication. However, on the legal issue raised by the Ld. AR, the Ld. DR did not advance any substantive or persuasive argument in rebuttal.
We have heard the rival submissions and perused the material available on record. We find that the very same income had been examined by the Ld. AO during the original assessment proceedings, and the corresponding addition was deleted by the Ld. CIT(A), relying upon the order of the ITAT, Mumbai Bench. In respect of the deduction claimed under section 80P of the Act, the issue had already been considered in the original assessment, date of order 19/03/2016 (APB page-41), and furthermore, the matter now stands conclusively settled by the Hon’ble Supreme Court. The notice under section 148 of the Act was issued based on recorded reasons wherein the Ld. AO merely reiterated the same grounds relating to the very income considered earlier. During the reassessment proceedings as well, the Ld. AO once again held that the same income was taxable. It is a well-settled proposition of law that, in the absence of any fresh, tangible material, an Assessing Officer cannot review or revisit his earlier view. Respectfully following the judgment of the Hon’ble Bombay High Court in Kalpataru Land Pvt. Ltd. v. ACIT [2022] 136 taxmann.com 434 (Bom.), the Special Leave Petition against which was dismissed by the Hon’ble Supreme Court as reported in [2022] 145 taxmann.com 77 (SC), we reproduce the relevant observations of the Hon’ble High Court:
The Panchratna Co-operative Housing Society Ltd “6. Therefore, it is not permissible for an Assessing Officer to reopen the assessment based on the very same material with a view to take another view without consideration of material on record once one view is conclusively taken by the Assessing Officer. It is also not permissible to reopen purely on change of opinion. A general statement that the escapement of income is by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment is not enough. The Assessing Officer should indicate what was the material fact that was not truly and fully disclosed to him.” Further, reliance is placed on the decision of the Hon’ble Bombay High Court in Golden Tobacco Ltd. v. ACIT [2022] 136 taxmann.com 185 (Bom.), wherein it was held as under: “10. Therefore, once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject for consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. There can be no doubt that in the present facts, the five points mentioned above were subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to the order dated 17th March 2006. It would, therefore, follow that the reopening of the assessment by the impugned notice dated 26th March 2008 is merely on the basis of change of opinion of the Assessing Officer from that held earlier… This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.” We also note that a mere change of opinion cannot form the basis for reopening an assessment. Reliance in this regard is placed on the judgment of the Hon’ble Supreme Court in DCIT v. Gandhibag Sahakari Bank Ltd. [2025] 178 taxmann.com 259 (SC). In light of the binding decisions of the jurisdictional High Court and the Hon’ble Supreme Court, reopening an assessment on an issue already examined and The Panchratna Co-operative Housing Society Ltd concluded during the original assessment proceedings is unsustainable in law. Accordingly, we hold that the reassessment proceedings initiated on the very same ground are invalid. Consequently, the reassessment order passed under section 147 read with section 144B of the Act dated 18/05/2023 is hereby quashed.