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TMI Blog2022 (1) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation of the audit report, one cannot overlook sight of the fact that the assessee has very conveniently mentioned under the head of deduction by referring to Section 80P and the reply which was submitted on record at the stage of scrutiny assessment. At first instance, it gives an impression that the writ applicant assessee has derived interest from it s own members. This Court finds that the writ applicant had failed to disclose fully and truly all material facts necessary for assessment, more particularly, to examine the nature of transaction vis-a-vis the deduction under Section 80P (a)(i) and Section 80P(2)(d). The Court further finds that in fact it was the duty of the assessee to make fully and truly material disclosure at the time of assessment. Mere production of the audit report without further reference of the interest derived from other than Cooperative Societies would not fall in the category of material evidence which the Assessing Officer with due diligence could have discovered and therefore, the Assessing Officer has rightly invoked proviso to Section 147 of the Act having satisfied for formation of belief which has bearing on the question of escape of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome for A.Y. 2015-16 was filed by the writ applicant Cooperative Society on 24.09.2015 and e-file return of income was submitted on 24.02.2016, whereby the writ applicant Cooperative Society had declared total income of Rs.NIL after claiming deduction under Section 80P for an amount of Rs. 21,17,354/-, which was processed under Section 143(1) of the Income Tax Act. The assessment proceedings were finalized under Section 143(3) of the Income Tax Act on 20.07.2017, whereby the respondent Authority had accepted the return filed by the writ applicant Cooperative Society. 2.3 The case of the writ applicant Cooperative Society was taken up for reopening for regular assessment under Section 147 of the Income Tax Act. The reasons for reopening of the assessment was served upon the writ applicant along with the notice dated 13.06.2019, issued under section 148 of the Income Tax act. 2.4 The principal ground which was taken into consideration was as regards the deduction claimed by the assessee society in terms of provisions of Section 80P(2)(d) of the Income Tax Act, as not admissible being interest received on FDR s from the cooperative banks and nationalized banks. 2.5 The writ a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Assessing Officer seeks to reopen the assessment on a mere change of opinion. 5. Having regard to the submissions advanced by the learned counsel for the petitioner, issue notice, returnable on 6th January, 2020. By way of ad-interim relief, further proceedings pursuant to the impugned notice dated 12th March, 2019 issued by the respondent under section 148 of the Income Tax Act, 1961 for assessment year 2015- 2016 are hereby stayed. 6. Direct service is permitted, today. 4. Learned advocate Mr. S.N. Divatia for the petitioner has drawn attention of this Court to the earlier proceedings of limited scrutiny assessment undertaken by the respondent Authority and has submitted that at the relevant stage, the Authority had called upon the writ applicant Cooperative Society to respond to mainly two issues (i) Sales Turnover Mismatch and (ii) Deduction under Chapter VI-A. Notice under Section 143(2) of the Income Tax Act was followed by another notice under Section 142(1) of the Act dated 16.05.2017 whereby the writ applicant Cooperative Society was called upon to produce the details as reflected in the list appended at Annexure A, which also includes the details soug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , when the transaction appeared to be on the basis of subsequent information having found bogus, disclosure made at the original stage cannot be termed as fully and truly as contemplated under the act. It is further submitted that the assessment year under consideration is of 2015-16 and the impugned notice is dated 12.03.2019, which is within a period of 4 years and therefore, the proviso to Section 148 would not be attracted in the facts of the case. Learned senior advocate for the Department has strongly objected to the contention of the assessee that there is no new material and the Assessing Officer has proceeded on pre-exist document, however, the same is immaterial. Learned senior advocate Mr. Bhatt has tried to justify the action of the respondent Authority by referring to Section 80P(2)(a)(i) as well as Section 80P(2)(d) of the Income Tax Act. 6. Learned senior advocate Mr. Bhatt has further taken this Court to the order passed by the Assistant Commissioner of Income Tax Circle, Himmatnagar, while disposing of the objections filed by the assessee against the reassessment proceedings under Section 147 and has strenuously submitted that the Assessing Officer has rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest derived from FDR s from other cooperative banks and nationalized banks provided it is engaged in such activities as described under the provision. 8. The aforesaid submission of the writ applicant has been strongly objected by the Learned Senior Counsel Mr. Bhatt who has submitted to read section 80P of the Income Tax act as a whole. It is submitted that the term gross total income appearing in section 80P(1) has to be read in reference to any income referred to in sub section (2) which has to be read in conjunction with the term such activities , as appearing under clause (a) of sub section (2) of section 80P, which includes carrying on business of banking or providing credit facilities to its members etc. The learned Senior Counsel Mr. Bhatt has further argued that in original assessment proceedings there was no application of mind by the AO, more particularly, to examine the nature of income derived vis- -vis section 80P(2)(d). The emphasis was laid on term other cooperative society appearing in section 80P(2)(d). It was further submitted that in absence of any opinion being formed by AO regarding applicability of section 80(2)(d), the case will not fall in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) in the case of a co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of the agricultural produce of its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities ; (b) in the case of co-operative society, being a primary society engaged in supplying milk raised by its members to a federal milk co-operative society, the whole of the amount of profits and gains of such business; (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause(b) [either independently of, or in addition to, all or any of the activities so specified], so much of its profits and gains attributable to such activities a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt that the writ applicant being society engaged in providing credit facilities is entitled to the deductions available in terms of section 80P(2)(a)(i) of the Income Tax act, 1961. The writ applicant has placed on record the original computation of Income along with audit report. Bare perusal of the same reveals that the writ applicant has disclosed Gross total income of Rs.2117353 as against that the writ applicant has disclosed deductions under Chapter VI-A of Rs. 2117353 , thereby declaring Net taxable income NIL . Now, under head of Gross Total Income, the deductions ( Chapter VI-A) refers to section 80P providing credit facilities to its members is shown Rs. 2121935 whereby the assessee writ applicant has claimed eligible deductions of Rs.2121935 by pressing Allowable deductions of Rs. 2117353. The Audit report of the writ applicant further explains return of Income wherein amount of Rs. 18,08,444:00 is shown under the head of interest derived from investment and Rs. 69,33,052 under the head of income derived from credit. The record of limited scrutiny reveals that under original assessment , the AO has mainly examined two issues viz. (a) Sales Turnover Mismatch (b) Dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) of the Income Tax Act, 1961 (for short 'the Act') in respect of whole of its income by way of interest earned by it during the relevant Assessment Years from 2007-2008 to 2011-2012 on the deposits or investments made by it during these years with a Co-operative Bank, M/s.Kanara District Central Co-operative Bank Limited? (II) Whether the Supreme Court decision in the case of the present respondent assessee, Totgar Co-operative Sale Society Limited itself rendered on 08th February 2010, in Totgar's Co-operative Sale Society Limited v.ITO , reported in MANU/SC/0095/2010: (2010) 322 ITR 283 SC : (2010) 3 SCC 223 for the preceding years, namely Assessment Years 1991-1992 to 1999-2000 (except Assessment Year 1995-1996) holding that such interest income earned by the assessee was taxable under the head 'Income from Other Sources' under Section 56 of the Act and was not 100% deductible from the Gross Total Income under Section 80P of the Act, is not applicable to the present Assessment Years 2007-2008 to 2011-2012 involved in the present appeals and therefore, whether the Income Tax Appellate Tribunal as well as CIT (Appeals) were justified in holding that such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Bank of India. Investing surplus funds in a bank is no part of the business of the assessee of providing credit facilities to its members. Therefore, it is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the State Bank of India not being attributable to the business carried on by the appellant, cannot be deducted under section 80P(2)(a)(i) of the Act. If the appellant wants to avail of the benefit of deduction of such interest income, it is always open for it to deposit the surplus funds with a co-operative bank and avail of deduction under section 80P(2)(d) of the Act. 17. Section 71 of the Gujarat Co-operative Societies Act, 1961 permits a society to invest or deposit its fund in the State Bank of India. Therefore, while investment in the State Bank of India is permissible under section 71 of that Act, there is no statutory obligation cast upon the appellant to deposit funds as a part of its business. The said provision also permits investment of funds in any co-operative bank or any banking company approved for this purpose by the Registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year : Provided further that nothing contained in the first proviso shall apply in a case where any income involving in relation to any assest ( including financial interest in any entity ) located outside india, chargeable to tax, has escaped assessment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. The bare reading of the amended section 147 explicitly provides that the only pre condition or requirement for the Assessing Officer to assume jurisdiction for reopening is to have reason to believe . It is settled legal position as held by the Hon ble Supreme Court as well as various High Courts that Explanation 2 to section 147 of the Act is required to be read with section 147 in its entirety, including the proviso. If one reads Explanation 2 to section 147, including the proviso, then it is clear that in cases where the Department reopens the assessment within a period of four years, it can do so, on the ground o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 147 would give arbitrary powers to Assessing Officer to reopen the assessment on the basis of mere change of opinion . The Assessing Officer has no inherent powers to review its own order though certainly he has power to reassess but such powers of reassessment has to be passed on fulfilling certain preconditions and if the concept of change of opinion is removed then in garb of reopening of the assessment, the power of review would come into play which is otherwise not permissible. 19. We are conscious of the settled legal position of law that post 01.04.1989, the Assessing Officer has power provided there is tangible material to come to the conclusion that there is escapement of income from the assessment and in absence of the same, the concept change of opinion may come into play which may preclude the Assessing Officer to reopen the assessment. However, in the given case, from plain reading of the reasons recorded for reopening the assessment, we find that the Assessing Officer has rightly formed opinion that the interest derived from the surplus funds invested by the assessee in the nature of FDRs other than the Cooperative Societies i.e. other Cooperative Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record. Thus, two situations are different when transaction itself on the basis of subsequent information found to be bogus, the disclosure made at original stage cannot be stated to be fully and truly. In this case, assessment was reopened within a period of four years and therefore, proviso to Section 147 has no application. The only requirement is to see the escapement of income which is there in this case, therefore, notice issued under section 148 is a valid notice. 20. It is true that the Assessing Officer has drawn inference from the examination of the record that the original order of assessment is erroneous which has probably resulted due to the failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment. We have consciously applied our mind to the relevant facts and material available. We find that it is true that the once assessment made on material available or existing at the relevant point of time while making assessment and again on same material, if different or divergent view is sought, it would tantamount to change of opinion , but at the same time even in the case of existing material, if no conscious at ..... 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