THE MEHSANA URBAN COOP BANK LTD. V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE MEHSANA

SCA/14458/2018

AI Insights

The case involves The Mehsana Urban Coop Bank Ltd. challenging a notice issued by the Assistant Commissioner of Income Tax, Circle Mehsana, under section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the year 2011-12. The original assessment had addressed the issue of interest on Non-Performing Assets (NPA), which was scrutinized and added to the bank's income. The Tribunal had previously allowed the bank's appeal, which was not contested by the revenue. However, the revenue later issued a notice to reopen the assessment, leading to this legal challenge. The court found that the reopening was based on the same material and constituted a change of opinion, thus not valid under the law.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 750859 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 08-01-2019
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income Tax Vs. Shri Mahila Sewa Sahakari Bank Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: B S SOPARKAR
• Keywords: Assessment Year 2011-12; Income Tax; Interest Accrued; Non-performing assets; Reopening of assessment
• Section: 147; 148; 143(3); 142(1); 143(2); 43D

Judgement Text

"C/SCA/14458/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 14458 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE DR.JUSTICE A. P. THAKER ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment? NO 2 To be referred to the Reporter or not? NO 3 Whether their Lordships wish to see the fair copy of the judgment? NO 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder? NO ====================================== THE MEHSANA URBAN COOP BANK LTD. Versus THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE MEHSANA ====================================== Appearance: MR B S SOPARKAR(6851) for the PETITIONER(s) No. 1 MRS MAUNA M BHATT(174) for the RESPONDENT(s) No. 1 ====================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE DR.JUSTICE A. P. THAKER Page 1 of 8 C/SCA/14458/2018 JUDGMENT Date : 08/01/2019 ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. Rule. Mrs. Mauna M. Bhatt, learned Senior Standing Counsel for the respondent waives service of notice of rule on behalf of the respondent. 2. Having regard to the controversy involved in the present case and with the consent of the learned advocates for the respective parties, the matter is taken up for final hearing today. 3. In this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 30.03.2018, issued by the respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') seeking to reopen the assessment of the petitioner for assessment year 2011-12. 4. The petitioner, a cooperative bank, had filed its return of income on 28.09.2011 declaring total income at Rs.21,26,48,410/-. The case was selected for scrutiny and notices came to be issued under sections 142(1) and 143(2) of Page 2 of 8 C/SCA/14458/2018 JUDGMENT the Act, calling upon the petitioner to furnish the details from time to time. A specific query was raised regarding interest on Non-Performing Assets (NPA) and eventually, the respondent made addition of Rs.61,08,604/- under section 43D of the Act on account of accrued interest of NPA in the assessment order dated 22.01.2014 under section 143(3) of the Act. Against the assessment order, the petitioner preferred an appeal before the Commissioner of Income Tax (Appeals), who, by an order dated 02.06.2014 dismissed the appeal and upheld the addition. The petitioner carried the matter in further appeal before the Income Tax Appellate Tribunal, which, by an order dated 30.11.2017, allowed the appeal. It appears that the order of Income Tax Appellate Tribunal was not challenged by the revenue but in assessment year 2012-13, the decision of the Tribunal on an identical question came to be challenged before this court in Tax Appeal No. 739 of 2018, which came to be dismissed by an order dated 02.07.2018. 5. In the meanwhile, the respondent issued the impugned notice under section 148 of the Act. The reasons for reopening came to be furnished vide letter dated 17.05.2018. The petitioner raised various objections on the merits of the reopening; however, by an order dated 20.08.2018, the Page 3 of 8 C/SCA/14458/2018 JUDGMENT respondent rejected the same. 6. Mr. B. S. Soparkar, learned advocate for the petitioner, invited the attention of the court to the reasons recorded for reopening of the assessment to submit that the Assessing Officer seeks to reopen the assessment on a perusal of the record which was available with him. It was submitted that, in this case, the assessment for the assessment year 2011-12 is sought to be reopened by the impugned notice dated 30.03.2018, which is clearly beyond a period of four years from the end of the relevant assessment year. It was submitted that during the course of assessment proceedings, the Assessing Officer had called for all the details in respect of the interest receivable on NPA and that, there being no failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the impugned notice under section 148 of the Act is without authority of law. 6.1 It was further pointed out that the Assessing Officer seeks to reopen the assessment on the ground that Rs.3,90,22,094/- being interest receivable on NPA had accrued during the year but had not offered by the petitioner for Page 4 of 8 C/SCA/14458/2018 JUDGMENT taxation. The attention of the Court was invited to the notice issued by the Assessing Officer at the time of regular assessment to point out that during the course of such proceedings, the Assessing Officer had specifically called upon the petitioner to state as to why the interest credited during the year of NPA should not be treated as income by virtue of section 43D of the Act. It was pointed out that in response thereto, the petitioner had furnished all details in that regard and that after due application of mind to the said issue, the Assessing Officer framed the assessment vide order dated 22.01.2014 wherein, he had treated the interest credit of NPA to the tune of Rs.61,08,604/- as income and added it to the total income of the assessee. It was submitted that, therefore, the Assessing Officer seeks to reopen the assessment on the mere change of opinion inasmuch as the Assessing Officer, at the time of regular assessment, has made the thorough inquiry in this aspect. 6.2 It was submitted that reopening of assessment is also bad on the count that this is a case of merger inasmuch as after the issue with regard to NPA was decided by the Assessing Officer, the matter was carried before the Commissioner of Income Tax (Appeals) who had dismissed the Page 5 of 8 C/SCA/14458/2018 JUDGMENT appeal, whereafter, the petitioner preferred further appeal before the Tribunal, which had deleted the addition. 6.3 It was submitted that even on merits, on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable has escaped assessment inasmuch as this Court, in the case of Principal Commissioner of Income Tax Vs. Shri Mahila Sewa Sahakari Bank Ltd., (2017) 395 ITR 324 (Guj.) has held that in view of the mandate of the guidelines, it is permissible for the assessee to recognize income from non-performing assets on accrued basis and can book such income only when it is actually received. It was submitted that the above view has been confirmed by the Supreme Court. 7. On the other hand, Mrs. Mauna M. Bhatt, learned Senior Standing Counsel for the respondent has reiterated the grounds set out in the affidavit-in-reply filed on behalf of the respondent. 8. In the present case, it is an admitted position that the impugned notice under section 148 of the Act has been issued beyond a period of four years from the end of the relevant Page 6 of 8 C/SCA/14458/2018 JUDGMENT assessment year and hence, the first proviso to section 147 of the Act would be attracted. A perusal of the reasons recorded reveals that the Assessing Officer has placed reliance upon the material available on record for the purpose of reopening the assessment. Therefore, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment, the reopening of assessment under section 147 of the Act beyond a period of four years from the end of the relevant assessment year is invalid. Moreover, the record of the case reveals that at the time of scrutiny assessment, the Assessing Officer had gone into this very issue of interest on NPA and had made addition in that regard, which had been carried in appeal before the CIT (Appeals) and in further appeal before the Tribunal. Therefore, it is evident that the Assessing Officer seeks to reopen the assessment on a mere change of opinion inasmuch as, at the time of scrutiny assessment, the Assessing Officer had applied his mind to the issue and even recorded finding in respect thereof in the assessment order framed under section 143(3) of the Act. Moreover, the assessment order has merged with the order passed by the CIT (Appeals) and the Tribunal and hence also, the reopening of the assessment on this very ground is without authority of law. Page 7 of 8 C/SCA/14458/2018 JUDGMENT 8.1 Lastly, even on merits, the issue stands concluded in favour of the assessee by the above cited decision of this court, which has been confirmed by the Supreme Court and hence, on the reasons recorded for reopening the assessment, the Assessing Officer could not have formed the belief that any income chargeable to tax has escaped assessment. The impugned notice under section 148 of the Act, therefore, cannot be sustained. 9. In the light of the above discussion, the petition succeeds and is, accordingly allowed. The impugned notice dated 30.03.2018 issued by the respondent under section 148 of the Act for the assessment year 2011-12 is hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs. [ Harsha Devani, J. ] [ A. P. Thaker, J. ] hiren Page 8 of 8 "