THE MEHSANA URBAN COOP BANK LTD. vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE MEHSANA

Facts

The petitioner, Mehsana Urban Coop Bank Ltd., is challenging a notice dated March 30, 2018, issued by the Assistant Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961, to reopen the assessment for assessment year 2011-12. The petitioner had filed its return declaring an income of Rs. 21,26,48,410/-. During scrutiny, the Assessing Officer (AO) made an addition of Rs. 61,08,604/- on account of accrued interest on Non-Performing Assets (NPA) under Section 43D. This addition was upheld by the CIT(A) but deleted by the ITAT. Subsequently, the AO issued the impugned notice to reopen the assessment, citing accrued interest on NPA of Rs. 3,90,22,094/- as escaped income. The petitioner objected, but the AO rejected these objections. The notice was issued beyond four years from the end of the assessment year.

Held

The High Court held that the impugned notice under Section 148 of the Income Tax Act, 1961, for reopening the assessment for assessment year 2011-12, issued beyond a period of four years from the end of the relevant assessment year, is invalid. The Court noted that the Assessing Officer (AO) relied on material already on record, and there was no failure on the part of the petitioner to disclose material facts. Furthermore, the AO had already examined the issue of interest on NPA during the scrutiny assessment and made an addition, indicating a mere change of opinion. The assessment order had also merged with the orders of the CIT(A) and the ITAT. Additionally, the Court found that on merits, the issue was concluded in favour of the assessee by this Court's decision in Principal Commissioner of Income Tax Vs. Shri Mahila Sewa Sahakari Bank Ltd., confirmed by the Supreme Court, meaning the AO could not have formed a belief that income chargeable to tax had escaped assessment. Therefore, the notice was not sustainable.

Key Issues

1. Whether the notice dated 30.03.2018 issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for assessment year 2011-12, beyond a period of four years from the end of the relevant assessment year, is valid, considering the first proviso to Section 147 of the Act? Assessee's Contention: The reopening is invalid as it is beyond four years and there was no failure on the part of the petitioner to disclose fully and truly all material facts. The AO had all the necessary details during the original assessment and the reopening is based on a mere change of opinion. The assessment order had merged with the orders of higher authorities. Revenue's Contention: The revenue reiterated the grounds set out in its affidavit-in-reply, without specifying further arguments in the judgment.