RESERVE BANK OFFICERS COOPERATIVE CREDIT SOCIETY LTD. vs. THE INCOME TAX OFFICER-17 (3)(1) AND 3 ORS.

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WP/3327/2019HC Bombay23 November 2021Author: HON'BLE SHRI JUSTICE K.R. SHRIRAM, HON'BLE SHRI JUSTICE AMIT BORKAR11 pages
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What did the High Court hold?

The High Court held that the reopening of assessment under Section 147/148 beyond four years from the end of the relevant assessment year was not justified. The Court emphasized that for reopening beyond four years, there must be a failure on the part of the assessee to disclose truly and fully all material facts. It is also settled law that an assessment cannot be reopened based on a mere change of opinion, and tangible material is required. In this case, the Assessing Officer had raised a specific query during the original assessment proceedings under Section 142 regarding the eligibility for deduction under Section 80P, to which the assessee had responded. The original assessment order accepted the assessee's claim. The audit report in Form 3CA, mandated by Section 44AB, also disclosed the amount admissible for deduction under Section 80P. The Court found no tangible material to justify the reopening and noted that the AO's action was based on a change of opinion regarding the interpretation of Section 80P(2)(d), which is impermissible after four years when primary facts were fully disclosed. The Court relied on the judgment in Ananta Landmark (P.) Ltd. vs Deputy Commissioner of Income Tax. The impugned notice and order were quashed and set aside.

What were the facts?

The assessee, Reserve Bank Officers Co-operative Credit Society Ltd., filed its return for Assessment Year 2013-2014 declaring 'Nil' income after claiming a deduction under Section 80P for interest income of Rs.7,03,48,883/- received from co-operative banks. The original assessment under Section 143(3) accepted this deduction. However, on March 31, 2019, the Assessing Officer (AO) issued a notice under Section 147/148 to reopen the assessment, believing income had escaped assessment because deduction under Section 80P is available only on income from co-operative societies, not co-operative banks. The assessee's objections to the reopening, arguing it was a change of opinion without new material and that the issue was already examined and accepted, were rejected by the AO. The assessee then filed a writ petition challenging the reopening notice and the order rejecting objections.

What were the issues?

1. Whether the reopening of assessment under Section 147/148 of the Income Tax Act, 1961, beyond a period of four years from the end of the relevant assessment year, is valid, considering the jurisdictional requirement of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment? 2. Whether the reopening of assessment constitutes a mere change of opinion by the Assessing Officer, given that the issue of deduction under Section 80P for interest income from co-operative banks was raised and accepted during the original assessment proceedings under Section 143(3)? Assessee's Contentions: - Reopening beyond four years requires failure to disclose material facts, which is absent. - The AO had made an enquiry during the original assessment, and the assessee provided relevant information. - The issue was raised and accepted by the AO in the original assessment, making the reopening a change of opinion. - The sanctity of Section 143(3) proceedings would be undermined if reopening based on a change of opinion is allowed. - No new material was brought on record for reopening. Revenue's Contentions: - Section 80P(2)(d) does not extend the deduction benefit for interest received from co-operative banks, as they are not co-operative societies as defined under Section 2(19) of the Co-operative Societies Act. - The AO had not applied his mind to the issue of eligibility for deduction on interest from co-operative banks during the original assessment. - The AO was within his jurisdiction in reopening the assessment and correctly rejected the objections.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 80P,Section 143(3),Section 142,Section 44AB,Section 2(19)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, .

The impugned notice dated 31/3/2019 issued under Section 148 of the Act and order of rejection of Petitioner's objections dated 31/10/2019 are quashed and set aside.

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15.

Rule is made absolute in the above terms. (AMIT B. BORKAR, J) (K. R. SHRIRAM, J.)

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