2025 (1) TMI 817 - HC - Income Tax

Reopening of assessment u/s 147 - Disallowance of deduction claimed u/s 80P (2) (d) - HELD THAT - When the issue which is sought to be raised for disallowance of the deduction claimed by the assessee u/s 80P (2) (d) of the Act which is on the interest income earned by the petitioner from the fixed deposit kept with the Cooperative Bank is held in favour of the petitioner of this Court in case of Ashwinkumar Arban Co-operative Society Ltd. 2024 (11) TMI 971 - GUJARAT HIGH COURT it cannot be said that this is a fit case to reopen the assessment in the facts of the case. Petition succeeds and is accordingly allowed. Impugned order passed u/s 148A (d) as well as notice are hereby quashed and set aside.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment addresses the following core issues:

Whether the reopening of assessment under Section 148 of the Income Tax Act, 1961, after the enactment of the Finance Act, 2021, is valid when the notice was issued under the old regime.
Whether the petitioner is entitled to the deduction under Section 80P(2)(d) of the Income Tax Act for interest income earned from fixed deposits in a cooperative bank.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Reopening Assessment under Section 148

Relevant Legal Framework and Precedents: The Finance Act, 2021, introduced changes to the reassessment provisions, and the Supreme Court in the case of Union of India vs. Ashish Agarwal provided guidance on handling notices issued after 31.03.2021.
Court's Interpretation and Reasoning: The Court noted that the notice issued under Section 148 was initially under the old regime. However, following the Supreme Court's judgment, such notices should be treated as issued under Section 148A(b) of the new regime.
Key Evidence and Findings: The petitioner had filed objections regarding the jurisdiction of the Assessing Officer under the old regime, which were addressed in the Supreme Court's judgment.
Application of Law to Facts: The Court applied the Supreme Court's directive to treat the notice as under Section 148A(b) and considered the procedural compliance by the Assessing Officer.
Treatment of Competing Arguments: The petitioner argued that the notice was invalid under the old regime, while the respondent relied on the Supreme Court's directive to validate the notice under the new provisions.
Conclusions: The Court concluded that the procedural requirements under the new regime were not properly met, making the reopening invalid.

Issue 2: Entitlement to Deduction under Section 80P(2)(d)

Relevant Legal Framework and Precedents: Section 80P(2)(d) allows deductions for interest income earned by cooperative societies from cooperative banks. The case of Principal Commissioner of Income Tax vs. Ashwinkumar Arban Co-Operative Society Ltd was referenced as precedent.
Court's Interpretation and Reasoning: The Court interpreted that the deduction under Section 80P(2)(d) applies to interest income from cooperative banks, as established in previous judgments.
Key Evidence and Findings: The petitioner had claimed deductions under Section 80P(2)(d) for interest income from deposits in a cooperative bank, which had been previously scrutinized and accepted.
Application of Law to Facts: The Court applied the established legal position that such deductions are permissible, aligning with the precedent case.
Treatment of Competing Arguments: The petitioner argued for the applicability of the deduction based on precedent, while the respondent did not contest the legal position established by prior judgments.
Conclusions: The Court concluded that the deduction under Section 80P(2)(d) was valid and disallowance was not justified.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Considering the submissions made by learned advocates for the respective parties and in the facts and circumstances of the case, when the issue which is sought to be raised for disallowance of the deduction claimed by the assessee under section 80P (2) (d) of the Act which is on the interest income earned by the petitioner from the fixed deposit kept with the Cooperative Bank is held in favour of the petitioner of this Court in case of Ashwinkumar Arban Co-operative Society Ltd (supra), it cannot be said that this is a fit case to reopen the assessment in the facts of the case."
Core Principles Established: Notices issued under Section 148 after the Finance Act, 2021, should be treated under Section 148A(b) as per the Supreme Court's directive. Deductions under Section 80P(2)(d) for interest income from cooperative banks are valid based on established precedents.
Final Determinations on Each Issue: The Court quashed the reopening of assessment under Section 148A(d) and set aside the notice dated 22.07.2022. The deduction under Section 80P(2)(d) was upheld as valid.

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