2023 (5) TMI 212 - AT - Income Tax

Reopening of assessment u/s 147 - Disallowance of deduction u/s 80P(2)(d) in respect of income earned from deposits kept with the co-operative banks i.e. the Nationalized banks - HELD THAT - Reassessment proceedings cannot be sustained, firstly, due to the reason that reassessment proceeding are based on mere change of opinion , secondly, no disclosure of full and true material facts by the assessee before the assessing officer, has not been substantiated by the Assessing officer, thirdly, there being no internal or external material to trigger the reopening of assessment or for recording the reasons to believe that income escaped assessment, the action is a kind of review of assessment already completed, for which the AO is not permitted. Hence, the reassessment proceeding u/s 147 is quashed as void ab initio. The ground of the appeal of the assessee are accordingly allowed. Deduction u/s 80P(2)(d) for interest from other than cooperative bank i.e nationalized bank - Interest from short term deposits with scheduled bank has been held as eligible by the Tribunal Shri Laxmi Narayan NagriSahkari Pat Sansthan Maryadait 2015 (8) TMI 1085 - ITAT PUNE and Gunja Samabay Krishi Unnayan Samity Ltd. 2023 (1) TMI 783 - CALCUTTA HIGH COURT under section 80P(2)(a)(i) of the Act and not under the section 80P(2)(d) - We are of the view that the Ld. CIT(A) has not adjudicated the issue in dispute of eligibility of deduction of interest from scheduled bank u/s 80P(2)(d), therefore the assessee should be given one more opportunity to appear before the Ld CIT(A) so that he can give his finding on the matter. We feel it appropriate to restore this issue back to the file of the Ld. CIT(A) for deciding after providing adequate opportunity of being heard to the assessee. Ground of appeal of the assessee is accordingly allowed for statistical purposes. Penalty u/s 272A - non-compliance on the part of the assessee for various notices issued u/s 142(1) - HELD THAT - Assessee could not comply with the issue of notices due to the reason that the authorized representative of assessee was occupied in regulatory compliance on some occasions and on one occasion, he could not respond due to medical emergency. In our opinion, the assessee should not be penalized for any bonafide non-compliance on the part of the authorized representative of the assessee. The assessee has duly explained the reasons for non-compliance. In our opinion, the failure in compliance to the notices is not deliberate on the part of the assessee - We direct to delete the penalty levied u/s 272A of the Act by the AO. Addition of other receipts shown under the head income from other sources - HELD THAT - Ultimately in the assessment order, the Assessing Officer has assessed income u/s 56 of the Act in respect of interest earned from deposits with bank and after reducing the corresponding expenses he made addition - Therefore, no addition has been made by the Assessing Officer in respect of other receipts and therefore, the ground No. 2 raised by the assessee being infructuous, same is rejected.

Summary

Issues Involved:
1. Validity of Reassessment Proceedings
2. Deduction under Section 80P(2)(d) of the Income Tax Act
3. Penalty under Section 272A(1)(d) of the Income Tax Act

Summary:

1. Validity of Reassessment Proceedings:
The assessee challenged the reassessment proceedings under Section 147 of the Income Tax Act on the grounds that it was based on a mere "change of opinion" and was initiated beyond the four-year period without any failure on the part of the assessee to disclose material facts. The Tribunal found that the reassessment was indeed based on the same material available during the original assessment proceedings and lacked any new tangible information. The Tribunal relied on various judicial precedents, including decisions from the Hon'ble Bombay High Court and the Hon'ble Gujarat High Court, to conclude that the reassessment proceedings were invalid. Consequently, the reassessment proceedings were quashed as void ab initio.

2. Deduction under Section 80P(2)(d) of the Income Tax Act:
The assessee sought deduction under Section 80P(2)(d) for interest received from deposits with cooperative banks and nationalized banks. The Tribunal upheld the deduction for interest received from cooperative banks, citing previous Tribunal decisions and distinguishing the case from the Hon'ble Karnataka High Court's decision in PCIT vs. Totagar's Cooperative Sales Society. However, for interest received from nationalized banks, the Tribunal observed that the CIT(A) did not adjudicate the issue and thus remanded the matter back to the CIT(A) for a fresh decision after providing adequate opportunity to the assessee.

3. Penalty under Section 272A(1)(d) of the Income Tax Act:
The assessee was penalized under Section 272A(1)(d) for non-compliance with statutory notices issued under Section 142(1). The assessee argued that the non-compliance was due to the authorized representative being occupied with regulatory compliance and undergoing medical treatment. The Tribunal found the reasons for non-compliance to be bona fide and not deliberate. Citing similar cases where penalties were deleted under comparable circumstances, the Tribunal directed the deletion of the penalty imposed under Section 272A(1)(d).

Conclusion:
The appeals were decided as follows:
- The reassessment proceedings for AY 2013-14 were quashed.
- The deduction under Section 80P(2)(d) for interest from cooperative banks was upheld.
- The issue of deduction for interest from nationalized banks was remanded back to the CIT(A) for fresh adjudication.
- The penalty under Section 272A(1)(d) was deleted.

The Tribunal's decisions were based on established legal principles and judicial precedents, ensuring that the reassessment and penalty proceedings adhered to the statutory requirements and principles of natural justice.