RBI NEW DELHI STAFF CO-OPERATIVE THRIFT AND CREDIT SOCIETY LTD,DELHI vs. ITO WARD 52(1), DELHI

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ITA 4850/DEL/2025Status: DisposedITAT Delhi15 May 2026AY 2016-177 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that interest income from investments does not constitute an asset as defined in Section 149(1)(b) of the Act. Therefore, the basis for reopening the assessment was flawed, rendering the reassessment proceedings invalid.

What were the facts?

The assessee society claimed deduction under Section 80P for interest income from investments. The Assessing Officer reopened the assessment, stating that the escaped income was represented as an asset in the books of account. The addition made was on account of disallowing the Section 80P deduction.

What were the issues?

Whether the reopening of assessment was valid when the escaped income was claimed as a deduction and not represented as an asset in the books of account.

Which sections of the Income-tax Act were involved?

Section 148,Section 148A,Section 149,Section 147,Section 80P,Section 56

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES, NEW DELHI

Before: SHRI VIKAS AWASTHY & SHRI BRAJESH KUMAR SINGH

PER VIKAS AWASTHY, JUDICIAL MEMBER: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ‘the CIT(A)’) dated 19.06.2025 for AY 2016-17.

2.

The assessee has raised additional grounds of appeal vide application dated 05.08.2025 assailing validity of reopening of assessment. The additional grounds of appeal raised by the assessee read as under: “1. That following ground is filed as additional grounds of appeal:-

ITA 4850/DEL/2025 RBI NEW DELHI STAFF CO- OPERATIVE THRIFT AND CREDIT SOCIETY LTD ADDITIONAL GROUND No. 1:- "That the impugned notice U/s. 148 is without jurisdiction as per Section 149. ADDITIONAL GROUND No. 2:- "That the impugned notice U/s. 148 is barred by limitation. " ADDITIONAL GROUND No. 3:- "That the impugned notice is without jurisdiction and bad in law as not issued in terms of Section 151A." 3. A bare perusal of the additional grounds of appeal reproduced herein above would show that these grounds are legal in nature and go to the root of validity of assessment, hence, the additional grounds of appeal are admitted for adjudication.

4.

Shri Saurav Rohatagi, appearing on behalf of the assessee challenging validity of reopening of assessment u/s.148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), submits that while issuing notice u/s 148A(b) of the Act, the Assessing Office (AO) has observed that as per the information available with the office, income chargeable to tax exceeding Rs.50,00,000/- has escaped assessment in the case of the assessee and the same is represented as an asset in the form of entry in the books of account on account of receipt of interest on investments during the relevant assessment year. Thereafter, while making assessment u/s.147 of the Act, the solitary addition/disallowance made by the AO was in respect of assessee’s claim of deduction u/s 80P(2)(a)(i) of the Act. The interest income claimed by the assessee as deduction u/s 80P(2)(a)(i) of the Act was added back and was held as income from other sources. The ld. Counsel for the assessee made a short submission that the interest income earned by the assessee on investments is not represented as an asset in the books of account. Therefore, the whole basis for reopening assessment is flawed. In support of his argument, the ld. Counsel placed reliance on the decision rendered in the case of Hexaware Technologies Ltd. vs. ACIT, 464 ITR 430 (Bom.).

5.

Per contra, Shri Om Prakash, representing the Department vehemently defending the impugned order submits that the assessee has claimed interest earned on investments with other banks as deduction u/s 80P(2)(a)(i) of the Act. The said claim of the assessee was not in accordance with the provisions of section 80P of the Act. The Hon’ble Supreme Court of India in the case of Totgars Co-operative Sale Society Ltd. vs. ITO, 188 Taxmann 282 (SC), has held that interest income earned from

ITA 4850/DEL/2025 RBI NEW DELHI STAFF CO- OPERATIVE THRIFT AND CREDIT SOCIETY LTD investments with other banks is chargeable to tax as income from other sources u/s.56 of the Act. Similar view has been taken by the Hon’ble Jurisdictional High Court in the case of Mantola Co-operative Thrift & Credit Society Ltd. vs. CIT, 110 DTR 89 (Del.).

6.

We have heard the submissions made by rival sides and have examined the orders of the authorities below. In the instant appeal, the assessee has raised legal grounds challenging validity of reopening of assessment stating that the reasons recorded for reopening are not sustainable. In the assessment order passed u/s.147 of the Act, the only issue on which addition is made by the AO is assessee’s claim of deduction u/s 80P(2)(a)(i) of the Act. The reasons for reopening as emanating from notice issued u/s.148A(b) of the Act and order passed u/s 148A(d) of the Act dated 07.04.2023, is that income chargeable to tax exceeding Rs.50,00,000/- has escaped assessment and the same is represented as an asset in the form of entry in the books of account. Before proceeding further, it would be imperative to refer to the notice issued u/s 148A(b) of the Act dated 20.03.2023. The same is extracted herein under:-

ITA 4850/DEL/2025 RBI NEW DELHI STAFF CO- OPERATIVE THRIFT AND CREDIT SOCIETY LTD

7.

Thereafter, on the objections filed by the assessee against the said notice, the AO vide order dated 07.04.2023 passed u/s.148A(d) of the Act disposed of the objections inter alia holding as under:-

“7 The assessee's case is covered under provisions of section 149(1)(b) of the Act as the period of three years but not more than ten years have elapsed from the end of the relevant assessment year and the documents or evidence are in possession which reveal that income chargeable to tax is likely to escape is more than Rs. 50 lac and same is represented inform of an "Asset" in the form of entries in books of accounts on account of receipt of interest on investments during the relevant assessment year.” 8. Undisputedly, in the assessment order dated 27.03.2024 passed u/s.147 r.w.s. 144B of the Act, the solitary addition made by the AO is in respect of interest income

ITA 4850/DEL/2025 RBI NEW DELHI STAFF CO- OPERATIVE THRIFT AND CREDIT SOCIETY LTD earned by the assessee from investments in other banks. The assessee’s claim of deduction u/s.80P of the Act was disallowed and the interest income was added back in the hands of the assessee under the head “Income from Other Sources”. The interest income received by the assessee on investments with other banks does not constitute an asset. Thus, interest income is never represented in the books of account as an asset. It is in the nature of revenue receipt. Similar issue was considered by the Hon’ble Bombay High Court in the case of Hexaware Technologies Ltd. vs. ACIT (supra). In the said case, the assessee therein had claimed deduction u/s.80JJAA of the Act. The AO in reassessment proceedings questioned the correctness of the claim of deduction u/s.80JJAA of the Act stating that the deduction claimed represented escapement of income in the form of an asset. The matter travelled to the Hon’ble High Court. The Hon’ble High Court held the notice issued u/s.148 of the Act is invalid merely for the reason that deduction claimed u/s.80JJAA of the Act is not covered by section 149(1)(b) of the Act, as it is not represented in the form of an asset or expenditure in respect of a transaction or in relation to an event, or an entry in the books of account. For the sake of completeness, the relevant findings of the Hon’ble High Court are reproduced herein below:

“41 As regards the claim of deduction under Section 80JJAA of the Act, an issue of correctness of claim of deduction under Chapter VI of the Act, in our view, cannot be covered by Section 149(1)(b) of the Act. Section 149(1)(b) of the Act prescribes that escaped income must be represented in the form of (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event; (iii) an entry in the books of Account. The question of a correctness of the claim of deduction under Section 80JJAA of the Act cannot represent escapement of income in the form of an asset. The term ‘asset’ is defined in Explanation to Section 149 of the Act to include immovable property being land or building or both, shares and securities, loans and advances, deposit in bank account. The present case does not fall in any of the types of the assets as mentioned above. Further, the alleged claim of disallowance of deduction also can never fall under the category of either clause (b) or clause (c) as it is neither a case of expenditure in relation to an event nor a case of an entry in the books of account as no entries are passed in the books of account for claiming a deduction under the provisions of the Act. On this ground also the impugned notice will be invalid.” (Emphasized by us)

ITA 4850/DEL/2025 RBI NEW DELHI STAFF CO- OPERATIVE THRIFT AND CREDIT SOCIETY LTD 9. We find parity in the instant case. The assessee’s claim of deduction u/s.80P of the Act represented by interest on investments does not fall within the meaning of asset and is not represented in books of account as asset. Thus, there is fundamental flow in reason for initiation of reopening of assessment. In the facts of the case and the decision rendered by the Hon’ble Bombay High Court in the case of Hexaware Technologies Ltd. vs. ACIT (supra), we hold that the notice issued u/s 148A(b) of the Act was defective and the reassessment proceedings based on such defective notice are vitiated. As a sequitur, the entire reassessment proceedings fail. Hence, the assessment order is quashed and appeal of the assessee is allowed.

Order pronounced in the open court on Friday the 15th day of May, 2026.

Sd/- Sd/- BRAJESH KUMAR SINGH VIKAS AWASTHY ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi Dated: 15-05-2026 NV Copy to: RBI NEW DELHI STAFF CO-OPERATIVE THRIFT AND CREDIT SOCIETY LTD, 6, RBI BUILDING, PARLIAMENT STREET 1 SANSAD MARG DELHI, NEW DELHI-110001, DELHI 2 ITO WARD 52(1), -, NEW DELHI-110002, DELHI 3 THE PCIT / CIT, 4 THE D.R., ITAT, DELHI BENCH 5 GUARD FILE

ITA 4850/DEL/2025 RBI NEW DELHI STAFF CO- OPERATIVE THRIFT AND CREDIT SOCIETY LTD TRUE COPY

ASSISTANT REGISTRAR I.T.A.T., DELHI

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