Reserve Bank Officers Co-Operative Credit Society Ltd.3Rd Floor, Amar Building, Sir P. M. Road,Mumbai-400 001 v. The Income Tax Officer- 17 (3) (1)Room

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3332 OF 2019 Reserve Bank Officers co-operative Credit Society Ltd.3rd floor, Amar Building, Sir P. M. Road,Mumbai-400 001 ...Petitioner Vs. 1. The Income Tax Officer- 17 (3) (1)Room No.125, 1st Floor, Kautilya Bhavan,C-41 to C-43, G Block, Bandra Kurla Complex,Bandra (E), Mumbai- 400 051 2. The Jt. Commissioner of Income Tax-17 (3),Kautilya Bhavan, Bandra Kurla Complex,Bandra (E), Mumbai 400 051. 3. The Pr. Commissioner of Income Tax-17,Aaykar Bhavan, M. K. Road, Mumbai-400 020 4. Union of India, Aaykar Bhavan, Mumbai. ...Respondents ---- Mr. Mandar Vaidya for Petitioner.Mr. P. C. Chhotaray for Respondent. ---- CORAM : K. R. SHRIRAM AND AMIT B. BORKAR, JJ. DATE : 23 November 2021. ORAL JUDGMENT : (Per Amit B. Borkar, J.) Rule. With the consent of both sides, Rule is made returnable forthwith. 2.By notice dated 14/3/2019, the Assessing Officer had soughtto reopen the assessment under Section 148 of the Income Tax Act, 1961(the Act) for Assessment Year 2014-2015. Objections that Petitionersubmitted to reopen the assessment have been rejected by order dated31/10/2019. Both the notice for reopening the assessment and the orderdisposing of the objections of Petitioner has been challenged in this petitionunder Article 226 of the Constitution of India. 3.Petitioner is a Co-operative Credit Society registered under theprovisions of the Multi-State Co-operative Societies Act. Petitioner filed itsreturn of income on 11/9/2014 for Assessment Year 2014-2015, declaringtotal income as 'Nil" after claiming deduction under Section 80P of the Actviz., deduction towards interest income received from co-operative Banks.Petitioner had received a sum of Rs.8,13,77,452/- as interest income fromco-operative Banks in the relevant year. Petitioner in the said return hadclaimed deduction of Rs.3,40,12,354/- by confining the same to the grosstotal income as per Section 80P of the Act. Petitioner had also filed an audit rsk report in Form 3CA as contemplated by Section 44AB of the Act, whichdisclosed the amount of Rs.8,13,77,452/- being eligible and admissible fordeduction under Section 80P of the Act. 4.Petitioner's return was picked up for scrutiny by issuing noticedated 9/5/2016 under Section 142 of the Act. Petitioner was called upon toexplain and justify the deductions claimed under Chapter VIA of the Act inwhich Section 80P falls. In response to the said notice, Petitioner filed areply dated 23/5/2016 explaining eligibility for deduction under Section80P of the Act. 5.Respondent No.1 on 25/11/2016 issued further notice underSection 142 of the Act requiring Petitioner to justify the claim of deductionof Rs.3,40,12,534/- claimed under Section 80P of the Act. In response tothe said notice, Petitioner filed a detailed reply dated 6/12/2016explaining the eligibility of Petitioner for deduction under Section 80P ofthe Act by giving reconciliation of interest amount received from co-operative Banks. Respondent No.1 on 23/12/2016 passed an assessmentorder under Section 143(3) of the Act accepting Petitioner's claim fordeduction under Section 80P of the Act by not making any additions to theincome of Petitioner. rsk6. 5.Respondent No.1 on 25/11/2016 issued further notice underSection 142 of the Act requiring Petitioner to justify the claim of deductionof Rs.3,40,12,534/- claimed under Section 80P of the Act. In response tothe said notice, Petitioner filed a detailed reply dated 6/12/2016explaining the eligibility of Petitioner for deduction under Section 80P ofthe Act by giving reconciliation of interest amount received from co-operative Banks. Respondent No.1 on 23/12/2016 passed an assessmentorder under Section 143(3) of the Act accepting Petitioner's claim fordeduction under Section 80P of the Act by not making any additions to theincome of Petitioner. rsk6. 6.On 14/3/2019, respondent No.1 issued a notice under Section148 of the Act seeking to reopen the assessment of Petitioner forAssessment Year 2014-2015. At the request made by Petitioner, respondentNo.1 supplied reasons for such reopening. Reasons supplied by respondentNo.1 disclosed that deduction under Section 80P is available only onincome received from co-operative Society and not from a co-operativebank. Accordingly, respondent No.1 had reason to believe that the incometo the extent of deduction allowed had escaped assessment. Upon receiptof the reasons, Petitioner submitted its objections to reopening ofassessment by letter dated 15/10/2019. Petitioner stated in the objectionsthat in the course of original assessment proceedings, the Assessing Officerhad already examined the issue, which is the issue in reopening. ThereafterAssessing Officer accepted the claim of the Petitioner by not disallowingdeduction towards Section 80P of the Act. Therefore, it was stated that thereopening of the assessment on the said issue amounted to a change ofopinion. It was further stated that reopening of assessment was withoutany new material brought on record. Petitioner also stated, on merits, thatthe issue of deduction under Section 80P of the Act on income receivedfrom co-operative Bank was covered in favour of Petitioner by the decisionsof various High Courts and Income Tax Appellate Tribunal. 7.Respondent No.1, vide order dated 31/10/2019 and servedupon Petitioner on 4/11/2019, dismissed the objections. Therefore,Petitioner has filed the present petition challenging the notice of reopeningof assessment and order of rejection of objections. 8. Mr. Vaidya, learned Advocate for Petitioner, submitted that (i) There was no tangible material based on which the AssessingOfficer could have formed reason to believe that income had escapedassessment. Reason to believe cannot be based on the same material. (ii) Once the reason to believe has been formulated in pursuanceto notice under Section 148 of the Act, no improvement is permissible atthe behest of succeeding Assessing Officer, who disposed of the objectionsraised by Petitioner to the reopening of assessment. (iii) The issue of deduction of interest received from co-operative Banks under Section 80P of the Act was raised by respondent No.1 in thecourse of original assessment proceedings. After he was satisfied, he madeno addition or disallowance in respect of the said issue. (iv) Specific query was raised by respondent No.1 during originalproceedings by issuing notice under section 142 of the Act to show cause as to why such deductions are not to be disallowed, which was replied byPetitioner and the Assessing Officer had not dis-allowed the saiddeductions. (v) If the stand of Revenue is to be accepted, the sanctity attached to proceedings under Section 143(3) would be done away with. (vi) It is evident from the reasons supplied to Petitioner forreopening the assessment that no new material has been brought on recordfor respondent to have any reason to believe that any income had escapedassessment. 9. Mr. Chhotaray appearing on behalf of Revenue, submitted that (iv) Specific query was raised by respondent No.1 during originalproceedings by issuing notice under section 142 of the Act to show cause as to why such deductions are not to be disallowed, which was replied byPetitioner and the Assessing Officer had not dis-allowed the saiddeductions. (v) If the stand of Revenue is to be accepted, the sanctity attached to proceedings under Section 143(3) would be done away with. (vi) It is evident from the reasons supplied to Petitioner forreopening the assessment that no new material has been brought on recordfor respondent to have any reason to believe that any income had escapedassessment. 9. Mr. Chhotaray appearing on behalf of Revenue, submitted that (i) Section 80P(2)(d) of the Act does not extend the benefit of thededuction for interest received from the investment made with co-operativeBanks as co-operative Banks are not co-operative Society as defined underSection 2(19) of the Co-operative Societies Act. (ii) From the tenor of the original assessment order, it is clear thatthe Assessing Officer had not applied his mind to the issue of eligibility of Petitioner to the deduction for interest received from the investment madewith co-operative Banks. (iii) The Assessing Officer was within his jurisdiction in reopeningthe assessment under Section 148 of the Act and had correctly rejected theobjections preferred by Petitioner. 10.The rival submission now fall for determination. From thereasons supplied to Petitioner, it appears that assessment for the assessmentyear 2014-2015 is sought to be reopened principally on the ground thatPetitioner claimed deduction under Section 80P (2) of the Act, which isclearly in contravention of the provisions of the Act and the income fromFixed Deposits was required to be shown under the head "income fromother sources". Additionally, as per the provision of the Act, a co-operativeBank is an Urban Commercial Bank and does not fall under the term 'Co-operative Society' referred to under Section 80P(2)(d) of the Act. 11.Reading the reasons of the Assessing Officer, it is evident thatthere is absolutely no tangible material based on which he could havereopened assessment for the assessment year 2014-2015. It is not indispute that Petitioner is a Multi-State Co-operative Society registeredunder the Multi-State Co-operative Societies Act. It is also not in disputethat the Assessing Officer raised a specific query during the originalassessment proceedings by issuing notice under Section 142 of the Act calling upon Petitioner to show cause as to why deduction under Section80P of the Act cannot be disallowed. Undisputedly, Petitioner filed a replyto the said notice, and the original assessment order was passed. It is alsonot in dispute that Petitioner, during the original assessment, had filed anaudit report in Form 3CA as mandated by Section 44AB of the Act statingthe amount of Rs.8,13,77,452/- admissible for deduction under Section80P of the Act. 12.Section 147 enables the Assessing Officer to assess or reassessany income chargeable to tax which he has reason to believe has escapedassessment for an assessment year. The proviso to section 147 imposes ad-ditional requirements where an assessment is sought to be reopened be-yond a period of four years from the end of the relevant assessment year.In the present case, the exercise of power is within a period of four yearsand, therefore, the requirements of the proviso are not attracted. Wherethe Assessing Officer purports to exercise power under section 147 within aperiod of four years of the end of the relevant assessment year, the condi-tion precedent to the exercise of the power, is the existence of a reason tobelieve that any income chargeable to tax has escaped assessment. Wemust keep in mind the conceptual difference between power to review andpower to reassess. The Assessing Officer has no power to review; he has the power to reassess. The reassessment has to be based on the fulfillment ofcertain conditions. It is settled law that if the concept of change of opinionis removed, then in the guise of reopening the assessment, the reviewwould take place. The concept of change of opinion has been built in thestatute to check abuse of power by the Assessing Officer. The Assessing Of-ficer has the power to reopen only when there is tangible material to cometo the conclusion that there is escapement of income from the original as-sessment. The test of "tangible material" has been enunciated in a judgment1of the Supreme Court in CIT v. Kelvinator of India Ltd. held thus (page564): "… one needs to give a schematic interpretation to the words'reason to believe' failing which, we are afraid, section 147would give arbitrary powers to the Assessing Officer to reopenassessments on the basis of 'mere change of opinion', which can-not be per se reason to reopen. We must also keep in mind theconceptual difference between power to review and power toreassess. The Assessing Officer has no power to review; he hasthe power to reassess. But reassessment has to be based on thefulfillment of certain pre-conditions. If the concept of 'change ofopinion' is removed, as contended on behalf of the Department,then the review would take place in the garb of reopening theassessment. One must treat the concept of 'change of opinion' asan in-built test to check abuse of power by the Assessing Officer.Hence, after April 1, 1989, the Assessing Officer has the power 1[2010] 320 ITR 561 to reopen, provided there is 'tangible material' to come to theconclusion that there is escapement of income from assessment.Reasons must have a link with the formation of the belief…" 13.Mr. Chhotaray, learned Counsel appearing for Revenue placedreliance on the proposition of law laid down by the Supreme Court in thethree judgments viz., A. L. A. Firm vs. Commissioner of Income-Tax[2],Rambagh Palace Hotels P. Ltd. vs. Deputy Commissioner of Income-Tax[3]and Assistant Commissioner of Income-Tax vs. Rajesh Jhaveri StockBrokers P. Ltd.4 There cannot be a dispute about the proposition of law laiddown in those judgments, but the judgments are distinguishable in thefacts of the present case. Moreover, in the present case, the AssessingOfficer raised a specific query in the original assessment proceedings, towhich Petitioner replied. Therefore it is clear that Assessing Officer in theoriginal assessment proceedings was conscious of the issue involved of theeligibility of Petitioner to claim deduction under Section 80P (2) of the Act. 14.The co-ordinate Bench of this Court has succinctly laid downthe criteria for reopening of assessment within a period of 4 years in 2(1991) 189 ITR 285 (SC) 3(2013) 350 ITR 660 (Delhi) 4(2007) 291 ITR 500 (SC) Jainam Investments vs. Assistant Commissioner of Income Tax[5]by holdingthat the Assessing Officer cannot reopen the assessment even within fouryears merely on the basis of change of opinion. The Assessing Officer hadno power to review the assessment, which has been concluded unless hehas tangible material to come to the conclusion that there is escapement ofincome from assessment. For all these reasons, we are of the view that the exercise ofjurisdiction under Section 148 of the Act in the present case is without anytangible material. 15. We, therefore, pass the following order: ORDER The impugned notice dated 14/3/2019 issued under Section 148 of the Act and order of rejection of Petitioner's objections dated 31/10/2019 are quashed and set aside. 16.Rule is made absolute in the above terms. (AMIT B. BORKAR, J) (K. R. SHRIRAM, J.) 5Writ Petition No.2760 of 2019