SURABHI SOUHARDA CREDIT CO-OPERATIVE LIMITED ,BANGALORE vs. INCOME TAX OFFICER WARD-7(2)(5), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER

ITA No. 206/Bang/2019 Assessment Year : 2014-15

Surabhi Souharda Credit Co-Operative Limited, Income Tax Officer, 270, I Floor, Sairam Complex, Ward-7(2)(5), 5th Block, Koramangala, Vs. BENGALURU BENGALURU [PAN: AAFAS0815D] APPELLANT RESPONDENT

Appellant by : Shri B.S. Balachandra, Advocate Respondent by : Shri R.N. Siddappaji, Addl.CIT Date of hearing : 10-04-2019 Date of Pronouncement : 12-04-2019 O R D E R Per N V Vasudevan, Vice President :

This is an appeal by the assessee against the order dated 14-12-2018 of the Commissioner of Income Tax (Appeals)-7, Bengaluru, relating to Assessment Year 2014-15.

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ground of appeal are that the assessee, which is a co-operative society, filed its return of income for the AY. 2014-15 on 27-08-2014. The said return was accepted by way of an acknowledgement. No notice u/s. 143(2) of the Act was issued within the period prescribed by the proviso to Section 143(2) of the Act i.e., on or before 30-09-2015. Therefore, the assessment for the AY 2014-15, should be deemed to have been concluded. For re-opening of assessment for the AY 2014- 15, the requirements of existence of reason to believe that income chargeable to tax has escaped income should exist and it should also be seen that whether the re-assessment proceedings have been initiated purely on the basis of change of opinion, which is not permissible in law.

“Reasons for the belief that income has escaped assessment: The assessee is a Credit Co-operative Society carrying on the business of lending loans to its members which is in the nature of banking activity. The assessee has earned interest of Rs. 1,53,81,509/- on the loans given to its members and has claimed the same as exempt u/s. 80P. Since the assessee is not entitled for the above exemption, the same has been excessively claimed by the assessee. Therefore, I have reasons to believe that an amount of Rs. 1,53,81,509/- Lakhs which should have been offered to tax, has escaped assessment. Hence, I propose to re-open the assessment by invoking the provisions of Section 147 of the I.T. Act.”

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3.1. It was submitted by the learned counsel for the Assessee that it is clear from the perusal of the reasons recorded that no tangible material has come into the possession of the AO, based on which he entertained a belief regarding escapement of income. He placed reliance on the decision of Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd., [320 ITR 561] (SC). It was his contention that in the said decision, the Hon'ble Supreme Court took the view that - the AO does not have a power to review his own order. If, without tangible material coming to his possession after the conclusion of an assessment, the AO is allowed to initiate re-assessment proceedings, then that would amount to giving power to the AO to review his own order. He submitted that the Hon'ble Supreme Court held that if power is given to the AO, to do so, then, that would be giving power to the AO to initiate re-assessment proceedings purely on a change of opinion, which is not permissible in law.

“6.3. As regards the contention of the appellant that the reassessment proceedings is on reappraisal of evidence/change of opinion, it is observed that there was no regular assessment in case of the assessee prior to issue of notice u/s. 148 and the return was only processed u/s.

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143(1). Thus, when there was no occasion for the AO to form any opinion at first place, the question of change of opinion does not arise. The Hon'ble High Court of Karnataka in case of Rinku Chakraborthy [2012] 20 taxmann.com 609 (Karnataka) have held that if in the original assessment the income liable to tax has escaped assessment due to oversight and inadvertence or a mistake committed by the ITO, the ITO has the jurisdiction to reopen the original assessment. It is not necessary that for such reopening of such assessment the information is to be derived from external source of any kind or disclosure of new and important matters subsequent to the original assessment. Even if the information is obtained from the record of the original assessment after a proper investigation from the material on record or the facts disclosed thereby or from any enquiry or research into facts or law, reassessment is permissible. Income may escape assessment as a result of lack of vigilance of the ITO or due to perfunctory performance of his duties without due care and Caution. Even in a case where a return has been submitted to the ITO who erroneously fails to tax a part of the assessable income, it is a case of the said part of the income as having escaped assessment and the Assessing Officer has jurisdiction under Section 147 to reopen the assessment and bring to tax the income that has escaped assessment. A taxpayer cannot be allowed to take advantage of any of those lapses, as ultimately if such an advantage is allowed, it would be prejudicial to the interest of the revenue and public interest. This is also to note that the Honourable jurisdictional High Court has given the categorical and emphatic decision in case of RinkuChakraborthy (supra) after referring and discussing various landmark decisions of the Honourable Supreme Court on the issue, such as; Kelvinalor of India Ltd. [2010] 228 CTR (SC) 488, Kalyanji Mavji& Co. v. CIT 1976 CTR (SC) 85, Maharaj Kumar Kamal Singh v. CIT[1959] 35 ITR I (SC), Dinesh Chandra Hon'ble Shah & Ors. [1972] 3 SCC 231. 6.4 In this case, the AO has recorded reason as regards escapement of income and has issued notice u/s 148 issued. The assessee has responded to the notice by submitting that the return of income filed on 27-08-2014 should be considered as compliance to the notice u/ s 148. The assessee has also requested for reasons recorded which has been provided by the AO on 21-09-2017. Subsequent to issue of notices u/s.

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143(2) and 142(1), the appellant has participated in the assessment proceedings. Thus, it is found that the AO has followed the procedure as laid down by the Honorable SC in the case of GKN Driveshaft 125 Taxman 965 and there is no infirmity in the action of the AO. The Delhi High Court vide its order dated 23-02-2017 in the case of Mega Corporation Ltd has held that in the light of section 124(3)(a) of the IT Act an assessee is not entitled to question the jurisdiction of an Assessing Officer after expiry of one month from the date on which he is served a notice u/s 142(1) or 143(2) or after the completion of assessment, whichever is earlier. 6.5 Thus, it is held that the action of the AO in issuing notice u/s 148 and subsequent assessment u/s 147 are legal and valid. Hence, the grounds of appeal by the appellant challenging the validity of reassessment are not sustainable”.

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7.1. As far as the other grounds of appeal are concerned, the same are in relation to deduction u/s.80P of the Act, on income from providing credit facilities to members and interest on Fixed Deposits. With respect to these disputes, the learned DR submitted that whether the assessee is a cooperative society or not, has to be examined and in this regard submitted that Souharda is a cooperative but not a co operative society under the ACT and hence, not eligible for deduction u/s.80P. He has also relied on a recent order in the matter of M/s. Udaya Souharda Credit Co operative Society Ltd [ITA No.2831/Bang/2017, dt.17-08-2018], wherein it was observed that Karnataka State has notified Karnataka Co-Operative Societies Act, 1959 as well as the Karnataka Souharda Sahakari Act, 1997 and both Acts are in force. Therefore, conversion from one into another is possible. Thereafter the Tribunal held that the deduction u/s.80P can only be applied to a cooperative society registered under the Karnataka Co-Operative

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Societies Act, 1959 and thereafter the matter was restored back to the AO for fresh decision after making necessary enquiry and investigation. In the present case, the facts are identical.

7.2. In view of the above we also restore the matter back to the file of the AO to examine the facts of the present case in the light of the decision of the Tribunal in Udaya Souharda Credit Co-operative Society Ltd (supra). The issue with regard to deduction u/s.80P(2) of the Act as claimed by the Assessee in the grounds of appeal before the Tribunal are left open as the same is dependent on the conclusions regarding the status of the Assessee in the set aside proceedings.

Pronounced in the open court on this 12th day of April, 2019

Sd/- Sd/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN) ACCOUNTANT MEMBER VICE PRESIDENT

Bangalore, Dated, the 12th April, 2019. TNMM

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Copy to:

By order

Assistant Registrar, ITAT, Bangalore