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Facts
The Revenue appealed an order from the CIT(A) that reversed an assessment. The Assessing Officer (AO) had treated certain incomes, including interest from co-operative bank deposits, recruitment entry fees, and supervision expenses, as 'income from other sources' and disallowed deductions under Section 80P of the Income Tax Act. The AO reopened the assessment beyond the usual time limit, citing a Supreme Court decision.
Held
The CIT(A) held that the reassessment proceedings were initiated beyond four years without tangible material evidence, constituting a 'change of opinion' and thus rendering the reassessment invalid. The CIT(A) concluded that the AO's action was bad in law, making the reassessment order unsustainable.
Key Issues
Whether the reassessment proceedings initiated by the Assessing Officer beyond the permissible time limit and without tangible material evidence are valid.
Sections Cited
143(3), 154, 148, 80P, 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 10/02/2025 Date of Order – 25/02/2025
O R D E R PER V. DURGA RAO, J.M.
This appeal by the Revenue is emanating from impugned order dated 26/02/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2013–14.
In assessee’s case, during the assessment proceedings, the Assessing Officer made various addition by concluding as under:-
“As discussed, the assessee had generated interest from the deposits made with co-operative bank to an extent of Rs.3,49,506/-. As rendered by the Honourable Apex court in the case of M/s Totagarh's co-operative sales society limited vs.ITO (2010), the interest on surplus invested in short-term deposits, not being attributable to the business of providing credit facilities to the 2 Zilla Parishad Shashkiya Karmachari Sahkari Pat Sanstha Maryadit ITA no.250/Nag./2024 members, is assessable as "other income ". Similarly, other income like recruitment entry fee for Rs.3,76,009/-Supervision expenses of Rs.23,20,018/-, Rs.6,20,730/- as reserve fund investment interest and Rs.1,54,365/- as misc are also in the nature of 'Other income' and should be taxed as income from other sources not eligible for deduction u/s 80P of the income tax act, 1961. In view of the above and in the absence of any details filed by the assessee, interest receipt is treated as 'Income from other sources'. Accordingly, the amount of Rs.34,82,219/- as mentioned above is hereby brought to tax and added to the total income of the assessee as income from 'Other sources'. In this regard, a show cause notice was issued to the assessee on 24-03- 2022. However, the assessee did not furnish any details till date. Hence, the assessment is completed accordingly and the income of the assessee is re- computed as under…….”
The learned CIT(A) reverse the assessment order passed by the Assessing Officer while observing as under:-
“6. Decision: 6.1 The appeal is decided on merits after due consideration of facts of the case and submissions filed by the appellant as under, 6.2 Validity of the reopening of the assessment: 6.2.1 The appellant on ground no. 1 to 5 has challenged the reopening of the assessment made by the assessing officer. The said grounds of appeal of appellant has been considered alongwith the written submission of the appellant. Accordingly, it is found that the original assessment u/s 143(3) of the Act was passed by the AO on 10.08.2015 by accepting the return of income of the appellant. Subsequently, the assessing officer has issued a notice u/s 154 of the Act on 11.05.2018 due to the reason that the appellant receipt of Rs.3,76,009/- from recruitment entry fee, income of Rs.23,20,018/- from supervision expenditure and income of Rs.1,54,365/- by way of miscellaneous sources amounting to total of Rs.28,50,392/- was not from the regular business activity as contemplated u/s 80P of the Income Tax Act, which is otherwise not allowable for deduction u/s 80P of the Act. On the receipt of the reply from the appellant, the assessing officer has passed the rectification order u/s 154 of the Act on 11.10.2018 by adding only an amount of Rs.27,000/- as income from other sources' and denied deduction u/s 80P of the Act.
3 Zilla Parishad Shashkiya Karmachari Sahkari Pat Sanstha Maryadit ITA no.250/Nag./2024 6.2.2 Subsequently, the assessing officer has issued notice u/s 148 of the Act on 26.03.2021 stating that the income earned by way of recruitment entry fee amounting to Rs.3,76,009/-, receipt of income of Rs.23,20,018/- by way of supervision expenditure, receipt of Rs.3,49,506/- by way of bank interest, receipt of Rs.6,20,730/- as interest from the reserve fund and miscellaneous income of Rs. 1,54,365/- which amounts to Rs.34,82,219/- has escaped assessment due to the fact that the above receipts are not eligible for deduction u/s 80P(2)(d) of the Act based on the decision of Hon'ble Supreme Court in the case of M/s Totagarh's Cooperative Sales Society Limited Vs. ITO. 6.2.3 From the above facts, it is clear that the assessment u/s 143(3) was completed by the AO accepting the return of income filed by the appellant vide assessment order u/s 143(3) dated 10.03.2015. Subsequently, the assessing officer has initiated a rectification proceedings u/s 154 of the Act on the issues on which the subsequent reassessment notice issued u/s 148 of the Act on 26.03.2021. 6.2.4 Accordingly, it is clear that the assessing officer has initiated the reassessment proceedings beyond 4 years from the end of the relevant assessment year without receipt of any tangible material evidences. Hence, the initiation of the reassessment proceedings by the AO is purely based on the information which was fully disclosed in the return of income and facts submitted during the course of the original assessment proceedings. 6.2.5 Hence, there is no tangible material evidence made by the assessing officer in order to prove that the appellant has not disclosed the material facts truly and fully before the assessing officer during the original assessment proceedings u/s 143(3) of the Act. Accordingly, I am of the considerate opinion that the action of the assessing officer is tantamount to change of opinion and hence the initiation of the reassessment proceedings is bad in law. 6.2.6 In this regard, the reliance is placed on the decision of Hon'ble Supreme Court in the case of CIT Vs. Kelvinator India Limited vide Civil appeal No. 2009 to 2011 of 2003 dated 18.01.2010, where in the Hon'ble Supreme Court has held that the AO deemed to have applied his mind in facts or on record and accordingly reopening of the assessment u/s 147 of the Act on change of opinion is not permissible even within 4 years. 6.2.7 Accordingly, I am of the considerate view that the initiation of the reassessment proceedings in the instant case beyond 4 years from the end of the relevant AY without tangible material evidence is bad in law. Accordingly, the reassessment order dated 29.03.2022 is not sustainable. 6.3 Since the reassessment proceedings initiated by the assessing officer is held to be invalid, the eligibility of deduction u/s 80P of the Act on the various receipts as mentioned above by way of receipt of recruitment fee, interest from bank and reserve fund investment, supervisory expenditure receipt and other income will be of academic in nature. Hence, the relevant ground of appeal in this regard is not considered for adjudication.
7. As a result, the appeal is allowed.”
4 Zilla Parishad Shashkiya Karmachari Sahkari Pat Sanstha Maryadit ITA no.250/Nag./2024 4. When the case was called for hearing, none appeared on behalf of the assessee appellant.
We have heard the arguments of the learned Departmental Representative and perused the material available on record and gone through the order of the authorities below. The impugned order passed by the learned CIT(A) is a self-explanatory and passed on merits keeping in view the facts and circumstances of the assessee’s case leaving no scope to tinker with the impugned order. Hence, we are not inclined to interfere with the well reasoned order passed by the learned CIT(A) which is hereby upheld by dismissing all the grounds raised by the assessee.
In the result, appeal by the Revenue stands dismissed. Order pronounced in the open Court on 25/02/2025