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2020 (3) TMI 601 - AT - Income TaxReopening of assessment u/s 147 - Deduction u/s. 80P (2)(a)(i) - assessee cannot be treated as a co-operative society meant only for its members and providing credit facilities to its members if it has carved out a category called nominal members and hence the principle of mutuality was compromised - HELD THAT - AO already formed an opinion and allowed deduction u/s 80P - AR further contended that there is no tangible fresh material on the basis of which assessment is sought to be reopened. In the present case the original assessment was completed u/s 143(3) of the Act on18.11.2016 accepting the declared income and the A.O. examined the deduction u/s 80P and granted the deduction. The reassessment in this case was made to withdraw deduction u/s 80P by treating the interest income under the head income from other sources instead of business income . This is nothing but change of opinion. On mere change of opinion the concluded assessment cannot be reopened as held in the case of CIT v. Kelvinator of India Ltd 2010 (1) TMI 11 - SUPREME COURT . For reopening the concluded assessment the Assessing Officer should form an opinion on the basis of same material which is already on record and not from any external sources. Reopening an assessment AO cannot consider the information which is already on record and it should be from outside sources as held by case of CIT v. Ramakrishna Hegde 2009 (7) TMI 815 - KARNATAKA HIGH COURT - Since there is no new material and on the available material the A.O. has reopened the present assessment. Being so we cannot uphold the action of the reopening of assessment. For this proposition reliance is placed on the following judgments viz. (i) CIT v. Standard Chartered Finance Ltd. 2012 (1) TMI 381 - KARNATAKA HIGH COURT (ii) Parixit Industires (P.) Ltd. v. ACIT 2012 (4) TMI 464 - GUJARAT HIGH COURT (iii) H.K.Buildcon Ltd. v.ITO 2010 (4) TMI 831 - GUJARAT HIGH COURT (iv) Lahneyer Holdings GmbH v. DCIT 2015 (5) TMI 654 - DELHI HIGH COURT . Accordingly we quash the reassessment order. Since we have decided the issue on merits we are refrain from going into other grounds raised by the assessee. - Decided in favour of assessee.
Issues Involved:
1. Validity of the notice issued under Section 148. 2. Validity of the assessment made under Section 147. 3. Disallowance of deduction under Section 80P(2)(a)(i) on the grounds that the appellant is not a Co-operative Society. 4. Disallowance of deduction under Section 80P(2)(a)(i) for dealing with associate and nominal members. 5. Disallowance of interest income earned from surplus funds kept as deposits in nationalized and co-operative banks under Section 80P(2)(a)(i). 6. Disallowance of deduction under Section 80P(2)(d) on the interest income earned from deposits kept in co-operative banks. 7. Proportional deduction under Section 80P(2)(a)(i) for profit from activities with regular and associate members. Detailed Analysis: 1. Validity of the notice issued under Section 148: The appellant argued that the notice issued under Section 148 was bad in law, asserting that the reassessment was based on a mere change of opinion. The appellant cited several judgments, including CIT v. Kelvinator of India Ltd., to support the claim that reassessment cannot be made on a mere change of opinion. The Tribunal noted that the original assessment was completed under Section 143(3) and that the deduction under Section 80P was already examined and allowed. The Tribunal agreed with the appellant, stating that the reassessment was indeed based on a mere change of opinion and thus quashed the reassessment order. 2. Validity of the assessment made under Section 147: The appellant contended that the assessment made under Section 147 was without jurisdiction and invalid. The Tribunal observed that the original assessment under Section 143(3) had already considered the deduction under Section 80P. The Tribunal held that the reassessment was not justified as it was based on the same material already on record and did not involve any new external source of information. This was in line with the judgments cited by the appellant, including CIT v. Ramakrishna Hedge and CIT v. Standard Chartered Finance Ltd. 3. Disallowance of deduction under Section 80P(2)(a)(i) on the grounds that the appellant is not a Co-operative Society: The AO disallowed the deduction claimed under Section 80P(2)(a)(i) on the grounds that the appellant was not a Co-operative Society registered under the Karnataka Souharda Sahakari Act, 1997. The Tribunal did not specifically address this issue as it quashed the reassessment order on other grounds. 4. Disallowance of deduction under Section 80P(2)(a)(i) for dealing with associate and nominal members: The AO disallowed the deduction under Section 80P(2)(a)(i), arguing that the appellant was providing banking/credit facilities to associate and non-associate members, thus lacking the principle of mutuality. The Tribunal did not specifically address this issue due to the quashing of the reassessment order. 5. Disallowance of interest income earned from surplus funds kept as deposits in nationalized and co-operative banks under Section 80P(2)(a)(i): The AO disallowed the deduction for interest income earned from deposits kept in nationalized and co-operative banks, citing the Supreme Court decision in Totagar's Co-operative Sale Society Ltd. vs. ITO. The Tribunal noted that the reassessment was based on the same material already on record and did not involve any new information. Therefore, the disallowance was not upheld. 6. Disallowance of deduction under Section 80P(2)(d) on the interest income earned from deposits kept in co-operative banks: The AO disallowed the deduction under Section 80P(2)(d) for interest income earned from deposits in co-operative banks. The Tribunal did not specifically address this issue as the reassessment order was quashed. 7. Proportional deduction under Section 80P(2)(a)(i) for profit from activities with regular and associate members: The appellant argued for a proportional deduction under Section 80P(2)(a)(i) to the extent of profit from activities with regular and associate members. The Tribunal did not specifically address this issue due to the quashing of the reassessment order. Conclusion: The Tribunal quashed the reassessment order on the grounds that it was based on a mere change of opinion and did not involve any new external source of information. Consequently, the appeal filed by the assessee was allowed, and the other grounds raised by the assessee were not specifically addressed.
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